10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 0-14120

Advanta Corp.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	23-1462070 (I.R.S. Employer Identification No.)
Welsh & McKean Roads, P.O. Box 844 Spring House, Pennsylvania (Address of principal executive offices)	19477 (Zip Code)

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

(Former name, former address and former fiscal year, if changed since last report) None

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Class A Common Stock, $.01 par value per share Class B Common Stock, $.01 par value per share Class A Right Class B Right	NASDAQ Global Select Market     NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

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

Large Accelerated Filer þ      Accelerated Filer o     Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

As of June 30, 2006, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $843,514,867 based on the closing sale price as reported on the NASDAQ Global Select Market.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at February 23, 2007
Class A Common Stock, $.01 par value per share	9,606,862 shares
Class B Common Stock, $.01 par value per share	19,380,375 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders to be held on June 4, 2007 (Proxy Statement)	Part III

TABLE OF CONTENTS

PART I
Item 1.	Business	2
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
PART II
Item 5.	Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 8.	Financial Statements and Supplementary Data	52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	99
Item 9A.	Controls and Procedures	99
Item 9B.	Other Information	99
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	100
Item 11.	Executive Compensation	100
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	100
Item 13.	Certain Relationships and Related Transactions, and Director Independence	101
Item 14.	Principal Accounting Fees and Services	101
PART IV
Item 15	Exhibits and Financial Statement Schedules	102
Signatures
Exhibit Index
Preferred Pricing Agreement,Effective 03-19-2006 between D&B,Inc.and Advanta Bank Corp.
Amendment to Service Agreement between First Data Resources, Inc and Advanta Bank Corp., dated as of December 18, 2006
Computation of Ratio of Earnings to Fixed Charges
Current List of Subsidiaries of Registrant
Consent of Independent Registered Public Accounting Firm
Certification of Chief Executive Officer Pursuant to Rule 302
Certification of Chief Financial Officer Pursuant to Rule 302
Certification of CEO Pursuant to Rule 18 U.S.C. Section 1350
Certification of CFO Pursuant to 18 U.S.C. Section 1350

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PART I

Item 1.   Business

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

OVERVIEW

Advanta is one of the nation’s largest credit card issuers (through Advanta Bank Corp.) in the small business market. We issue business purpose credit cards to small businesses and business professionals. Our business credit card accounts provide approved customers with unsecured revolving business credit lines. Advanta’s exclusive focus on the small business market, as well as our size, experience in the small business market and commitment to developing meaningful product offerings and a high level of service tailored to the needs of small businesses, differentiate us from other credit card issuers. We use our direct marketing and information based expertise to identify potential customers. Founded in 1951, Advanta has long been an innovator in developing and introducing many of the marketing techniques that are common in the financial services industry today, including remote lending and direct mail, affinity and relationship marketing.

At December 31, 2006, we had $1.1 billion of owned business credit card receivables and $4.1 billion of securitized business credit card receivables.

We own two depository institutions, Advanta Bank Corp. and Advanta National Bank. We primarily fund and operate our business credit card business through Advanta Bank Corp., which offers a variety of deposit products that are insured by the Federal Deposit Insurance Corporation (the “FDIC”) in accordance with applicable FDIC regulations and limits. We offer credit protection and related products to our customers. A portion of these products are insurance products that we offer through our insurance subsidiaries, Advanta Life Insurance Company and Advanta Insurance Company. We also have venture capital investments remaining from our venture capital activities which had an estimated fair value of $1.0 million at December 31, 2006. In recent years, we have limited our new venture capital investment activity and we presently do not expect to make significant additional venture capital investments.

Through the first quarter of 2001, we had two additional lending businesses, Advanta Mortgage and Advanta Leasing Services. In the first quarter of 2001, we exited our mortgage business and ceased originating new leases in our small ticket equipment leasing business. See “— Discontinued Operations.”

Prior to February 20, 1998, we also issued consumer credit cards. Under the terms of a contribution agreement, dated October 27, 1997 and amended on February 20, 1998, we and Fleet Financial Group, Inc. (“Fleet”) each contributed substantially all of the assets of our respective consumer credit card businesses, subject to liabilities, to a newly formed entity controlled by Fleet that is now known as Fleet Credit Card Services, L.P. This transaction is referred to in this Form 10-K as the “Consumer Credit Card Transaction.” We acquired a 4.99% interest in the Fleet Credit Card Services, L.P. as of the date of closing of the Consumer Credit Card Transaction. At December 31, 2006, our ownership interest in this partnership was approximately 1.3%. As a result of our May 28, 2004 agreement with Bank of America Corp. (“Bank of America”) and the combination of Bank of America’s and Fleet Credit Card Services, L.P.’s consumer credit card businesses, our partnership interest in Fleet Credit Card Services, L.P. represents an interest in the combined business. See Note 17 to the consolidated financial statements.

Advanta Corp. was incorporated in Delaware in 1974 as Teachers Service Organization, Inc., the successor to a business originally founded in 1951. In January 1988, we changed our name from TSO Financial Corp. to Advanta Corp. Our principal executive office is located at Welsh & McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477-0844. Our telephone number at our principal executive office is (215) 657-4000.

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CONTINUING OPERATIONS

Advanta Business Cards

Overview

Advanta Business Cards is one of the nation’s largest issuers (through Advanta Bank Corp.) of business purpose credit cards to small businesses and business professionals. Our business purpose credit cards are issued and primarily funded by Advanta Bank Corp. Our strategy in our Advanta Business Cards business segment is to maximize long-term profits by attracting and retaining high credit quality customers and deepening our customer relationships.

Our principal objective is to use our information-based strategy to continue to prudently grow our business and increase our profitability. Based on our experience and expertise in analyzing the credit behavior and characteristics of our customers, we have developed an extensive database of customer information and attributes. We use this information, in conjunction with proprietary credit scoring, targeting and other sophisticated analytical models we have developed, to market our product offerings and services to prospective customers and to manage our relationships with our existing customers. We continually monitor our customer segments and validate our models based on actual results, and use this information to refine and improve our analytical assumptions. The information we gather and analyze allows us to market directly to specific customer segments and target prospects effectively. We also use this information proactively to anticipate customer needs and customize our product offerings to meet those needs and to enhance and maintain our relationships with existing customers.

We use a targeted approach to these market segments, aiming to anticipate the distinct needs of various small businesses and business professionals and to design product offerings and services that are useful to them, based on their specific needs. Our strategy also involves strengthening and deepening our relationships with our existing customers through our rewards programs, promotional offers, on-line account management tools and customer service.

Under the terms of our cardholder agreement, our business purpose credit cards may be used for business purposes only. Our business purpose credit cards provide approved customers with access, through merchants, banks, checks and ATMs, to unsecured revolving business purpose credit lines.

We are licensed to issue both MasterCard^®* and VISA^®** business purpose credit cards, although our primary product offering is a MasterCard^® business purpose credit card. MasterCard^® and VISA^® both license banks and other financial institutions, such as Advanta Bank Corp., to issue credit cards using their respective service marks and interchange networks.

We offer a number of benefits that we believe are important to small businesses and business professionals, including:

•  competitively priced offerings and rewards programs;

•  additional cards for employees at no fee with the ability to set individual spending limits;

•  on-line, downloadable detailed expense management reports that categorize purchases and itemize charges for recordkeeping and tax purposes;

•  customized cards with the customer’s business name and logo displayed on the front of the card and customized business checks;

•  free on-line account management and account payment; and

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

** VISA^® is a federally registered service mark of Visa International Service Association.

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•  access to product features and services that are designed to meet the needs of our customers on favorable terms and conditions.

Additional benefits of our MasterCard^® and VISA^® business purpose credit cards include free auto rental insurance, free purchase protection service for a specified time period and several free emergency assistance and referral services. We are continually looking for innovative ways to tailor products to the needs of small businesses and business professionals.

We offer rewards programs with most of our business purpose credit cards. Under our rewards programs, customers may earn either cash back rewards or business rewards that can be redeemed for travel, gift certificates or merchandise, based on net purchases charged on their business credit card accounts.

As a participant in the MasterCard^® and VISA^® associations, Advanta Bank Corp. receives interchange fees as partial compensation for taking credit risk, absorbing fraud losses and funding credit card receivables for a limited period prior to account billing. The interchange fees are paid to us by merchant banks, based on the purchase activity of our customers. In addition to interchange income, we generate revenue through interest earned on outstanding balances, balance transfer fees, cash usage fees and other fees. We also generate fees and revenues through products and services offered to our business credit card customers such as specialty credit-related insurance, other credit protection products and services and other products relevant to small businesses.

For 2006, 94% of Advanta’s total revenues were derived from Advanta Business Cards as compared to 82% for 2005 and 98% for 2004. For 2005, Advanta’s total revenues also included the gain on transfer of consumer credit card business. See Note 16 to the consolidated financial statements for additional segment financial information about Advanta Business Cards and Note 17 to the consolidated financial statements for further information about the gain on transfer of consumer credit card business.

Origination

We originate, directly and through the use of third parties, substantially all of our business credit card accounts using direct marketing techniques. Our sources for potential customers include credit reporting agencies, lists from data compilers and customer lists from establishments that have a small business customer base. We also acquire customers through our strategic relationships with other organizations serving the small businesses market. In an effort to expand our customer reach, we regularly test new sources and channels for identifying potential customers. We target prospects for our business purpose credit cards using relevant information from the sources described above, historical solicitation data and our proprietary segmentation methods. Our targeting models and product offerings are continually updated to reflect changes in the competitive environment. We originated approximately 371 thousand new business credit card accounts during the year ended December 31, 2006.

Underwriting

We have developed sophisticated models for assessing the creditworthiness of applicants. Using a proprietary credit scoring system, we evaluate common applicant characteristics and their correlation to credit risk. We regularly validate and update our scoring models to maintain and enhance their predictive power.

On the application for our business purpose credit card, we request information about the individual signing the application (the “signing individual”) and the business. Generally, under the cardholder agreement for our business purpose credit card, the signing individual (typically an owner or authorized officer of the business) and the business are jointly and severally liable for all transactions on the account. On these accounts, we may consider credit-related and other relevant data about both the signing individual and the business in our assessment of the creditworthiness of potential customers. Through the application process, we verify the applicant’s identification information and collect information about the applicant’s business. This information, combined with credit reports received from external credit reporting agencies and other data sources, forms the basis for our decision to extend credit. The credit line size we offer varies and is ultimately determined based upon the information we receive regarding the credit history and creditworthiness of the business and signing individual. In other cases, however, we offer our business purpose credit card to business professionals. For these accounts we consider relevant data only about the signing individual in our credit assessment because on these accounts only the signing individual is liable.

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Pricing

Our product offerings are competitively-priced and typically include promotional pricing and rewards. We design our product offerings to selectively attract and retain high credit quality customers and to respond to the competitive environment. Our current pricing and rewards strategies include a combination of promotional pricing and either cash back rewards or business rewards that our customers can redeem for travel, gift certificates or merchandise. A customer may receive promotional pricing, including an introductory period during which a low or zero percent finance charge rate is charged for a specified duration on specified types of transactions, after which the introductory rate generally is converted to a higher rate. Some customers may receive non-introductory promotional pricing for specified types of balances or account transactions. Generally, our customers earn rewards based on net purchases on their business credit card accounts. We continually test different pricing and reward strategies.

Our business credit card accounts are assigned finance charge rates which are either fixed or variable rates. Our variable finance charge rates adjust from time to time according to an interest rate index such as the Prime Rate or LIBOR. We may reprice accounts at our discretion and in accordance with the terms of the applicable cardholder agreement.

We continually monitor the credit quality of our business credit card customers and adjust the pricing and/or credit line size on their accounts based on a variety of factors, including changes in a customer’s credit standing and other factors that could indicate a risk of future nonpayment. To discourage delinquent payments, we assess late fees and use “penalty pricing” which automatically increases the finance charge rate assessed on any account that is in default in accordance with the terms of the applicable cardholder agreement. The amount by which the finance charge rate is automatically increased may vary.

Servicing

We use internal and external resources for servicing our credit card accounts. Certain administrative functions associated with the servicing of our business credit card accounts are outsourced to First Data Resources, Inc. Our agreement with FDR requires that the services be performed in accordance with our policies and procedures. The services may include: authorizing transactions through the MasterCard^® and VISA^® systems, based upon our criteria for approval; providing data processing services; performing billing, posting and settlement processes; generating monthly billing statements; providing credit and fraud management tools; and issuing credit card plastics and new account agreements. Under our policies and procedures, we monitor the services provided by FDR for compliance with our criteria.

Customer Service and Support

We maintain several channels of communication and support for our customers, including a toll-free phone number, on-line account management, secure message center and postal and facsimile services. We maintain multi-site contact centers, currently located in Horsham, Pennsylvania and Draper, Utah. Our contact centers are managed so that functions can be performed seamlessly regardless of geographic location. Customer contacts are distributed across these sites based on service level objectives. In addition, we leverage numerous technology solutions to increase efficiencies, reduce costs and improve customer satisfaction. We use metrics such as first contact resolution and average speed of answer to measure our performance and success.

Our customer service function works closely with other functions across our organization to achieve seamless service and problem resolution. We are focused on supporting and maintaining our relationships with our existing customers through programs designed to stimulate card usage, enhance customer loyalty and retain existing accounts. Our objective is to maximize every contact opportunity to provide “best in class” service to our customers.

Collections

Delinquencies and charge-offs are monitored by management in our collections and credit departments. We use a variety of techniques to discourage delinquent payments, including assessment of late fees and use of penalty pricing, as described above. Our credit evaluation, servicing and charge-off policies and collection practices may change from time to time in accordance with our business judgment and applicable laws and regulations.

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We use a variety of collections strategies to pursue late payments. Our strategies are developed using proprietary models that analyze an array of variables, including payment history, Fair, Isaac and Company (“FICO”) credit score and other credit indicators, to predict the type and timing of collections activity to be implemented for each account in order to optimize our collection efforts. Collection activities include statement messages, formal collection letters and telephone calls, as well as a self-service website that our customers can access. We maintain multi-site collection centers, currently located in Horsham, Pennsylvania and Draper, Utah. Efforts to collect delinquent and charged-off accounts are made by our collections staff, supplemented in certain cases by external resources such as collection agencies and attorneys. We may sell accounts that we decide not to pursue through a collection agency or litigation.

Credit Protection and Related Products

We offer credit protection and related products to our existing business credit card customers. Our credit protection products include coverage for loss of life, disability, key person departure, business interruption and involuntary unemployment. A portion of our credit protection and related products are insurance products offered through our insurance subsidiaries. Together with unaffiliated insurance carriers, our life/health and property/casualty insurance subsidiaries, Advanta Life Insurance Company and Advanta Insurance Company, respectively, provide insurance and related products mostly to existing Advanta customers. Under reinsurance agreements, our insurance subsidiaries generally assume the risks associated with these products from the unaffiliated insurance carriers. In consideration for assuming these risks, our insurance subsidiaries receive reinsurance premiums equal to the net premiums collected by the insurance carriers, less a ceding fee as defined by the reinsurance treaties, and acquisition expenses, premium taxes and loss payments made by the carriers on these risks.

Depository Institutions

We own two depository institutions, Advanta Bank Corp. and Advanta National Bank. Advanta Bank Corp. is an industrial bank chartered under the laws of the State of Utah with its principal executive offices located in Draper, Utah. Advanta Bank Corp.’s principal activity consists of the issuance of our business purpose credit card, the Advanta Business Card, to small businesses and business professionals.

Advanta National Bank is a national banking association organized under the laws of the United States of America with its headquarters and sole branch currently located in Wilmington, Delaware. Prior to the closing of the Mortgage Transaction (as defined herein), we conducted a large portion of our mortgage business through Advanta National Bank. For the year ended December 31, 2006, Advanta National Bank’s operations were not material to our consolidated operating results.

Deposit, Savings and Investment Products

We offer a variety of deposit products such as retail certificates of deposit, large denomination (more than $99,000) certificates of deposit and money market accounts that are insured by the FDIC in accordance with applicable FDIC regulations and limits. At December 31, 2006, we had total deposits of approximately $1.4 billion at our banks, compared to approximately $1.1 billion at December 31, 2005. Substantially all of the deposits at December 31, 2006 and 2005 were at Advanta Bank Corp. Advanta Bank Corp. generates retail deposits from repeat deposits from existing customers and from new depositors attracted by direct mail solicitations, newspaper and other media advertising, and the internet.

Since 1951, Advanta Corp. and its predecessor, Teachers Service Organization, Inc., have offered senior unsecured debt securities of the corporation, in the form of RediReserve Variable Rate Certificates and Investment Notes, to retail investors through our retail note program. Advanta Corp. has sold these debt securities, also referred to in this Form 10-K as “retail notes,” predominantly on a direct basis in select states. The RediReserve Variable Rate Certificates are payable on demand and the Investment Notes have maturities that can range from 91 days to ten years. The RediReserve Variable Rate Certificates and Investment Notes are obligations of Advanta Corp. and are not insured or guaranteed by the FDIC or by any other public or private entity. We change the interest rates that we offer frequently, depending on market conditions and our funding needs. The interest rates and other terms of the retail notes may also vary depending on the size of the investment, state of residence of the investor or other factors.

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At each of December 31, 2006 and December 31, 2005, approximately $227 million aggregate principal amount of RediReserve Variable Rate Certificates and Investment Notes was outstanding.

DISCONTINUED OPERATIONS

Advanta Leasing Services

Prior to January 23, 2001, Advanta Leasing Services, a business unit of Advanta, offered flexible lease financing programs to small businesses. On January 23, 2001, we announced that after a thorough review of strategic alternatives available for our leasing business, we decided to cease originating leases. However, we continued to service the existing lease portfolio during its wind down period.

We had no lease receivables outstanding as of December 31, 2006. At December 31, 2005, we had lease receivables of $1.2 million. See Note 20 to the consolidated financial statements for additional information regarding gains or losses on the discontinuance of Advanta Leasing Services.

Advanta Mortgage

Pursuant to the terms of the purchase and sale agreement, dated January 8, 2001, as amended, by and between Advanta and Chase Manhattan Mortgage Corporation, a New Jersey corporation (“Chase” or “Buyer”), Advanta and certain of its subsidiaries transferred and assigned to Buyer and certain of its affiliates substantially all of the assets and operating liabilities associated with Advanta’s mortgage business. This transaction is referred to throughout this Form 10-K as the “Mortgage Transaction.” The Mortgage Transaction was consummated on March 1, 2001, effective as of February 28, 2001 (the “Closing Date”).

The assets acquired by Buyer in the Mortgage Transaction consisted of loan receivables, retained interests in securitizations and other receivables, contractual mortgage servicing rights and other contractual rights, property and equipment, and prepaid assets. The liabilities assumed by Buyer in the Mortgage Transaction consist primarily of certain of our contractual obligations and other liabilities that appeared on our balance sheet, as well as specified contingent liabilities arising out of the operation of the mortgage business before closing that are identified in the purchase and sale agreement.

Prior to the closing of the Mortgage Transaction, Advanta Mortgage, a business unit of Advanta, offered a broad range of mortgage products and services to consumers throughout the country. Advanta Mortgage originated and serviced non-conforming credit first and second lien mortgage loans, including home equity lines of credit. In addition to servicing and managing the loans we originated, Advanta Mortgage serviced the home equity loans of unaffiliated third parties through our subservicing business. Following the Mortgage Transaction, we no longer operate a mortgage business. However, we have retained contingent liabilities, primarily relating to litigation, arising from our operation of the mortgage business before the Closing Date that were not specifically assumed by Buyer in the Mortgage Transaction. See Note 20 to the consolidated financial statements for additional information regarding gains or losses on the discontinuance of Advanta Mortgage.

GOVERNMENT REGULATION

The following discussion sets forth some of the elements of an extensive regulatory framework applicable to banks, their affiliates and the banking and credit card industries, and provides some specific information that is relevant to Advanta Corp. and its subsidiaries. To the extent that the following information describes statutory provisions and regulatory provisions and agreements, it is qualified in its entirety by reference to the particular statutory provisions and regulatory provisions and agreements.

Advanta Corp.

Although Advanta Corp. owns two banking subsidiaries, Advanta Bank Corp. and Advanta National Bank, it is not required to register as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Advanta National Bank is a “bank” as defined under the BHCA, as amended by the Competitive

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Equality Banking Act of 1987 (“CEBA”). However, under grandfathering provisions of CEBA, Advanta Corp. is not required to register as a bank holding company because Advanta National Bank did not come within the BHCA definition of the term “bank” prior to the enactment of CEBA. Also, under CEBA, our other banking subsidiary, Advanta Bank Corp., is not considered a “bank” for purposes of the BHCA and therefore does not impact Advanta Corp.’s exempt status under the BHCA. Because Advanta Corp. is not a bank holding company under the BHCA, it is not subject to examination by the Federal Reserve Board, other than for purposes of assuring continued compliance with the CEBA restrictions discussed below.

Advanta Corp. is not required to register as a bank holding company as long as it continues to comply with certain restrictions under CEBA. For example, Advanta National Bank may take demand deposits but may not make commercial loans. In addition, Advanta Corp. would lose its exemption under CEBA if it were to acquire control of more than 5% of the stock or assets of an additional “bank” or “savings association,” as these terms are defined in the BHCA. The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), which became effective on May 12, 2000, includes a provision that gives us the opportunity to cure or remediate an activity that is out of compliance with applicable CEBA restrictions. Under the GLB Act, if Advanta Corp. or Advanta National Bank fails to comply with any of the restrictions applicable to them under CEBA, there is a 180-day right to cure period following receipt of a notice from the Federal Reserve Board. The opportunity to cure or remediate an activity that is out of compliance with CEBA significantly reduces the risk that Advanta Corp. will be required to register as a bank holding company under the BHCA.

Registration as a bank holding company is not automatic and, if Advanta Corp. were to register, then it and its subsidiaries would be subject to examination and regulation by the Federal Reserve Board.

Advanta Bank Corp.

Supervision and Regulation

Advanta Bank Corp. is an industrial bank chartered under the laws of the State of Utah. Under its banking charter, Advanta Bank Corp. may make consumer and commercial loans and may accept all FDIC-insured deposits other than demand deposits such as checking accounts. It is a depository institution subject to regulatory oversight and examination by both the FDIC and the Utah Department of Financial Institutions. Applicable federal and state regulations relate to a broad range of banking activities and practices, including minimum capital standards, maintenance of reserves and the terms on which a bank may engage in transactions with its affiliates. In addition, the FDIC has regulatory authority to prohibit Advanta Bank Corp. from engaging in any unsafe or unsound practice in conducting its business.

Capital Requirements

Advanta Bank Corp. is subject to capital adequacy guidelines issued by the Federal Financial Institutions Examination Council (the “FFIEC”). These risk-based capital and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among banking organizations and consider off-balance sheet exposures in determining capital adequacy. Under the rules and regulations of the FFIEC, at least half of a bank’s total capital is required to be “Tier I capital,” comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual preferred stock. The remaining capital, “Tier II capital,” may consist of other preferred stock, a limited amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The FFIEC has also adopted minimum leverage ratios for banks, which are calculated by dividing Tier I capital by total quarterly average assets. Recognizing that the risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banks are expected to maintain capital in excess of the minimum standards. Management believes that at December 31, 2006, Advanta Bank Corp. was in compliance with the capital adequacy requirements to which it was subject. See Note 14 to the consolidated financial statements.

Prompt Corrective Action

Among other things, the FDIC Improvement Act of 1991 (“FDICIA”) requires federal bank regulatory authorities to take prompt corrective action with respect to FDIC-insured institutions that do not meet certain minimum capital

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requirements. To be “well-capitalized” under the prompt corrective action provisions, a bank must have a ratio of combined Tier I and Tier II capital to risk-weighted assets of not less than 10%, a ratio of Tier I capital to risk-weighted assets of not less than 6%, and a ratio of Tier I capital to average assets of not less than 5%. At December 31, 2006, Advanta Bank Corp. met the capital requirements of FDICIA and had capital at levels a bank is required to maintain to be classified as “well capitalized” under the regulatory framework for prompt corrective action. See Note 14 to the consolidated financial statements.

Pursuant to provisions of FDICIA and related regulations with respect to prompt corrective action, FDIC-insured institutions such as Advanta Bank Corp. may only accept brokered deposits without FDIC permission if they meet specified capital standards. FDIC-insured institutions are also subject to restrictions with respect to the interest they may pay on brokered deposits unless they are “well-capitalized.”

Dividends

Advanta Bank Corp. may supply funds to its parent companies or affiliates, subject to certain legal limitations contained in Utah state law. Under Utah law, an industrial bank may declare a dividend out of net profits after providing for all expenses, losses, interest and taxes accrued or due and after complying with required transfers to surplus accounts. In addition, the FDIC has authority under the Financial Institutions Supervisory Act to prohibit an industrial bank from engaging in any unsafe or unsound practice in conducting its business. It is possible that the FDIC, pursuant to its authority under the Financial Institutions Supervisory Act, could claim that a dividend payment might under some circumstances be an unsafe or unsound practice.

Advanta National Bank

Supervision and Regulation

Advanta National Bank is subject to regulation and periodic examination, primarily by the Office of the Comptroller of the Currency (the “OCC”). The OCC’s regulations relate to a broad range of banking practices, including maintenance of reserves, the maintenance of certain financial ratios and the terms on which a bank may engage in transactions with its affiliates. In addition, the OCC has regulatory authority to prohibit Advanta National Bank from engaging in any unsafe or unsound practice in conducting its business.

Capital Requirements

Advanta National Bank is subject to the FFIEC capital adequacy guidelines described above. See “— Advanta Bank Corp. — Capital Requirements.” Management believes that at December 31, 2006, Advanta National Bank was in compliance with the capital adequacy requirements to which it was subject. See Note 14 to the consolidated financial statements.

Prompt Corrective Action

Advanta National Bank is subject to the provisions of FDICIA and related regulations with respect to prompt corrective action and the taking of brokered deposits, as described above. See “— Advanta Bank Corp. — Prompt Corrective Action.” Presently, pursuant to its agreement with the OCC described below, Advanta National Bank is required to maintain capital in excess of the minimum regulatory standards. At December 31, 2006, Advanta National Bank had capital at levels a bank is required to maintain to be classified as “well-capitalized” under the regulatory framework for prompt corrective action. However, Advanta National Bank does not meet the definition of “well-capitalized” because of the existence of its agreement with the OCC, even though it has achieved the higher imposed capital ratios required by the agreement with the OCC. See Note 14 to the consolidated financial statements.

Dividends

There are various legal limitations on the extent to which national banks, including Advanta National Bank, can supply funds through dividends to their parent companies or affiliates. Generally, national banks are required to obtain the prior approval of the OCC for a dividend if the total of all dividends declared by the national bank in any

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calendar year exceeds its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus accounts. In addition, a national bank generally may not pay a dividend in an amount greater than its undivided profits then on hand after deducting its losses and bad debts. The OCC also has authority under the Financial Institutions Supervisory Act to prohibit a national bank from engaging in any unsafe or unsound practice in conducting its business. It is possible that the OCC, pursuant to its authority under the Financial Institutions Supervisory Act, could claim that a dividend payment might under some circumstances be an unsafe or unsound practice.

Under Advanta National Bank’s current agreement with the OCC described below, Advanta National Bank is not eligible to pay any dividends without the OCC’s prior approval.

Regulatory Agreements

In 2000, Advanta National Bank reached agreements with its bank regulatory agency, primarily relating to the bank’s subprime lending operations. The agreements established temporary asset growth limits at Advanta National Bank, imposed restrictions on taking brokered deposits and required that Advanta National Bank maintain certain capital ratios in excess of the minimum regulatory standards. In 2001, Advanta National Bank entered into an additional agreement with the OCC regarding restrictions on new business activities and product lines at Advanta National Bank after the Mortgage Transaction, and the resolution of outstanding Advanta National Bank liabilities. The agreement also reduced the capital requirements for Advanta National Bank to a ratio of 12.7% for Tier 1 and total capital to risk-weighted assets, and to a ratio of 5% for Tier 1 capital to adjusted total assets as defined in the agreement. In addition, the agreement prohibits the payment of dividends by Advanta National Bank without prior regulatory approval. Management believes that Advanta National Bank was in compliance with its regulatory agreements at December 31, 2006.

Transfers of Funds and Transactions with Affiliates

Sections 23A and 23B of the Federal Reserve Act and applicable regulations impose restrictions on Advanta Bank Corp. and Advanta National Bank that limit the transfer of funds by each of these depository institutions to Advanta Corp. and certain of its affiliates, in the form of loans, extensions of credit, investments or purchases of assets. These transfers by any one depository institution to Advanta Corp. or any other single affiliate are limited in amount to 10% of the depository institution’s capital and surplus, and transfers to all affiliates are limited in the aggregate to 20% of the depository institution’s capital and surplus. These loans and extensions of credit are also subject to various collateral requirements. Sections 23A and 23B of the Federal Reserve Act and applicable regulations also require generally that the depository institution’s transactions with its affiliates be on terms no less favorable to the bank than comparable transactions with unrelated third parties. In addition, in order for Advanta Corp. to maintain its grandfathered exemption under CEBA, Advanta National Bank is not permitted to make any loans to Advanta Corp. or any of Advanta Corp.’s subsidiaries.

Lending Activities

Our current lending activities are solely focused on business purpose credit for small businesses and business professionals. Certain aspects of various federal and state laws, including the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Fair Credit Reporting Act (the “FCRA”) as amended by the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”), the Federal Trade Commission Act — Unfair or Deceptive Acts and Practices and the Servicemembers Civil Relief Act, may be interpreted to apply to our lending activities. Provisions of these statutes and related regulations require that certain disclosures be made to borrowers, prohibit discriminatory practices in extending credit, prohibit sending unsolicited credit cards, prohibit unfair deceptive acts or practices, provide certain credit protections for activated military borrowers or regulate the dissemination and use of information relating to a borrower’s creditworthiness.

The FFIEC released Account Management and Loss Allowance Guidance (the “Guidance”) applicable to all credit card lending of federally regulated financial institutions that generally requires that banks properly manage several elements of their credit card lending programs, including line assignments, over-limit practices and minimum payment and negative amortization. The Guidance provides wide discretion to bank regulatory agencies

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in the application of the Guidance and, as a result, Advanta Bank Corp.’s regulators could require changes to the bank’s account management or loss allowance practices.

Privacy

The GLB Act contains privacy requirements dealing with the use of nonpublic information about consumer customers. The GLB Act and its accompanying regulations apply to retail deposit customers of Advanta Bank Corp. and Advanta National Bank, as well as to investors who purchase Advanta Corp.’s retail notes. The GLB Act is not preemptive and states may impose different and possibly more burdensome requirements.

Regulation of Non-bank Activities

Insurance

Our insurance subsidiaries are subject to the laws and regulations of, and supervision by, the states in which they are domiciled or have obtained authority to transact insurance business. These states have adopted laws and regulations which govern all insurance policy underwriting, rating, licensing, marketing, administration and financial operations of an insurance company, including dividend payments and financial solvency. In addition, our insurance subsidiaries must comply with Arizona insurance holding company system laws and regulations which require the filing of annual registration statements and the disclosure and approval of certain transactions among affiliated entities.

The maximum dividend that Advanta Insurance Company can distribute to Advanta Corp., its parent, in any twelve-month period, without prior approval of the State of Arizona Department of Insurance, is the lesser of: 10% of Advanta Insurance Company’s statutory surplus; or for any given twelve-month period, its net investment income. Similarly, the maximum dividend that Advanta Life Insurance Company can distribute to Advanta Insurance Company, its parent, in any twelve-month period, without prior approval of the State of Arizona Department of Insurance, is the lesser of: 10% of Advanta Life Insurance Company’s statutory surplus; or for any given twelve-month period, its net gain from operations.

The State of Arizona has adopted minimum risk-based capital standards for insurance companies, as developed by the National Association of Insurance Commissioners. Risk-based capital is the quantification of an insurer’s investment, underwriting, reserve and business risks in relation to its total adjusted capital and surplus. The ratio of an insurer’s total adjusted capital and surplus is compared to various levels of risk-based capital to determine what intervention, if any, is required by either the insurance company or an insurance department. At December 31, 2006, our insurance subsidiaries met all risk-based capital standards and required no intervention by any party.

Legislative and Regulatory Developments

State-chartered Industrial Banks

There are legislative initiatives and proposals under consideration at the federal and state levels that could cause Advanta Bank Corp., as a state-chartered industrial bank, to lose future flexibility in branch locations or limit its ability to offer new deposit products. For example, Congress is considering legislation that would enhance the authority for banks to pay interest on business checking accounts and to fully implement interstate banking. However, both of these legislative proposals also include initiatives that would limit their applicability so that state-chartered industrial banks, such as Advanta Bank Corp., would be excluded. On the state level, several states are considering legislation that would limit the ability of industrial banks to branch into these states or acquire local banks. Two states have already enacted such statutes.

Congress is also considering limiting the ability of commercial firms that are ineligible to own banks under the BHCA from chartering industrial banks. The definition of “commercial” firms used in the proposed legislation includes companies such as Advanta Corp. that, although principally engaged in the financial services business, have not registered with the Federal Reserve Board as a bank holding company or a financial services holding company. Enactment of this limitation might also restrict Advanta Bank Corp.’s flexibility in the future. Federal legislation has also been introduced that would limit new industrial bank charters to companies that are principally

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engaged in financial services. If this legislation were to be adopted as proposed, it would not impact Advanta Bank Corp.’s operations; however, it includes provisions that could increase Advanta Corp.’s reporting requirements to the FDIC.

Credit Card Industry Practices

Federal and state governments are very focused on the credit card industry and credit card lending and marketing practices. The Senate Banking Committee held a hearing on January 25, 2007 entitled “Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers.” The Senate Permanent Subcommittee on Investigations is also conducting an inquiry of credit card lending practices and disclosures. Last year the Senate Judiciary Committee and House Commerce Committee held hearings on credit card interchange fees. A number of trade associations representing retailers and gasoline marketers continue to lobby for hearings on interchange fees but, to date, no legislation has been introduced on the federal level. Several states are also considering interchange legislation. The proposals range from capping interchange fees on certain classes of transactions to requiring additional disclosures at point of sale to prohibiting the levying of interchange fees on the portion of retail transactions that constitutes sales tax. It is expected that the legislative proposals that will stem from these efforts will be generally directed at consumer transactions; however, it is possible that if any were to become effective they could impact small business and other business purpose lending.

Additionally, we expect that Congress and state legislatures as well as government regulatory agencies may consider legislative and regulatory initiatives related to credit scoring disclosure, minimum monthly payments, interchange fees and other aspects of credit card lending and marketing. Presently, these initiatives are generally directed at consumer transactions; however, it is possible that if any were to be enacted in the future they could impact small business and other business purpose lending. There are other legislative initiatives under consideration that could impact our business, including the manner in which we conduct our business, such as: proposals to impose additional anti-money laundering requirements; proposals dealing with data security, notification of customers in the event of data breach, as well as specific initiatives dealing with identity theft. While we are highly regulated by state and federal banking agencies in many of these areas, some of these proposals may extend to and impact data warehousers, vendors and other third parties with whom we do business.

Future Legislation

The businesses in which we engage are generally the subject of extensive regulation at the state and federal levels. Numerous legislative and regulatory proposals, such as those described above, are advanced each year which, if adopted, could affect our profitability or the manner in which we conduct our activities. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the federal or state proposals will become law.

COMPETITION

As a marketer of credit products, we face intense competition from numerous financial services providers. The credit card industry is highly competitive. Within the credit card industry there is increased competitive use of advertising, target marketing and pricing, including with respect to finance charge rates, rewards programs and cardholder fees. Many of our competitors are substantially larger and have more capital and other resources than we do. In addition, there has been a trend toward consolidation among credit card issuers in recent years which has resulted in even larger competitors. Competition among lenders can take many forms, including convenience in obtaining a loan, the size of their existing customer base and the ability to cross sell products to that customer base, intellectual property rights, customer service, rewards programs, size of loans, finance charge rates and other types of finance or service charges, the nature of the risk the lender is willing to assume and the type of security, if any, required by the lender. We have chosen not to compete in all areas of the credit card industry, but have focused on business purpose credit for small businesses and business professionals. We have responded to competition in this segment by focusing exclusively on the small business market, offering credit cards tailored to the needs of our customers with competitive pricing that typically includes promotional pricing and competitively structured rewards programs. We also have responded by developing marketing strategies for our business purpose credit cards

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that are designed to attract and retain high credit quality customers. Although we believe we are generally competitive in the geographic areas in which we offer our products and services, there can be no assurance that our ability to market our products and services successfully or to obtain an adequate yield on our business purpose credit cards will not be impacted by the nature of the competition that now exists or may develop. See “Item 1A. Risk Factors.”

We fund our operations through, among other things, sales of our retail notes. We face competition from banks, savings institutions, money market funds, mutual funds, credit unions and a wide variety of private and public entities that offer and sell debt securities, some of which are publicly traded. Our retail notes are not listed on any securities exchange. In addition, many of our competitors are larger and have more capital and other resources than we do. Competition for investment funds relates to matters such as: rate of return; collateral, insurance or guarantees applicable to the investment; the minimum investment amount; credit ratings, if any, on the debt security; convenience and the cost to and conditions imposed upon the investor to invest in or liquidate the investment, including any commissions which must be paid or interest forfeited on funds withdrawn; customer service; service charges; and the taxability of interest. See “Item 1A. Risk Factors.”

EMPLOYEES

As of December 31, 2006, we had 952 employees.  We believe that we have good relationships with our employees. None of our employees is represented by a collective bargaining unit.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). These filings are available to the public over the internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room located at 100 F Street NE, Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

Our principal internet address is http://www.advanta.com. We make our annual, quarterly and current reports, and amendments to those reports, available free of charge on or through http://www.advanta.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at the following address or telephone number: Investor Relations, Advanta Corp., Welsh & McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477, telephone: (215) 444-5335.

We have adopted, and posted on our website, a Code of Ethics that applies to, among others, our Chief Executive Officer and senior financial officers (including the Chief Financial Officer, Chief Accounting Officer, Controller and persons performing similar functions).

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CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995

We have included or incorporated by reference in this Annual Report on Form 10-K statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). In addition, other written or oral communications provided by Advanta from time to time may contain “forward-looking statements.” Forward-looking statements are not historical facts but instead are based on certain assumptions by management and represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These statements include statements other than historical information or statements of current condition and may relate to, among other things, anticipated earnings per share; anticipated growth in receivables outstanding and credit card accounts; anticipated net interest margins; anticipated operating expenses and employment growth; the level of new account acquisitions, customer spending and account attrition; anticipated payment rates of outstanding loans; anticipated marketing and other operating expense; estimated values of and anticipated cash flows from our retained interests in securitizations; industry trends; our ability to replace existing credit facilities and securitization financing when they expire or terminate with appropriate levels of funding on similar terms and conditions; the value of the investments that we hold; anticipated delinquencies and charge-offs; realizability of net deferred tax asset; anticipated outcome and effects of litigation and other future expectations of Advanta. Forward-looking statements are often identified by words or phrases such as “is anticipated,” “are expected to,” “are estimated to be,” “intend to,” “believe,” “will likely result,” “projected,” “may,” or other similar words or phrases. The cautionary statements provided below are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act for any such forward-looking information.

Forward-looking statements are subject to various assumptions, risks and uncertainties which change over time, and speak only as of the date they are made. We undertake no obligation to update any forward-looking information. However, any further disclosures made on related subjects in our subsequent reports filed with the SEC, including our Reports on Forms 10-K, 10-Q and 8-K, should be consulted. We caution readers that any forward-looking statement provided by us is not a guarantee of future performance and that actual results may be materially different from those in the forward-looking information. In addition, future results could be materially different from historical performance. See “Item 1A. Risk Factors” for further discussion of important factors that could cause actual results to differ from those in the forward-looking statements.

Item 1A.   Risk Factors

We may make changes in the terms of our business credit card accounts that could negatively affect our results of operations and profitability. We have the right to change the terms of our agreements with our customers, including the finance charge rates and the other fees and charges that are applicable from time to time on the accounts, the applicable minimum monthly payment required on the accounts and various other terms. We may decide to increase or decrease finance charge rates or other fees and charges for existing accounts, or to take actions that would otherwise change the terms of the accounts, as a result of: changes in applicable law or regulations; changes in the marketplace; changes in the economic, political or regulatory environments; prudent business practice; or other reasons. Changes in the terms of our business credit card accounts may cause account attrition or changes in customer behavior, such as credit card use, payment patterns and rates of delinquencies and charge-offs, which could negatively affect our results of operations and profitability. Changes in the finance charges and the other fees and charges assessed on the accounts and changes in minimum monthly payments required may affect the effective yield on the accounts and could negatively impact our results of operations and profitability.

Marketing with low introductory or promotional rates may result in account attrition when these rates expire. A portion of our business credit card accounts have introductory or promotional finance charge rates which are generally at low levels during an initial or other specified period and which generally increase to higher rates after the initial or other specified period expires. Accounts with these introductory or promotional rate features are subject to a risk that customers who were attracted by the low introductory or promotional rates will transfer account balances or shift credit card spending to credit card accounts with other credit card providers when our introductory or promotional rate period expires. There can be no assurance that our efforts to retain these customers will be successful and that there will not be significant attrition in these accounts.

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Changes in our product offerings, including changes in product features or services, could negatively affect our ability to originate and retain customer relationships and may reduce our profitability. The product offerings we use in our marketing campaigns are competitively priced and typically include promotional pricing and rewards. Changes to our product offerings, including changes in rewards program terms, changes in introductory and promotional pricing levels or changes to other product features or services, may result in changes in customer behavior, such as levels of credit card use and payment patterns, that could negatively impact our profitability. In addition, changes to our product offerings, including changes in product features or services such as those described above, may negatively affect our ability to attract and retain high credit quality customers.

If we are unable to develop, introduce or offer new or competitive products and services, our ability to generate new accounts and compete effectively could be adversely affected. Many factors could prevent us from developing, introducing or offering new or competitive products and services, including our inability to obtain licenses for intellectual property rights or to obtain them at acceptable costs, the failure of or delay in customers’ acceptance of our products or services, losses associated with the testing and implementation of new products or services or financial, legal or other difficulties arising in the course of implementing new products or services. If we are unable to successfully develop, acquire, produce, test, market and offer new or competitive products and services, it could adversely affect our competitive position, including our ability to generate new accounts and to generate receivables in existing accounts.

Our strategic and contractual relationships with third parties expose us to risks that may disrupt our business operations and adversely affect our results of operations and financial condition. We rely on third parties to provide services that are critically important to our business credit card business. For example, we rely on third parties to perform certain administrative functions associated with servicing our business credit card accounts, and to supply FICO scores and other credit-related data and information about our potential and existing customers. In addition, from time to time we partner, contract with or invest in third parties to establish relationships that are intended to benefit our business operations and financial condition, including outsourcing and other initiatives to enhance our productivity and operational efficiency.

These arrangements with third parties expose us to a number of risks, such as the following:

•  If any third party providing services critical to our business were to fail or become insolvent, or if we were unable to renew expiring agreements with such parties on mutually acceptable terms, our business operations, results of operations and financial condition could be adversely impacted.

•  To the extent these third party relationships involve or depend on the transfer of knowledge related to our business for their success, we may be exposed to risks associated with misappropriation or misuse of intellectual property or confidential information, including information that is proprietary to us or to our customers.

•  If the third parties do not perform as anticipated or if they default on their obligations, we may not realize the intended benefits of these relationships, including the expected productivity, cost or expense improvements.

•  In the event of a default or termination, our agreements with third parties may take an extended period of time to unwind or resolve and, under certain circumstances such as early termination, may require us to pay substantial termination fees, which could adversely affect our business operations, results of operations and financial condition.

We face intense competition in the credit card industry which could negatively impact our ability to generate new accounts and receivables. Advanta Business Cards competes in the highly competitive credit card industry. Within the credit card industry there is highly competitive use of advertising, target marketing and pricing, including with respect to finance charge rates, rewards programs and cardholder fees. Many of our competitors are substantially larger and have more capital and other resources than we do. In addition, there has been a trend toward consolidation among credit card issuers in recent years which has resulted in even larger competitors. Competition among lenders can take many forms, including convenience in obtaining a loan, the size of their existing customer base, the ability to cross-sell products to that customer base, intellectual property rights, customer service, rewards programs, size of loans, finance charge rates and other types of finance or service charges, the nature of the risk the lender is willing to assume and the type of security, if any, required by the lender. These competitive pressures may

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increase and could negatively impact our ability to market our products and services effectively, our ability to generate new business credit card receivables and our profitability. See “Item 1. Business — Competition” for further discussion.

If we are unable to attract and retain talented employees our business could be adversely affected. Our success depends on our ability to attract and retain talented employees. Competition for talented personnel is intense. If we are less successful in our recruiting efforts, or if we are unable to retain key employees, our ability to develop and deliver our products and services may be adversely affected.

Legislative, regulatory and other legal developments may affect our business operations and ability to generate new accounts. Banking, finance and insurance businesses, in general, and banks, including industrial loan banks such as Advanta Bank Corp., are the subject of extensive regulation at the state and federal levels. Numerous legislative and regulatory proposals are advanced each year which, if adopted, could affect our profitability or the manner in which we conduct our activities.

The credit card industry is also highly regulated by federal and state laws. These laws affect how loans are made, enforced and collected. The United States Congress and state legislatures may pass new laws, or may amend existing laws, to regulate further the credit card industry or to reduce finance charges or other fees applicable to credit card accounts. This could make it more difficult for us to change the terms of our existing business credit card accounts or to collect business credit card receivables and could decrease our income and profitability.

In recent years certain industry groups and consumers have expressed concerns about interchange rates related to Visa^® and MasterCard^® credit and debit transactions and about increases in the interchange rates. In some other countries, regulators have taken actions to challenge or reduce interchange rates and certain other fees banks charge on transactions. While there is no specific imminent regulatory action pending to restrict interchange rates in the United States, interchange rates have also been the topic of increased Congressional and regulatory interest. Also in the United States, several suits have been filed by various merchants alleging that the establishment of interchange rates violates the antitrust laws. Any restriction on or reduction in interchange rates would reduce the amount of interchange paid to us and could have an adverse effect upon our results of operations and financial position.

Federal and state legislatures as well as government regulatory agencies are considering legislative and regulatory initiatives related to enhanced credit scoring disclosure, interchange rates, data security, penalty pricing, minimum monthly payments and other aspects of credit card lending, marketing and operations. While many of these initiatives are generally directed at consumer transactions, it is possible that if any were to become effective they could impact small business lending and, accordingly, could make compliance more difficult and expensive and could negatively affect our operating results and the manner in which we conduct our business.

Changes to statutes, regulations or regulatory policies, guidance or interpretations could adversely affect us, including by limiting the types of products and services we may offer and the amounts of finance charge rates or other fees we may charge. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the federal or state proposals will become law. See “Item 1. Business — Government Regulation” for further discussion.

Actions by bank regulatory authorities could affect the manner in which we conduct our business and our financial condition. We conduct our business credit card business through Advanta Bank Corp., a Utah chartered industrial bank that is subject to regulatory oversight and examination by both the FDIC and the Utah Department of Financial Institutions. We also own Advanta National Bank, a national banking association that is subject to regulatory oversight primarily by the OCC. Both banks are subject to provisions of federal law that regulate their activities and require them to operate in a safe and sound manner. The effects of, and changes in, the level of regulatory scrutiny, regulatory requirements and initiatives, including mandatory and possible discretionary actions by federal and state regulators, restrictions and limitations imposed by laws applicable to industrial loan banks and national banks, examinations, audits and possible agreements between the bank and its regulators may affect the operations of the bank and our financial condition. See “Item 1. Business — Government Regulation” for further discussion.

We have procedures to comply with applicable local, state and federal laws, rules and regulations and we believe that we comply in all material respects with these requirements. We incur substantial costs and expenses in

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connection with our compliance programs and efforts. Changes in or the adoption of additional or more restrictive laws, rules and regulations applicable to us could make compliance more difficult and expensive. Failure to comply with applicable statutory and regulatory requirements can lead to, among other remedies, class action lawsuits and administrative enforcement actions.

Legal proceedings against us may result in adverse outcomes. We are now and in the future may become subject to a variety of legal proceedings, including class action lawsuits, other litigation and claims arising in the ordinary course of business or discontinued operations. The costs we incur in defending ourselves or associated with settling any of these proceedings, as well as a material final judgment, injunction or decree against us, could materially adversely affect our financial condition or our ability to conduct our business. The results of litigation are difficult to predict and there can be no assurance that legal proceedings will not have a material adverse impact on our results of operations or financial condition. See “Item 3. Legal Proceedings” and Note 11 to the consolidated financial statements for further discussion.

Changes in accounting may affect our reported earnings and results of operations. U.S. generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines, interpretations and practices for many aspects of our business are complex and involve subjective judgments, such as accounting for the allowance for receivable losses, securitization income, rewards programs and income taxes. Changes in these estimates or changes in other accounting rules and principles, or their interpretation, could significantly change our reported earnings and operating results, and could add significant volatility to those measures. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” and Note 2 to the consolidated financial statements for further discussion.

If third parties claim we infringe their intellectual property rights it could negatively impact our business and financial position. From time to time we receive notices from others claiming we infringe their intellectual property rights. In recent years, the number of patent claims assertions has increased generally in the United States and the number of these claims that others may assert against us could grow. Regardless of the merit of these claims, they could be time consuming and could result in costly litigation. Responding to these claims may require us to:

•  enter into royalty and licensing agreements on less favorable terms;

•  develop non-infringing products, services or business methods or operations; or

•  pay damages or satisfy indemnification commitments under contractual provisions.

If we are required to do any of these things, our operating results and financial position may be negatively impacted.

Changes in tax laws and outcomes of tax audits may affect our tax liabilities, tax assets and financial condition. We are subject to federal income taxes as well as income and other business taxes in certain state and local jurisdictions. Significant judgment is required in determining our provision for income and other business taxes. In the ordinary course of our business, there are circumstances where the ultimate tax determination is uncertain. Our tax returns and filings are regularly under audit or examination by tax authorities. Although we believe our tax estimates are appropriate, the final determination of tax audits or examinations, and any related litigation, as well as changes in tax laws, rates, regulations and policies, or interpretations of any of the foregoing, could materially affect our tax liabilities, tax assets and financial condition.

Changes in interest rates may reduce our profitability. Fluctuations in interest rates, whether caused by changes in economic conditions or other factors, may affect our profitability. Our cost of funding our business is influenced by market interest rates because the interest rates we pay on our publicly-offered debt securities, business credit card securitizations and bank deposit products are influenced by market interest rates. A portion of our business credit card receivables are effectively at a fixed rate because of the nature of the pricing of the accounts or because the customer pays the balance in full each month. Therefore, an increase in market interest rates could reduce our net interest income and/or our securitization income. Changes in interest rates can also affect the value of our assets and liabilities.

Our business and business prospects could be negatively impacted if our reputation is damaged. We are exposed to risk to our reputation which can result from alleged conduct in a number of areas, including marketing, lending and pricing practices, corporate governance and actions taken by legislators, regulators, customers or

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parties with whom we have a business relationship. Our reputation could also be harmed by even the appearance of not adequately addressing these or other similar potential issues that may arise. If these or other similar issues were to arise we could face increased risk of litigation, fines or penalties as well as increased costs and expenses to address the issues, which could have a material adverse effect on our results of operations, financial condition or our ability to conduct our business.

Social, economic, environmental and geographic factors can affect levels of customer spending, credit card payments and other customer behaviors in ways that could negatively impact our asset quality and profitability. A variety of social, economic, environmental and geographic factors can adversely affect customer behaviors, such as levels of credit card use and payment patterns. Social factors include changes in confidence levels and attitudes toward incurring debt, the public’s perception of the use of credit cards and the stigma of bankruptcy. Economic factors include the rates of inflation, the unemployment rates and the relative interest rates offered for various types of loans. In addition, acts of terrorism in the United States and the political and military response to any such events may have an adverse effect on general economic or environmental conditions, business confidence and spending, and general market liquidity. Geographic factors may include adverse changes in economic and environmental conditions in states where customers are located which could have a direct impact on the customers’ use of our credit cards as well as on the timing and amount of payments on the accounts. Any of these factors could negatively impact the performance of our business credit card portfolio and our profitability through, among other things, lower new account originations, lower credit card use, increases in delinquencies, increases in the number of customers seeking protection under the bankruptcy laws and increases in credit losses.

Market conditions and other factors beyond our control could negatively impact the availability and cost of funding for our operations. We fund our operations through diversified sources, including securitizations, deposits at our bank subsidiaries and sales of unsecured debt securities. Currently our unsecured debt is rated below investment grade. Non-investment grade ratings of our unsecured debt from rating agencies could make it more difficult and more costly for us to sell debt or equity securities in the capital markets. Continuation of our below investment grade ratings or a down-grade of any of the ratings of our unsecured debt may negatively affect, among other things, our ability to borrow or raise funds on terms that we consider favorable to us. If we are unable to obtain funding on favorable terms, it may negatively impact our ability to fund our operations.

To generate cash for the funding of our operations we also rely on our ability to combine and sell business credit card receivables as asset-backed securities through transactions known as securitizations. At December 31, 2006, off-balance sheet securitized receivables represented 63% of our funding. Our ability to complete securitizations depends upon:

•  general conditions in the securities markets;

•  specific conditions in the asset-backed securities markets;

•  the quality of our business credit card portfolio; and

•  the ratings on the asset-backed securities sold in the securitizations.

Adverse changes in these market conditions, the quality of our loan portfolio or any down-grade of the ratings on the asset-backed securities may disrupt the timing of our securitization transactions and impair our ability to complete securitizations on terms that are satisfactory to us. Although securitizations are not our only source of cash to fund our operations, any substantial reduction in our ability to complete securitizations could negatively impact our results of operations and financial condition.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

At December 31, 2006, Advanta had no owned real property and total leased office space was approximately 337,000 square feet. The significant properties that Advanta leases for its business operations are described below. Advanta leases approximately 110,000 square feet in Spring House, Pennsylvania for its principal executive and

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corporate offices and for use by Advanta Business Cards. In Horsham, Pennsylvania, Advanta leases approximately 110,000 square feet in one building for Advanta Business Cards operations and certain Advanta Bank Corp. and corporate staff functions, and approximately 12,000 square feet in a second building for storage space. Advanta also leases approximately 12,000 square feet of office space in Gibbsboro, New Jersey for Advanta Business Cards operations. In Wilmington, Delaware, Advanta leases approximately 19,000 square feet of office space for Advanta National Bank and for corporate and Advanta Business Cards operations. Advanta also leases approximately 72,000 square feet of office space in Draper, Utah for Advanta Bank Corp. and Advanta Business Cards operations. In addition to these leased properties, Advanta has four additional leases for approximately 2,000 square feet of office space.

Item 3.   Legal Proceedings

Since June 20, 2001, 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 in San Francisco, California brought by Goodrich & Pennington Mortgage Fund, Inc. (“GPMF”), a participant in one of the programs of our former mortgage business. GPMF’s asserted claims in the arbitration included allegations that AMCUSA and AMCSI failed to provide information and documentation under the former mortgage program and various claims concerning GPMF’s relationship with AMCUSA and AMCSI. After several interim awards, on January 24, 2006, the arbitrator issued a final award in favor of AMCUSA and AMCSI rejecting all of GPMF’s claims. The arbitrator further held that AMCUSA and AMCSI were the prevailing parties in the arbitration and that AMCUSA and AMCSI are entitled to recover their reasonable attorney fees and costs. GPMF filed a petition in California state court seeking to vacate the arbitration final award and requesting a new arbitration hearing. On March 8, 2006, AMCUSA and AMCSI opposed GPMF’s petition to vacate and filed a cross-petition to confirm the arbitration award as a judgment. On April 6, 2006, the California state court denied GPMF’s petition to vacate and granted the cross-petition to confirm. The court then entered judgment in conformance with the arbitration award. GPMF is currently appealing that judgment. In a related matter, on July 5, 2005, GPMF filed an action in California state court against the American Arbitration Association seeking damages relating to the arbitrator’s fees and injunctive relief to prevent entry of the arbitrator’s ruling and award in favor of AMCUSA and AMCSI. On April 19, 2006, the court dismissed GPMF’s claims against the American Arbitration Association with prejudice. GPMF is appealing that judgment. We do not expect these matters to have a material adverse effect on our financial position or results of operations.

In addition to the matters 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.

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 operations based on our current expectations regarding the ultimate resolutions of these existing actions 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 actual results will differ from our estimates.

Item 4.   Submission of Matters to a Vote of Security Holders

Not applicable.

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Executive Officers of the Registrant

The applicable Board of Directors elected each of the executive officers of Advanta Corp. and its subsidiaries listed below, to serve at the pleasure of the Board in the capacities indicated.

Name	Age		Office	Date Elected
Dennis Alter		64	Chairman of the Board and Chief Executive Officer		1972
William A. Rosoff		63	Vice Chairman of the Board and President		1996
Philip M. Browne		46	Senior Vice President and Chief Financial Officer		1998
Christopher J. Carroll		47	Chief Credit Officer		2001
John F. Moore		55	President, Advanta Bank Corp.		2004
David B. Weinstock		42	Vice President and Chief Accounting Officer		2001

Mr. Alter became Executive Vice President and a Director of the Company’s predecessor organization in 1967. He became President and Chief Executive Officer in 1972, and Chairman of the Board of Directors in August 1975. Mr. Alter has remained as Chairman of the Board since August 1975. In February 1986, he relinquished the title of President, and in August 1995 he relinquished the title of Chief Executive Officer. In October 1997, Mr. Alter reassumed the title of Chief Executive Officer.

Mr. Rosoff joined the Company in January 1996 as a Director and Vice Chairman. In October 1999, Mr. Rosoff became President as well as Vice Chairman of the Board of the Company. Prior to joining the Company, Mr. Rosoff was a long time partner of the law firm of Wolf, Block, Schorr and Solis-Cohen LLP, the Company’s outside counsel, where he advised the Company for over 20 years. While at Wolf, Block, Schorr and Solis-Cohen LLP he served as Chairman of its Executive Committee and, immediately before joining the Company, as a member of its Executive Committee and Chairman of its Tax Department.

Mr. Browne joined Advanta Corp. in June 1998 as Senior Vice President and Chief Financial Officer. Prior to joining Advanta Corp., he was an Audit and Business Advisory Partner at Arthur Andersen LLP where, for over sixteen years, he audited public and private companies and provided business advisory and consulting services to financial services companies. Mr. Browne is a director of The Bon-Ton Stores, Inc., a publicly held corporation. He serves as Chairman of the Audit Committee for The Bon-Ton Stores, Inc.

Mr. Carroll joined Advanta Corp. in 2001 as Chief Credit Officer. Prior to joining Advanta Corp., Mr. Carroll was a consultant with The Secura Group for two years where he assisted clients, including Advanta, with bank regulatory issues in areas such as credit risk management, credit policy and process management, regulatory compliance, due diligence, and consolidation and conversion projects. Prior to that, he held a variety of positions in credit management and administration at First Interstate Bancorp. (now Wells Fargo), where he spent 11 years as a consumer and commercial lender, credit administrator, regulatory liaison and credit risk manager.

Mr. Moore joined Advanta Corp. in 1986 as Assistant Treasurer. In addition to serving as Assistant Treasurer, from January 2001 until January 2004, Mr. Moore also served as Advanta Corp.’s Managing Director, Retail Funding; and from January 1995 until June 2005, Mr. Moore also served as Vice President of Advanta National Bank. In June 2002, Mr. Moore was elected as a Director of Advanta National Bank. In January 2004, Mr. Moore was elected President of Advanta Bank Corp.

Mr. Weinstock joined Advanta Corp. in 1998 and became Vice President and Chief Accounting Officer in March 2001. From October 1999 to January 2005, Mr. Weinstock also served as Vice President of Investor Relations. Prior to that, from April 1999 to October 1999 he served as Controller. Prior to joining Advanta Corp., Mr. Weinstock served as a Senior Manager at Arthur Andersen LLP from 1996 to 1998, where he audited public and private companies and provided business advisory and consulting services to financial services companies.

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PART II

Item 5.   Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Price Ranges and Dividends

Advanta Corp.’s common stock is traded on the NASDAQ Global Select Market under the symbols ADVNA (Class A voting common stock) and ADVNB (Class B non-voting common stock).

Following are the high, low and closing prices and cash dividends declared for the last two years as they apply to each class of stock:

							Cash
							Dividends
Quarter Ended:	High		Low		Close		Declared
Class A:
March 31, 2005	$	22.80	$	20.23	$	20.80	$	0.0945
June 30, 2005		27.19		20.49		25.89		0.1134
September 30, 2005		28.75		24.34		26.06		0.1134
December 31, 2005		31.30		22.62		30.13		0.1134
March 31, 2006	$	34.74	$	28.82	$	34.09	$	0.1134
June 30, 2006		38.24		31.52		32.79		0.2125
September 30, 2006		34.99		29.16		33.97		0.2125
December 31, 2006		42.63		33.52		39.81		0.2125
Class B:
March 31, 2005	$	24.70	$	21.84	$	23.00	$	0.1134
June 30, 2005		29.44		22.48		28.16		0.1361
September 30, 2005		30.96		26.65		28.23		0.1361
December 31, 2005		33.06		24.76		32.44		0.1361
March 31, 2006	$	37.44	$	30.84	$	36.87	$	0.1361
June 30, 2006		41.74		34.50		35.95		0.2550
September 30, 2006		38.25		31.92		36.90		0.2550
December 31, 2006		46.71		36.51		43.63		0.2550

At February 1, 2007, Advanta Corp. had approximately 188 holders of record of Class A Common Stock and 328 holders of record of Class B Common Stock.

In March 2006, our Board of Directors approved an increase in the regular quarterly cash dividends on Class A Common Stock and Class B Common Stock beginning with the dividend paid in the second quarter of 2006. As a result of this increase, quarterly dividends declared for Class A Common Stock and Class B Common Stock increased to and are currently 21.25 cents per share of Class A Common Stock and 25.50 cents per share of Class B Common Stock. Although we anticipate that cash dividends will continue to be paid in the future, the payment of future dividends by Advanta will be at the discretion of the Board of Directors and will depend on numerous factors including Advanta’s cash flow, financial condition, capital requirements, restrictions on the ability of subsidiaries to pay dividends to Advanta Corp. and such other factors as the Board of Directors deems relevant. See “Part I, Item 1. Government Regulation,” “Part I, Item 1A. Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Resources and Analysis of Financial Condition.”

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Item 6.   Selected Financial Data

($ in thousands, except per share amounts)	Year Ended December 31,
	2006(1)		2005			2004		2003			2002
Summary of Operations(2)
Interest income	$	169,755	$	139,601		$	106,709	$	108,361		$	103,604
Interest expense		75,310		57,586			45,577		48,308			47,580
Noninterest revenues		337,955		290,840			287,841		268,541			240,101
Provision for credit losses		38,600		40,297			42,368		45,423			40,906
Operating expenses		256,812		243,058			234,298		225,165			201,741
Minority interest in income of consolidated subsidiary(3)		0		0			0		8,880			8,880
Gain (loss) on transfer of consumer credit card business		0		67,679			0		0			(43,000	)
Income from continuing operations before income taxes		136,988		157,179			72,307		49,126			1,598
Income (loss) from continuing operations		84,248		116,689			44,273		30,213			(15,572	)
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax		738		(6,260	)		468		(1,968	)		(8,610	)
Net income (loss)		84,986		110,429			44,741		28,245			(24,182	)
Per Common Share Data
Basic income (loss) from continuing operations:
Class A	$	3.01	$	4.34		$	1.69	$	1.19		$	(0.69	)
Class B		3.18		4.47			1.80		1.29			(0.59	)
Combined(4)		3.12		4.43			1.76		1.25			(0.63	)
Diluted income (loss) from continuing operations:
Class A		2.82		3.99			1.57		1.16			(0.69	)
Class B		2.88		4.04			1.62		1.23			(0.59	)
Combined(4)		2.86		4.02			1.60		1.21			(0.63	)
Basic net income (loss):
Class A		3.04		4.11			1.71		1.11			(1.03	)
Class B		3.21		4.23			1.82		1.21			(0.94	)
Combined(4)		3.15		4.19			1.78		1.17			(0.97	)
Diluted net income (loss):
Class A		2.84		3.77			1.58		1.08			(1.03	)
Class B		2.91		3.82			1.64		1.16			(0.94	)
Combined(4)		2.89		3.81			1.62		1.13			(0.97	)
Cash dividends declared:
Class A		0.7509		0.4347			0.3465		0.2520			0.2520
Class B		0.9011		0.5217			0.4158		0.3024			0.3024
Book value-combined		20.65		18.74			14.90		13.87			13.11
Closing stock price:
Class A		39.81		30.13			22.62		12.93			8.98
Class B		43.63		32.44			24.27		12.72			9.39
Financial Condition at Year End
Investments(5)	$	745,108	$	574,839		$	482,917	$	480,935		$	503,479
Gross business credit card receivables:
Owned		1,133,132		879,468			730,483		518,040			445,083
Securitized		4,073,128		2,880,401			2,564,147		2,463,747			2,149,147
Managed(6)		5,206,260		3,759,869			3,294,630		2,981,787			2,594,230
Total owned assets		2,413,138		2,127,403			1,692,924		1,698,444			1,681,613
Deposits		1,365,138		1,070,572			825,273		672,204			714,028
Debt		227,126		226,856			265,759		314,817			315,886
Subordinated debt payable to preferred securities trust(3)		103,093		103,093			103,093		103,093			0
Trust preferred securities(3)		0		0			0		0			100,000
Stockholders’ equity		567,161		515,437			392,194		341,207			321,313

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($ in thousands, except per share amounts)	Year Ended December 31,
	2006(1)			2005			2004			2003			2002
Selected Financial Ratios
Return on average assets		3.79	%		5.61	%		2.81	%		1.45	%		(1.50	)%
Return on average common equity		15.80			23.06			12.18			8.59			(6.74	)
Return on average total equity		15.80			23.04			12.19			8.61			(6.68	)
Equity/owned assets		23.50			24.23			23.17			20.09			19.11
Equity/managed assets(7)		8.94			10.52			9.44			8.38			8.34
Dividend payout(8)		27.70			12.32			23.79			26.78			N/M
As a percentage of owned business credit card receivables:
Total receivables 30 days or more delinquent at year end		2.30			2.68			3.87			4.88			5.26
Net principal charge-offs		3.19			5.37			6.38			7.42			7.92

(1)	Effective January 1, 2006, we adopted SFAS 123(R), Share-Based Payment, using the modified prospective method and began recognizing compensation expense for equity-based compensation arrangements, including stock options, using a fair value based method.
(2)	The results of the mortgage and leasing businesses are reported as discontinued operations in all periods presented.
(3)	Our adoption of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51, 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 beginning December 31, 2003, the balance sheets include subordinated debt payable to preferred securities trust and an equity investment in the trust rather than the trust preferred securities. Also, the consolidated income statements include 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.
(4)	Combined represents net income (loss) allocable to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.
(5)	Includes federal funds sold and investments available for sale.
(6)	Managed statistics are non-GAAP financial measures and represent the sum of owned (GAAP) business credit card statistics and securitized business credit card statistics. We believe that performance on a managed basis provides useful supplemental information to investors because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables.
(7)	See “Liquidity, Capital Resources and Analysis of Financial Condition” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of managed assets to on-balance sheet assets and a description of why management believes the ratio of equity to managed assets is useful to investors.
(8)	The dividend payout ratio for the year ended December 31, 2002 is negative and, therefore, not meaningful.

N/M — Not Meaningful

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our Advanta Business Cards segment issues (through Advanta Bank Corp.) business purpose credit cards to small businesses and business professionals in the United States. Our business credit card accounts provide approved customers with unsecured revolving business credit lines. Advanta Business Cards revenue is generated through interest earned on outstanding balances, interchange income, balance transfer fees, cash usage fees and other fees. Through the first quarter of 2001, we had two additional lending businesses, Advanta Mortgage and Advanta Leasing Services. In the first quarter of 2001, we completed our exit from the mortgage business, announced the discontinuance of our leasing business, and restructured our corporate functions to a size commensurate with our ongoing businesses. Changes in estimate related to our exit from the mortgage business and discontinuance of the leasing business are reported as discontinued operations for all periods presented. The results of our ongoing businesses are reported as continuing operations for all periods presented.

Our strategy in Advanta Business Cards is to maximize long-term profits by attracting and retaining high credit quality customers and deepening our customer relationships. Our marketing campaigns are designed to achieve our strategy by utilizing competitively-priced product offerings that typically include promotional pricing and rewards. We have designed our recent credit card product offerings to be the best combinations of pricing, rewards, features and customer service for small businesses and business professionals. We use a targeted approach to market segments, aiming to anticipate the needs of various small businesses and business professionals, and to offer products and services that are useful to them. Our strategy also involves strengthening and deepening our relationships with our existing customers through our rewards programs, tailored promotional offers, on-line account management tools and a high level of customer service.

Our primary competitors are among the largest issuers of credit cards in the United States. We believe our sole focus on the small business market, as well as our experience in serving this market, provide us with a competitive advantage as compared to these larger competitors. Small business credit cards generally represent a less significant portion of our competitors’ businesses as compared to their consumer credit card portfolios. We believe that our focus and size enable us to quickly respond to the market environment. The small business credit card market has grown significantly in the past several years. We expect the migration of small businesses to business credit cards from consumer credit cards, increased usage of business credit cards as a payment vehicle and the increase in the number of small businesses to generate continued growth.

While the current market environment presents opportunities for us, it also presents us with inherent and specific challenges. The intense competition in the credit card industry may affect our ability to attract and retain high credit quality customers and deepen our customer relationships. The general economic environment in the United States may also affect our results. We believe that a strong U.S. economy could favorably impact the credit quality of our receivables and increase customer activity, while deterioration in the U.S. economy could negatively impact the credit quality of our receivables and decrease customer activity. Increased competition or additional improvement in the U.S. economy could result in lower net interest margin that we believe could be partially offset by increases in customer activity and further improvements in the credit quality of our receivables. In response to these challenges, we continue to develop and refine our product offerings, services and strategies to assist us with originating and retaining profitable relationships with high credit quality customers. As part of our response, we may continue to test new means of marketing to complement our direct mail offers and develop additional product offerings to meet and anticipate the needs of small businesses and business professionals.

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Income from continuing operations includes the following business segment results for the years ended December 31:

($ in thousands, except per share amounts)	2006		2005		2004
Pretax income (loss):
Advanta Business Cards	$	135,587	$	88,905	$	75,182
Other(1)		1,401		68,274		(2,875	)
Total pretax income		136,988		157,179		72,307
Income tax expense		52,740		40,490		28,034
Income from continuing operations	$	84,248	$	116,689	$	44,273
Per combined common share, assuming dilution	$	2.86	$	4.02	$	1.60

(1) Other for 2005 includes a $67.7 million pretax gain on transfer of consumer credit card business.

Our Advanta Business Cards segment offers business credit cards that are competitively priced and typically include promotional pricing and rewards. We design our product offerings to selectively attract and retain high credit quality customers and to respond to the competitive environment. We experience the benefits of high credit quality customers through lower delinquency and credit loss rates and increases in transaction volume. Advanta Business Cards pretax income increased for the years ended December 31, 2006 and 2005, each as compared to the prior year, due primarily to growth in average owned and securitized receivables, higher transaction volume, improved asset quality resulting in decreases in credit loss rates on owned and securitized receivables, and decreases in operating expenses as a percentage of owned and securitized receivables. These favorable impacts were partially offset by higher cost of funds on securitized receivables and a decline in yields on owned and securitized receivables as a result of our competitively-priced product offerings and an increase in the percentage of customers in the receivable portfolio with competitive and promotional pricing in 2006 as compared to 2005 due to a higher rate of receivables growth.

Pretax income from continuing operations in each reporting period also includes venture capital investment realized and unrealized gains or losses reflecting the market conditions for our venture capital investments in each respective period. The estimated fair value of our venture capital investments was $1.0 million at December 31, 2006 and $1.2 million at December 31, 2005. In recent years, we have limited our new venture capital investment activity and we presently do not expect to make significant additional venture capital investments. Pretax income from continuing operations includes operating expenses related to venture capital of $1.0 million in 2004. These types of expenses were minimal in subsequent periods.

Pretax income for the year ended December 31, 2005 includes a $67.7 million pretax gain on transfer of consumer credit card business relating to our May 28, 2004 agreement with Bank of America Corp. (“Bank of America”). See “Gain on Transfer of Consumer Credit Card Business” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

Gain (loss), net, on discontinuance of mortgage and leasing businesses was comprised of the following components for the years ended December 31:

($ in thousands, except per share amounts)	2006			2005			2004
Mortgage business pretax gain (loss) on discontinuance	$	500		$	(13,762	)	$	(3,270	)
Leasing business pretax gain on discontinuance		700			3,500			4,035
Income tax (expense) benefit		(462	)		4,002			(297	)
Gain (loss), net, on discontinuance of mortgage and leasing businesses	$	738		$	(6,260	)	$	468
Per combined common share, assuming dilution	$	0.03		$	(0.21	)	$	0.02

In each of the periods presented, we revised our estimates related to the exit from the mortgage business and discontinuance of the leasing business and recognized pretax gains or losses on discontinuance as shown in the table

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above. See “Discontinued Operations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 2 to the consolidated financial statements. The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates are inherently subjective and are susceptible to significant revision as more information becomes available. Changes in estimates could have a material impact on our financial position or results of operations. We have identified the following 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. We have discussed the development, selection and disclosure of the critical accounting policies and estimates with the Audit Committee of the Board of Directors. Where management has provided sensitivities below, they depict only certain possibilities out of a large set of possible scenarios. These sensitivities do not reflect management’s expectations of changes and are for demonstrative purposes only.

Allowance for Receivable Losses

Receivables on the consolidated balance sheets are presented net of the allowance for receivable losses. We establish the allowance for receivable losses as losses are estimated to have occurred through provisions charged to earnings. We report provisions for credit losses, representing the portion of receivable losses attributable to principal, separately on the consolidated income statements. We record provisions for interest and fee receivable losses as direct reductions to interest and fee income. The allowance for receivable losses is evaluated on a regular basis by management and is based upon management’s review of the collectibility of receivables in light of historical experience by receivable type, the nature and volume of the receivable portfolio, adverse situations that may affect the borrowers’ ability to repay and prevailing economic conditions. Since our business credit card receivable portfolio is comprised of smaller balance homogeneous receivables, we generally evaluate the receivables collectively for impairment through the use of a migration analysis as well as the consideration of other factors that may indicate increased risk of loss, such as bankrupt accounts, overlimit accounts or accounts that have been re-aged or entered a workout program. A migration analysis is a technique used to estimate the likelihood that a receivable or a pool of receivables will progress through various delinquency stages and charge off. The allowance evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Changes in economic conditions, the composition and risk characteristics of the receivables portfolio, bankruptcy laws or regulatory policies could impact our credit losses. A 10% change in the allowance for business credit card receivable losses at December 31, 2006 would impact the allowance for receivable losses and pretax income of the Advanta Business Cards segment by $5.0 million. See Note 5 to the consolidated financial statements for a rollforward of the allowance for receivable losses including provisions and charge-offs in each reporting period.

Securitization Income

A significant portion of our funding for the Advanta Business Cards segment is through securitizations. Retained interests in securitizations are included in accounts receivable from securitizations on the consolidated balance sheets. These assets are carried at estimated fair value and the resulting unrealized gain or loss from the valuation is included in securitization income on the consolidated income statements. We estimate the fair value of retained interests in securitizations based on a discounted cash flow analysis if quoted market prices are not available. We estimate the cash flows of the retained interest-only strip as the excess of the weighted average interest yield on the pool of the receivables sold over the sum of the interest rate earned by noteholders, the servicing fee and an estimate of future credit losses over the life of the existing receivables. We discount cash flows from the date the cash is expected to become available to us using an interest rate that management believes a third party purchaser would demand. The discounted cash flow analysis requires estimates that are susceptible to significant revision as more

26

information becomes available. Changes in economic conditions, market interest rates and pricing spreads, changes in the level of payments on securitized receivables, the composition and risk characteristics of the securitized receivables, bankruptcy laws or regulatory policies could cause actual cash flows from the securitized receivables to vary from management’s estimates. Note 6 to the consolidated financial statements summarizes the key assumptions used to estimate the fair value of retained interests in securitizations during each of the reporting periods and at December 31, 2006 and 2005. It also includes a sensitivity analysis of the valuations of retained interests in securitizations, assuming two changes in each of those assumptions at December 31, 2006.

Rewards Programs

We offer rewards programs with most of our business purpose credit cards. Under our rewards programs, customers may earn either cash back rewards or business rewards that can be redeemed for travel, gift certificates or merchandise. We estimate the costs of future reward redemptions and record a liability at the time cash back rewards or business rewards are earned by the customer. These costs of future reward redemptions are recorded as a reduction of other revenues on the consolidated income statements. Estimates of the costs of future reward redemptions require management to make predictions about future customer behavior, including assumptions regarding the percentage of earned rewards that customers will ultimately redeem and the cost of business rewards. We base the assumptions on historical experience, consideration of changes in portfolio composition and changes in the rewards programs, including redemption terms. It is reasonably possible that actual results will differ from our estimates or that our estimated liability for these programs may change. If either the estimated percentage of earned rewards that customers will ultimately redeem for each program or the estimated cost per redeemed reward point increased by 10% at December 31, 2006, other revenues of the Advanta Business Cards segment would decrease $3.1 million and other liabilities would increase by the same amount.

We revised our estimated costs of future reward redemptions in each of the three years ended December 31, 2006 based on changes in experience in redemption rates and the costs of business rewards redeemed, and/or changes in the rewards programs. The changes in estimated costs of future reward redemptions increased other revenues $500 thousand in the year ended December 31, 2006 and decreased other revenues $1.2 million in 2005 and $2.7 million in 2004.

Income Taxes

Our effective tax rate is based on expected income, statutory tax rates, current tax law and tax planning opportunities available to us in the various jurisdictions in which we operate. Management judgment is required in determining our effective tax rate and in evaluating our tax positions. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our income tax accruals reflect the probable outcome of known tax contingencies.

Deferred income tax assets and liabilities are determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and give current recognition to changes in tax rates and laws. Changes in tax laws, rates, regulations and policies, or the final determination of tax audits or examinations, could materially affect our tax estimates and are outside of our control. We evaluate the realizability of the deferred tax asset and recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. When evaluating the realizability of the deferred tax asset, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. Estimates of expected future taxable income are based on forecasts for continuing operations over a reasonable forecasting horizon and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast the business credit card market and the competitive and general economic environment in future periods.

Changes in estimates of deferred tax asset realizability or effective tax rates may impact the income tax expense of our Advanta Business Cards segment, other continuing operations not attributable to segments or discontinued operations, depending on the circumstances associated with the change in estimate. The net deferred tax asset is included in other assets on the consolidated balance sheets. A 10% decrease in the estimated realizability

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of our net deferred tax assets would decrease deferred tax assets and increase income tax expense by $3.9 million at December 31, 2006. A 100 basis point increase in our effective tax rate would increase our income tax expense by $1.4 million for the year ended December 31, 2006.

In January 2005, we received the Internal Revenue Service’s final approval of the settlement of tax disputes in our May 28, 2004 agreement with Bank of America. The settlement resulted in a reduction of our deferred tax asset related to net operating loss carryforwards and a reduction in the valuation allowance in 2005. See “Income Taxes” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

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 years ended December 31. Credit quality statistics for the business credit card portfolio are included in the “Provision and Allowance for Receivable Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

($ in thousands)	2006		2005		2004
Average owned receivables	$	1,059,566	$	835,093	$	626,383
Average securitized receivables	$	3,337,888	$	2,675,906	$	2,524,547
Customer transaction volume	$	12,342,149	$	9,830,979	$	8,256,552
New account originations		370,564		237,005		130,563
Average number of active accounts(1)		713,302		598,839		582,625
Ending number of accounts at December 31		1,126,083		877,114		777,943

(1) Active accounts are defined as accounts with a balance at month-end. Active account statistics do not include charged-off accounts. The statistics reported above are the average number of active accounts for the years ended December 31.

The increases in new account originations for years ended December 31, 2006 and 2005 are due to enhanced product offerings resulting in improved effectiveness in account acquisition campaigns as well as the size and number of account acquisition campaigns. Based on our current marketing plans and strategies, we expect to originate over 300 thousand new accounts in the year ending December 31, 2007, and we expect owned and securitized business credit card receivables to grow by between 20% and 25% for the year ending December 31, 2007.

The components of pretax income for Advanta Business Cards for the years ended December 31 were as follows:

($ in thousands)	2006			2005			2004
Net interest income on owned interest-earning assets	$	97,505		$	85,670		$	63,415
Noninterest revenues		332,924			284,556			285,610
Provision for credit losses		(38,650	)		(40,315	)		(42,486	)
Operating expenses		(256,192	)		(241,006	)		(231,357	)
Pretax income	$	135,587		$	88,905		$	75,182

Net interest income on owned interest-earning assets increased $11.8 million for the year ended December 31, 2006 as compared to 2005 and increased $22.3 million for the year ended December 31, 2005 as compared to 2004. The increases in both years were due primarily to increases in average owned business credit card receivables, partially offset by decreases in the average yield earned on our business credit card receivables as a result of our competitively-priced product offerings and an increase in the percentage of customers in the receivable portfolio with competitive and promotional pricing in 2006 as compared to 2005 due to a higher rate of receivables growth. Average owned business credit card receivables increased $224 million for the year ended December 31, 2006 as compared to 2005, and increased $209 million for the year ended December 31, 2005 as compared to 2004.

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Noninterest revenues include securitization income, servicing revenues, interchange income and other revenues, and are reduced by rewards costs. Noninterest revenues increased $48.4 million for the year ended December 31, 2006 as compared to 2005 due primarily to higher transaction volume that resulted in higher interchange income and increased volume of securitized receivables that resulted in higher servicing fees, partially offset by higher rewards costs. Securitization income also increased for 2006 as compared to 2005 due to increased volume of securitized receivables and decreases in the net principal charge-off rates on securitized receivables, partially offset by an increase in the floating interest rates earned by noteholders and a decrease in yields on securitized receivables. Noninterest revenues for the year ended December 31, 2006 include a $2.4 million investment gain on MasterCard Incorporated’s redemption of a portion of our shares related to their initial public offering. Noninterest revenues decreased $1.1 million for the year ended December 31, 2005 as compared to 2004. The most significant components of the $1.1 million variance were a decrease in securitization income, an increase in interchange income resulting from higher transaction volume, and an increase in rewards costs. The decrease in securitization income for the year ended December 31, 2005 as compared to 2004 was due primarily to increases in the floating interest rates earned by noteholders, partially offset by increased volume of securitized receivables and decreases in charge-off rates on securitized receivables. Noninterest revenues also include the impact of changes in estimated costs of future reward redemptions in each reporting period. See further discussion in the “Other Revenues” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The decrease in provision for credit losses for the year ended December 31, 2006 as compared to 2005 was due primarily to lower bankruptcy petition filings and improved credit quality of the portfolio, partially offset by increases in average owned business credit card receivables. The decrease in provision for credit losses for the year ended December 31, 2005 as compared to 2004 was due primarily to a reduction in the estimate of losses inherent in the portfolio based on delinquency and charge-off trends and the composition of the portfolio that included more high credit quality customers, partially offset by growth in average owned business credit card receivables. The reduction in the estimate of losses in 2005 was further offset by additional provisions related to potential incremental exposures from increases in the number of customers filing for bankruptcy protection before the change in bankruptcy law on October 17, 2005 and from the 2005 hurricanes. See “Provision and Allowance for Receivable Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for more detailed discussion and a table of credit quality data.

Operating expenses for the year ended December 31, 2006 increased as compared to 2005 due primarily to higher amortization of deferred origination costs related to the increases in new account originations, and higher business credit card marketing expenses related to incremental customer acquisition costs. Operating expenses increased for the year ended December 31, 2005 as compared to 2004 due primarily to higher amortization of deferred origination costs resulting from the increase in new account originations.

Interest Income and Expense

Interest income increased $30.2 million to $169.8 million for the year ended December 31, 2006 as compared to 2005, and increased $32.9 million to $139.6 million for the year ended December 31, 2005 as compared to 2004. The increases in interest income for both 2006 and 2005 were due primarily to increases in average owned business credit card receivables and federal funds sold, and an increase in average yields earned on our federal funds sold and investments, partially offset by decreases in the average yield earned on our business credit card receivables. The decrease in the average yield on our business credit card receivables for 2005 as compared to 2004 was the result of our competitively-priced product offerings. The decrease in the average yield on our business credit card receivables for 2006 was primarily the result of an increase in the percentage of customers in the receivable portfolio with competitive and promotional pricing as compared to 2005 due to a higher rate of receivables growth in 2006. Based on expected levels of receivables growth in 2007 and planned marketing strategies, we expect the average yield earned on business credit card receivables for 2007 to continue to decrease as compared to 2006, but the amount of decrease in average yield is expected to be less than the amount of decrease experienced in 2006 as compared to 2005.

Interest expense increased $17.7 million to $75.3 million for the year ended December 31, 2006 as compared to 2005 and increased $12.0 million to $57.6 million for the year ended December 31, 2005 as compared to 2004. The increases in interest expense were due primarily to increases in deposits outstanding and increases in the

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average cost of funds on deposits resulting from the interest rate environment. Average deposits increased $206 million for the year ended December 31, 2006 as compared to 2005 and increased $284 million for the year ended December 31, 2005 as compared to 2004. Average deposits for the years ended December 31, 2006 and 2005 were higher due to the funding of higher levels of on-balance sheet assets as a result of growth in receivables and securitizations in their accumulation periods in those years.

The following table provides an analysis of interest income and expense data, average balance sheet data, net interest spread and net interest margin. 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.

Interest Rate Analysis and Average Balances

	Year Ended December 31,
	2006							2005							2004
	Average				Average			Average				Average			Average				Average
($ in thousands)	Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
Interest-earning assets:
Owned receivables:
Business credit cards(1)	$	1,059,566	$	125,580		11.85	%	$	835,093	$	106,888		12.80	%	$	626,383	$	82,054		13.10	%
Other receivables		7,656		375		4.90			8,987		475		5.29			11,406		525		4.60
Total receivables		1,067,222		125,955		11.80			844,080		107,363		12.72			637,789		82,579		12.95
Federal funds sold		396,835		20,003		5.04			372,389		12,067		3.24			279,952		3,824		1.37
Restricted interest-bearing deposits		1,321		50		3.79			1,806		37		2.05			10,045		100		1.00
Tax-free investments(2)		576		31		5.38			968		59		6.10			806		45		5.58
Taxable investments		126,119		5,568		4.41			166,578		5,287		3.17			169,618		3,037		1.79
Retained interests in securitizations		203,921		18,158		8.90			168,907		14,809		8.77			151,770		17,140		11.29
Interest-earning assets of discontinued operations		0		0		0.00			7,724		677		8.76			40,624		4,207		10.36
Total interest-earning assets(3)		1,795,994	$	169,765		9.45	%		1,562,452	$	140,299		8.98	%		1,290,604	$	110,932		8.60	%
Noninterest-earning assets		444,984							406,943							301,726
Total assets	$	2,240,978						$	1,969,395						$	1,592,330
Interest-bearing liabilities:
Deposits:
Money market savings	$	47,835	$	2,253		4.71	%	$	7,610	$	218		2.86	%	$	2,962	$	85		2.88	%
Time deposits under $100,000		428,192		18,867		4.41			401,641		14,146		3.52			338,547		9,715		2.87
Time deposits of $100,000 or more		705,203		31,159		4.42			565,694		19,381		3.43			348,957		10,120		2.90
Total deposits		1,181,230		52,279		4.43			974,945		33,745		3.46			690,466		19,920		2.89
Debt		216,364		13,818		6.39			241,482		14,877		6.16			281,973		17,445		6.19
Subordinated debt payable to preferred securities trust		103,093		9,167		8.89			103,093		9,158		8.88			103,093		9,158		8.88
Other borrowings		850		46		5.42			61		2		3.75			145		2		1.58
Total interest-bearing liabilities(4)		1,501,537	$	75,310		5.02	%		1,319,581	$	57,782		4.38	%		1,075,677	$	46,525		4.33	%
Noninterest-bearing liabilities		201,443							170,484							149,535
Total liabilities		1,702,980							1,490,065							1,225,212
Stockholders’ equity		537,998							479,330							367,118
Total liabilities and stockholders’ equity	$	2,240,978						$	1,969,395						$	1,592,330
Net interest spread						4.43	%						4.60	%						4.27	%
Net interest margin						5.26	%						5.28	%						4.99	%

(1)	Interest income includes late fees for owned business credit card receivables of $8.5 million for the year ended December 31, 2006, $7.1 million for 2005, and $5.8 million for 2004.
(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 for the years ended December 31, 2005 and 2004.

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Interest Variance Analysis

The following table presents the effects of changes in average volume and interest rates on individual financial statement line items on a tax equivalent basis using a statutory rate of 35%. The effects on individual financial statement line items are not necessarily indicative of the overall effect on net interest income. Total interest income includes income from assets held and available for sale.

	2006 vs. 2005												2005 vs. 2004
	Increase (Decrease) Due to												Increase (Decrease) Due to
	Changes			Changes			Changes			Total			Changes			Changes			Changes			Total
	in			in			in Rate/			Increase			in			in			in Rate/			Increase
($ in thousands)	Volume(1)			Rate(2)			Volume(3)			(Decrease)			Volume(1)			Rate(2)			Volume(3)			(Decrease)
Interest income from:
Owned receivables:
Business credit cards	$	28,733		$	(7,933	)	$	(2,108	)	$	18,692		$	27,341		$	(1,879	)	$	(628	)	$	24,834
Other receivables		(70	)		(35	)		5			(100	)		(111	)		79			(18	)		(50	)
Federal funds sold		792			6,703			441			7,936			1,266			5,235			1,742			8,243
Restricted interest-bearing deposits		(10	)		31			(8	)		13			(82	)		105			(86	)		(63	)
Tax-free investments		(24	)		(7	)		3			(28	)		9			4			1			14
Taxable investments		(1,283	)		2,066			(502	)		281			(54	)		2,341			(37	)		2,250
Retained interests in securitizations		3,071			220			58			3,349			1,935			(3,825	)		(441	)		(2,331	)
Interest-earning assets of discontinued operations		(677	)		0			0			(677	)		(3,408	)		(650	)		528			(3,530	)
Total interest income	$	30,532		$	1,045		$	(2,111	)	$	29,466		$	26,896		$	1,410		$	1,061		$	29,367
Interest expense on:
Deposits:
Money market savings	$	1,150		$	141		$	744		$	2,035		$	134		$	(1	)	$	0		$	133
Time deposits under $100,000		935			3,575			211			4,721			1,811			2,201			419			4,431
Time deposits of $100,000 or more		4,785			5,600			1,393			11,778			6,285			1,849			1,127			9,261
Debt		(1,547	)		555			(67	)		(1,059	)		(2,506	)		(85	)		23			(2,568	)
Subordinated debt payable to preferred securities trust		0			9			0			9			0			0			0			0
Other borrowings		30			1			13			44			(1	)		3			(2	)		0
Total interest expense		5,353			9,881			2,294			17,528			5,723			3,967			1,567			11,257
Net interest income	$	25,179		$	(8,836	)	$	(4,405	)	$	11,938		$	21,173		$	(2,557	)	$	(506	)	$	18,110

(1)	Equals change in volume multiplied by prior year rate.
(2)	Equals change in rate multiplied by prior year volume.
(3)	Equals change in rate multiplied by change in volume.

Provision and Allowance for Receivable Losses

For the year ended December 31, 2006, provision for credit losses on a consolidated basis decreased $1.7 million to $38.6 million as compared to 2005, and the provision for interest and fee losses on business credit card receivables, which is recorded as a direct reduction to interest and fee income, decreased $440 thousand to $8.8 million as compared to 2005. The decreases in provisions were due primarily to lower bankruptcy petition filings and improved credit quality of the portfolio, partially offset by an increase in average owned business credit card receivables of $224 million for the year ended December 31, 2006 as compared to 2005. The improved credit quality is evident in lower delinquency and charge-off rates. Charge-off rates in both 2005 and 2006 were impacted by the change in bankruptcy law on October 17, 2005 that resulted in receipt of a significantly higher than average number of bankruptcy filings in September through November 2005, as borrowers rushed to file their petitions before the new bankruptcy law took effect. We estimated that the surge in bankruptcy petition filings in 2005 principally reflected an acceleration of losses that we otherwise would have expected to occur in later periods, including the first half of 2006. Subsequent to periods impacted by the 2005 acceleration, we experienced lower levels of monthly bankruptcy petition filings as compared to the months preceding the surge in 2005. The acceleration of bankruptcy charge-offs into 2005, the subsequent reduction in bankruptcy petition filings and improved credit quality each contributed to the lower level of charge-offs for the year ended December 31, 2006 as compared to 2005.

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For the year ended December 31, 2005, provision for credit losses on a consolidated basis decreased $2.1 million to $40.3 million as compared to 2004, and the provision for interest and fee losses, which is recorded as a direct reduction to interest and fee income, decreased $444 thousand to $9.3 million as compared to 2004. The decreases in provision for credit losses and provision for interest and fee losses were due primarily to a reduction in the estimate of losses inherent in the portfolio based on delinquency and charge-off trends and the composition of the portfolio that included more high credit quality customers, partially offset by growth in average owned business credit card receivables of $209 million for the year ended December 31, 2005 as compared to 2004. The reduction in the estimate of losses in 2005 was further offset by additional provisions related to potential incremental exposures from increases in the number of customers filing for bankruptcy protection and from the 2005 hurricanes.

The allowance for receivable losses on business credit card receivables was $49.7 million as of December 31, 2006, or 4.39% of owned receivables, which was lower as a percentage of owned receivables than the allowance of $44.3 million, or 5.04% of owned receivables, as of December 31, 2005. Owned business credit card receivables increased to $1.1 billion at December 31, 2006 from $879 million at December 31, 2005. The decrease in allowance as a percentage of owned receivables reflects a reduction in the estimate of losses inherent in the portfolio based on improvements in delinquency and net principal charge-off rates reflecting the composition of the portfolio that included more high credit quality customers. The decrease also reflects a reduction in our estimate of potential loss exposure related to customers affected by the 2005 hurricanes, based on subsequent experience.

In December 2006, the federal financial institutions regulatory agencies issued the Interagency Policy Statement on the Allowance for Loan and Lease Losses that replaces the banking agencies’ previous policy statement on allowance for loan and lease losses. The policy statement was revised to ensure consistency with GAAP and describes the responsibilities of the board of directors, management and bank examiners regarding the allowance for loan and lease losses. In accordance with the guidance in the policy statement, management implemented enhancements to the allowance process and documentation as of December 31, 2006 that had no impact on our reported results. Management is currently evaluating the implementation of additional process and documentation enhancements in accordance with the policy statement. We do not expect the implementation to have a material impact on our financial position or results of operations.

Our charge-off and re-age policies conform to the Uniform Retail Credit Classification and Account Management Policy, as well as the Credit Card Lending Guidance, issued by the federal financial institutions regulatory agencies. Our charge-off policy for contractually delinquent business credit card accounts is to charge-off an unpaid receivable no later than the end of the month in which it becomes and remains past due 180 cumulative days from the contractual due date. Our charge-off policy for bankrupt business credit card accounts is to charge-off the unpaid receivable within 60 days of receipt of notification of filing from the bankruptcy court or within the timeframes adopted in the Uniform Retail Credit Classification and Account Management Policy, whichever is shorter.

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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. Accounts previously reported as delinquent that have been re-aged after meeting prescribed criteria and are not reported in delinquency statistics were $6.4 million at December 31, 2006 and $7.7 million at December 31, 2005. Gross interest income that would have been recorded for nonaccrual receivables, had interest been accrued throughout the year in accordance with the assets’ original terms, was approximately $3.4 million for the year ended December 31, 2006, $3.8 million for 2005 and $2.9 million for 2004. Prior to October 1, 2002, the billing and recognition of interest and fees was discontinued when the related receivable became 90 days past due or when the account was classified as fraudulent, bankrupt, deceased, hardship or workout. Effective October 1, 2002, we continue to bill and recognize interest and fees on accounts when they become 90 days past due, and an additional allowance for receivable losses is established for the additional billings estimated to be uncollectible through a provision for interest and fee losses.

	December 31,
($ in thousands)	2006			2005			2004			2003			2002
Consolidated — Owned
Allowance for receivable losses	$	50,926		$	45,589		$	50,478		$	48,454		$	46,159
Receivables 30 days or more delinquent		26,053			23,646			28,369			25,413			25,197
Receivables 90 days or more delinquent		12,632			10,837			13,638			12,808			12,755
Nonaccrual receivables		10,524			11,476			11,393			7,978			5,525
Accruing receivables past due 90 days or more		11,302			9,479			12,233			11,320			10,535
As a percentage of gross receivables:
Allowance for receivable losses		4.46	%		5.14	%		6.81	%		9.06	%		9.81	%
Receivables 30 days or more delinquent		2.28			2.66			3.83			4.75			5.35
Receivables 90 days or more delinquent		1.11			1.22			1.84			2.39			2.71
Nonaccrual receivables		0.92			1.29			1.54			1.49			1.17
Accruing receivables past due 90 days or more		0.99			1.07			1.65			2.12			2.24
Net principal charge-offs	$	33,780		$	44,870		$	39,943		$	43,704		$	37,416
As a percentage of average gross receivables:
Net principal charge-offs		3.17	%		5.32	%		6.26	%		7.18	%		7.49	%
Business Credit Cards — Owned
Allowance for receivable losses	$	49,715		$	44,323		$	49,190		$	47,041		$	44,466
Receivables 30 days or more delinquent		26,053			23,595			28,287			25,301			23,406
Receivables 90 days or more delinquent		12,632			10,837			13,638			12,696			11,959
Nonaccrual receivables		10,524			11,476			11,393			7,866			4,729
Accruing receivables past due 90 days or more		11,302			9,479			12,233			11,320			10,535
As a percentage of gross receivables:
Allowance for receivable losses		4.39	%		5.04	%		6.73	%		9.08	%		9.99	%
Receivables 30 days or more delinquent		2.30			2.68			3.87			4.88			5.26
Receivables 90 days or more delinquent		1.11			1.23			1.87			2.45			2.69
Nonaccrual receivables		0.93			1.30			1.56			1.52			1.06
Accruing receivables past due 90 days or more		1.00			1.08			1.67			2.19			2.37
Net principal charge-offs	$	33,775		$	44,865		$	39,936		$	43,670		$	37,400
As a percentage of average gross receivables:
Net principal charge-offs		3.19	%		5.37	%		6.38	%		7.42	%		7.92	%

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Securitization Income

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. Securitizations impacted the following line items on the consolidated income statements for the years ended December 31:

($ in thousands)	2006		2005		2004
Securitization income	$	114,938	$	109,051	$	124,769
Interest income (discount accretion)		18,158		14,809		17,140
Interchange income		155,160		126,056		112,568
Servicing revenues		63,726		51,079		49,516
Total	$	351,982	$	300,995	$	303,993

Our retained interests in securitizations entitle us to the excess spread on the securitized receivables. Excess spread represents income-related cash flows on securitized receivables net of noteholders’ interest, servicing fees and credit losses. Fair value estimates used in the recognition of securitization income include cash flow estimates of interest income on securitized receivables in excess of interest expense (interest earned by noteholders), servicing fees and credit losses on securitized receivables.

Securitization income increased for the year ended December 31, 2006 as compared to 2005 due to increased volume of securitized receivables and decreases in the net principal charge-off rates on securitized receivables, partially offset by an increase in the floating interest rates earned by noteholders and a decrease in the yields on securitized receivables. Yields on securitized receivables decreased for the year ended December 31, 2006 as compared to 2005 as a result of an increase in the percentage of customers in the receivable portfolio with competitive and promotional pricing in 2006 as compared to 2005 due to a higher rate of receivables growth. The increase in the floating interest rates earned by noteholders for the year ended December 31, 2006 as compared to 2005 resulted from the rising interest rate environment. The decrease in charge-off rates on securitized receivables for the year ended December 31, 2006 as compared to 2005 was due to lower bankruptcy petition filings, improved asset quality of the portfolio and the impact of the change in bankruptcy law in 2005 discussed in the “Provision and Allowance for Receivable Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. We estimate that the increase in bankruptcy charge-offs in 2005 principally reflected an acceleration of losses that we otherwise would have expected to occur in later periods, including the first half of 2006. As a result of lower yields, higher floating interest rates earned by noteholders, the impact of the timing of bankruptcy charge-offs and our expectations regarding future charge-off rates, our estimate of future cash flows over the three-month weighted average life of the existing securitized receivables decreased in the year ended December 31, 2006 as compared to the estimates as of December 31, 2005, which resulted in an unfavorable valuation adjustment to the retained interest-only strip of $3.5 million in 2006. Our future expectations for yields on securitized receivables are similar to those in owned business credit card receivables as discussed in the “Interest Income and Expense” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The decrease in securitization income for the year ended December 31, 2005 as compared to 2004 was due primarily to increases in the floating interest rates earned by noteholders resulting from the rising interest rate environment, partially offset by increased volume of securitized receivables and a decrease in charge-off rates on securitized receivables. The decrease in charge-off rates on securitized receivables was due to the composition of the portfolio that included more high credit quality customers, partially offset by an increase in bankruptcy charge-offs resulting from the impact of the change in bankruptcy law in 2005. The acceleration of bankruptcy charge-offs in 2005 lowered our estimate of future credit losses over the life of the existing receivables, which resulted in a $3.5 million favorable valuation adjustment to the retained interest-only strip as of December 31, 2005.

Managed Receivable Data

In addition to evaluating the financial performance of the Advanta Business Cards segment under 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 believe that performance

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on a managed basis provides useful supplemental information to investors because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. 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:

Managed Financial Measures and Statistics

	Advanta Business					Securitization			Advanta Business
($ in thousands)	Cards GAAP		GAAP Ratio(1)			Adjustments			Cards Managed		Managed Ratio(1)
Year Ended December 31, 2006
Net interest income	$	97,505		7.72	%	$	260,319		$	357,824		8.14	%
Provision for credit losses		38,650		3.06			119,727	(2)		158,377		3.60
Noninterest revenues		332,924		26.35			(140,592	)		192,332		4.37
Average business credit card interest-earning assets		1,263,487					3,133,967			4,397,454
Year Ended December 31, 2005
Net interest income	$	85,670		8.53	%	$	280,021		$	365,691		10.42	%
Provision for credit losses		40,315		4.02			152,118	(2)		192,433		5.48
Noninterest revenues		284,556		28.34			(127,903	)		156,653		4.46
Average business credit card interest-earning assets		1,004,000					2,506,999			3,510,999
Year Ended December 31, 2004
Net interest income	$	63,415		8.15	%	$	310,509		$	373,924		11.87	%
Provision for credit losses		42,486		5.46			170,024	(2)		212,510		6.75
Noninterest revenues		285,610		36.70			(140,485	)		145,125		4.61
Average business credit card interest-earning assets		778,153					2,372,777			3,150,930
As of December 31, 2006
Ending business credit card receivables	$	1,133,132				$	4,073,128		$	5,206,260
Receivables 30 days or more delinquent		26,053		2.30	%		108,159			134,212		2.58	%
Receivables 90 days or more delinquent		12,632		1.11			52,279			64,911		1.25
As of December 31, 2005
Ending business credit card receivables	$	879,468				$	2,880,401		$	3,759,869
Receivables 30 days or more delinquent		23,595		2.68	%		87,610			111,205		2.96	%
Receivables 90 days or more delinquent		10,837		1.23			40,223			51,060		1.36

(1)

Ratios are as a percentage of average business credit card interest-earning assets except delinquency ratios which are as a percentage of ending business credit card receivables.

(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. The year ended December 31, 2006 includes a $3.5 million unfavorable valuation adjustment to retained interests in securitizations as an increase to provision for credit losses. The year ended December 31, 2005 includes a $3.5 million favorable valuation adjustment to retained interests in securitizations as a reduction to provision for credit losses.

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Servicing Revenues

Servicing revenues were $63.7 million for the year ended December 31, 2006, $51.1 million for 2005 and $49.5 million for 2004. The increases in servicing revenues in 2006 and 2005 were due to increased volume of securitized business credit card receivables.

Other Revenues

	Year Ended December 31,
($ in thousands)	2006			2005			2004
Interchange income	$	203,369		$	164,853		$	140,534
Cash back rewards		(45,845	)		(33,581	)		(24,713	)
Business rewards		(22,216	)		(20,140	)		(16,513	)
Balance transfer fees		7,848			5,561			4,572
Investment securities gains (losses), net		5,508			780			(1,498	)
Other business credit card fees		3,545			3,283			2,911
Cash usage fees		3,487			3,199			3,097
Earnings on investment in Fleet Credit Card Services, L.P.		1,246			1,948			2,545
Other, net		2,349			4,807			2,621
Total other revenues, net	$	159,291		$	130,710		$	113,556

Interchange income includes interchange fees on both owned and securitized business credit cards. The increases in interchange income for years ended December 31, 2006 and 2005, each as compared to the prior year, were due primarily to higher merchandise sales transaction volume. The average interchange rates were 2.2% for the years ended December 31, 2006 and 2005 as compared to 2.1% for 2004. The average interchange rates are impacted by the interchange fees established by MasterCard^®* in April of each year.

The increase in cash back rewards for the year ended December 31, 2006 as compared to 2005 was due primarily to higher merchandise sales transaction volume and a higher average number of business credit card accounts in the cash back rewards programs. The increase in cash back rewards for the year ended December 31, 2005 as compared to 2004 was due primarily to higher merchandise sales transaction volume, higher average business credit card accounts in the cash back rewards programs and higher costs of rewards programs. The increases in business rewards for the years ended December 31, 2006 and 2005, each as compared to the prior year, were due primarily to higher merchandise sales transaction volume, partially offset by changes in estimates of costs of future reward redemptions. Each of the three years ended December 31, 2006 includes changes in estimates of costs of future reward redemptions based on changes in experience in redemption rates and the costs of business rewards redeemed, and/or changes in the rewards programs. Changes in estimates increased other revenues $500 thousand in the year ended December 31, 2006 as compared to a decrease of $1.2 million in 2005 and a decrease of $2.7 million in 2004.

The increase in balance transfer fees for the year ended December 31, 2006 as compared to 2005 was due primarily to a higher volume of balance transfers resulting from higher new account originations. The increase in balance transfer fees for the year ended December 31, 2005 as compared to 2004 was due primarily to an increase in average owned business credit card receivables, partially offset by the impact of an increase in life of balance promotional offers that generally do not have a transaction fee but carry a higher interest rate than offers with a transaction fee.

Investment securities gains (losses), net, include realized and unrealized gains and losses on venture capital investments reflecting the market conditions for our investments in each respective period, as well as realized gains and losses on the sale of other investments. We had gains of $1.4 million on venture capital investments for the year ended December 31, 2006, as compared to a net gain of $593 thousand for 2005 and a net loss of $1.5 million for

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

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2004. Realized gains on other investments in 2006 include a $2.4 million gain on MasterCard Incorporated’s redemption of a portion of our shares related to their initial public offering.

As a result of our May 28, 2004 agreement with Bank of America and the combination of Bank of America’s and Fleet Credit Card Services, L.P.’s consumer credit card businesses, our partnership interest in Fleet Credit Card Services, L.P. represents an interest in the combined business. Subsequent to the date of the agreement with Bank of America, we have accounted for our investment in Fleet Credit Card Services, L.P. using the cost method and have recognized dividend distributions from net accumulated earnings as income. Prior to the date of the agreement, we recognized earnings allocable to our partnership interest using the equity method.

Gain on Transfer of Consumer Credit Card Business

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 Financial Group, Inc. (“Fleet”), which was acquired by Bank of America, relating to the transfer of our consumer credit card business to Fleet Credit Card Services, L.P. in 1998. The agreement was subject to the Internal Revenue Service’s final approval of the settlement of the tax disputes. We received the final approval of the Internal Revenue Service in January 2005 and, as a result, we received $63.8 million in cash from Bank of America in February 2005, representing a return of the payments that we made to Fleet in the Delaware state court litigation in February 2004. Consistent with the terms of our agreement with Bank of America, all outstanding litigation between Advanta and Fleet was dismissed in February 2005. The overall impact of the agreement with Bank of America, including the cash received, settlement of the tax disputes and reevaluation of the valuation allowance on deferred tax assets, was a pretax gain of $67.7 million, tax expense of $5.6 million and an increase in additional paid-in capital of $6.0 million in the year ended December 31, 2005. See “Income Taxes” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of the income tax impact of our May 28, 2004 agreement with Bank of America.

Operating Expenses

	Year Ended December 31,
($ in thousands)	2006		2005		2004
Salaries and employee benefits	$	96,371	$	96,012	$	92,863
Amortization of deferred origination costs, net		48,285		41,729		33,508
External processing		25,072		21,216		20,267
Marketing		23,193		20,560		21,014
Professional fees		11,907		12,236		14,043
Equipment		9,942		10,954		11,173
Occupancy		9,102		8,180		8,695
Credit		5,140		5,064		5,781
Other		27,800		27,107		26,954
Total operating expenses	$	256,812	$	243,058	$	234,298

Salaries and employee benefits for the year ended December 31, 2006 include an increase in expense related to employee stock options resulting from the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share-Based Payment, discussed below. Salaries and employee benefits for the year ended December 31, 2005 include $2.9 million of expense associated with a separation agreement with a former executive in the first quarter of 2005, and a reduction in staffing levels implemented in the second quarter of 2005 as part of productivity and efficiency initiatives that resulted in $2.1 million of severance and related costs. Salaries and employee benefits for the year ended December 31, 2004 include $1.6 million of expense associated with executive compensation incurred in connection with changes in senior management and venture capital personnel severance costs.

In December 2004, the FASB issued SFAS No. 123R that addresses accounting for equity-based compensation arrangements, including employee stock options. Entities are 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.

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Prior to January 1, 2006, we used the intrinsic value based method of accounting for employee stock options permitted by SFAS No. 123 Accounting for Stock Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, and, as a result, had not recognized compensation expense for options granted to employees that had no intrinsic value at grant date. We adopted SFAS No. 123R on January 1, 2006 using the modified prospective method, and recognized $3.8 million of salaries and employee benefits expense related to employee stock options for the year ended December 31, 2006. As of December 31, 2006, total unrecognized compensation expense related to outstanding stock options was $8.9 million and the expense is expected to be recognized over a weighted average period of 2.1 years.

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 a privilege period of one year. Amortization of deferred origination costs, net, increased for the years ended December 31, 2006 and 2005, each as compared to the prior year, due primarily to an increase in new account originations, partially offset by a decrease in our average acquisition cost per account due to enhanced product offerings resulting in improved effectiveness in account acquisition campaigns.

External processing expense increased for the year ended December 31, 2006 as compared to 2005 due primarily to an increase in the number of accounts and higher transaction volume.

Marketing expense increased for the year ended December 31, 2006 as compared to 2005 due primarily to incremental customer acquisition costs largely associated with new prospect lists, partially offset by a reduction in sponsorship and advertising costs associated with cultural and tennis events. Marketing expense decreased for the year ended December 31, 2005 as compared to 2004 due primarily to higher costs in 2004 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. Partially offsetting this decrease were increased costs in 2005 associated with sponsorship activities relating to cultural events and the development of programs to originate new customers as compared to the same period of 2004.

Professional fees decreased for the year ended December 31, 2005 as compared to 2004 due primarily to decreases in the use of external consultants for marketing initiatives.

Occupancy expense for the year ended December 31, 2004 includes approximately $571 thousand of expense relating to lease commitments associated with the closure in the first quarter of 2004 of an operational location previously used for venture capital operations.

In 2007, we plan to pilot new outsourcing initiatives, including offshoring, involving certain of our business processes and information technology functions and to pursue other re-engineering opportunities. We currently anticipate incurring approximately $5 million of incremental operating expenses in 2007 related to these activities.

Litigation Contingencies

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. 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 operations based on our current expectations regarding the ultimate resolutions of these existing actions 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 actual results will differ from our estimates.

Income Taxes

Income tax expense attributable to continuing operations was $52.7 million for the year ended December 31, 2006, $40.5 million for 2005 and $28.0 million for 2004. Our effective tax rate was 38.5% for 2006, 25.8% for 2005 and 38.8% for 2004.

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In January 2005, we received the Internal Revenue Service’s final approval of the settlement of tax disputes in our May 28, 2004 agreement with Bank of America and in February 2005, we received $63.8 million in cash from Bank of America. See “Gain on Transfer of Consumer Credit Card Business” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion. Excluding the impact of the Bank of America agreement and reevaluation of the valuation allowance discussed below, our effective tax rate would have been 39.0% for the year ended December 31, 2005. The settlement of the tax disputes resulted in an allocation of $381 million of the disputed partnership tax deductions to Fleet, which was acquired by Bank of America, and $617 thousand of the disputed $47 million partnership taxable gain to Advanta. The impact to us of the tax deduction and gain allocation was a reduction in our deferred tax asset related to net operating loss carryforwards of $133.4 million and a corresponding reduction in our valuation allowance on deferred tax assets of $133.4 million, both in the year ended December 31, 2005. Upon receipt of the Internal Revenue Service’s approval of the settlement of the tax disputes, the remaining valuation allowance of $12.4 million was evaluated, and management determined that it was more likely than not that the remaining deferred tax asset was realizable and therefore, no valuation allowance was needed, resulting in a $6.4 million reduction in tax expense and a $6.0 million increase in additional paid-in capital in the year ended December 31, 2005. The increase in additional paid-in capital represented the portion of the valuation allowance that had been related to tax benefits from stock-based compensation. The gain associated with the original transfer of assets to Fleet Credit Card Services, L.P. in 1998 was not subject to income tax, and therefore, a substantial portion of the February 2004 payment to Fleet was not tax-deductible. A substantial portion of the $63.8 million payment received in February 2005 was not taxable since it is a return of our payment to Fleet in February 2004. As of December 31, 2006, the cumulative gain on transfer of consumer credit card business and our deficit capital account in Fleet Credit Card Services L.P. on a tax basis for which no deferred taxes have been provided is approximately $650 million, as the transaction structure remains nontaxable under current tax law. See Note 19 to the consolidated financial statements.

In the third quarter of 2006, we completed the preparation and filing of our 2005 U.S. federal income tax return and recognized a current tax benefit and deferred tax provision to reflect a reduction in current taxes payable and deferred tax assets from the amounts previously estimated. These results were due to changes in the timing of certain deductions and recognition of certain revenues in the 2005 tax return and had no net impact on our effective tax rate or total income tax expense for the year ended December 31, 2006.

At December 31, 2006, we have $4.3 million of capital loss carryforwards that are scheduled to expire in the year ending December 31, 2009, $7.4 million that are scheduled to expire in the year ending December 31, 2010, and $7.3 million that are scheduled to expire in the year ending December 31, 2011.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109. The statement provides a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In accordance with the statement, before a tax benefit can be recognized, a tax position is evaluated using a threshold that it is more likely than not that the tax position will be sustained upon examination. When evaluating the more-likely-than-not recognition threshold, the interpretation provides that a company should presume the tax position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. If the tax position meets the more-likely-than-not recognition threshold, it is initially and subsequently measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Based on our current assessment and subject to changes that may result from additional guidance issued by the FASB on this statement, we do not expect the adoption of this statement effective January 1, 2007 to have a material impact on our financial position or results of operations.

Discontinued Operations

For the year ended December 31, 2006, we recorded a net after-tax gain on the discontinuance of our mortgage and leasing businesses of $738 thousand. The components of the net gain included a $500 thousand pretax gain on the discontinuance of the mortgage business, a $700 thousand pretax gain on the discontinuance of the leasing business, and tax expense of $462 thousand. The gain on the discontinuance of the mortgage business represented changes in

39

estimates of legal expenses and related insurance reimbursements, and other favorable changes in estimate related to a former mortgage insurance product. The gain on the discontinuance of the leasing business represented changes in estimated leasing operating results of the leasing segment over the wind down period. The largest components of the change in leasing estimate in 2006 were favorable credit recoveries and equipment realization rates based on recent performance trends.

For the year ended December 31, 2005, we recorded a net after-tax loss on the discontinuance of our mortgage and leasing businesses of $6.3 million. The components of the net loss included a $13.8 million pretax loss on the discontinuance of the mortgage business, a $3.5 million pretax gain on the discontinuance of the leasing business, and a tax benefit of $4.0 million. The loss on the discontinuance of our mortgage business included a $25.5 million loss resulting from the court ruling in the July 26, 2001 litigation with Chase Manhattan Mortgage Corporation (“Chase”), a $3.1 million gain on the settlement with Chase of separate litigation that commenced during 2004, and an $8.6 million gain representing a change in estimate of costs of mortgage business-related contingent liabilities. The change in estimate of costs of mortgage business-related contingent liabilities was due primarily to recoveries from insurance reimbursements for past and ongoing legal expenses, partially offset by increased litigation reserves and reserves for legal costs based on developments in litigation prior to the resolution of the Chase matters. The gain on the discontinuance of the leasing business represented a change in estimated leasing operating results of the leasing segment over the remaining life of the lease portfolio based on performance trends, including favorable credit performance, sales tax refunds and reduced estimates of certain operating expenses, partially offset by a reduction in our estimated realization rate on equipment residuals.

For the year ended December 31, 2004, we recorded a net after-tax gain on the discontinuance of our mortgage and leasing businesses of $468 thousand. The components of the net gain included a $3.3 million pretax loss on the discontinuance of the mortgage business, a $4.0 million pretax gain on the discontinuance of the leasing business, and tax expense of $297 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 disputes related to one of our former mortgage programs and litigation with Chase, partially offset by an insurance settlement. The gain on the discontinuance of the leasing business was principally associated with favorable performance in revenues and credit losses and an insurance settlement, partially offset by increased operating expenses due to a lengthening of the anticipated timeframe over which we expected to incur certain operating expenses related to the lease portfolio.

Off-Balance Sheet Arrangements

Off-Balance Sheet Securitizations

Off-balance sheet business credit card securitizations provide a significant portion of our funding and they are one of our primary sources of liquidity. At December 31, 2006, off-balance sheet securitized receivables represented 63% of our funding. Our credit risk in the securitized receivables is limited to the amount of our retained interests in securitizations. We had securitized business credit card receivables of $4.1 billion at December 31, 2006 and $2.9 billion at December 31, 2005.

We generally retain an interest in securitized receivables in the form of subordinated trust assets, cash reserve accounts and retained interest-only strips. Subordinated trust assets represent an ownership interest in the securitized receivables that is subordinated to the other noteholders’ interests. Retained interests in securitizations serve as credit enhancement to the noteholders’ interests in the securitized receivables. We had $234.1 million of retained interests in securitizations at December 31, 2006 and $183.4 million at December 31, 2005. The fair values of retained interests in securitizations are dependent upon the performance of the underlying securitized receivables. Our retained interests in securitizations entitle us to the excess spread on the receivables. Excess spread represents income-related cash flows on securitized receivables (interest, interchange and fees) net of noteholders’ interest, servicing fees and credit losses. If the income-related cash flows on securitized receivables do not exceed the other components of the excess spread, the value of our retained interests will decline, potentially to zero.

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The following table summarizes securitization data including income and cash flows for the years ended December 31:

($ in thousands)	2006		2005		2004
Average securitized receivables	$	3,337,888	$	2,675,906	$	2,524,547
Securitization income		114,938		109,051		124,769
Discount accretion		18,158		14,809		17,140
Interchange income		155,160		126,056		112,568
Servicing revenues		63,726		51,079		49,516
Proceeds from new securitizations		2,160,674		1,248,066		131,641
Proceeds from collections reinvested in revolving-period securitizations		7,553,476		6,023,825		6,557,489
Cash flows received on retained interests		332,439		301,531		264,391

See Note 6 to the consolidated financial statements for the key assumptions used in estimating the fair value of retained interests in securitizations during each reporting period and at December 31, 2006 and 2005. Our accounting policies related to securitization transactions are discussed in Note 2 to the consolidated financial statements and the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The revolving periods of our securitizations extend to the following dates:

	Noteholder
	Principal
	Balance at				Scheduled End of		Extended End of
($ in thousands)	December 31, 2006(1)		Coupon Type		Revolving Period		Revolving Period
Series 1997-A	$	206,718		Floating		June 2007		N/A
Series 2001-A		300,000		Floating		July 2007		N/A
AdvantaSeries:
2006-A1		200,000		Fixed		February 2007		September 2007
2005-A4		150,000		Fixed		May 2007		December 2007
2005-A1		250,000		Floating		August 2007		N/A
2005-D1		20,000		Floating		September 2007		N/A
2005-C1		100,000		Floating		December 2007		N/A
2005-A3		250,000		Fixed		February 2008		N/A
2006-A2		250,000		Floating		May 2008		N/A
2005-D2		25,000		Floating		July 2008		N/A
2005-A5		200,000		Floating		August 2008		N/A
2006-A3		250,000		Fixed		September 2008		N/A
2006-B1		100,000		Floating		November 2008		N/A
2004-C1		100,000		Floating		January 2009		N/A
2004-D1		10,000		Floating		January 2009		N/A
2006-A5		200,000		Fixed		January 2009		N/A
2006-D3		30,000		Floating		January 2009		N/A
2006-A7		200,000		Floating		February 2009		N/A
2005-B1		100,000		Floating		June 2009		N/A
2005-A2		225,000		Floating		September 2009		N/A
2006-A6		250,000		Floating		January 2010		N/A
2006-D1		15,000		Floating		May 2010		N/A
2006-A4		300,000		Floating		August 2010		N/A

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	Noteholder
	Principal
	Balance at				Scheduled End of		Extended End of
($ in thousands)	December 31, 2006(1)		Coupon Type		Revolving Period		Revolving Period
AdvantaSeries (continued):
2006-D2		25,000		Floating		September 2010		N/A
2006-B2		125,000		Floating		October 2010		N/A
2006-C1		140,000		Floating		February 2011		N/A

(1) A portion of the noteholder principal balance of securitized receivables as of December 31, 2006 was owned by Advanta and included in accounts receivable from securitizations on the consolidated balance sheet. The principal balances owned by Advanta are subordinated to the other noteholders’ interests.

In addition to noteholder principal balance, our securitized business credit card receivables included billed interest and fees of $51.4 million on those accounts at December 31, 2006.

When a securitization is in its revolving period, principal collections on securitized receivables allocated to that securitization are used to purchase additional receivables to replenish receivables that have been repaid. In contrast, when a securitization starts its accumulation period, principal collections are held in the trust until the payment date of the notes. As principal is collected on securitized receivables during an accumulation period of a securitization, we need to replace that amount of funding. The revolving periods for each securitization, 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. We expect to replace the funding of accumulating securitizations through additional securitizations with similar terms and conditions as our recent securitizations. The level of investment-grade notes outstanding at December 31, 2006 issued as part of the AdvantaSeries de-linked securitization structure, and our ability to issue and hold additional AdvantaSeries non-investment grade notes, provides additional capacity for future securitization issuances in excess of our expected securitization funding needs through December 31, 2007. The de-linked structure provides flexibility to issue different classes of asset-backed securities with varying maturities, sizes, and terms based on our funding needs and prevailing market conditions.

The following securitizations had noteholder principal payment dates in 2006:

	Noteholder
	Principal		End of		Noteholder
($ in thousands)	Balance		Revolving Period		Payment Date
Series 2003-A	$	400,000		November 2005		February 2006
Series 2003-B		300,000		March 2006		June 2006
Series 2003-D		400,000		August 2006		November 2006

Accounts receivable from securitizations and amounts due to the securitization trust at December 31, 2006 have decreased as compared to December 31, 2005 because noteholders had been paid and amounts due from the trust had been collected as of December 31, 2006 for all securitizations that ended their revolving period in 2006. At December 31, 2005, accounts receivable from securitizations included amounts due from the securitization trust associated with principal collections of receivables that had been allocated to the Series 2003-A securitization during its accumulation period.

Our Series 1997-A securitization represents a $200 million committed commercial paper conduit facility that provides off-balance sheet funding. This facility was fully utilized at December 31, 2006. Upon the expiration of the Series 1997-A facility in June 2007, management expects to obtain the appropriate level of replacement funding under similar terms and conditions.

The securitization agreements contain conditions that would trigger an early amortization event. An early amortization event would result in the end of the revolving period prior to the expected dates, which would require us to find an alternate means of funding new receivables generated on existing business credit card accounts. The conditions to trigger an early amortization event include the failure to make payments under the terms of the agreement, or the insolvency or other similar event of Advanta Bank Corp. An early amortization event would also

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be triggered for the Series 1997-A or Series 2001-A securitization if the three-month average excess spread percentage was not maintained at a level greater than 0% for that securitization. An early amortization event for the AdvantaSeries would be triggered if the three-month average excess spread amount was not maintained at a level greater than $0. At December 31, 2006, our three-month average excess spread percentage for the Series 1997-A and Series 2001-A securitizations was at least 6.69%. For the AdvantaSeries, our three-month average excess spread amount was $18.0 million. Based on the current and forecasted levels of excess spread, our financial position and other considerations, management believes that it is unlikely that the trust or any individual securitization will have an early amortization event. The securitization agreements do not have any provisions or conditions involving the debt rating of Advanta Corp.

In August 2005, the FASB issued a revised exposure draft, Accounting for Transfers of Financial Assets — An Amendment of FASB Statement No. 140. The statement provides guidance for determining whether financial assets must first be transferred to a qualifying special-purpose entity (“QSPE”) to be derecognized, determining additional permitted activities for QSPEs, eliminating prohibitions on QSPEs’ ability to hold passive derivative financial instruments, and requires that interests related to transferred financial assets held by a transferor be initially recorded at fair value. In November 2006, the FASB reported that it expects to issue a final statement in the second quarter of 2007. Management will evaluate any potential impact of the final statement when it is available.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments.  This statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140 and eliminates the guidance in SFAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, which provided that beneficial interests in securitized financial assets are not subject to SFAS No. 133. Under the new statement, an entity may irrevocably elect to measure a hybrid financial instrument that would otherwise require bifurcation at fair value in its entirety on an instrument-by-instrument basis. The statement clarifies which interest-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding certain derivative financial instruments. The statement is effective for all financial instruments that we acquire or issue after January 1, 2007. We do not expect the adoption of this statement to have a material impact on our financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, that amends SFAS No. 140. The statement clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either the amortization method or fair value method for subsequent measurement. We do not expect the adoption of this statement effective January 1, 2007 to have a material impact on our financial position or results of operations.

Obligations under Guarantees

In the normal course of business, including discontinued operations, we enter into agreements pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. These indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell assets or services, finance our business and business transactions, establish alliances or other strategic business relationships, service assets (including for unaffiliated third parties), buy or lease real property and license intellectual property. The agreements we enter into in the normal course of business, including discontinued operations, generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay certain amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees or infringement of third party intellectual property rights. Under these typical indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. Further, our

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indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement. Also, in connection with the securitization of receivables, we enter into agreements pursuant to which we agree to indemnify other parties to these transactions. The agreements contain standard representations and warranties about the receivables that are securitized and include indemnification provisions under certain circumstances involving a breach of these representations or warranties. In connection with the securitization transactions we also include indemnifications that protect other parties to the transactions upon the occurrence of certain events, such as violations of securities laws and certain tax matters. Contingencies triggering material indemnification obligations have not occurred historically and are not expected to occur. Maximum exposure to loss is not possible to estimate due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. The nature of the indemnification provisions in the various types of agreements described above are low risk and pervasive, and we consider them to have a remote risk of loss. There are no amounts on the consolidated balance sheets related to these indemnifications.

In connection with our exit from certain businesses, we have entered into agreements that include customary indemnification obligations to the other parties. In general, the agreements we have entered into in connection with our disposition of assets, liabilities and/or businesses provide that we will indemnify the other parties to the transactions for certain losses relating to the assets, liabilities or business acquired by them. The obligations to indemnify are transaction and circumstance specific, and in most cases the other party must suffer a minimum threshold amount of losses before our indemnification obligation is triggered. Under the indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. It is not possible to determine the maximum potential amount of future payments under these or similar arrangements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. We previously had litigation relating to indemnification provisions of transaction agreements governing the transfer of the consumer credit card business and our exit from the mortgage business. Outstanding litigation relating to both of these transaction agreements was resolved prior to December 31, 2005. There are no amounts on the consolidated balance sheets related to these indemnifications.

See Note 22 to the consolidated financial statements for a discussion of parent guarantees of subsidiary obligations.

Preferred Securities Trust

We own 100% of a statutory business trust that issued $100 million of trust preferred securities, representing preferred beneficial interests in the assets of the trust. The trust was deconsolidated from our balance sheet effective December 31, 2003, in connection with our adoption of FASB Interpretation No. 46, Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51, as revised. We established the trust in 1996 as a financing vehicle and we used the proceeds from the issuance of the trust preferred securities for general corporate purposes. The assets of the trust consist of $103 million of 8.99% junior subordinated debentures issued by Advanta Corp., due December 17, 2026. The trust preferred securities are subject to mandatory redemption upon the optional prepayment by Advanta Corp. of the junior subordinated debentures at any time on or after December 17, 2006 at an amount per trust preferred security equal to 104.495% of the principal amount plus accrued and unpaid distributions. This amount declines ratably on each December 17 thereafter to 100% on December 17, 2016. Dividends on the trust preferred securities are cumulative and payable semi-annually in arrears at an annual rate of 8.99%. The trust has no operations or assets separate from its investment in the junior subordinated debentures.

Advanta Corp. provides a full and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities. At December 31, 2006, the maximum amount of the undiscounted future payments that Advanta Corp. could be required to make under this guarantee was $280 million, representing the amount of trust preferred securities outstanding of $100 million at December 31, 2006 and future dividends of approximately $9 million per year through December 2026. Our consolidated balance sheets reflect the subordinated debt payable to the trust of $103 million.

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ASSET/LIABILITY MANAGEMENT

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 completely insulated from these forces.

We are exposed to equity price risk on the equity securities in our investments available for sale portfolio. We typically do not attempt to reduce or eliminate the market exposure on equity investments. A 20% adverse change in equity prices would result in an approximate $2.0 million decrease in the fair value of our equity investments at December 31, 2006. A 20% adverse change would have resulted in an approximate $2.1 million decrease in fair value at December 31, 2005.

Financial performance variability as a result of fluctuations in interest rates is commonly called interest rate risk. Interest rate risk generally results from mismatches in the timing of asset and liability repricing (gap risk) and from differences between the repricing indices of assets and liabilities (basis risk). We regularly evaluate our interest rate risk profile and attempt to minimize the impact of interest rate risk on net interest income on owned assets and net interest income on securitized receivables. In managing interest rate risk exposure, we may periodically securitize receivables, sell and purchase assets, alter the mix and term structure of our funding base or change our investment portfolio.

Risk exposure levels vary continuously, as changes occur in our asset/liability mix, market interest rates and other factors affecting the timing and magnitude of cash flows. We attempt to analyze the impact of interest rate risk by regularly evaluating the perceived risks inherent in our asset and liability structure. We use simulations to generate expected financial performance in a variety of interest rate environments. We analyze those results to determine if we need to take actions to mitigate our interest rate risk.

We measure our interest rate risk using a rising rate scenario and a declining rate scenario. We estimate net interest income using a third party software model that uses standard income modeling techniques. We 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 securitization noteholders. Both increasing and decreasing rate scenarios assume an instantaneous shift in interest rates and measure the corresponding change in expected net interest income as compared to a base case scenario that includes management’s current expectations of future interest rate movements. As of December 31, we estimated that our net interest income would change as follows over a twelve-month period:

	2006			2005
Estimated percentage increase (decrease) in net interest income on owned assets:
Assuming 200 basis point increase		12	%		13	%
Assuming 200 basis point decrease		(6	)%		(11	)%
Estimated percentage increase (decrease) in net interest income on securitized receivables:
Assuming 200 basis point increase		(8	)%		(9	)%
Assuming 200 basis point decrease		15	%		12	%
Estimated percentage increase (decrease) in net interest income on managed assets:
Assuming 200 basis point increase		(3	)%		(3	)%
Assuming 200 basis point decrease		10	%		5	%

Our managed net interest income decreases in a rising rate scenario due to the variable rate funding of the majority of our 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 customer pays their balance in full each month. Our business credit card receivables include interest rate floors that cause our managed

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net interest income to increase in the declining rate scenario. Changes in the composition of our balance sheet, the interest rate environment, business credit card pricing terms and securitization funding strategies have also impacted the results of the net interest income sensitivity analyses as of December 31, 2006 as compared to the results as of December 31, 2005.

The above estimates of net interest income sensitivity alone do not provide a comprehensive view of our exposure to interest rate risk and are not necessarily indicative of potential changes in our owned, securitized and managed net interest income. Additional factors such as changes in the portfolio, customer behavior, marketing strategies and funding strategies also affect owned, securitized and managed net interest income and accordingly, actual results may differ from these estimates. 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

At December 31, 2006, we had a high level of liquidity including $35.1 million of cash and $547.6 million of federal funds sold. At December 31, 2006, we also had receivables held for sale and investments available for sale that could be sold to generate additional liquidity. At December 31, 2006, we had $133.7 million of subordinated trust assets held at non-bank subsidiaries that were rated BB by Standard & Poor’s and Ba2 by Moody’s Investor Service that could be sold or borrowed against to generate additional liquidity.

As shown on the statements of cash flows, our operating activities generated $131.7 million of cash in the year ended December 31, 2006 due primarily to excess spread and servicing revenues related to securitized receivables, interchange income, and interest and fee income on owned receivables, partially offset by operating expenses, interest expense and costs of rewards programs. Our operating activities generated $8.1 million of cash in the year ended December 31, 2005 and were impacted by an increase in accounts receivable from securitizations in the period. For the year ended December 31, 2004, the net use of cash flows from operating activities of $92.3 million was due primarily to the increase in receivables held for sale in excess of proceeds from receivables sold in the period due to the timing of securitization transactions.

Our access to unsecured, institutional debt is limited since Advanta Corp.’s debt rating is not investment grade. However, we do have access to a diversity of funding sources. Our components of funding were as follows at December 31:

	2006					2005
($ in thousands)	Amount		%			Amount		%
Off-balance sheet securitized receivables(1)	$	3,932,732		63	%	$	2,771,505		59	%
Deposits		1,365,138		22			1,070,572		23
Debt		227,126		4			226,856		5
Subordinated debt payable to preferred securities trust		103,093		2			103,093		2
Equity		567,161		9			515,437		11
Total	$	6,195,250		100	%	$	4,687,463		100	%

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

Our ratio of equity to on-balance sheet assets was 23.50% at December 31, 2006 as compared to 24.23% at December 31, 2005. The ratio of equity and subordinated debt payable to preferred securities trust to on-balance sheet assets was 27.78% at December 31, 2006 as compared to 29.07% at December 31, 2005. In managing our capital needs, we also consider our ratio of equity to managed assets to be useful because our on-balance sheet assets include retained interests in securitizations that serve as credit enhancement to the noteholders’ interests in the securitized receivables. Our ratio of equity to managed assets was 8.94% at December 31, 2006 as compared to 10.52% at December 31, 2005. The ratio of equity and subordinated debt payable to preferred securities trust to

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managed assets was 10.56% at December 31, 2006 as compared to 12.63% at December 31, 2005. We calculate managed assets as follows at December 31:

($ in thousands)	2006		2005
Total on-balance sheet assets	$	2,413,138	$	2,127,403
Off-balance sheet securitized receivables		3,932,732		2,771,505
Managed assets	$	6,345,870	$	4,898,908

Off-Balance Sheet Securitized Receivables

As shown in the components of funding table, off-balance sheet securitizations provide a significant portion of our funding and are one of our primary sources of liquidity. See “Off-Balance Sheet Arrangements” section in 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.

Deposits, Debt and Equity

We offer a variety of deposit products at Advanta Bank Corp. We also offer unsecured debt securities of Advanta Corp., in the form of RediReserve Variable Rate Certificates and Investment Notes, to retail investors through our retail note program. We change the interest rates we offer on deposits and debt securities frequently depending on market conditions and our funding needs.

In March 2006, the Board of Directors of Advanta Corp. approved an increase in the regular quarterly cash dividends on Class A and Class B Common Stock beginning with the dividend paid in the second quarter of 2006. The quarterly dividend increased for Class A Common Stock from $0.1134 to $0.2125 per share and for Class B Common Stock from $0.1361 to $0.2550 per share. We funded the increase in dividends with sources of operating cash flows.

In May 2006, we repurchased 995 thousand shares of Class B Common Stock beneficially owned by Advanta Corp.’s Chairman and Chief Executive Officer for $38.5 million. The purchase price was funded with existing liquidity. The stock repurchase and material terms were authorized by Advanta Corp.’s Audit Committee and Board of Directors (with the Chairman and Chief Executive Officer abstaining). Also in May 2006, in connection with the vesting of shares related to the 2005 performance year for our management incentive program, we withheld 132 thousand vested shares with a market value of $5.0 million from certain employees (including officers) to meet our minimum statutory tax withholding requirements. We funded tax withholding payments with existing liquidity.

Litigation

Advanta Corp. and its subsidiaries are involved in litigation, class action lawsuits, claims and legal proceedings arising in the ordinary course of business or discontinued operations. 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.

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Contractual Obligations

The following table summarizes our contractual cash obligations at December 31, 2006 by period.

	Payments Due by Period
			Less than
			or equal		1-3		3-5		After 5
($ in thousands)	Total		to 1 year		years		years		years
Time deposits	$	1,287,724	$	854,336	$	403,824	$	29,564	$	0
Debt		227,126		92,140		95,414		19,396		20,176
Subordinated debt payable to preferred securities trust		103,093		0		0		0		103,093
Operating leases		23,328		6,313		12,271		4,744		0
Purchase obligations		58,142		22,368		20,302		14,567		905
Supplemental executive retirement plan obligations		1,594		0		0		0		1,594
Total	$	1,701,007	$	975,157	$	531,811	$	68,271	$	125,768

We expect to fund commitments related to operating leases, purchase obligations and supplemental executive retirement plan obligations with operating cash flows. Sources of operating cash flows include securitization of receivables, excess spread and servicing revenues related to securitized receivables, interchange income, and interest and fee income on owned receivables. Uses of cash in operations include funding of receivables, operating expenses, interest expense and costs of rewards programs. Management expects to fund our deposit and debt obligations with replacement deposits or debt having similar terms and conditions. The subordinated debt payable to preferred securities trust is not due until 2026. Payments related to supplemental executive retirement plan obligations in the table above represent the present value of vested future benefits payable and are based on service rendered through December 31, 2006.

We have commitments to purchase goods and services that are purchase obligations. These agreements are legally binding, specify all significant terms about the transaction, including fixed or minimum quantities and fixed, minimum or variable price provisions, and may be renewable or cancelable without notice or penalty. Certain agreements are cancelable with a specified notice period or penalty; however, all contracts are reflected in the table above as if they will be performed for the full term of the original agreement without regard to such notice period.

We have a contract with a third party to perform certain administrative functions associated with the servicing of our business credit card portfolio. The five year agreement is effective until December 31, 2011 and we are obligated to pay the greater of $7 million or 80% of the fees paid in the previous year on an annual basis. We can terminate the contract without penalty at our discretion as of December 31, 2009. If the contract had been terminated on December 31, 2006, the liquidated damages upon termination would have been approximately $8.3 million plus any costs incurred for programming in order to convert to a new third party service provider.

In addition to these obligations, we have commitments to extend credit to our business credit card customers, representing unused lines of credit, of $11.5 billion at December 31, 2006 and $8.9 billion at December 31, 2005. Total lines of credit on our customers’ business credit cards were $16.7 billion at December 31, 2006 and $12.7 billion at December 31, 2005. We believe that our customers’ utilization of their lines of credit will continue to be substantially less than the amount of the commitments, as has been our experience to date. We expect to fund the commitments to extend credit with the various components of funding described above, similar to the funding of other new receivables.

Restrictions at Subsidiaries and Undistributed Earnings of Limited Partnership Interest

Advanta Bank Corp. and Advanta National Bank 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 primarily funds our business purpose credit cards. 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 were not material to our consolidated operating results in the three years ended

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December 31, 2006. 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. See “Part I. Item 1 — Government Regulation.”

Advanta Bank Corp. paid $75 million in cash dividends to Advanta Corp. in 2006. In 2005, Advanta Bank Corp. paid $35 million in cash dividends to Advanta Corp. In 2004, Advanta Bank Corp. paid $32 million in cash dividends and a $3 million noncash dividend to Advanta Corp. Advanta National Bank paid no dividends to Advanta Corp. in the three years ended December 31, 2006. There were no dividends from insurance subsidiaries to Advanta Corp. in the three years ended December 31, 2006.

At December 31, 2006, Advanta Bank Corp.’s combined total capital ratio (combined Tier I and Tier II capital to risk-weighted assets) was 21.37% as compared to 21.82% at December 31, 2005. 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.

Total stockholders’ equity of our banking and insurance subsidiaries was $491 million at December 31, 2006, of which $338 million was restricted. At January 1, 2007, $153 million of stockholders’ equity of our bank and insurance subsidiaries was available for payment of cash dividends in 2007 under applicable regulatory guidelines without prior regulatory approval.

In addition to dividend restrictions at banking and insurance subsidiaries, one of our other subsidiaries is subject to a minimum equity requirement as part of a transaction agreement. The total minimum equity requirement of this subsidiary was $10 million at December 31, 2006 and the subsidiary was in compliance with its minimum equity requirement. We also have an investment in a limited partnership, Fleet Credit Card Services, L.P., and estimated undistributed partnership earnings included in our retained earnings were $12.1 million at December 31, 2006.

Management believes that the restrictions, for bank, insurance and other subsidiaries and undistributed earnings of our limited partnership interest, 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.

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Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2006. Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Advanta Corp.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Advanta Corp. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated February 26, 2007, expressed an unqualified opinion on those consolidated financial statements.

/s/  KPMG LLP

Philadelphia, Pennsylvania
February 26, 2007

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Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

The information called for by this Item is incorporated by reference to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Asset/Liability Management.”

Item 8.   Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Advanta Corp.:

We have audited the accompanying consolidated balance sheets of Advanta Corp. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” effective January 1, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal controls over financial reporting.

/s/  KPMG LLP

Philadelphia, Pennsylvania
February 26, 2007

52

Advanta Corp. and Subsidiaries

Consolidated Balance Sheets

	December 31,
(In thousands, except share amounts)	2006			2005
ASSETS
Cash	$	35,055		$	34,109
Federal funds sold		547,631			355,057
Restricted interest-bearing deposits		1,211			1,333
Investments available for sale		197,477			219,782
Receivables, net:
Held for sale		568,456			474,881
Other		546,553			389,012
Total receivables, net		1,115,009			863,893
Accounts receivable from securitizations		334,486			450,001
Premises and equipment (at cost, less accumulated depreciation of $33,120 in 2006 and $33,029 in 2005)		16,715			16,901
Other assets		165,554			186,327
Total assets	$	2,413,138		$	2,127,403
LIABILITIES
Deposits	$	1,365,138		$	1,070,572
Debt		227,126			226,856
Subordinated debt payable to preferred securities trust		103,093			103,093
Other liabilities		150,620			211,445
Total liabilities		1,845,977			1,611,966
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Class A preferred stock, $1,000 par value:
Authorized, issued and outstanding — 1,010 shares in 2006 and 2005		1,010			1,010
Class A voting common stock, $.01 par value:
Authorized — 200,000,000 shares; issued — 10,041,017 shares in 2006 and 2005		100			100
Class B non-voting common stock, $.01 par value:
Authorized — 200,000,000 shares; issued — 23,425,609 shares in 2006 and 21,918,569 shares in 2005		234			219
Additional paid-in capital		308,219			276,231
Nonvested shares		0			(1,148	)
Unearned ESOP shares		(9,204	)		(9,622	)
Accumulated other comprehensive loss		(288	)		(678	)
Retained earnings		359,813			298,472
Treasury stock at cost, 434,155 Class A common shares in 2006 and 2005; 4,290,789 Class B common shares in 2006 and 3,162,019 Class B common shares in 2005		(92,723	)		(49,147	)
Total stockholders’ equity		567,161			515,437
Total liabilities and stockholders’ equity	$	2,413,138		$	2,127,403

See Notes to Consolidated Financial Statements.

53

Advanta Corp. and Subsidiaries

Consolidated Income Statements

	Year Ended December 31,
(In thousands, except per share amounts)	2006		2005			2004
Interest income:
Receivables	$	125,955	$	107,363		$	82,579
Investments		25,642		17,429			6,990
Other interest income		18,158		14,809			17,140
Total interest income		169,755		139,601			106,709
Interest expense:
Deposits		52,279		33,619			19,261
Debt and other borrowings		13,864		14,809			17,158
Subordinated debt payable to preferred securities trust		9,167		9,158			9,158
Total interest expense		75,310		57,586			45,577
Net interest income		94,445		82,015			61,132
Provision for credit losses		38,600		40,297			42,368
Net interest income after provision for credit losses		55,845		41,718			18,764
Noninterest revenues:
Securitization income		114,938		109,051			124,769
Servicing revenues		63,726		51,079			49,516
Other revenues, net		159,291		130,710			113,556
Gain on transfer of consumer credit card business (See Note 17)		0		67,679			0
Total noninterest revenues		337,955		358,519			287,841
Operating expenses		256,812		243,058			234,298
Income from continuing operations before income taxes		136,988		157,179			72,307
Income tax expense		52,740		40,490			28,034
Income from continuing operations		84,248		116,689			44,273
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax		738		(6,260	)		468
Net income	$	84,986	$	110,429		$	44,741
Basic income from continuing operations per common share
Class A	$	3.01	$	4.34		$	1.69
Class B		3.18		4.47			1.80
Combined		3.12		4.43			1.76
Diluted income from continuing operations per common share
Class A	$	2.82	$	3.99		$	1.57
Class B		2.88		4.04			1.62
Combined		2.86		4.02			1.60
Basic net income per common share
Class A	$	3.04	$	4.11		$	1.71
Class B		3.21		4.23			1.82
Combined		3.15		4.19			1.78
Diluted net income per common share
Class A	$	2.84	$	3.77		$	1.58
Class B		2.91		3.82			1.64
Combined		2.89		3.81			1.62
Basic weighted average common shares outstanding
Class A		8,858		8,825			8,798
Class B		18,064		17,512			16,225
Combined		26,922		26,337			25,023
Diluted weighted average common shares outstanding
Class A		8,858		8,825			8,798
Class B		20,530		20,160			18,750
Combined		29,388		28,985			27,548

See Notes to Consolidated Financial Statements.

54

Advanta Corp. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

																	Accumulated
														Nonvested			Other
	Comprehensive			Class A		Class A		Class B			Additional			Shares &			Comprehensive									Total
	Income			Preferred		Common		Common			Paid-In			Unearned			Income			Retained			Treasury			Stockholders’
($ in thousands)	(Loss)			Stock		Stock		Stock			Capital			ESOP Shares			(Loss)			Earnings			Stock			Equity
Balance at December 31, 2003				$	1,010	$	100	$	206		$	245,295		$	(23,629	)	$	63		$	167,783		$	(49,621	)	$	341,207
Net income	$	44,741																			44,741						44,741
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $175		(324	)															(324	)								(324	)
Comprehensive income	$	44,417
Preferred and common cash dividends declared																					(10,752	)					(10,752	)
Exercise of stock options									8			8,489															8,497
Modification of stock options												196															196
Stock option exchange program stock distribution																								146			146
Stock-based nonemployee compensation expense												482															482
Issuance of nonvested shares									3			5,427			(5,430	)											0
Amortization of nonvested shares															7,740												7,740
Forfeitures of nonvested shares									(2	)		(1,887	)		1,473												(416	)
ESOP shares committed to be released												221			456												677
Balance at December 31, 2004				$	1,010	$	100	$	215		$	258,223		$	(19,390	)	$	(261	)	$	201,772		$	(49,475	)	$	392,194
Net income	$	110,429																			110,429						110,429
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $224		(417	)															(417	)								(417	)
Comprehensive income	$	110,012
Preferred and common cash dividends declared																					(13,729	)					(13,729	)
Exercise of stock options									5			6,100															6,105
Stock option exchange program stock distribution																								328			328
Stock-based nonemployee compensation expense												124															124
Excess tax benefits from stock-based compensation and ESOP												12,800															12,800
Issuance of nonvested shares												222			(222	)											0
Amortization of nonvested shares															7,633												7,633
Forfeitures of nonvested shares									(1	)		(1,811	)		900												(912	)
ESOP shares committed to be released												573			309												882
Balance at December 31, 2005				$	1,010	$	100	$	219		$	276,231		$	(10,770	)	$	(678	)	$	298,472		$	(49,147	)	$	515,437
Net income	$	84,986																			84,986						84,986
Other comprehensive income (loss):
Unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of ($210)		390																390									390
Comprehensive income	$	85,376
Preferred and common cash dividends declared																					(23,645	)					(23,645	)
Exercise of stock options									9			10,499															10,508
Stock-based nonemployee compensation expense												238															238
Stock-based employee compensation expense												3,842															3,842
Excess tax benefits from stock-based compensation and ESOP												12,149															12,149
Issuance of nonvested shares									7			(7	)														0
Amortization of nonvested shares												5,953															5,953
Forfeitures of nonvested shares									(1	)		(359	)														(360	)
Reclassification of nonvested shares												(1,148	)		1,148												0
Treasury stock acquired (See Note 12)																								(43,576	)		(43,576	)
ESOP shares committed to be released												821			418												1,239
Balance at December 31, 2006				$	1,010	$	100	$	234		$	308,219		$	(9,204	)	$	(288	)	$	359,813		$	(92,723	)	$	567,161

See Notes to Consolidated Financial Statements.

55

Advanta Corp. and Subsidiaries

Consolidated Statements of Cash Flows

	Year Ended December 31,
($ in thousands)	2006			2005			2004
OPERATING ACTIVITIES — CONTINUING OPERATIONS
Net income	$	84,986		$	110,429		$	44,741
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
(Gain) loss, net, on discontinuance of mortgage and leasing businesses, net of tax		(738	)		6,260			(468	)
Investment securities (gains) losses, net		(5,508	)		(780	)		1,498
Depreciation and amortization		5,785			7,184			9,666
Stock-based compensation expense		9,673			6,845			8,002
Provision for credit losses		38,600			40,297			42,368
Provision for interest and fee losses		8,830			9,270			9,714
Change in deferred origination costs, net of deferred fees		(3,123	)		(6,262	)		3,466
Change in receivables held for sale		(2,254,249	)		(1,345,789	)		(299,496	)
Proceeds from sale of receivables held for sale		2,160,674			1,248,066			137,002
Change in accounts receivable from securitizations		115,515			(205,639	)		(25	)
Excess tax benefits from stock-based compensation		(12,149	)		0			0
Change in other assets and other liabilities		(16,607	)		138,189			(48,737	)
Net cash provided by (used in) operating activities		131,689			8,070			(92,269	)
INVESTING ACTIVITIES — CONTINUING OPERATIONS
Change in federal funds sold and restricted interest-bearing deposits		(192,452	)		(54,767	)		34,560
Purchase of investments available for sale		(768,031	)		(543,157	)		(563,030	)
Proceeds from sales of investments available for sale		710,185			428,436			572,309
Proceeds from sales of other investments		2,440			0			0
Proceeds from maturing investments available for sale		83,818			79,318			27,108
Change in receivables not held for sale		(201,848	)		(103,445	)		(93,311	)
Purchases of premises and equipment, net		(5,584	)		(6,070	)		(5,977	)
Net cash used in investing activities		(371,472	)		(199,685	)		(28,341	)
FINANCING ACTIVITIES — CONTINUING OPERATIONS
Change in demand and savings deposits		56,614			11,720			875
Proceeds from issuance of time deposits		735,309			482,612			539,954
Payments for maturing time deposits		(517,854	)		(263,294	)		(393,736	)
Proceeds from issuance of debt		31,886			23,311			29,319
Payments on redemption of debt		(39,973	)		(70,805	)		(90,625	)
Change in cash overdraft and other borrowings		16,222			6,283			(4,596	)
Proceeds from exercise of stock options		10,508			6,105			8,497
Cash dividends paid		(23,645	)		(13,729	)		(10,752	)
Excess tax benefits from stock-based compensation		12,149			0			0
Treasury stock acquired		(43,576	)		0			0
Net cash provided by financing activities		237,640			182,203			78,936
DISCONTINUED OPERATIONS
Net cash provided by operating activities of discontinued operations		3,089			7,956			50,298
Net increase (decrease) in cash		946			(1,456	)		8,624
Cash at beginning of year		34,109			35,565			26,941
Cash at end of year	$	35,055		$	34,109		$	35,565

See Notes to Consolidated Financial Statements.

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands except per share amounts, unless otherwise noted)

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.   Nature of Operations and Basis of Presentation

Our Advanta Business Cards segment is one of the nation’s largest credit card issuers (through Advanta Bank Corp.) in the small business market. Advanta’s exclusive focus on this market, as well as our size, experience and commitment to developing meaningful product offerings and a high level of service tailored to the needs of small businesses, differentiate us from other issuers. Founded in 1951, Advanta has long been an innovator in developing and introducing many of the marketing techniques that are common in the financial services industry today. We own two depository institutions, Advanta Bank Corp. and Advanta National Bank. Advanta Business Cards is primarily funded and operated through Advanta Bank Corp., which offers a variety of deposit products, such as retail and large denomination certificates of deposits and money market savings accounts that are insured by the Federal Deposit Insurance Corporation. At December 31, 2006, we had 1.1 million business credit card accounts and had owned business credit card receivables of $1.1 billion and securitized business credit card receivables of $4.1 billion. Certain administrative functions associated with the servicing of our business credit card accounts are performed by a single third party vendor.

Through the first quarter of 2001, we had two additional lending businesses, Advanta Mortgage and Advanta Leasing Services. In the first quarter of 2001, we completed our exit from the mortgage business, Advanta Mortgage, through a purchase and sale agreement with Chase Manhattan Mortgage Corporation as buyer (the “Mortgage Transaction”), announced the discontinuance of our leasing business, and restructured our corporate functions to a size commensurate with our ongoing businesses. Changes in estimate related to our exit from the mortgage business and discontinuance of the leasing business are reported as discontinued operations for all periods presented. The results of our ongoing businesses are reported as continuing operations for all periods presented.

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Advanta Corp. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

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

Note 2.   Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the accounting for the allowance for receivable losses, securitization income, rewards programs and income taxes.

Investments Available for Sale

Investments available for sale include securities that we sell from time to time to provide liquidity and in response to changes in the market. Debt and equity securities classified as available for sale are reported at fair value and unrealized gains and losses on these securities are reported in other comprehensive income, net of income taxes. The fair values of investments available for sale are based on quoted market prices, dealer quotes or estimates using quoted market prices for similar securities. Declines in the fair values of investments available for sale below their cost that are deemed to be other than temporary, if any, are reflected in earnings as realized losses. In estimating other than temporary impairment losses, we consider (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition of the issuer, and (3) our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our venture capital investments are included in investments available for sale at estimated fair value. Management makes fair value determinations based on quoted market prices, when available, and considers each investee’s financial results, conditions and prospects and overall market liquidity, when market prices are not available. In accordance with the specialized industry accounting principles of venture capital investment companies, the unrealized and realized gains and losses on these investments are included in other revenues rather than other comprehensive income and the equity method of accounting for investments is not applied.

We recognize purchase premiums and discounts in interest income using the interest method over the term of the securities. Gains and losses on the sales of securities are recorded on the trade date and are determined using the specific identification method.

Receivables Held for Sale

Receivables held for sale represent receivables currently on the balance sheet that we intend to sell or securitize within the next six months. We report these assets at the lower of aggregate cost or fair market value by receivable type. We recognize net unrealized losses, if any, through a valuation allowance by charges to income.

Allowance for Receivable Losses

We establish the allowance for receivable losses as losses are estimated to have occurred through provisions charged to earnings. Business credit card receivables are comprised of principal amounts due from customers for purchase activities, balance transfers and cash usage, and amounts due from customers relating to billed interest and fees. We report provisions for credit losses, representing the portion of receivable losses attributable to principal, separately on the consolidated income statements. We record provisions for interest and fee receivable losses as direct reductions to interest and fee income as described below in “Interest and Fee Income on Receivables.” The allowance for receivable losses is evaluated on a regular basis by management and is based upon management’s review of the collectibility of receivables in light of historical experience by receivable type, the nature and volume of the receivable portfolio, adverse situations that may affect the borrowers’ ability to repay and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Since our business credit card receivable portfolio is comprised of smaller balance homogeneous receivables, we generally evaluate the receivables collectively for impairment through the use of a migration analysis as well as the consideration of other factors that may indicate increased risk of loss, such as bankrupt accounts, overlimit accounts or accounts that have been re-aged or entered a workout program. Accordingly, we do not separately identify individual receivables for impairment disclosures. A migration analysis is a technique used to estimate the likelihood that a receivable or pool of receivables will progress through various delinquency stages and charge off.

Our charge-off and re-age policies for business credit card accounts conform to the Uniform Retail Credit Classification and Account Management Policy, as well as the Credit Card Lending Guidance, issued by the federal financial institutions regulatory agencies. Our charge-off policy for contractually delinquent business credit card accounts is to charge-off an unpaid receivable no later than the end of the month in which it becomes and remains past due 180 cumulative days from the contractual due date. Our charge-off policy for bankrupt business credit card accounts is to charge-off the unpaid receivable within 60 days of receipt of notification of filing from the bankruptcy court or within the timeframes adopted in the Uniform Retail Credit Classification and Account Management Policy, whichever is shorter. Subsequent recoveries are credited to the allowance for receivable losses.

Our charge-off policy for other receivables is to charge-off the unpaid receivable when management believes the uncollectibility of a receivable balance is confirmed.

Interest and Fee Income on Receivables

We accrue interest income on the unpaid balance of receivables. Interest income includes late fees billed on business credit card receivables. Fee income is recognized when billed to the customer, with the exception of origination fees as discussed in “Origination Costs and Fees” below. We continue to bill and recognize interest and fees on accounts

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

when they become 90 days past due, and an additional allowance for receivable losses is established for the additional billings estimated to be uncollectible through a provision for interest and fee losses. We discontinue the billing and recognition of interest and fees when the account is classified as fraudulent, bankrupt, deceased, hardship or workout. Provisions for interest and fee losses are recorded as direct reductions to interest and fee income. The accrued interest and fee portion of charged-off receivables is charged against the allowance for receivable losses. All subsequent recoveries of charged-off receivables are classified as principal recoveries, since any amounts related to accrued interest and fees are de minimus.

Origination Costs and Fees

We engage unrelated third parties to solicit and originate business credit card account relationships. 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 a privilege period of one year. These costs represent the cost of acquiring business credit card account relationships, and the net amortization is included in operating expenses. A substantial portion of amounts paid to acquire new business credit card accounts are paid to a single third party vendor.

Securitization Income

A significant portion of our funding for Advanta Business Cards is through off-balance sheet securitizations using a securitization trust. The securitization trust was created to hold the collateral (the securitized receivables) and issue notes to primarily institutional investors. The securitization trust is a qualifying special-purpose entity as defined by Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a Replacement of FASB Statement No. 125, and therefore, is not consolidated as part of Advanta’s consolidated financial statements. We do not provide any guarantee of the notes issued by the special-purpose entity and our recourse in the transactions is limited to the value of our interests in securitizations that serve as credit enhancement to the noteholders’ interests in the securitized receivables.

We sell business credit card receivables through securitizations with servicing retained. Also, during the revolving period of each securitization, we sell new receivables to the securitization trust to replenish the noteholders’ interest in securitized receivables that have been repaid by the business credit card customers. When we sell receivables to the securitization trust, we surrender control over the transferred assets and account for the transaction as a sale when we receive consideration other than beneficial interests in the transferred assets in exchange. We allocate the previous carrying amount of the securitized receivables between the assets sold and the retained interests based on their relative estimated fair values at the date of sale. We recognize securitization income at the time of a sale equal to the excess of the fair value of the assets obtained (principally cash) over the allocated cost of the assets sold and transaction costs. Fair value estimates used in the recognition of securitization income require assumptions of discount rates, payment rates, credit loss rates, and interest rates and yields.

On a monthly basis, income-related cash flows on securitized receivables (interest, interchange and fees) are used to pay both interest to noteholders and servicing fees, and any excess cash flow serves as credit enhancement to cover credit losses in that month.

Accounts Receivable from Securitizations

Accounts receivable from securitizations include retained interests in securitizations, accrued interest and fees on securitized receivables, amounts due from the securitization trust related to the sale of new receivables or amounts due during the accumulation period, and amounts due from the securitization trust for one month’s servicing fee and one month’s income-related cash flows in excess of that month’s noteholders’ interest, servicing fees and credit losses.

Retained interests in securitizations include cash reserve accounts, retained interest-only strips and subordinated trust assets. Subordinated trust assets represent an ownership interest in the securitized receivables that is subordinated to the other noteholders’ interests. Retained interests in securitizations serve as credit enhancement to

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the noteholders’ interests in the securitized receivables. We account for retained interests in securitizations as trading securities. These assets are carried at estimated fair value and the resulting unrealized gain or loss from the valuation is included in securitization income.

We estimate the fair value of retained interests in securitizations based on a discounted cash flow analysis if quoted market prices are not available. We estimate the cash flows of the retained interest-only strip as the excess of the weighted average interest yield on the pool of the receivables sold over the sum of the interest rate earned by noteholders, the servicing fee and an estimate of future credit losses over the life of the existing receivables. We discount cash flows from the date the cash is expected to become available to us using an interest rate that management believes a third party purchaser would demand. The discounted cash flow analysis is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. We recognize interest income over the life of the retained interests in securitizations by applying the discount rate used in the valuation.

We adjust accrued interest and fees on securitized receivables for amounts estimated to be uncollectible. The estimate is based on the same methodology as that used for on-balance sheet receivables that is described above in “Allowance for Receivable Losses” and “Interest and Fee Income on Receivables.” Provisions for interest and fee losses on securitized receivables are recorded as a reduction of securitization income.

Servicing Assets

We do not recognize servicing assets associated with securitization transactions because the benefits of servicing are not expected to be more or less than adequate compensation for performing the servicing.

Premises and Equipment

Premises, equipment, computer hardware and software are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance are charged to expense as incurred. We amortize leasehold improvements over the shorter of the lives of the leases or estimated service lives of the leasehold improvements.

Investment in Limited Partnership

On February 20, 1998, we completed a transaction with Fleet Financial Group, Inc. (“Fleet”) to contribute substantially all of our consumer credit card receivables, subject to liabilities, to a newly formed entity controlled by Fleet that is now known as Fleet Credit Card Services, L.P. As of the consummation of the transaction on February 20, 1998, our ownership interest in the newly formed entity was 4.99% and the carrying value of the investment was $20.0 million. Our ownership interest at December 31, 2006 and 2005 was approximately 1.3%. As a result of our May 28, 2004 agreement with Bank of America Corp. (“Bank of America”) and the combination of Bank of America’s and Fleet Credit Card Services, L.P.’s consumer credit card businesses, our partnership interest in Fleet Credit Card Services, L.P. represents an interest in the combined business.

Subsequent to the date of the agreement with Bank of America, we have accounted for our investment in Fleet Credit Card Services, L.P. using the cost method and have recognized dividend distributions from net accumulated earnings as income. Prior to the date of the agreement with Bank of America, we recognized earnings allocable to our partnership interest using the equity method in accordance with Emerging Issues Task Force Topic D-46, Accounting for Limited Partnership Interests. The partnership interest is included in other assets on the consolidated balance sheets and earnings on the partnership interest are included in other revenues on the consolidated income statements. We received distributions from the partnership of $1.2 million in the year ended December 31, 2006, $1.9 million in 2005 and $2.4 million in 2004.

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Rewards Programs

We offer rewards programs with most of our business purpose credit cards. Under our rewards programs, customers may earn either cash back rewards or business rewards that can be redeemed for travel, gift certificates or merchandise. Eligible customers earn cash back rewards or business rewards based on net purchases charged on their business credit card accounts. We estimate the costs of future reward redemptions and record a liability at the time cash back rewards or business rewards are earned by the customer. These costs of future reward redemptions are recorded as a reduction of other revenues on the consolidated income statements. Estimates of the costs of future reward redemptions include assumptions regarding the percentage of earned rewards that customers will ultimately redeem and the cost of business rewards. It is reasonably possible that actual results will differ from our estimates or that our estimated liability for these programs may change.

Securities Sold Under Repurchase Agreements

We account for securities sold under agreements to repurchase as secured borrowings because we maintain effective control over the transferred assets. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. We may be required to provide additional collateral based on the fair value of the underlying securities.

Interchange Income

Interchange income represents fees paid to us by merchant banks through the credit card interchange network based on the purchase activity of our customers as partial compensation for taking credit risk, absorbing fraud losses and funding credit card receivables for a limited period prior to account billing. Interchange income includes interchange fees on both owned and securitized business credit cards.

Stock-Based Compensation

SFAS No. 123(R), Share-Based Payment (“SFAS No. 123R”) addresses accounting for equity-based compensation arrangements, including employee stock options, and requires entities 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. We adopted SFAS No. 123R effective January 1, 2006 using the modified prospective method. Awards that are granted, modified, or settled after January 1, 2006 are measured and accounted for in accordance with SFAS No. 123R and expense is recognized for the unvested portion of awards that were granted prior to January 1, 2006 based upon the fair value determined at the grant date under SFAS No. 123 Accounting for Stock Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure (“SFAS No. 123”). We estimate the fair value of each option grant on the date of grant using the Black-Scholes-Merton option-pricing model. We recognize compensation expense on stock options and nonvested shares over the vesting period of the award.

Prior to our adoption of SFAS No. 123R, we recognized the effect of nonvested share forfeitures as they occurred. Nonvested shares were previously referred to as restricted stock. Under SFAS No. 123R, we are required to estimate forfeitures and to eliminate previously recognized compensation cost, net of related tax effects, for those nonvested shares as a cumulative effect of a change in accounting principle effective January 1, 2006. We determined that the compensation expense previously recognized in income as of December 31, 2005 related to outstanding nonvested shares that may forfeit prior to vesting was not material. Prior to our adoption of SFAS No. 123R, we classified nonvested shares as a separate component of stockholders’ equity. In accordance with SFAS No. 123R, on January 1, 2006, we reclassified nonvested shares to additional paid-in capital on the consolidated balance sheet. Prior to the adoption of SFAS No. 123R, we presented excess tax benefits from stock-based compensation as an operating cash flow. SFAS No. 123R requires that cash flows resulting from tax deductions in excess of recognized stock-based compensation costs be reported as a financing cash flow. Excess tax benefits from stock-based compensation were $12.1 million in the year ended December 31, 2006 and $12.8 million in 2005. Excess tax benefits in 2004 were not recognized in that period due to our net operating loss carryforward

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

position. We have elected the alternative transition method in Financial Accounting Standards Board (“FASB”) Staff Position No. FAS 123R-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards to calculate the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123R.

Prior to January 1, 2006, we used the intrinsic value based accounting methodology prescribed by Accounting Principles Board Opinion (“Opinion”) No. 25, Accounting for Stock Issued to Employees, as permitted by SFAS No. 123, whereby compensation expense was 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, and compensation expense was recognized over the vesting period of the award. We also 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. See Note 13 for these pro forma disclosures for the years ended December 31, 2005 and 2004.

The impact of recognizing stock-based compensation expense for employee stock options in accordance with SFAS No. 123R instead of Opinion No. 25 in the year ended December 31, 2006 was as follows:

Decrease in income from continuing operations before income taxes	$	(3,842	)
Income tax benefit		1,479
Decrease in income from continuing operations		(2,363	)
Decrease in net income		(2,363	)
Decrease in basic earnings per combined share	$	(0.09	)
Decrease in diluted earnings per combined share		(0.08	)

Income Taxes

Our effective tax rate is based on expected income, statutory tax rates, current tax law and tax planning opportunities available to us in the various jurisdictions in which we operate. Management judgment is required in determining our effective tax rate and in evaluating our tax positions. Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method. Under this method, we determine the net deferred tax asset or liability based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and give current recognition to changes in tax rates and laws. Changes in tax laws, rates, regulations and policies, or the final determination of tax audits or examinations, could materially affect our tax estimates and are outside of our control. We evaluate the realizability of the deferred tax asset and recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. When evaluating the realizability of the deferred tax asset, we consider estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast the business credit card market and the competitive and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if applicable, are included in income tax expense on the consolidated income statements.

Discontinued Operations

Our exit from the mortgage business and discontinuance of the leasing business represent the disposal of business segments following Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. Accordingly, results of these segments are classified as discontinued operations in all periods presented. Our accounting for discontinuance of the mortgage and leasing businesses was not impacted by the issuance of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, since its provisions for disposal groups of long-lived assets are effective for disposal activities initiated after January 1, 2002. We use estimates of future cash flows in the accounting for discontinued operations, including estimates of the future costs of mortgage

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

business-related litigation and estimates of operating results of the leasing segment over the wind down period. As all estimates used are influenced by factors outside of our control, there is uncertainty inherent in these estimates, making it reasonably possible that they could change. Changes in estimates related to discontinued operations are included in gain (loss), net, on discontinuance of mortgage and leasing businesses on the consolidated income statements.

Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Net income available to common stockholders is computed by deducting preferred stock dividends from net income. Diluted earnings per common share is computed by dividing net income available to common stockholders by the sum of weighted average common shares outstanding plus dilutive common shares for the period. Potentially dilutive common shares include stock options and nonvested shares. Since the cash dividends declared on our Class B Common Stock were higher than the dividends declared on the Class A Common Stock, basic and diluted earnings per common share have been calculated using the “two-class” method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and participation rights in undistributed earnings. Both classes of our common stock share equally in undistributed earnings. We have also presented combined earnings per common share, which represents net income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

Recently Issued Accounting Standards

In August 2005, the FASB issued a revised exposure draft, Accounting for Transfers of Financial Assets — An Amendment of FASB Statement No. 140. The statement provides guidance for determining whether financial assets must first be transferred to a qualifying special-purpose entity (“QSPE”) to be derecognized, determining additional permitted activities for QSPEs, eliminating prohibitions on QSPEs’ ability to hold passive derivative financial instruments, and requires that interests related to transferred financial assets held by a transferor be initially recorded at fair value. In November 2006, the FASB reported that it expects to issue a final statement in the second quarter of 2007. Management will evaluate any potential impact of the final statement when it is available.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. This statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140 and eliminates the guidance in SFAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, which provided that beneficial interests in securitized financial assets are not subject to SFAS No. 133. Under the new statement, an entity may irrevocably elect to measure a hybrid financial instrument that would otherwise require bifurcation at fair value in its entirety on an instrument-by-instrument basis. The statement clarifies which interest-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special purpose entity from holding certain derivative financial instruments. The statement is effective for all financial instruments that we acquire or issue after January 1, 2007. We do not expect the adoption of this statement to have a material impact on our financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, that amends SFAS No. 140. The statement clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either the amortization method or fair value method for subsequent measurement. We do not expect the adoption of this statement effective January 1, 2007 to have a material impact on our financial position or results of operations.

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109. The statement provides a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In accordance with the statement, before a tax benefit can be recognized, a tax position is evaluated using a threshold that it is more likely than not that the tax position will be sustained upon examination. When evaluating the more-likely-than-not recognition threshold, the interpretation provides that a company should presume the tax position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. If the tax position meets the more-likely-than-not recognition threshold, it is initially and subsequently measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Based on our current assessment and subject to changes that may result from additional guidance issued by the FASB on this statement, we do not expect the adoption of this statement effective January 1, 2007 to have a material impact on our financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The statement defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The statement also establishes a framework for measuring fair value by creating a three-level fair value hierarchy that ranks the quality and reliability of information used to determine fair value, and requires new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy. We do not expect the adoption of this statement effective January 1, 2008 to have a material impact on our financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132(R) (“SFAS No. 158”). This statement requires an employer to recognize the funded status of a defined benefit plan on the balance sheet, recognize changes in the funded status of a defined benefit plan in comprehensive income in the year in which the changes occur, measure plan assets and obligations as of the date of the employer’s fiscal year end and provide additional disclosures. The requirements regarding financial statement recognition and disclosures are effective for Advanta as of December 31, 2006. We have one benefit plan within the scope of SFAS No. 158, a supplemental executive retirement plan, which is an unfunded plan. The adoption of this interpretation on December 31, 2006 did not impact our financial position or results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). This guidance was issued to resolve diversity in current practice among registrants. The bulletin establishes that registrants must quantify the impact of correcting all misstatements on the financial statements by using both the rollover and iron curtain approaches to evaluate the errors. The rollover approach quantifies the misstatement based on the amount of the error originating in the current year income statement and the iron curtain approach quantifies a misstatement based on the amount of the error existing in the balance sheet at the end of the fiscal year. The bulletin contains guidance on correcting errors under the dual approach and transition guidance. The adoption of SAB 108 did not have a material impact on our financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This statement provides entities with an irrevocable option to report most financial assets and liabilities at fair value, with subsequent changes in fair value reported in earnings. The election can be applied on an instrument-by-instrument basis. The statement establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The statement is effective for Advanta on January 1, 2008. Management is currently evaluating the impact that this statement may have on our financial position or results of operations.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash Flow Reporting

Cash paid for interest was $40.5 million for the year ended December 31, 2006, $31.9 million for 2005 and $28.9 million for 2004. In addition, interest expense includes interest credited directly to the accounts of deposit customers and retail note program investors of $28.9 million for the year ended December 31, 2006, $22.9 for 2005 and $18.2 million for 2004.

Cash paid for taxes was $21.0 million for the year ended December 31, 2006, $18.8 million for 2005 and $13.9 million for 2004. Tax refunds received were $10.0 million for the year ended December 31, 2006, $1.7 million for 2005 and $339 thousand for 2004.

Note 3.   Investments Available For Sale

Investments available for sale consisted of the following at December 31:

	2006									2005									2004
			Gross		Gross							Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. Treasury and government agency securities	$	21,098	$	0	$	(158	)	$	20,940	$	51,399	$	0	$	(722	)	$	50,677	$	69,402	$	0	$	(485	)	$	68,917
State and municipal securities		13,247		65		(70	)		13,242		4,730		31		(45	)		4,716		3,329		46		(5	)		3,370
Commercial paper		6,944		0		(3	)		6,941		0		0		0			0		0		0		0			0
Corporate bonds		8,488		0		(124	)		8,364		10,593		0		(148	)		10,445		12,308		0		(49	)		12,259
Asset backed securities(1)		46,214		82		(100	)		46,196		39,352		28		(114	)		39,266		4,358		87		(47	)		4,398
Equity securities(2)		10,118		0		(135	)		9,983		10,374		0		(73	)		10,301		14,626		51		0			14,677
Money market funds		91,771		0		0			91,771		104,272		0		0			104,272		80,509		0		0			80,509
Other		40		0		0			40		105		0		0			105		110		0		0			110
Total investments available for sale	$	197,920	$	147	$	(590	)	$	197,477	$	220,825	$	59	$	(1,102	)	$	219,782	$	184,642	$	184	$	(586	)	$	184,240

(1)	Includes mortgage-backed securities.
(2)	Includes venture capital investments of $1.0 million at December 31, 2006, $1.2 million at December 31, 2005 and $5.3 million at December 31, 2004. The amount shown as amortized cost represents fair value for these investments.

Distributions from money market funds were $1.0 million in the year ended December 31, 2006, $2.2 million in 2005 and $1.2 million in 2004, and were included in interest income on the consolidated income statements.

Maturities of investments available for sale at December 31, 2006 were as follows:

	Amortized		Fair
	Cost		Value
Due in 1 year	$	26,544	$	26,388
Due after 1 but within 5 years		10,301		10,177
Due after 5 but within 10 years		10,104		10,074
Due after 10 years		2,868		2,888
Subtotal		49,817		49,527
Asset-backed securities		46,214		46,196
Equity securities		10,118		9,983
Money market funds		91,771		91,771
Total investments available for sale	$	197,920	$	197,477

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net realized gains and losses on the sale of investments are included in other revenues on the consolidated income statements. Realized gains and losses on sales of investments available for sale were as follows for the years ended December 31:

	2006		2005			2004
Gross realized gains	$	4,559	$	1,452		$	1,179
Gross realized losses		0		(755	)		0
Net realized gains	$	4,559	$	697		$	1,179

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

	Less Than					12 Months
	12 Months in an					or Longer in an
	Unrealized Loss					Unrealized Loss
	Position					Position					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
December 31, 2006	Amount			Value		Amount			Value		Amount			Value
U.S. Treasury and government agency securities	$	(10	)	$	3,701	$	(148	)	$	16,402	$	(158	)	$	20,103
State and municipal securities		(34	)		5,771		(36	)		1,839		(70	)		7,610
Commercial paper		(3	)		6,941		0			0		(3	)		6,941
Corporate bonds		0			0		(124	)		8,364		(124	)		8,364
Asset-backed securities		(13	)		3,000		(87	)		1,992		(100	)		4,992
Equity securities		0			0		(135	)		7,165		(135	)		7,165
Total	$	(60	)	$	19,413	$	(530	)	$	35,762	$	(590	)	$	55,175

	Less Than					12 Months
	12 Months in an					or Longer in an
	Unrealized Loss					Unrealized Loss
	Position					Position					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
December 31, 2005	Amount			Value		Amount			Value		Amount			Value
U.S. Treasury and government agency securities	$	(39	)	$	10,157	$	(683	)	$	40,520	$	(722	)	$	50,677
State and municipal securities		(12	)		1,838		(33	)		887		(45	)		2,725
Corporate bonds		(140	)		8,450		(8	)		0		(148	)		8,450
Asset-backed securities		(45	)		22,800		(69	)		3,426		(114	)		26,226
Equity securities		(73	)		7,227		0			0		(73	)		7,227
Total	$	(309	)	$	50,472	$	(793	)	$	44,833	$	(1,102	)	$	95,305

There were no declines in the fair value of investments available for sale below their cost that were deemed to be other than temporary at December 31, 2006 or 2005. At December 31, 2006, we held nine investments in U.S. Treasury and government agency securities in an unrealized loss position, thirty-two investments in other debt securities in an unrealized loss position and one equity investment in an unrealized loss position. The range of unrealized losses per individual debt security at December 31, 2006 was $1 thousand to $110 thousand. The maximum length of time an investment was in an unrealized loss position was thirty-three months as of December 31, 2006. At December 31, 2005, we held eighteen investments in U.S. Treasury and government agency securities in an unrealized loss position, twenty-five investments in other debt securities in an unrealized

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

loss position and one equity investment in an unrealized loss position. The range of unrealized losses per individual debt security at December 31, 2005 was $1 thousand to $193 thousand. The maximum length of time an investment was in an unrealized loss position was twenty-one months as of December 31, 2005. The unrealized losses at December 31, 2006 and 2005 were not deemed to be other than temporary impairments based upon the length of time and the extent to which the fair value has been less than cost, review of the current interest rate environment, the underlying credit rating of the issuers, anticipated volatility in the market, and our intent and ability to retain the investments for a period of time sufficient to allow for recovery in fair value, which may be maturity. The unrealized losses on debt securities at both dates resulted from increases in interest rates, not from deterioration in the creditworthiness of the issuers. In addition, the U.S. Treasury and government agency securities, state and municipal securities, corporate bonds and commercial paper have contractual terms which do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.

The fair value of investments deposited with insurance regulatory authorities to meet statutory requirements or held by a trustee for the benefit of primary insurance carriers was $6.3 million at December 31, 2006 and 2005.

Note 4.   Receivables

Receivables on the balance sheet, including those held for sale, consisted of the following at December 31:

	2006			2005
Business credit card receivables	$	1,133,132		$	879,468
Other receivables		7,673			8,007
Gross receivables		1,140,805			887,475
Add: Deferred origination costs, net of deferred fees		25,130			22,007
Less: Allowance for receivable losses
Business credit cards		(49,715	)		(44,323	)
Other receivables		(1,211	)		(1,266	)
Total allowance for receivable losses		(50,926	)		(45,589	)
Receivables, net	$	1,115,009		$	863,893

We had commitments to extend credit to our credit card customers, representing unused lines of credit, of $11.5 billion at December 31, 2006 and $8.9 billion at December 31, 2005. Lines of credit on our customers’ business purpose credit cards totaled $16.7 billion at December 31, 2006 and $12.7 billion at December 31, 2005. We believe that our customers’ utilization of their lines of credit will continue to be substantially less than the amount of the commitments, as has been our experience to date.

See Note 6 for information on geographic concentrations for owned business credit card receivables. Also see Note 6 for statistical information on owned receivables 30 days or more delinquent, 90 days or more delinquent, on nonaccrual status, accruing receivables past due 90 days or more, and net principal charge-offs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5.   Allowance For Receivable Losses

The following table displays five years of allowance history for the years ended December 31:

	2006			2005			2004			2003			2002
Balance at January 1	$	45,589		$	50,478		$	48,454		$	46,159		$	41,971
Provision for credit losses		38,600			40,297			42,368			45,423			40,906
Provision for interest and fee losses(1)		8,830			9,270			9,714			11,623			6,889
Gross principal charge-offs:
Business credit cards		(36,777	)		(48,552	)		(42,991	)		(46,597	)		(41,660	)
Other receivables		(5	)		(5	)		(11	)		(34	)		(16	)
Total gross principal charge-offs		(36,782	)		(48,557	)		(43,002	)		(46,631	)		(41,676	)
Principal recoveries:
Business credit cards		3,002			3,687			3,055			2,927			4,260
Other receivables		0			0			4			0			0
Total principal recoveries		3,002			3,687			3,059			2,927			4,260
Net principal charge-offs		(33,780	)		(44,870	)		(39,943	)		(43,704	)		(37,416	)
Interest and fee charge-offs:
Business credit cards		(8,313	)		(9,586	)		(10,115	)		(11,047	)		(6,191	)
Balance at December 31	$	50,926		$	45,589		$	50,478		$	48,454		$	46,159

(1) Prior to October 1, 2002, the billing and recognition of interest and fees was discontinued when the related receivable became 90 days past due or when the account was classified as fraudulent, bankrupt, deceased, hardship or workout. Effective October 1, 2002, we continue to bill and recognize interest and fees on accounts when they become 90 days past due, and an additional allowance for receivable losses is established for the additional billings estimated to be uncollectible through a provision for interest and fee losses.

Note 6.   Securitization Activities

Accounts receivable from securitizations consisted of the following at December 31:

	2006		2005
Retained interests in securitizations	$	234,054	$	183,391
Accrued interest and fees on securitized receivables, net(1)		64,713		53,844
Amounts due from the securitization trust		35,719		212,766
Total accounts receivable from securitizations	$	334,486	$	450,001

(1) Reduced by an estimate for uncollectible interest and fees of $8.7 million at December 31, 2006 and $7.0 million at December 31, 2005.

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following represents securitization data for the years ended December 31, 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.

	2006			2005			2004
Average securitized receivables		$3,337,888			$2,675,906			$2,524,547
Securitization income		114,938			109,051			124,769
Discount accretion		18,158			14,809			17,140
Interchange income		155,160			126,056			112,568
Servicing revenues		63,726			51,079			49,516
Proceeds from new securitizations		2,160,674			1,248,066			131,641
Proceeds from collections reinvested in revolving-period securitizations		7,553,476			6,023,825			6,557,489
Cash flows received on retained interests		332,439			301,531			264,391
Key assumptions:
Discount rate		8.71% - 10.43	%		8.22% - 11.27	%		9.79% - 14.33	%
Monthly payment rate		21.29% - 25.00	%		21.77% - 25.00	%		20.63% - 22.65	%
Loss rate		3.70% -  4.90	%		4.25% -  6.79	%		5.90% -  8.47	%
Interest yield, net of interest earned by noteholders		7.30% -  9.95	%		9.95% - 11.28	%		11.28% - 13.84	%

There were no purchases of delinquent accounts from the securitization trust in the three years ended December 31, 2006.

We used the following assumptions in measuring the fair value of retained interests in securitizations at December 31. The assumptions listed represent weighted averages of assumptions used for each securitization. The monthly payment rate assumptions used at both December 31, 2006 and 2005 result in cash flow projections over a three month weighted average life of existing receivables for the retained interest-only strip valuation.

	2006		2005
Discount rate		8.82% -  9.84%		8.71% -  9.81%
Monthly payment rate		21.29% - 23.10%		23.37% - 25.00%
Loss rate		3.70% -  4.07%		4.25% -  4.68%
Interest yield, net of interest earned by noteholders		7.30%		9.95%

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

We have prepared sensitivity analyses of the valuations of retained interests in securitizations that were estimated using the assumptions identified above. The sensitivity analyses show the hypothetical effect on the estimated fair value of those assets of two unfavorable variations from expected levels for each key assumption,

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

independently from any change in another key assumption. Set forth below are the results of those sensitivity analyses on the valuation at December 31.

	2006			2005
Effect on estimated fair value of the following hypothetical changes in key assumptions:
Discount rate increased by 2%	$	(4,764	)	$	(2,947	)
Discount rate increased by 4%		(9,309	)		(5,770	)
Monthly payment rate at 110% of base assumption(1)		(1,144	)		(2,315	)
Monthly payment rate at 125% of base assumption(1)		(2,591	)		(3,998	)
Loss rate at 110% of base assumption		(3,633	)		(2,606	)
Loss rate at 125% of base assumption		(9,082	)		(6,515	)
Interest yield, net of interest earned by noteholders, decreased by 1%		(9,819	)		(6,132	)
Interest yield, net of interest earned by noteholders, decreased by 2%		(19,637	)		(12,264	)

(1) The sensitivity analysis at December 31, 2005 used stress rates of 115% and 130% of the base monthly payment rate assumption.

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

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Managed business credit card 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 at December 31:

	2006		2005
Owned business credit card receivables	$	1,133,132	$	879,468
Securitized business credit card receivables		4,073,128		2,880,401
Total managed receivables		5,206,260		3,759,869
Receivables 30 days or more delinquent:
Owned		26,053		23,595
Securitized		108,159		87,610
Total managed		134,212		111,205
Receivables 90 days or more delinquent:
Owned		12,632		10,837
Securitized		52,279		40,223
Total managed		64,911		51,060
Nonaccrual receivables:
Owned		10,524		11,476
Securitized		45,160		42,828
Total managed		55,684		54,304
Accruing receivables past due 90 days or more:
Owned		11,302		9,479
Securitized		46,785		35,063
Total managed		58,087		44,542
Net principal charge-offs for the year ended December 31(1):
Owned		33,775		44,865
Securitized		116,227		155,618
Total managed		150,002		200,483

(1) Net principal charge-offs for the year ended December 31, 2004 were $40 million on owned receivables and $170 million on securitized receivables, for a total of $210 million on managed receivables.

At December 31, 2006, approximately 15% of our owned and managed business credit card receivables were concentrated in the state of California. This compares to U.S. Census population estimates of 12% of the U.S. population residing in the state of California. We had no other concentrations in a single state in excess of 10% of total owned or managed business credit card receivables.

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7.   Selected Balance Sheet Information

Other assets consisted of the following at December 31:

	2006		2005
Net deferred tax asset	$	39,166	$	64,923
Investment in Fleet Credit Card Services, L.P.		32,095		32,095
Investment in preferred securities trust		3,093		3,093
Other		91,200		86,216
Total other assets	$	165,554	$	186,327

Other liabilities consisted of the following at December 31:

	2006		2005
Cash overdraft	$	41,188	$	24,966
Business rewards liability		25,467		20,658
Cash back rewards liability		7,366		4,506
Accounts payable and accrued expenses		31,628		28,018
Current income taxes payable		21,473		17,048
Amounts due to the securitization trust		7,287		105,917
Liabilities of discontinued operations, net		1,607		509
Other		14,604		9,823
Total other liabilities	$	150,620	$	211,445

Note 8.   Deposits

Deposit accounts consisted of the following at December 31:

	2006		2005
Demand deposits	$	4,889	$	4,447
Money market savings		72,525		16,353
Time deposits of $100,000 or less		668,398		602,820
Time deposits of more than $100,000		619,326		446,952
Total deposits	$	1,365,138	$	1,070,572

All deposits are interest bearing except demand deposits. Time deposit maturities were as follows at December 31, 2006:

Year Ending December 31,
2007	$	854,336
2008		295,068
2009		108,756
2010		12,859
2011		16,705

The average interest cost of our deposits was 4.43% for the year ended December 31, 2006, 3.46% for 2005 and 2.89% for 2004.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9.   Debt and Other Borrowings

The composition of debt was as follows at December 31:

	2006		2005
RediReserve variable rate demand certificates (4.50% - 5.35%)	$	12,511	$	13,638
91 day retail notes, fixed (5.12% - 5.26%)		738		0
6 month retail notes, fixed (5.35%)		1,826		0
12 month retail notes, fixed (3.83% - 5.83%)		21,170		19,684
18 month retail notes, fixed (3.34% - 6.06%)		4,333		4,505
24 month retail notes, fixed (3.10% - 6.30%)		19,336		22,970
30 month retail notes, fixed (3.44% - 5.97%)		5,251		9,114
36 month retail notes, fixed (4.40% - 6.77%)		16,556		21,773
48 month retail notes, fixed (5.12% - 8.30%)		16,128		18,010
60 month retail notes, fixed (5.59% - 9.22%)		106,677		104,207
84 month retail notes, fixed (6.30% - 8.62%)		4,278		3,137
120 month retail notes, fixed (6.77% - 9.53%)		16,500		8,406
Other retail notes, fixed (3.20% - 9.53%)		1,822		1,412
Total debt	$	227,126	$	226,856

Interest rates shown in the table above represent the range of rates on debt outstanding at December 31, 2006.

The annual contractual maturities of debt were as follows at December 31, 2006:

Year Ending December 31,
2007	$	92,140
2008		63,747
2009		31,667
2010		10,843
2011 and thereafter		28,729

The average interest cost of our debt was 6.39% for the year ended December 31, 2006, 6.16% for 2005 and 6.19% for 2004.

We had no short-term borrowings outstanding at December 31, 2006 or 2005. The following table displays information related to selected types of short-term borrowings for the years ended December 31:

	2006					2005					2004
	Amount		Rate			Amount		Rate			Amount		Rate
Average for the year:
Securities sold under repurchase agreements	$	5		4.65	%	$	5		4.00	%	$	0		0	%
Federal funds purchased		845		5.43			56		3.73			145		1.58
Total	$	850		5.42	%	$	61		3.75	%	$	145		1.58	%
Maximum month-end balance:
Federal funds purchased	$	50,000				$	0				$	18,536

The weighted average interest rates were calculated by dividing the interest expense for the period by the average amount of short-term borrowings outstanding during the period, calculated as an average of daily amounts.

At December 31, 2006, Advanta Bank Corp. had uncommitted federal funds purchased facilities available with six correspondent banks totaling $247.0 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 10.   Subordinated Debt Payable to Preferred Securities Trust

We own 100% of a statutory business trust, Advanta Capital Trust I, that issued $100 million of trust preferred securities, representing preferred beneficial interests in the assets of the trust. We established the trust in 1996 as a financing vehicle and used the proceeds from the issuance for general corporate purposes. The assets of the trust consist of $103 million of 8.99% junior subordinated debentures issued by Advanta Corp., due December 17, 2026. The trust preferred securities are subject to mandatory redemption upon the optional prepayment by Advanta Corp. of the junior subordinated debentures at any time on or after December 17, 2006 at an amount per trust preferred security equal to 104.495% of the principal amount plus accrued and unpaid distributions. This amount declines ratably on each December 17 thereafter to 100% on December 17, 2016. Advanta Corp. provides a full and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities. Dividends on the trust preferred securities are cumulative and payable semi-annually in arrears at an annual rate of 8.99%, and are deferrable at our option for up to ten consecutive semi-annual periods, provided that no deferral may extend beyond December 17, 2026. We cannot pay dividends on our preferred or common stocks during deferments. There have been no deferments as of December 31, 2006. The trust has no operations or assets separate from its investment in the junior subordinated debentures.

In accordance with FASB Interpretation No. 46, Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51, as revised, the subsidiary trust that issued the trust preferred securities is not consolidated. 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. The consolidated income statements include interest expense on subordinated debt payable to preferred securities trust of $9.2 million in each year.

The following is summarized financial information for Advanta Capital Trust I:

	December 31,
	2006		2005
Balance Sheet
Total assets	$	103,453	$	103,453
Total liabilities		360		360
Mandatorily redeemable preferred securities		100,000		100,000
Total common securityholder’s equity		3,093		3,093

	Year Ended December 31,
	2006		2005		2004
Income Statement
Interest income	$	9,268	$	9,268	$	9,268
Expenses		0		0		0
Net income	$	9,268	$	9,268	$	9,268

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 11.   Commitments and Contingencies

Litigation Contingencies

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. 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 operations based on our current expectations regarding the ultimate resolutions of these existing actions 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 actual results will differ from our estimates.

Obligations under Guarantees

In the normal course of business, including discontinued operations, we enter into agreements pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. These indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell assets or services, finance our business and business transactions, establish alliances or other strategic business relationships, service assets (including for unaffiliated third parties), buy or lease real property and license intellectual property. The agreements we enter into in the normal course of business, including discontinued operations, generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay certain amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees or infringement of third party intellectual property rights. Under these typical indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. Further, our indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement. Also, in connection with the securitization of receivables, we enter into agreements pursuant to which we agree to indemnify other parties to these transactions. The agreements contain standard representations and warranties about the receivables that are securitized and include indemnification provisions under certain circumstances involving a breach of these representations or warranties. In connection with the securitization transactions we also include indemnifications that protect other parties to the transactions upon the occurrence of certain events, such as violations of securities laws and certain tax matters. Contingencies triggering material indemnification obligations have not occurred historically and are not expected to occur. Maximum exposure to loss is not possible to estimate due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. The nature of the indemnification provisions in the various types of agreements described above are low risk and pervasive, and we consider them to have a remote risk of loss. There are no amounts on the consolidated balance sheets related to these indemnifications.

In connection with our exit from certain businesses, we have entered into agreements that include customary indemnification obligations to the other parties. In general, the agreements we have entered into in connection with our disposition of assets, liabilities and/or businesses provide that we will indemnify the other parties to the transactions for certain losses relating to the assets, liabilities or business acquired by them. The obligations to indemnify are transaction and circumstance specific, and in most cases the other party must suffer a minimum threshold amount of losses before our indemnification obligation is triggered. Under the indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. It is not possible to determine the maximum potential amount of future payments under these or similar arrangements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. We previously had litigation relating to indemnification provisions of transaction agreements governing

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the transfer of the consumer credit card business and the Mortgage Transaction. Outstanding litigation relating to both of these transaction agreements was resolved prior to December 31, 2005. There are no amounts on the consolidated balance sheets related to these indemnifications.

We own 100% of a statutory business trust that issued $100 million of trust preferred securities, representing preferred beneficial interests in the assets of the trust. See Note 10 for further discussion. Advanta Corp. provides a full and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities. At December 31, 2006, the maximum amount of the undiscounted future payments that Advanta Corp. could be required to make under this guarantee was $280 million, representing the amount of trust preferred securities outstanding of $100 million at December 31, 2006 and future dividends of approximately $9 million per year through December 2026. Our consolidated balance sheets reflect subordinated debt payable to the preferred securities trust of $103 million.

See Note 22 for a discussion of parent guarantees of subsidiary obligations.

Commitments

We lease office space in several states under leases accounted for as operating leases. Total rent expense was $5.4 million for the year ended December 31, 2006, $5.1 million for 2005, and $5.5 million for 2004. Future minimum lease payments include rent and other related expenses. The future minimum lease payments of non-cancelable operating leases are as follows at December 31, 2006:

Year Ending December 31,
2007	$	6,313
2008		6,127
2009		6,144
2010		4,744

In the normal course of business, we have commitments to extend credit to our business credit card customers. See Note 4 for further discussion.

Note 12.   Capital Stock

Class A Preferred Stock is entitled to 1/2 vote per share and a noncumulative dividend of $140 per share per year, which must be paid prior to any dividend on the common stock. The redemption price of the Class A Preferred Stock is equivalent to its par value and redemption is only permitted upon approval of the Board of Directors of Advanta Corp.

Cash dividends per share of common stock declared were as follows for the years ended December 31:

	2006		2005		2004
Class A Common Stock	$	0.7509	$	0.4347	$	0.3465
Class B Common Stock		0.9011		0.5217		0.4158

In May 2006, we repurchased 995 thousand shares of Class B Common Stock beneficially owned by Advanta Corp.’s Chairman and Chief Executive Officer for $38.5 million. The stock repurchase and material terms were authorized by Advanta Corp.’s Audit Committee and Board of Directors (with the Chairman and Chief Executive Officer abstaining). Also in May 2006, in connection with the vesting of shares related to the 2005 performance year for our management incentive program, we withheld 132 thousand vested shares with a market value of $5.0 million from certain employees (including officers) to meet our minimum statutory tax withholding requirements.

Note 13.   Stock-Based Compensation and Benefit Plans

We have adopted a stock-based incentive plan designed to provide incentives to participating employees to remain in our employ and devote themselves to Advanta’s success. Our incentive plan authorizes an aggregate of

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

20.0 million shares of Advanta Corp. Class B Common Stock for the grant of stock options, awards of shares of stock or awards of stock appreciation rights to employees, directors and consultants. Shares available for future grant were 5.6 million at December 31, 2006 and 7.0 million at December 31, 2005.

Nonvested Shares

Under our stock-based incentive plan, we have management incentive programs that provide eligible employees with the opportunity to elect to take portions of their potential, or target, bonus payments for future years in the form of nonvested shares of Advanta Corp. Class B Common Stock. Nonvested shares were formerly referred to as restricted stock. To the extent that these elections are made, or are required by the terms of the programs for certain of our executive officers, nonvested shares are granted to employees. The number of nonvested shares granted to employees is determined by dividing the amount of future target bonus payments that the employee elects to receive in stock by the market price as determined under the incentive program. Nonvested shares vest ten years from the date of grant and are subject to forfeiture prior to vesting under certain conditions, including termination of employment. Vesting has been and may continue to be accelerated annually with respect to the nonvested shares granted under the program covering the particular performance year, based on the extent to which the employee and Advanta met or meet their respective business objectives and/or performance goals for that performance year. We also may issue nonvested shares to employees as part of employment agreements. The vesting and forfeiture terms vary depending on the specific terms of the employment agreement.

Compensation expense, net of forfeitures, and related tax effects recognized in connection with nonvested shares were as follows for the years ended December 31:

	2006		2005		2004
Compensation expense	$	5,593	$	6,721	$	7,324
Income tax benefit		2,153		2,621		2,841

The total fair value of nonvested shares that vested was $22.8 million for the year ended December 31, 2006, $20.2 million for 2005 and $6.9 million for 2004. As of December 31, 2006, there was $14.4 million of total unrecognized compensation expense related to outstanding nonvested shares and we expect to recognize the expense over a weighted average period of 3.4 years.

The following table summarizes nonvested share activity for the years ended December 31:

	2006					2005					2004
				Weighted Average					Weighted Average					Weighted Average
	Number of			Price at Date of		Number of			Price at Date of		Number of			Price at Date of
(Shares in thousands)	Shares			Issuance		Shares			Issuance		Shares			Issuance
Outstanding at beginning of year		811		$	8.56		1,784		$	9.67		2,089		$	8.27
Granted		715			36.45		10			22.27		351			15.46
Vested		(597	)		8.68		(828	)		10.50		(433	)		8.23
Forfeited		(104	)		19.13		(155	)		11.81		(223	)		8.47
Outstanding at end of year		825		$	31.32		811		$	8.56		1,784		$	9.67

Stock Options

All stock options outstanding in the three years ended December 31, 2006 were options to purchase Class B Common Stock. Our stock options generally vest over a four-year period and expire ten years after the date of grant.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Compensation expense, net of forfeitures, and related tax effects recognized in connection with employee stock options were as follows:

	2006		2005		2004
Compensation expense	$	3,842	$	0	$	196
Income tax benefit		1,479		0		77

As of December 31, 2006, there was $8.9 million of total unrecognized compensation expense related to outstanding stock options and we expect to recognize the expense over a weighted average period of 2.1 years.

Stock option activity in the years ended December 31 was as follows:

	2006					2005					2004
	Number of			Weighted Average		Number of			Weighted Average		Number of			Weighted Average
(Shares in thousands)	Options			Exercise Price		Options			Exercise Price		Options			Exercise Price
Outstanding at beginning of year		4,986		$	11.37		5,522		$	11.14		5,358		$	9.79
Granted		1,012			37.77		155			23.52		1,352			16.03
Exercised		(896	)		11.74		(523	)		11.67		(867	)		9.78
Forfeited		(156	)		23.54		(168	)		14.34		(320	)		12.83
Expired		0			0		0			0		(1	)		22.13
Outstanding at end of year		4,946		$	16.32		4,986		$	11.37		5,522		$	11.14
Options exercisable at end of year		3,269		$	10.42		3,680		$	10.46		2,795		$	10.42
Weighted average fair value of options granted in the year	$9.99					$9.49					$6.56

The aggregate intrinsic value of stock options exercised was $21.8 million in the year ended December 31, 2006, $7.3 million in 2005 and $6.8 million in 2004. The aggregate intrinsic value of stock options outstanding at December 31, 2006 was $135.1 million with a weighted average remaining contractual life of 5.1 years. The aggregate intrinsic value of stock options exercisable at December 31, 2006 was $108.6 million with a weighted average remaining contractual life of 3.4 years.

The assumptions listed in the table below represent weighted averages of the assumptions used to estimate the fair value for each option grant using the Black-Scholes-Merton option pricing model. The expected dividend yield is based on current dividend rates as well as announced and anticipated changes in dividend rates based upon management’s expectations of future performance. The expected life of the options is estimated by reviewing historical option exercise data and considering the contractual life of the options and the vesting periods. Expected volatility is based on the historical volatility of Class B Common Stock. The risk-free interest rate is based on the discount rate on a U.S. Treasury Note of a similar duration to the expected life of the options.

	2006		2005		2004
Expected life (in years)		5.3		5.0		5.0
Expected volatility		38.09%		53.60%		54.74%
Risk-free interest rate		4.95%		3.79%		3.62%
Expected dividend yield		4.24%		3.14%		2.85%
Range of expected dividend yield over expected life		2.70% – 7.38%		2.32% – 4.07%		2.83% – 5.94%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Prior to January 1, 2006, we used the intrinsic value based method of accounting for employee stock options permitted by SFAS No. 123 and, as a result, have provided pro forma disclosures of compensation expense. Had compensation expense for employee stock options been determined using the fair value based method, our compensation expense for employee stock options, net of related tax effects, net income and net income per common share would have changed to the following pro forma amounts for the years ended December 31, 2005 and 2004:

	2005				2004
	As		Pro		As		Pro
	Reported		Forma		Reported		Forma
Stock-based employee compensation expense for stock option plans, net of related tax effects	$	0	$	2,449	$	119	$	3,120
Net income		110,429		107,980		44,741		41,740
Basic net income per common share
Class A	$	4.11	$	4.01	$	1.71	$	1.59
Class B		4.23		4.14		1.82		1.70
Combined		4.19		4.09		1.78		1.66
Diluted net income per common share
Class A	$	3.77	$	3.68	$	1.58	$	1.48
Class B		3.82		3.73		1.64		1.54
Combined		3.81		3.71		1.62		1.52

Due to the restructuring of Advanta in the first quarter of 2001, we implemented a program whereby certain out-of-the-money options were exchanged for shares of Class B Common Stock. Shares granted in exchange for options were immediately vested but their distribution was deferred. Participants could elect to receive distributions of 25% of their shares on the first, second, third and fourth anniversaries of the program or to defer distributions of any installment of shares until the second through tenth anniversaries of the program. If a participant terminates employment with Advanta, any unpaid installments will be distributed on the tenth anniversary of the program. No shares were distributed in the year ended December 31, 2006. We distributed 25 thousand shares in the year ended December 31, 2005 and 11 thousand shares in 2004. There were 72 thousand shares remaining to be distributed in connection with this program at December 31, 2006.

Employee Savings Plan

Our Employee Savings Plan is a defined contribution plan available to all of our employees who have reached age 21 with six months of service. It provides tax-deferred savings and investment opportunities, including the ability to invest in Advanta Corp. Class B Common Stock. The plan provides for discretionary employer contributions equal to a portion of the first 5% of an employee’s compensation contributed to the plan. The compensation expense for this plan totaled $1.9 million for the year ended December 31, 2006, $1.9 million for 2005, and $1.7 million for 2004. All shares of Advanta Corp. Class B Common Stock purchased by the plan in the three years ended December 31, 2006 were purchased on the open market.

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan, which allows employees and directors to purchase Advanta Corp. Class B Common Stock at a 15% discount from the market price without paying brokerage fees. We report this 15% discount as compensation expense and we incurred expense of $68 thousand for the year ended December 31, 2006, $76 thousand for 2005 and $65 thousand for 2004. All shares of Advanta Corp. Class B Common Stock purchased by the plan in the three years ended December 31, 2006 were purchased on the open market.

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Employee Stock Ownership Plan

On September 10, 1998, the Board of Directors authorized the formation of an Employee Stock Ownership Plan (“ESOP”), available to all of our employees who have reached age 21 with one year of service. In 1998, the ESOP borrowed approximately $12.6 million from Advanta Corp. and used the proceeds to purchase approximately 1 million shares of Class A Common Stock. The ESOP loan is repayable with an interest rate of 8% over 30 years. We make contributions to the ESOP equal to the ESOP’s debt service less dividends received on ESOP shares. As the ESOP makes each loan payment, an appropriate percentage of stock becomes available to be allocated to participants. At the time of the loan payment, shares are allocated to participants equal to the value of dividends on allocated shares used for loan payments. The remaining shares available for allocation are allocated to eligible employees’ accounts as of each year end based on relative participant compensation. Unallocated shares are reported as unearned ESOP shares on the consolidated balance sheets. As shares of common stock acquired by the ESOP are committed to be released to each employee, we report compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. Dividends on unallocated ESOP shares are used to fund debt service of the ESOP. ESOP compensation expense was $1.1 million for the year ended December 31, 2006, $822 thousand for 2005 and $639 thousand for 2004. At December 31, 2006, there were 732 thousand unearned and unallocated ESOP shares with a fair value of $29.2 million. At December 31, 2005, there were 766 thousand unearned and unallocated ESOP shares with a fair value of $23.1 million.

Supplemental Executive Retirement Plan

In February 2005, the Board of Directors approved and established the Advanta Corp. Supplemental Executive Retirement Plan (“SERP”) to provide retirement benefits to a senior executive with an unreduced survivor benefit to the executive’s spouse. The SERP is a nonqualified, noncontributory, unfunded defined benefit retirement plan. The annual benefit of $625 thousand vests ratably from February 2005 through August 2012. Assuming the executive does not retire until age 70 when he is fully vested, we expect that no benefit payments will be made in the next 5 years and estimate benefit payments of $2.7 million in the 5 years thereafter.

The net periodic pension cost included in compensation expense was as follows for the years ended December 31:

	2006		2005		2004
Service cost	$	769	$	742	$	0
Interest cost		64		19		0
Total net periodic pension cost	$	833	$	761	$	0

The following is a reconciliation of the beginning and ending balances of the accumulated and projected benefit obligation at December 31:

	2006		2005
Benefit obligation at beginning of year	$	761	$	0
Service cost		769		742
Interest cost		64		19
Benefit obligation at end of year	$	1,594	$	761

The measurement date used to determine the benefit obligation for the SERP is December 31. The benefit obligation was included in other liabilities on the consolidated balance sheets. We used a discount rate in calculating the benefit obligation of 5.9% as of December 31, 2006 and 5.6% as of December 31, 2005.

80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 14.   Minimum Regulatory Capital Requirements

Advanta Bank Corp. and Advanta National Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the banks’ and our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The banks’ capital amounts and classification are also subject to qualitative judgments by the bank regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets, each as defined in the regulations. Management believes that Advanta Bank Corp. and Advanta National Bank meet all capital adequacy requirements to which they are subject as of December 31, 2006 and 2005.

In 2000, Advanta National Bank reached agreements with its bank regulatory agency, primarily relating to the bank’s subprime lending operations. The agreements established temporary asset growth limits at Advanta National Bank, imposed restrictions on taking brokered deposits and required that Advanta National Bank maintain certain capital ratios in excess of the minimum regulatory standards. In 2001, Advanta National Bank entered into an additional agreement with its regulatory agency regarding restrictions on new business activities and product lines at Advanta National Bank after the Mortgage Transaction, and the resolution of outstanding Advanta National Bank liabilities. The agreement also reduced the capital requirements for Advanta National Bank to a ratio of 12.7% for Tier 1 and total capital to risk-weighted assets, and to a ratio of 5% for Tier 1 capital to adjusted total assets as defined in the agreement. In addition, the agreement prohibits the payment of dividends by Advanta National Bank without prior regulatory approval. Advanta National Bank’s operations were not material to our consolidated operating results in the three years ended December 31, 2006. Management believes that Advanta National Bank was in compliance with its regulatory agreements at December 31, 2006.

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As set forth in the table below, at December 31, 2006 and 2005, Advanta Bank Corp. and Advanta National Bank had capital at levels a bank is required to maintain to be classified as “well-capitalized” under the regulatory framework for prompt corrective action. However, Advanta National Bank does not meet the definition of “well-capitalized” because of the existence of its agreement with its regulatory agency, even though it has achieved the higher imposed capital ratios required by the agreement.

						To Be Adequately					To Be Well-
						Capitalized Under					Capitalized Under
						Prompt Corrective					Prompt Corrective
	Actual					Action Provisions					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2006
Total Capital (to Risk-Weighted Assets)
Advanta Bank Corp.	$	439,335		21.37	%	$	259,648		³ 8.0	%	$	286,535		³ 10.0	%
Advanta National Bank		77,984		287.33			2,170		³ 8.0			2,715		³ 10.0
Tier I Capital (to Risk-Weighted Assets)
Advanta Bank Corp.	$	398,653		19.39	%	$	177,516		³ 4.0	%	$	207,866		³ 6.0	%
Advanta National Bank		77,762		286.51			1,085		³ 4.0			1,628		³ 6.0
Tier I Capital (to Average Assets)
Advanta Bank Corp.	$	398,653		20.33	%	$	78,444		³ 4.0	%	$	98,055		³ 5.0	%
Advanta National Bank		77,762		78.25			3,975		³ 4.0			4,970		³ 5.0
December 31, 2005
Total Capital (to Risk-Weighted Assets)
Advanta Bank Corp.	$	393,841		21.82	%	$	221,684		³ 8.0	%	$	246,608		³ 10.0	%
Advanta National Bank		66,768		254.42			2,100		³ 8.0			2,625		³ 10.0
Tier I Capital (to Risk-Weighted Assets)
Advanta Bank Corp.	$	359,082		19.89	%	$	148,728		³ 4.0	%	$	176,710		³ 6.0	%
Advanta National Bank		66,486		253.35			1,050		³ 4.0			1,575		³ 6.0
Tier I Capital (to Average Assets)
Advanta Bank Corp.	$	359,082		21.98	%	$	65,347		³ 4.0	%	$	81,684		³ 5.0	%
Advanta National Bank		66,486		45.84			5,800		³ 4.0			7,250		³ 5.0

Note 15.   Restrictions on Dividends, Loans and Advances

In the normal course of business, Advanta Corp. and its subsidiaries enter into agreements, or are subject to regulatory requirements, that result in dividend and loan restrictions.

Banks insured by the Federal Deposit Insurance Corporation are subject to certain provisions of the Federal Reserve Act which impose various legal limitations on the extent to which banks may finance or otherwise supply funds to certain of their affiliates. In particular, Advanta Bank Corp. and Advanta National Bank are subject to certain restrictions on any extensions of credit to, or other covered transactions, such as certain purchases of assets, with Advanta Corp. or its affiliates. These restrictions prevent Advanta Bank Corp. and Advanta National Bank from lending to Advanta Corp. and its affiliates unless these extensions of credit are secured by U.S. Government obligations or other specified collateral. Further, secured extensions of credit are limited in amount: (1) as to Advanta Corp. or any affiliate, to 10% of each bank’s capital and surplus; and (2) as to Advanta Corp. and all affiliates in the aggregate, to 20% of each bank’s capital and surplus.

Under grandfathering provisions of the Competitive Equality Banking Act of 1987, Advanta Corp. is not required to register as a bank holding company under the Bank Holding Company Act of 1956, as amended, so long

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

as Advanta Corp. and Advanta National Bank continue to comply with certain restrictions on their activities. These restrictions include the limitation that Advanta National Bank may take demand deposits but may not make commercial loans. We have no present plans to register as a bank holding company under the Bank Holding Company Act.

Advanta Bank Corp. paid $75 million in cash dividends to Advanta Corp. in 2006. In 2005, Advanta Bank Corp. paid $35 million in cash dividends to Advanta Corp. In 2004, Advanta Bank Corp. paid $32 million in cash dividends and a $3 million noncash dividend to Advanta Corp. Advanta National Bank’s agreements with its regulatory agency prohibit the payment of dividends by Advanta National Bank without prior regulatory approval. Advanta National Bank paid no dividends to Advanta Corp. in the three years ended December 31, 2006.

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. At December 31, 2006, the insurance subsidiaries were in compliance with these rules and regulations. The insurance subsidiaries paid no dividends to Advanta Corp. in the three years ended December 31, 2006.

Total stockholders’ equity of our banking and insurance subsidiaries was $491 million at December 31, 2006 and $437 million at December 31, 2005. Of our total equity in these subsidiaries, $338 million was restricted at December 31, 2006 and $290 million was restricted at December 31, 2005. At January 1, 2007, $153 million of stockholders’ equity of our bank and insurance subsidiaries was available for payment of cash dividends in 2007 under applicable regulatory guidelines without prior regulatory approval.

In addition to dividend restrictions at banking and insurance subsidiaries, one of our other subsidiaries is subject to a minimum equity requirement as part of a transaction agreement. The total minimum equity requirement of this subsidiary was $10 million at December 31, 2006 and the subsidiary was in compliance with its minimum equity requirement. We also have an investment in a limited partnership, Fleet Credit Card Services, L.P., and estimated undistributed partnership earnings included in our retained earnings were $12.1 million at December 31, 2006.

Note 16.   Segment Information

Our only reportable business segment is Advanta Business Cards, which issues business purpose credit cards to small businesses and business professionals through our subsidiary, Advanta Bank Corp. Our business credit card accounts provide approved customers with unsecured revolving business credit lines. Advanta Business Cards revenue is generated through interest earned on outstanding balances, interchange income, balance transfer fees, cash usage fees and other fees.

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reconciles information about the Advanta Business Cards segment to the consolidated financial statements:

	Advanta
	Business
	Cards		Other(1)			Total
Year Ended December 31, 2006
Interest income	$	143,738	$	26,017		$	169,755
Interest expense		46,233		29,077			75,310
Noninterest revenues		332,924		5,031			337,955
Pretax income from continuing operations		135,587		1,401			136,988
Total assets at end of period		1,495,544		917,594			2,413,138
Capital expenditures		225		5,643			5,868
Depreciation and amortization		145		5,640			5,785
Year Ended December 31, 2005
Interest income	$	121,697	$	17,904		$	139,601
Interest expense		36,027		21,559			57,586
Noninterest revenues		284,556		6,284			290,840
Gain on transfer of consumer credit card business		0		67,679			67,679
Pretax income from continuing operations		88,905		68,274			157,179
Total assets at end of period		1,362,133		765,270			2,127,403
Capital expenditures		0		6,193			6,193
Depreciation and amortization		392		6,792			7,184
Year Ended December 31, 2004
Interest income	$	99,194	$	7,515		$	106,709
Interest expense		35,779		9,798			45,577
Noninterest revenues		285,610		2,231			287,841
Pretax income (loss) from continuing operations		75,182		(2,875	)		72,307
Total assets at end of period		994,194		698,730			1,692,924
Capital expenditures		187		6,925			7,112
Depreciation and amortization		2,012		7,654			9,666

(1) Other includes venture capital operations as well as investment and other activities not attributable to segments. Total assets in Other include assets of discontinued operations, if applicable.

Note 17.   Gain on Transfer of Consumer Credit Card Business

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 acquired by Bank of America, relating to the transfer of our consumer credit card business to Fleet Credit Card Services, L.P. in 1998. The agreement was subject to the Internal Revenue Service’s final approval of the settlement of the tax disputes. We received the final approval of the Internal Revenue Service in January 2005 and, as a result, we received $63.8 million in cash from Bank of America in February 2005, representing a return of the payments that we made to Fleet in the Delaware state court litigation in February 2004. Consistent with the terms of our agreement with Bank of America, all outstanding litigation between Advanta and Fleet was dismissed in February 2005. The overall impact of the agreement with Bank of America, including the cash received, settlement of the tax disputes and reevaluation of the valuation allowance on deferred tax assets, was a pretax gain of $67.7 million, tax expense of $5.6 million and an increase in additional paid-in capital of $6.0 million in the year ended December 31, 2005. See Note 19 for further description of the income tax impact of our May 28, 2004 agreement with Bank of America.

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 18.   Selected Income Statement Information

Other revenues consisted of the following for the years ended December 31:

	2006			2005			2004
Interchange income	$	203,369		$	164,853		$	140,534
Cash back rewards		(45,845	)		(33,581	)		(24,713	)
Business rewards		(22,216	)		(20,140	)		(16,513	)
Balance transfer fees		7,848			5,561			4,572
Investment securities gains (losses), net(1)		5,508			780			(1,498	)
Other business credit card fees		3,545			3,283			2,911
Cash usage fees		3,487			3,199			3,097
Earnings on investment in Fleet Credit Card Services, L.P.		1,246			1,948			2,545
Other, net		2,349			4,807			2,621
Total other revenues, net	$	159,291		$	130,710		$	113,556

(1) Investment securities gains (losses), net, include changes in the fair value and realized gains and losses on venture capital investments.

In each reporting period, we evaluate our estimates of the percentage of earned rewards that customers will ultimately redeem and the costs of business rewards and adjust our estimates, if needed, based on historical experience, consideration of changes in portfolio composition and changes in the rewards programs, including redemption terms. The following table shows the impact of the changes in the estimated percentage of earned rewards that customers will ultimately redeem and other changes in estimated costs of future period reward redemptions for the years ended December 31:

	2006		2005			2004
Increase (decrease) in other revenues	$	500	$	(1,200	)	$	(2,700	)
Increase (decrease) in net income		308		(730	)		(1,660	)
Amount per combined diluted share	$	0.01	$	(0.03	)	$	(0.06	)

Operating expenses consisted of the following for the years ended December 31:

	2006		2005		2004
Salaries and employee benefits	$	96,371	$	96,012	$	92,863
Amortization of deferred origination costs, net		48,285		41,729		33,508
External processing		25,072		21,216		20,267
Marketing		23,193		20,560		21,014
Professional fees		11,907		12,236		14,043
Equipment		9,942		10,954		11,173
Occupancy		9,102		8,180		8,695
Credit		5,140		5,064		5,781
Other		27,800		27,107		26,954
Total operating expenses	$	256,812	$	243,058	$	234,298

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 19.   Income Taxes

Income tax expense was as follows for the years ended December 31:

	2006		2005			2004
Income tax expense (benefit) attributable to:
Continuing operations	$	52,740	$	40,490		$	28,034
Gain (loss), net, on discontinuance of mortgage and leasing businesses		462		(4,002	)		297
Total income tax expense	$	53,202	$	36,488		$	28,331

Income tax expense (benefit) attributable to continuing operations consisted of the following components for the years ended December 31:

	2006			2005		2004
Current:
Federal	$	21,794		$	15,090	$	13,139
State		5,861			3,539		2,699
Total current		27,655			18,629		15,838
Deferred:
Federal		25,281			21,432		12,032
State		(196	)		429		164
Total deferred		25,085			21,861		12,196
Total income tax expense attributable to continuing operations	$	52,740		$	40,490	$	28,034

The reconciliation of the statutory federal income tax to income tax expense attributable to continuing operations is as follows for the years ended December 31:

	2006		2005			2004
Statutory federal income tax	$	47,946	$	55,013		$	25,307
State income taxes, net of federal income tax benefit		3,641		2,579			1,861
Nondeductible expenses		945		1,174			982
Compensation limitation		201		440			512
Gain on transfer of consumer credit card business		0		(12,347	)		0
Change in valuation allowance		0		(6,393	)		0
Other		7		24			(628	)
Income tax expense attributable to continuing operations	$	52,740	$	40,490		$	28,034

Our effective tax rate attributable to continuing operations was 38.5% for the year ended December 31, 2006, 25.8% for 2005 and 38.8% for 2004. The effective tax rate for the year ended December 31, 2005 was impacted by the Bank of America agreement and reevaluation of the valuation allowance discussed below.

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 was comprised of the following at December 31:

	2006			2005
Deferred tax assets	$	66,059		$	79,452
Deferred tax liabilities		(26,893	)		(14,529	)
Net deferred tax asset	$	39,166		$	64,923

The components of the net deferred tax asset were as follows at December 31:

	2006			2005
Alternative minimum tax credit carryforwards	$	17,249		$	26,060
Business credit card rewards		11,492			8,807
Deferred revenue		(10,435	)		0
Deferred origination costs, net of deferred fees		(8,910	)		(7,345	)
Allowance for receivable losses		8,864			18,400
Capital loss carryforwards		6,653			4,476
Incentive and deferred compensation		6,065			5,029
Securitization income		(2,624	)		(3,849	)
Unrealized venture capital investment losses		1,352			5,934
Other		9,460			7,411
Net deferred tax asset	$	39,166		$	64,923

In January 2005, we received the Internal Revenue Service’s final approval of the settlement of tax disputes in our May 28, 2004 agreement with Bank of America and in February 2005, we received $63.8 million in cash from Bank of America. See Note 17 for further discussion. The settlement of the tax disputes resulted in an allocation of $381 million of the disputed partnership tax deductions to Fleet, which was acquired by Bank of America, and $617 thousand of the disputed $47 million partnership taxable gain to Advanta. The impact to us of the tax deduction and gain allocation was a reduction in our deferred tax asset related to net operating loss carryforwards of $133.4 million and a corresponding reduction in our valuation allowance on deferred tax assets of $133.4 million, both in the year ended December 31, 2005. Upon receipt of the Internal Revenue Service’s approval of the settlement of the tax disputes, the remaining valuation allowance of $12.4 million was evaluated, and management determined that it was more likely than not that the remaining deferred tax asset was realizable and therefore, no valuation allowance was needed, resulting in a $6.4 million reduction in tax expense and a $6.0 million increase in additional paid-in capital in the year ended December 31, 2005. The increase in additional paid-in capital represented the portion of the valuation allowance that had been related to tax benefits from stock-based compensation. The gain associated with the original transfer of assets to Fleet Credit Card Services, L.P. in 1998 was not subject to income tax, and therefore, a substantial portion of the February 2004 payment to Fleet was not tax-deductible. A substantial portion of the $63.8 million payment received in February 2005 was not taxable since it is a return of our payment to Fleet in February 2004. As of December 31, 2006, the cumulative gain on transfer of consumer credit card business and our deficit capital account in Fleet Credit Card Services L.P. on a tax basis for which no deferred taxes have been provided is approximately $650 million, as the transaction structure remains nontaxable under current tax law.

In the third quarter of 2006, we completed the preparation and filing of our 2005 U.S. federal income tax return and recognized a current tax benefit and deferred tax provision to reflect a reduction in current taxes payable and deferred tax assets from the amounts previously estimated. These results were due to changes in the timing of certain deductions and recognition of certain revenues in the 2005 tax return and had no net impact on our effective tax rate or total income tax expense for the year ended December 31, 2006.

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2006, we have $4.3 million of capital loss carryforwards that are scheduled to expire in the year ending December 31, 2009, $7.4 million that are scheduled to expire in the year ending December 31, 2010, and $7.3 million that are scheduled to expire in the year ending December 31, 2011. Alternative minimum tax credit carryforwards do not expire.

Note 20.   Discontinued Operations

Effective February 28, 2001, we completed the Mortgage Transaction. Prior to the Mortgage Transaction, Advanta Mortgage made nonconforming home equity loans directly to consumers and through brokers. This business unit originated and serviced first and second lien mortgage loans, including home equity lines of credit, through subsidiaries of Advanta. In addition to servicing and managing the loans it originated, Advanta Mortgage contracted with third parties to service their nonconforming home equity loans on a subservicing basis. Following the Mortgage Transaction, we no longer operate a mortgage business. The purchase and sale agreement provided for the sale, transfer and assignment of substantially all of the assets and operating liabilities associated with our mortgage business, as well as specified contingent liabilities arising from our operation of the mortgage business prior to closing that were identified in the purchase and sale agreement. We retained contingent liabilities, primarily relating to litigation, arising from our operation of the mortgage business before closing that were not specifically assumed by the buyer.

On January 23, 2001, we decided to cease originating leases. Our leasing business, Advanta Leasing Services, offered flexible lease financing programs on small-ticket equipment to small businesses. The primary products financed included office machinery, security systems and computers. We continued to service the existing lease portfolio during its wind down period. As of December 31, 2006, we had no lease receivables outstanding.

The components of the gain (loss) on discontinuance of our mortgage and leasing businesses for the years ended December 31 were as follows:

	2006						2005						2004
				Advanta						Advanta						Advanta
	Advanta			Leasing			Advanta			Leasing			Advanta			Leasing
	Mortgage			Services			Mortgage			Services			Mortgage			Services
Pretax gain (loss) on discontinuance of mortgage and leasing businesses	$	500		$	700		$	(13,762	)	$	3,500		$	(3,270	)	$	4,035
Income tax (expense) benefit		(193	)		(269	)		5,367			(1,365	)		1,268			(1,565	)
Gain (loss) on discontinuance of mortgage and leasing businesses, net of tax	$	307		$	431		$	(8,395	)	$	2,135		$	(2,002	)	$	2,470

The gain (loss) on discontinuance of the mortgage business in each of the applicable reported periods represents a change in our estimates of the future costs of mortgage business-related contingent liabilities based on new developments in litigation or disputes related to our former mortgage programs, or insurance reimbursements related to past or future costs. The loss on discontinuance of the mortgage business in 2005 includes the impact of the resolution of the litigation matters with Chase Manhattan Mortgage Corporation related to the Mortgage Transaction. The gain on discontinuance of the leasing business in each of the applicable reported periods represents changes in estimated operating results of the leasing segment over the wind down period based on trends of performance of the leasing portfolio, sales tax assessments or refunds, or changes in the anticipated timeframe over which we expect to incur certain operating expenses related to the leasing business.

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Per share amounts were as follows for the years ended December 31:

	Advanta Mortgage								Advanta Leasing Services
	2006		2005			2004			2006		2005		2004
Basic gain (loss) on discontinuance of mortgage and leasing businesses, net of tax, per common share
Class A	$	0.01	$	(0.32	)	$	(0.08	)	$	0.02	$	0.08	$	0.10
Class B		0.01		(0.32	)		(0.08	)		0.02		0.08		0.10
Combined		0.01		(0.32	)		(0.08	)		0.02		0.08		0.10
Diluted gain (loss) on discontinuance of mortgage and leasing businesses, net of tax, per common share
Class A	$	0.01	$	(0.29	)	$	(0.07	)	$	0.01	$	0.07	$	0.09
Class B		0.01		(0.29	)		(0.07	)		0.01		0.07		0.09
Combined		0.01		(0.29	)		(0.07	)		0.01		0.07		0.09

Note 21.   Calculation of Earnings Per Share

The following table shows the calculation of basic earnings per common share and diluted earnings per common share for the years ended December 31:

	2006			2005			2004
Income from continuing operations	$	84,248		$	116,689		$	44,273
Less: Preferred A dividends		(141	)		(141	)		(141	)
Income from continuing operations available to common stockholders		84,107			116,548			44,132
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax		738			(6,260	)		468
Net income available to common stockholders		84,845			110,288			44,600
Less: Class A dividends declared		(6,712	)		(3,842	)		(3,067	)
Less: Class B dividends declared		(16,792	)		(9,746	)		(7,544	)
Undistributed net income	$	61,341		$	96,700		$	33,989
Basic income from continuing operations per common share
Class A	$	3.01		$	4.34		$	1.69
Class B		3.18			4.47			1.80
Combined(1)		3.12			4.43			1.76
Diluted income from continuing operations per common share
Class A	$	2.82		$	3.99		$	1.57
Class B		2.88			4.04			1.62
Combined(1)		2.86			4.02			1.60
Basic net income per common share
Class A	$	3.04		$	4.11		$	1.71
Class B		3.21			4.23			1.82
Combined(1)		3.15			4.19			1.78

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	2006		2005		2004
Diluted net income per common share
Class A	$	2.84	$	3.77	$	1.58
Class B		2.91		3.82		1.64
Combined(1)		2.89		3.81		1.62
Basic weighted average common shares outstanding
Class A		8,858		8,825		8,798
Class B		18,064		17,512		16,225
Combined		26,922		26,337		25,023
Dilutive effect of
Options Class B		2,153		1,942		1,606
Nonvested shares Class B		313		706		919
Diluted weighted average common shares outstanding
Class A		8,858		8,825		8,798
Class B		20,530		20,160		18,750
Combined		29,388		28,985		27,548
Antidilutive shares
Options Class B		702		13		161
Nonvested shares Class B		2		0		0

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

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 22.   Parent Company Financial Statements

ADVANTA CORP. (Parent Company Only)
Condensed Balance Sheets

($ in thousands)	December 31,
	2006		2005
Assets
Cash	$	5,836	$	7,559
Commercial paper equivalent(1)		40,000		40,000
Restricted interest-bearing deposits		2,142		2,096
Investments available for sale		66,623		93,488
Receivables, net		39,386		17,512
Investments in and advances to bank and insurance subsidiaries		517,722		448,761
Investments in and advances to other subsidiaries		172,080		143,273
Other assets		88,202		120,562
Total assets	$	931,991	$	873,251
Liabilities
Debt	$	227,126	$	226,856
Subordinated debt payable to preferred securities trust		103,093		103,093
Other liabilities		34,611		27,865
Total liabilities		364,830		357,814
Stockholders’ Equity
Preferred stock		1,010		1,010
Common stock		334		319
Other stockholders’ equity		565,817		514,108
Total stockholders’ equity		567,161		515,437
Total liabilities and stockholders’ equity	$	931,991	$	873,251

(1) Commercial paper equivalent refers to unsecured loans made to Advanta Business Services Holding Corp. for terms of less than 30 days in maturity which are not automatically renewable, consistent with commercial paper issuance.

Parent company cash includes amounts deposited at bank subsidiaries of $5.8 million at December 31, 2006 and $7.5 million at December 31, 2005. Restricted interest-bearing deposits include amounts deposited at bank subsidiaries of $1.3 million at December 31, 2006 and 2005.

The parent company guarantees certain lease payments of its subsidiaries in connection with lease agreements extending through November 30, 2010. At December 31, 2006, the maximum amount of undiscounted future payments that the parent could be required to make under these lease agreement guarantees was $11.5 million. The parent company guarantees payments of distributions and other amounts due on trust preferred securities issued by its wholly-owned statutory business trust. See Note 10 for a discussion of Advanta Corp.’s guarantee of payments of distributions and other amounts due on the trust preferred securities. The parent company also guarantees that an insurance subsidiary will remain in compliance with its minimum statutory capital requirement of $2.5 million.

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ADVANTA CORP. (Parent Company Only)

Condensed Statements of Operations

($ in thousands)	Year Ended December 31,
	2006			2005			2004
Income:
Dividends from bank and insurance subsidiaries	$	75,000		$	35,000		$	35,000
Dividends from other subsidiaries		282			329			1,542
Interest income		5,757			4,682			2,057
Other revenues, net		5,880			4,175			1,388
Loss on sale of receivables to bank subsidiary		(2,688	)		0			0
Gain on transfer of consumer credit card business		0			49,899			0
Total income		84,231			94,085			39,987
Expenses:
Interest expense		19,712			20,042			23,299
Provision for credit losses		490			30			0
Operating expenses		34,600			37,309			33,763
Total expenses		54,802			57,381			57,062
Gain (loss) from continuing operations before income taxes and equity in undistributed net income in subsidiaries		29,429			36,704			(17,075	)
Income tax benefit		(2,941	)		(15,104	)		(18,008	)
Income from continuing operations before equity in undistributed net income of subsidiaries		32,370			51,808			933
Gain (loss) on discontinuance of mortgage business, net of tax		279			(8,469	)		(1,999	)
Income (loss) before equity in undistributed net income of subsidiaries		32,649			43,339			(1,066	)
Equity in undistributed net income of subsidiaries		52,337			67,090			45,807
Net income	$	84,986		$	110,429		$	44,741

The Parent Company Only Statements of Changes in Stockholders’ Equity are the same as the Consolidated Statements of Changes in Stockholders’ Equity.

The parent company had interest income related to affiliate borrowings of $3.3 million for the year ended December 31, 2006, $4.0 million for 2005 and $3.3 million for 2004. The parent company provided certain administrative and support services to affiliates. Revenues related to these services were $2.6 million for the year ended December 31, 2006, $2.8 million for 2005 and $2.4 million for 2004. Affiliates provide certain administrative and support services to the parent company. Fees paid to affiliates for these services were $14.3 million for the year ended December 31, 2006, $12.7 million for 2005 and $12.8 million for 2004.

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ADVANTA CORP. (Parent Company Only)

Condensed Statements of Cash Flows

($ in thousands)	Year Ended December 31,
	2006			2005			2004
Operating Activities
Net income	$	84,986		$	110,429		$	44,741
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
(Gain) loss on discontinuance of mortgage business, net of tax		(279	)		8,469			1,999
Equity in net income of subsidiaries		(127,619	)		(102,419	)		(82,349	)
Loss on sale of receivables to bank subsidiary		2,688			0			0
Investment securities gains, net		(1,658	)		(185	)		(14	)
Dividends received from subsidiaries		75,282			35,329			33,559
Provision for credit losses		490			30			0
Depreciation		146			121			97
Excess tax benefits from stock-based compensation		(12,149	)		0			0
Change in other assets and other liabilities		69,278			24,169			(7,437	)
Net cash provided by (used in) operating activities		91,165			75,943			(9,404	)
Investing Activities
Investments in subsidiaries		0			0			(59	)
Return of investment from subsidiaries		224			14			6,028
Purchase of investments available for sale		(611,358	)		(404,227	)		(468,082	)
Proceeds from sales of investments available for sale		625,633			358,492			424,811
Proceeds from maturing investments available for sale		14,500			30,055			10,000
Change in commercial paper equivalents		0			4,000			90,000
Change in restricted interest-bearing deposits		(46	)		429			402
Change in receivables		(32,515	)		(16,507	)		476
Purchases of premises and equipment, net		0			(291	)		(1	)
Net cash (used in) provided by investing activities		(3,562	)		(28,035	)		63,575
Financing Activities
Proceeds from issuance of debt		31,886			23,311			29,319
Payments on redemption of debt		(39,973	)		(70,805	)		(90,625	)
Change in affiliate borrowings		(37,966	)		16,725			20,631
Proceeds from exercise of stock options		10,508			6,105			8,497
Cash dividends paid		(23,645	)		(13,729	)		(10,752	)
Excess tax benefits from stock-based compensation		12,149			0			0
Treasury stock acquired		(43,576	)		0			0
Net cash used in financing activities		(90,617	)		(38,393	)		(42,930	)
Discontinued Operations
Net cash provided by (used in) operating activities		1,291			(7,748	)		(5,551	)
Net (decrease) increase in cash		(1,723	)		1,767			5,690
Cash at beginning of year		7,559			5,792			102
Cash at end of year	$	5,836		$	7,559		$	5,792

In 2006, the parent company contributed $7.5 million of receivables to Advanta Bank Corp. as a noncash investment in subsidiary. In 2005, noncash transactions of the parent company included noncash investment in subsidiaries of $21.5 million. In 2004, noncash transactions of the parent company included noncash dividends of $3.0 million from subsidiaries and noncash investment in subsidiaries of $3.0 million.

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 23.   Fair Value of Financial Instruments

The estimated fair values and related carrying amounts of our financial instruments are as follows at December 31:

	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash	$	35,055	$	35,055	$	34,109	$	34,109
Federal funds sold		547,631		547,631		355,057		355,057
Restricted interest-bearing deposits		1,211		1,211		1,333		1,333
Investments available for sale		197,477		197,477		219,782		219,782
Receivables, net		1,115,009		1,155,280		863,893		902,888
Accounts receivable from securitizations		334,486		334,486		450,001		450,001
Accrued interest receivable		6,076		6,076		5,236		5,236
Financial liabilities:
Demand and savings deposits	$	77,414	$	77,414	$	20,800	$	20,800
Time deposits		1,287,724		1,283,141		1,049,772		1,038,764
Debt		227,126		229,164		226,856		234,248
Subordinated debt payable to preferred securities trust		103,093		105,155		103,093		102,062
Accrued interest payable		10,415		10,415		5,414		5,414
Off-balance sheet financial instruments:
Commitments to extend credit	$	0	$	0	$	0	$	0

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, quoted market prices are not available for our various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. SFAS No. 107, Disclosures about Fair Value of Financial Instruments, excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of Advanta.

We used the following methods and assumptions in estimating fair value disclosures for financial instruments:

Cash, Federal Funds Sold, Restricted Interest-Bearing Deposits, Accrued Interest Receivable and Accrued Interest Payable

For cash and these short-term financial instruments, the carrying amount approximates the fair value.

Investments Available for Sale

Investments available for sale are carried at fair value. The fair values of investments available for sale are based on quoted market prices, dealer quotes or estimates using quoted market prices for similar securities. For investments that are not publicly traded, management has made estimates of fair value that consider several factors including the investees’ financial results, conditions and prospects.

Receivables, Net

The fair values of receivables are estimated using a discounted cash flow analysis that incorporates estimates of the excess of the weighted average interest and fee yield over the aggregate cost of funds, servicing costs, future credit

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

losses over the life of the receivables, and interest rates currently being offered for receivables with similar terms to borrowers of similar credit quality.

Accounts Receivable from Securitizations

Retained interests in securitizations are carried at fair value. We estimate the fair values of retained interests in securitizations based on discounted cash flow analyses as described in Note 2. See Note 6 for the assumptions used in the estimation of fair values of the retained interests in securitizations.

The carrying amount approximates the fair value of other components of accounts receivable from securitizations based on the short-term nature of the assets.

Demand and Savings Deposits

The fair value of demand and money market savings deposits is the amount payable on demand at the reporting date. This fair value does not include any benefit that may result from the low cost of funding provided by these deposits compared to the cost of borrowing funds in the market.

Time Deposits

The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses based on the rates currently offered for deposits of similar remaining maturities.

Debt

The fair value of our debt is estimated using discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements.

Subordinated Debt Payable to Preferred Securities Trust

We estimate the fair value of our subordinated debt using dealer quotes for similar securities.

Commitments to Extend Credit

There is no fair value associated with commitments to extend credit to our business credit card customers, since any fees charged are consistent with the fees charged by other companies at the reporting date to enter into similar agreements. We had commitments to extend credit of $11.5 billion at December 31, 2006 and $8.9 billion at December 31, 2005.

95

SUPPLEMENTAL SCHEDULES (UNAUDITED)

QUARTERLY DATA

(In thousands, except per share amounts)	2006
	December 31,		September 30,		June 30,		March 31,
Interest income	$	45,048	$	45,928	$	40,511	$	38,268
Interest expense		22,227		19,649		17,479		15,955
Net interest income		22,821		26,279		23,032		22,313
Provision for credit losses		9,969		9,202		10,145		9,284
Net interest income after provision for credit losses		12,852		17,077		12,887		13,029
Noninterest revenues		85,210		83,197		87,312		82,236
Operating expenses		68,505		65,932		62,736		59,639
Income from continuing operations before income taxes		29,557		34,342		37,463		35,626
Income from continuing operations		18,178		21,120		23,040		21,910
Gain on discontinuance of mortgage and leasing businesses, net of tax(1)		0		0		738		0
Net income	$	18,178	$	21,120	$	23,778	$	21,910
Basic income from continuing operations per common share
Class A	$	0.63	$	0.75	$	0.84	$	0.79
Class B		0.69		0.81		0.87		0.82
Combined(2)		0.67		0.79		0.86		0.81
Diluted income from continuing operations per common share
Class A	$	0.60	$	0.71	$	0.78	$	0.73
Class B		0.62		0.73		0.79		0.74
Combined(2)		0.62		0.73		0.79		0.73
Basic net income per common share
Class A	$	0.63	$	0.75	$	0.86	$	0.79
Class B		0.69		0.81		0.90		0.82
Combined(2)		0.67		0.79		0.89		0.81
Diluted net income per common share
Class A	$	0.60	$	0.71	$	0.81	$	0.73
Class B		0.62		0.73		0.81		0.74
Combined(2)		0.62		0.73		0.81		0.73
Basic weighted average common shares outstanding
Class A		8,870		8,862		8,854		8,846
Class B		18,315		17,887		17,945		18,107
Combined		27,185		26,749		26,799		26,953
Diluted weighted average common shares outstanding
Class A		8,870		8,862		8,854		8,846
Class B		20,626		20,167		20,459		20,876
Combined		29,496		29,029		29,313		29,722

(1)	See Note 20 to the consolidated financial statements.
(2)	Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

96

SUPPLEMENTAL SCHEDULES (UNAUDITED) — (Continued)

QUARTERLY DATA — Continued

	2005
(In thousands, except per share amounts)
	December 31,		September 30,			June 30,		March 31,
Interest income	$	41,284	$	35,293		$	30,845	$	32,179
Interest expense		15,982		15,301			13,718		12,585
Net interest income		25,302		19,992			17,127		19,594
Provision for credit losses		10,018		11,232			8,603		10,444
Net interest income after provision for credit losses		15,284		8,760			8,524		9,150
Noninterest revenues(1)		66,289		76,439			77,304		138,487
Operating expenses		59,472		58,715			62,251		62,620
Income from continuing operations before income taxes		22,101		26,484			23,577		85,017
Income from continuing operations		13,482		16,155			14,382		72,670
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax(2)		2,074		(12,299	)		3,965		0
Net income	$	15,556	$	3,856		$	18,347	$	72,670
Basic income from continuing operations per common share
Class A	$	0.48	$	0.58		$	0.53	$	2.82
Class B		0.51		0.61			0.56		2.85
Combined(3)		0.50		0.60			0.55		2.84
Diluted income from continuing operations per common share
Class A	$	0.45	$	0.54		$	0.49	$	2.54
Class B		0.46		0.56			0.50		2.55
Combined(3)		0.46		0.55			0.50		2.55
Basic net income per common share
Class A	$	0.56	$	0.12		$	0.68	$	2.82
Class B		0.59		0.15			0.71		2.85
Combined(3)		0.58		0.14			0.70		2.84
Diluted net income per common share
Class A	$	0.52	$	0.12		$	0.63	$	2.54
Class B		0.53		0.14			0.64		2.55
Combined(3)		0.53		0.13			0.64		2.55
Basic weighted average common shares outstanding
Class A		8,837		8,829			8,821		8,812
Class B		17,992		17,901			17,433		16,705
Combined		26,829		26,730			26,254		25,517
Diluted weighted average common shares outstanding
Class A		8,837		8,829			8,821		8,812
Class B		20,535		20,409			20,013		19,670
Combined		29,372		29,238			28,834		28,482

(1)	Noninterest revenues for the three months ended March 31, 2005 included a $67.7 million pretax gain on the transfer of our consumer credit card business. See Note 17 to the consolidated financial statements.
(2)	See Note 20 to the consolidated financial statements.
(3)	Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

97

SUPPLEMENTAL SCHEDULES (UNAUDITED) — (Continued)

ALLOCATION OF ALLOWANCE FOR RECEIVABLE LOSSES

($ in thousands)	December 31,
	2006					2005					2004					2003					2002
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Business credit cards	$	49,715		98	%	$	44,323		97	%	$	49,190		97	%	$	47,041		97	%	$	44,466		96	%
Other receivables		1,211		2			1,266		3			1,288		3			1,413		3			1,693		4
Total	$	50,926		100	%	$	45,589		100	%	$	50,478		100	%	$	48,454		100	%	$	46,159		100	%

COMPOSITION OF GROSS RECEIVABLES

($ in thousands)	December 31,
	2006					2005					2004					2003					2002
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Business credit cards	$	1,133,132		99	%	$	879,468		99	%	$	730,483		99	%	$	518,040		97	%	$	445,083		95	%
Other receivables		7,673		1			8,007		1			10,280		1			16,976		3			25,589		5
Total	$	1,140,805		100	%	$	887,475		100	%	$	740,763		100	%	$	535,016		100	%	$	470,672		100	%

YIELD AND MATURITY OF INVESTMENTS AT DECEMBER 31, 2006

($ in thousands)	Maturing
						After One But					After Five But
	Within One Year					Within Five Years					Within Ten Years					After Ten Years
	Fair Value		Yield(3)			Fair Value		Yield(3)			Fair Value		Yield(3)			Fair Value		Yield(3)
U.S. Treasury and government agency securities	$	18,262		3.26	%	$	2,678		4.70	%	$	0		0.00	%	$	0		0.00	%
State and municipal securities(1)		320		4.71			0		0.00			10,074		5.16			2,848		5.87
Commercial paper		6,941		5.33			0		0.00			0		0.00			0		0.00
Corporate bonds		865		4.27			7,499		4.25			0		0.00			0		0.00
Asset backed securities		0		0.00			0		0.00			0		0.00			46,196		5.58
Other(2)		0		0.00			0		0.00			0		0.00			40		6.00
Total investments available for sale	$	26,388		3.86	%	$	10,177		4.37	%	$	10,074		5.16	%	$	49,084		5.60	%

(1)	Yield computed on a tax equivalent basis using a statutory rate of 35%.
(2)	Equity investments and money market funds are excluded from this table because they do not have a stated maturity.
(3)	Yields are computed by dividing interest by the amortized cost of the respective investment securities.

MATURITY OF TIME DEPOSITS OF $100,000 OR MORE

	December 31,
($ in thousands)	2006
Maturity:
3 months or less	$	180,918
Over 3 months through 6 months		152,038
Over 6 months through 12 months		216,445
Over 12 months		281,825
Total	$	831,226

98

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) 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 December 31, 2006, 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 control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s report on internal control over financial reporting and the report of our independent registered public accounting firm on management’s assessment of internal control over financial reporting are incorporated herein from pages 50 and 51.

Item 9B.   Other Information

On February 28, 2007, the Board of Directors of Advanta National Bank authorized a dividend of $39.1 million and return of capital of $28 million payable to Advanta Corp., after having received prior approval from the Office of the Comptroller of the Currency.

98

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

The information required to be furnished pursuant to this item will be set forth in the Proxy Statement under the captions “Election of Directors,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated herein by reference, as is the information in Part I of this Report under the captions, “Executive Officers of the Registrant,” and “Available Information.”

Item 11.   Executive Compensation

The information required to be furnished pursuant to this item will be set forth in the Proxy Statement under the captions “Executive and Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report” “Compensation Committee Interlocks and Insider Participation” and “Employment Agreements with Executive Officers and Other Transactions and Arrangements” and is incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required to be furnished pursuant to this item will be set forth in the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” and is incorporated herein by reference.

The following table gives information about equity awards under our 2000 Omnibus Stock Incentive Plan and our Employee Stock Purchase Plan as of December 31, 2006.

Equity Compensation Plan Information

(In thousands, except weighted average exercise price)
	(a)			(b)		(c)
						Number of Securities
						Remaining Available for
	Number of Securities to be					Future Issuance under
	Issued upon Exercise of			Weighted Average Exercise		Equity Compensation Plans
	Outstanding Options,			Price of Outstanding Options,		(excluding securities
Plan Category	Warrants and Rights			Warrants and Rights		reflected in column (a))
Equity compensation plans approved by stockholders		4,946	(1)	$	16.32		5,571(2	)
Equity compensation plans not approved by stockholders(3)		—			—		—
Total		4,946		$	16.32		5,571(2	)(3)

(1)	Does not include 825 thousand shares of restricted Class B Common Stock granted pursuant to the Advanta Corp. 2000 Omnibus Stock Incentive Plan. Generally, restrictions on these shares may be removed between 2007 and 2016.
(2)	All of the shares remaining available for future issuance are available under the 2000 Omnibus Stock Incentive Plan which provides for the issuance of stock options, awards of stock and/or awards of stock appreciation rights.
(3)	Advanta Corp.’s Employee Stock Purchase Plan (the “Stock Purchase Plan”) does not specify a maximum number of shares that may be issued. An aggregate of 15 thousand shares of Class B Common Stock were purchased under the Stock Purchase Plan in 2006.

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Summary Description of Equity Compensation Plans

Advanta Corp. 2000 Omnibus Stock Incentive Plan

The 2000 Omnibus Stock Incentive Plan (the “Omnibus Plan”) was adopted by the Board of Directors in April 2000 and approved by the stockholders of the Company on June 7, 2000. The Omnibus Plan provides for the issuance of a maximum of 20,000,000 shares of Class B Common Stock (including 9,860,191 shares that were available for issuance under the Company’s prior stock incentive plans that were in effect at the time the Omnibus Plan was approved by the stockholders and which plans were amended and restated by the Omnibus Plan). The Omnibus Plan provides for the issuance of options to acquire Class B Common Stock, awards of Class B Common Stock and/or awards of stock appreciation rights (referred to collectively as “Awards”). Shares of Class B Common Stock awarded pursuant to the Omnibus Plan must be authorized and unissued shares or shares acquired for the treasury of the Company. Generally, if an Award granted under the Omnibus Plan expires, terminates or lapses for any reason without the issuance of shares of Class B Common Stock thereunder, such shares shall be available for reissuance under the Omnibus Plan. Employees and directors of the Company, and consultants and advisors to the Company, who render bona fide services to the Company unrelated to the offer of securities, are eligible to receive Awards under the Omnibus Plan. The terms of any Award made pursuant to the Omnibus Plan are described and established in a grant document provided to the Award recipient. No Awards may be granted under the Omnibus Plan after April 5, 2010. Awards granted and outstanding as of the date the Omnibus Plan terminates will not be affected by the termination of the plan. In the event of a change of control of the Company (as defined by the Omnibus Plan), stock options and stock appreciation rights granted pursuant to the Omnibus Plan will become immediately exercisable in full. Other Awards granted pursuant to the Omnibus Plan may also vest in connection with a change of control of the Company, depending upon the applicable circumstances. Shares subject to Awards granted pursuant to the Omnibus Plan are subject to adjustment for changes in capitalization for stock splits, stock dividends and similar events.

Advanta Corp. Employee Stock Purchase Plan

In September 1989, the Board of Directors adopted its Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is a broad-based plan that has not been approved by stockholders and is not intended to qualify as an employee stock purchase plan pursuant to Section 423 of the Internal Revenue Code, as amended. All full-time and part-time employees and non-employee directors of the Company or its subsidiaries with at least six months of service with the Company are eligible to participate in the plan. Eligible employees may acquire shares of Class B Common Stock (and under certain limited circumstances Class A Common Stock) under the plan through payroll deductions. Non-employee directors may contribute a portion of their directors’ fees to the plan to purchase shares of Class B Common Stock. No individual participant may purchase more than $25,000 of stock under the plan in any one year. Shares are purchased monthly under the plan. Participants in the Stock Purchase Plan in effect purchase shares at a 15% discount from the market price because the Company contributes to the plan an amount equal to 15% of the market price of the shares actually purchased for the month, and also pays all fees and commissions relating to the administration of the Stock Purchase Plan and the purchases of shares under the plan.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information required to be furnished pursuant to this item will be set forth in the Proxy Statement under the captions “Independence of Non-employee Directors” and “Employment Agreements with Executive Officers and Other Transactions and Arrangements” and is incorporated herein by reference.

Item 14.   Principal Accounting Fees and Services

The information required to be furnished pursuant to this item will be set forth in the Proxy Statement under the captions “Audit Fees” and “Pre-Approval Policy for Services by Independent Auditors” is incorporated herein by reference.

101

PART IV

Item 15.   Exhibits and Financial Statement Schedules

The following Financial Statements, Schedules, and Other Information of the Registrant and its subsidiaries are included in this Form 10-K:

(a)(1)	Financial Statements.
1.	Consolidated Balance Sheets at December 31, 2006 and 2005.
2.	Consolidated Income Statements for each of the years in the three year period ended December 31, 2006.
3.	Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three year period ended December 31, 2006.
4.	Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2006.
5.	Notes to Consolidated Financial Statements.
(a)(2)	Schedules.
	Other statements and schedules are not being presented either because they are not required or the information required by such statements and schedules is presented elsewhere in the financial statements.
(a)(3)	Exhibits*
2-a	Purchase and Sale Agreement, dated January 8, 2001, by and between Advanta Corp. and Chase Manhattan Mortgage Corporation.(1)
2-b	Mortgage Loan Purchase and Sale Agreement, dated February 23, 2001, by and among Advanta Corp., Chase Manhattan Mortgage Corporation, and Chase Manhattan Bank USA, National Association.(2)
2-c	Mortgage Loan Purchase and Sale Agreement, dated February 28, 2001, by and among Advanta Corp., Chase Manhattan Mortgage Corporation, and Chase Manhattan Bank USA, National Association.(2)
3-a	Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-3 (File No. 33-53475), filed June 10, 1994), as amended by the Certificate of Designations, Preferences, Rights and Limitations of the Registrant’s 63/4% Convertible Class B Preferred Stock, Series 1995 (Stock Appreciation Income Linked Securities (SAILS)) (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K dated August 15, 1995), as further amended by the Certificate of Designations, Preferences, Rights and Limitations of the Registrant’s Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A, dated March 17, 1997).
3-b	By-laws of the Registrant, as amended.(3)
3-c	Rights Agreement, dated as of March 14, 1997, by and between the Registrant and the Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate (incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A dated March 17, 1997), as amended by Amendment No. 1, dated as of June 4, 1998 (incorporated by reference to Exhibit 1 to the Registrant’s Amended Registration Statement on Form 8-A/A, dated June 11, 1998), and Amendment No. 2, dated as of September 4, 1998, (incorporated by reference to Exhibit 1 to the Registrant’s Amended Registration Statement on Form 8-A/ A, dated September 23, 1998).
4-a	Specimen of Class A Common Stock Certificate and specimen of Class B Common Stock Certificate.(4)

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4-b	Senior Trust Indenture, dated as of October 23, 1995, between the Registrant and The Bank of New York, as successor Trustee.(6)
4-c	Indenture dated as of December 17, 1996 between Advanta Corp. and The Chase Manhattan Bank, as trustee relating to the Junior Subordinated Debentures.(7)
4-d	Declaration of Trust dated as of December 5, 1996 of Advanta Capital Trust I.(7)
4-e	Amended and Restated Declaration of Trust dated as of December 17, 1996 for Advanta Capital Trust I.(7)
4-f	Series A Capital Securities Guarantee Agreement dated as of December 17, 1996.(7)
10-a†	Advanta Corp. 2000 Omnibus Stock Incentive Plan.(8)
10-a.1†	Form of Stock Option Agreement.(9)
10-a.2†	Advanta Management Incentive Program VI.(22)
10-a.3†	Form of AMIP VI Restricted Stock Award.(22)
10-a.4†	Criteria for certain Bonus Awards to Executive Officers for Performance Year 2006 (incorporated by reference to the information set forth under Item 1.01 of the Registrant’s Current Report on Form 8-K filed on April 21, 2006).
10-b	Card Member License Agreement between Colonial National Financial Corp. (now known as Advanta Bank Corp.) and MasterCard International Incorporated dated April 14, 1994.(10)
10-c	VISA U.S.A. Inc. Membership Agreement and Principal Member Addendum executed by Advanta Corp. on February 27, 1997.(10)
10-d	VISA U.S.A. Inc. Membership Agreement executed by Advanta Bank Corp. on March 3, 2000.(10)
10-e†	Advanta Corp. Supplemental Executive Retirement Plan.(23)
10-f†	Advanta Corp. Executive Deferral Plan.(11)
10-g†	Advanta Corp. Non-Employee Directors Deferral Plan.(11)
10-h†	Summary of Life Insurance Benefits for Directors and Executives.(9)
10-i	Preferred Pricing Agreement, effective March 19, 2006, between Dun & Bradstreet, Inc. and Advanta Bank Corp. (filed herewith).
10-j	Tournament Class Membership Purchase Agreement, dated as of February 7, 2006, between Advantennis Corp. and WTA Tour, Inc. d/b/a Sony Ericsson WTA Tour.(12)
10-k†	Agreement dated as of January 15, 1996 between the Registrant and William A. Rosoff.(11)
10-l†	Agreement dated May 11, 1998 between the Registrant and Philip M. Browne.(13)
10-m	Contribution Agreement, dated as of October 28, 1997, by and between Advanta Corp. and Fleet Financial Group (incorporated by reference to Exhibit(c)(2) to the Registrant’s Schedule 13E-4, dated January 20, 1998), as amended by the First Amendment to the Contribution Agreement, dated as of February 10, 1998, by and among Advanta Corp., Fleet Financial Group and Fleet Credit Card, LLC (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed March 6, 1998).
10-n	Commercial Lease, dated September 28, 1995, by and between Draper Park North, L.C. and Advanta Financial Corp., as amended January 31, 1996 and May 20, 1996, as amended.(14)
10-n.1	Amendment to Commercial Lease, dated as of December 6, 2004, between Carramerica Realty, L.P. and Advanta Bank Corp.(9)
10-n.2	Amendment to Commercial Lease, dated as of January 25, 2005, between Carramerica Realty, L.P. and Advanta Bank Corp.(9)

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10-o	Master Indenture, dated as of August 1, 2000, between Wilmington Trust Company, as Owner Trustee of the Advanta Business Card Master Trust and Bankers Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (Commission File No. 333-32874) filed August 30, 2000 by Advanta Business Receivables Corp.), as amended May 9, 2006 (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K (Commission File No. 333-32874) filed May 19, 2006 by Advanta Business Receivables Corp.).
10-p	Transfer and Servicing Agreement, dated as of August 1, 2000, among Advanta Business Receivables Corp., Advanta Bank Corp., as Servicer, and Wilmington Trust Company, as Owner Trustee of Advanta Business Card Master Trust (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K (Commission File No. 333-32874) filed August 30, 2000 by Advanta Business Receivables Corp.), as amended May 9, 2006 (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K (Commission File No. 333-32874) filed May 19, 2006 by Advanta Business Receivables Corp.).
10-q	Limited Partnership Agreement of Fleet Credit Card Services, L.P., dated as of May 26, 1998.(9)
10-r	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.(15)
10-s.1	Service Agreement between First Data Resources Inc. and Advanta Bank Corp., dated as of January 1, 2002 (incorporated by reference to Exhibit 10-u to Annual Report on Form 10-K for year ended December 31, 2001).
10-s.2	Amendment to Service Agreement, between First Data Resources, Inc. and Advanta Bank Corp., dated as of December 18, 2006 (filed herewith) (confidential treatment has been requested for portions of this document).
10-t	Separation Agreement, dated as of April 15, 2005, between Advanta Corp. and Brian Tierney.(19)
10-u†	Relocation Agreement by and between Advanta Corp. and John F. Moore, dated as of May 20, 2004.(15)
10-v	Direct Marketing Agreement, dated effective as of December 15, 1999, by and among Advanta Bank Corp. and CFM Direct, as amended.(14)
10-w	Advanta Corp. Employee Stock Purchase Plan, as amended.(14)
10-x	Lease Agreement, dated August 4, 1995, between Ortho Pharmaceutical Corporation and Advanta Corp.(14)
10-y	Agreement of Lease dated February 27, 2003 between Advanta Shared Services Corp and Liberty Property Limited Partnership (without exhibits) and Guaranty of Advanta Corp.(16)
10-z†	Letter Agreement dated as of October 14, 2003, between Advanta Corp. and Jeffrey D. Beck.(18)
10-aa†	Advanta Corp. Office of the Chairman Supplemental Compensation Program.(9)
10-bb†	Advanta Senior Management Change of Control Severance Plan Restated December 21, 2000.(9)
10-cc†	Advanta Senior Management Change of Control Severance Plan.(9)
10-dd	Sponsorship Agreement, dated as of March 14, 2005, between Advantennis Corp. and World Team Tennis Franchise Inc.(5)
10-ee	Stock Repurchase Agreement, entered into May 9, 2006, by and among Advanta Corp., Dennis Alter, Dennis J. Alter, Trustee U/I/T dated December 15, 2003 and Dennis J. Alter, Trustee U/I/T dated May 24, 2004.(21)
12	Computation of Ratio of Earnings to Fixed Charges.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm.
24	Powers of Attorney (included on the signature page hereof).

104

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 Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Incorporated by reference to Definitive Proxy Statement filed January 25, 2001.
(2)	Incorporated by reference to Current Report on Form 8-K dated March 14, 2001.
(3)	Incorporated by reference to Current Report on Form 8-K dated March 17, 1997.
(4)	Incorporated by reference to Amendment No. 1 to Form 8 and Exhibit 1 to Registrant’s Form 8-A, respectively, both dated April 22, 1992.
(5)	Incorporated by reference to Current Report on Form 8-K filed on March 17, 2005.
(6)	Incorporated by reference to Registration Statement on Form S-3 (File No. 33-62601) filed September 13, 1995.
(7)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 1996.
(8)	Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (File No. 333-04469) filed on November 1, 2000.
(9)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 2004.
(10)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 2001.
(11)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 1995.
(12)	Incorporated by reference to Current Report on Form 8-K filed on February 13, 2006.
(13)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 1998.
(14)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 2002.
(15)	Incorporated by reference to Quarterly Report on Form 10-Q for quarter ended June 30, 2004.
(16)	Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.
(17)	Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
(18)	Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.
(19)	Incorporated by reference to Current Report on Form 8-K filed on April 20, 2005.
(20)	Incorporated by reference to Current Report on Form 8-K filed on May 5, 2005.
(21)	Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.
(22)	Incorporated by reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.
(23)	Incorporated by reference to Annual Report on Form 10-K for the year ended December 31, 2005.

*	Unless otherwise indicated, each exhibit incorporated herein by reference was previously filed with the SEC under Commission File Number 0-14120.
†	Management contract or compensatory plan or arrangement.

105

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By:       /s/ William A. Rosoff

William A. Rosoff, President and

Vice Chairman of the Board

Dated: February 28, 2007

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does hereby constitute and appoint Dennis Alter, William A. Rosoff, Philip M. Browne, David B. Weinstock and Elizabeth H. Mai, or any of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and on his or her behalf to sign, execute and file an Annual Report on Form 10-K under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 2006 relating to Advanta Corp. and any or all amendments thereto, with all exhibits and any and all documents required to be filed with respect thereto, with the Securities and Exchange Commission or any regulatory authority, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that such attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated, effective on the 28th day of February, 2007.

Name	Title
/s/  Dennis Alter Dennis Alter	Chairman of the Board and Chief Executive Officer
/s/  William A. Rosoff William A. Rosoff	President and Vice Chairman of the Board
/s/  Philip M. Browne Philip M. Browne	Senior Vice President and Chief Financial Officer
/s/  David B. Weinstock David B. Weinstock	Vice President and Chief Accounting Officer
/s/  Robert S. Blank Robert S. Blank	Director
/s/  Max Botel Max Botel	Director

106

Name	Title
/s/  Thomas Costello Thomas Costello	Director
/s/  Dana Becker Dunn Dana Becker Dunn	Director
/s/  Ronald Lubner Ronald Lubner	Director
/s/  Olaf Olafsson Olaf Olafsson	Director
/s/  Michael Stolper Michael Stolper	Director

107

EX-10.I

One Year Preferred Pricing Agreement for
D&B Risk Management Solutions (07-05)

This Preferred Pricing Agreement for D&B Risk Management Solutions (“PPA”) is subject to the PPA Terms and Conditions set forth below in addition to the existing D&B Master Agreement between Customer and D&B that was signed June 17, 2002. Upon acceptance of this PPA by both parties, this PPA shall constitute an “Order” under the existing Master Agreement. Customer, by signing below, acknowledges receipt of the D&B Product & Service Pricing Guide. Notwithstanding anything to the contrary contained in the Master Agreement, this Order constitutes a binding commitment for the term of this Order, and neither party may terminate this Order for convenience.

Effective Date March 19,
2006

PPA Terms and Conditions

PPA Term: 1 year from Effective Date; (referred to herein as a “Contract Year”).

Customer shall have access to all products and services listed on attached Appendix A (“Included Services”), subject to the following:

1.     In consideration of Customer’s payment of the PPA Fee for each Contract Year, Customer shall be entitled to receive an unlimited amount of Included Services, subject to usage limits on selected products and services included within the Included Services (which limits are referred to as “Product Usage Limits”), determined by reference to the applicable pricing set forth below (subject to Customer’s band discount set forth below);

2.     Any use of Included Services in excess of the applicable Product Usage Limits during a particular Contract Year shall be billed to Customer at the above referenced pricing, including applicable band discount;

3.     The use of Included Services under this Agreement applies to Customer as it exists today, and may be used only to support Customer’s U.S. business, and may be used by Customer’s U.S. divisions and wholly owned subsidiaries that are identified on a “Schedule of Locations of Service and Customer Related Companies” attached hereto and executed by the parties and that are not currently eligible to receive included Services under an existing agreement with D&B (“Included Entities”) to support their respective U.S. businesses, provided Customer is liable for such Included Entities’ compliance with the PPA and Master Agreement. Any change to Customer via merger or acquisition shall require a written addendum between D&B and Customer to reflect such change, which addendum shall include the applicable revised PPA Fee schedule. Future acquisitions by Customer of, or future acquisitions of Customer by, companies with a D&B credit information contract (“Acquired/Acquiring Companies”) shall not be included in this Agreement. Acquired/Acquiring Companies shall continue to receive D&B services pursuant to the terms and conditions of the respective D&B credit information contract (“Credit Contract”) and shall not be included as an Included Entity under this PPA, until the expiration of such Credit Contract and the execution of an addendum to this PPA as referenced above;

4.     Any use of Included Services by Customer’s affiliates other than Included Entities shall be the subject of a separate, mutually agreed amendment to this PPA; and

5.     Customer’s use of D&B products and services other than Included Services, if any, shall be the subject of separate Orders executed by the parties, each of which shall be subject to, and incorporate by reference therein, the terms of the Master Agreement.

PPA Fee*	Band Discount:     7	Product Usage Limits (per Contract Year)
Contract Year 1:     957,891.	Applicable Pricing:	International Reports           15% of PPA Fee
Annual Service Fee: $570	D&B’s published pricing for 2003

1.     *In the event the parties agree to renew this Order under this PPA, the PPA Fee for the next Contract Year shall be equal to (a) the PPA Fee for such year, plus (b) 50% of the amount, if any, by which Customer’s actual usage in Contract Year 1 exceeded three (3) times the PPA Fee for Contract Year 1.

2.     Customer’s actual usage for a particular Contract Year and the PPA Fee for the subsequent Contract Year shall be determined by D&B by reference to the above referenced pricing, including applicable band discount and communicated to Customer within thirty (30) days after the end of the applicable Contract Year. Payment for such subsequent Contract Year shall be due within thirty (30) days after Customer’s receipt of invoice.

3.     PPA Fees include the Annual Service Fee, and are non-refundable, and unused amounts may not be carried over to subsequent Contract Years.

4.     In the event Customer does not renew this Order prior to or on the expiration date, Customer may continue to receive Services, provided that Customer will pay D&B’s then current published pricing (subject to Customer’s discount associated with the prior Contract Year PPA Fee set forth herein) for such Included Services for the sixty day period following the expiration date.

Payment Options: þ Annual Eff. Date o Annual Eff. Date 30/60

AGREED TO BY:

DUN & BRADSTREET, INC.	CUSTOMER
Approved:	Company Name:
Authorized Signature: /s/ Thomas M. Wickersham	Authorized Signature: /s/ David W. Griffith
Name (Please Print): Thomas M. Wickersham	Name (Please Print): David W. Griffith
Title: RVP Strategic Accounts	Title: SVP Credit Analysis and Marketing Analysis
Date: 3-8-06	Date: 3-9-06

Dun & Bradstreet, Inc. (“D&B”) and the customer named on the attached Order (“Customer”) agree that D&B shall make available to Customer business information services (“Services”), which may include information (“Information”); computer programs or applications (including those accessed remotely), documentation and media (collectively, “Software”); and other services, subject to this Master Agreement (“Agreement”). The Services subject to this Agreement are identified in Orders entered into from time to time by D&B and Customer. No obligation to furnish or to pay for a particular Service arises under this Agreement until D&B accepts an order and any attachments thereto placed by Customer. All accepted orders and their attachments (collectively, the “Order(s)”) for Services are subject to this Agreement, and the terms of such Orders are incorporated by reference in this Agreement. Subject to paragraph 10.2, this Agreement continues in force even though no Order may then be outstanding. The Services will also be made available to Customer’s U.S. parent and to U.S. companies that are subsidiaries, divisions or affiliates, wholly-owned or controlled by Customer and that are identified on a “Schedule of Locations of Service & Customer-Related Companies” schedule attached to such Order and signed by the parties.

1.     Licenses

1.1          D&B grants to Customer a non-exclusive, non-transferable license (“License”) to use and display the Information and Software (in object code format only) constituting each D&B product specified in an Order, subject to the limitations contained in this Agreement and such Order. D&B retains all ownership rights (including copyrights and other intellectual property rights) in the Services, in any form, and Customer obtains only such rights as are explicitly granted in this Agreement and such Order. The Services will include a custom model developed by D&B through the use of D&B and Customer information. To the extent such model is customized for Customer, the customized model shall be owned by Customer; provided that (i) Customer grants D&B a license to use such model in connection with its provision of Services to Customer hereunder, (ii) Customer’s ownership of the customized model does not (x) include ownership of any D&B information, techniques, processes, methods, expertise, or other intellectual property included therein (which collectively remain D&B intellectual property) or (y) affect D&B’s ability or rights with respect to the use of such D&B information, techniques, processes, methods, expertise, or other intellectual property for the purpose of developing custom models for other customers for any purpose, and (iii) Customer shall not license, sell, distribute or otherwise make available such custom model to any third party, other than those third parties to which Customer may make Information or Software available pursuant to the first sentence of paragraph 2.2.

1.2          Each License and Order is for a term, beginning on the date of the Order, of 12 months, unless another term is specified in the Order. D&B may extend the term for an additional period, in its discretion, while the parties are engaged in renewal discussions. Any such extension shall be subject to this Agreement. Each License or Order may be renewed as set forth in the Order and by mutual written agreement and payment of renewal fees and applicable product and service fees (the initial term and any renewal period for an Order or License constitute “the Term” for such Order or License).

1.3          Software “Updates” (i.e., minor enhancements, additions, and substitutions to Software, including corrections and bug fixes) are provided at no additional fee, if available. “Upgrades” (i.e., modifications, additions or substitutions that result in a substantial change, improvement or addition to Software), if available, are provided for an additional fee, if applicable. The determination of whether a matter involves an Update or an Upgrade is within the sole discretion of D&B. All Updates and Upgrades obtained by Customer are subject to this Agreement.

1.4          Telephone and email based software support is available during the Term of an Order for the currently licensed Software versions, and only if Customer has installed all Updates received.

2.     Restrictions on Use

2.1          Information and Software are licensed for Customer’s internal use only and (i) only at the points of service specified in the Order; (ii) only for the frequency of use or total number of users set forth in the Order; and (iii) subject to any other restrictions set forth in the Order.

2.2          Customer will not provide Information or Software to others, whether directly in any media or indirectly through incorporation in a database, marketing list, report or otherwise, or use or permit the use of Information to generate any statistical or other information that is or will be provided to third parties (including as the basis for providing recommendations to others); use or permit the use of Information to prepare any comparison to other information databases that is or will be provided to third parties; or voluntarily produce Information in legal proceedings; except that Customer may provide Information or Software to Representatives as defined below, in response to regulatory requests, or as otherwise required by law. Customer shall: (i) maintain the Information in strict confidence, including by restricting disclosure of the Information solely to those of its employees, consultants, agents and advisors (collectively, “Representatives”) with a need to know and not allowing it to be disclosed, through negligence or otherwise, to third parties, (ii) advise Representatives who receive the Confidential Information of their obligations hereunder and assume full responsibility for any breach by them of such obligations, (iii) use the Confidential Information only in furtherance of the business relationship described in Paragraph 1 above, and (iv) take all steps to ensure that no unauthorized persons have access to Confidential Information and that all persons having access to Confidential Information refrain from any unauthorized disclosure.

2.3          Customer will not attempt to access, use, modify, copy, reverse engineer, or otherwise derive the source code of Software.

2.4          Upon reasonable notice and during regular business hours, Customer will permit D&B to inspect the locations at, or computer systems on which, Information and Software are used, stored or transmitted so that D&B can verify Customer’s compliance with this Agreement.

2.5          Customer will be responsible for any direct damages or lost profits incurred by D&B as a result of Customer’s breach of this paragraph 2.

3.     Copying

3.1          Customer will not copy, download, upload or in any other way reproduce Information or Software except for (i) creating a reasonable number of copies of Information in any format for internal use only in accordance with this Agreement and not for general internal distribution; and (ii) making one copy of Information and of Software for internal archival purposes.

4.     D-U-N-S Numbers

4.1          D-U-N-S Numbers are proprietary to and controlled by D&B. D&B grants Customer a non-exclusive, perpetual, limited license to use D-U-N-S Numbers solely for identification purposes and only for Customer’s internal business use. Where practicable, Customer will refer to the number as a “D-U-N-S Number” and state that D-U-N-S is a registered trademark of D&B.

5.     Third Party Services

5.1          Customer may engage a third party to process or host Information (the “Processor”) provided that the Processor and D&B enter into a D&B Processor’s Agreement before any Information or Software is provided to the Processor.

5.2          Third parties that provide Information to D&B for use in providing the Services are intended third party beneficiaries of paragraphs 8 and 11.

6.     Payment

6.1          Customer will pay D&B in accordance with the Order. Prices and product descriptions are those set forth in the Order, or, if not included in the Order, in the applicable pricing and product policies made available to Customer in hard copy or on any D&B Internet site, which policies are incorporated herein. A late payment charge of the lesser of 1¹/2% per month or the highest lawful rate may be applied to any outstanding balances until paid.

6.2          Customer will pay any applicable taxes relating to this Agreement, other than taxes based on D&B income and franchise — related taxes.

6.3          For certain Orders for a committed volume or usage represented by an upfront payment by Customer, Customer may be entitled to “carry over” portions of unused volume or usage upon renewal. In addition, if Customer’s usage exceeds the committed amount, such excess usage shall be billed at a specified “overrun” rate. Such carryover and/or overrun rate, if applicable, will be determined in accordance with the Order, or, if not included in the Order, in

the applicable pricing and product policies made available to Customer in hard copy or on any D&B Internet site.

6.4          If Customer’s pricing with respect to a particular Order is based on Customer’s expected volume or usage as indicated on such Order and Customer does not meet such volume or usage levels, Customer will pay D&B a “true-up amount” based on the pricing applicable to the volume or usage actually utilized by Customer.

7.     Compliance with Law

7.1          Customer will not use Information as a factor in establishing an individual’s eligibility for (i) credit or insurance to be used primarily for personal, family, or household purposes, or (ii) employment. In addition, Customer will not use any Service to engage in any unfair or deceptive practices and will use the Services only in compliance with applicable state, local, federal or foreign laws or regulations, including laws and regulations regarding telemarketing, customer solicitation (including fax and/or e-mail solicitation), data protection and privacy.

8.     Disclaimers

8.1          Though D&B uses extensive procedures to keep its database current and to maintain accurate data, Customer acknowledges that the Information will contain a degree of error and that Customer is responsible for determining that the Information is sufficiently accurate for Customer’s purposes. If the Information is not sufficiently accurate for Customer’s purposes, then Customer must so notify D&B, in writing, within 15 days after receipt of such Information. D&B will, at its option, either correct the inaccuracy at D&B’s expense or refund any amounts paid relating to the unusable Information.

8.2          ALL SERVICES ARE PROVIDED ON AN “AS IS,” “AS AVAILABLE” BASIS. OTHER THAN AS EXPLICITLY STATED IN THIS AGREEMENT, D&B DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF ACCURACY, COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. D&B DOES NOT WARRANT THAT THE SERVICES WILL BE UNINTERRUPTED OR ERROR-FREE AND DISCLAIMS ANY WARRANTY OR REPRESENTATION REGARDING AVAILABILITY OF A SERVICE, SERVICE LEVELS OR PERFORMANCE. D&B WILL NOT BE LIABLE FOR ANY LOSS OR INJURY ARISING OUT OF, IN WHOLE OR IN PART, D&B’S CONDUCT IN PROCURING, COMPILING, COLLECTING, INTERPRETING, REPORTING OR DELIVERING SERVICES.

9.     Copyrights and Other Proprietary Rights

9.1          Customer acknowledges that Information and Software are proprietary works of D&B and comprise: (i) works of original authorship, including compiled Information containing D&B’s selection, arrangement and coordination and expression of such Information or pre-existing material it has created, gathered or assembled; (ii) trade secret and other confidential information, including information that derives value or potential value from not being readily known or available; and (iii) information that has been created, developed and maintained by D&B at great expense, such that misappropriation or unauthorized use by others for commercial gain would unfairly and/or irreparably harm D&B or reduce D&B’s incentive to create, develop and maintain such information. Customer will not knowingly commit or permit any act or omission that would contest or impair D&B’s proprietary and intellectual property rights in Information and Software or that would cause the Information or Software to infringe the proprietary or intellectual property rights of a third party. Customer will reproduce D&B’s copyright and proprietary rights legend on all copies of Information and Software which are so marked when received. Customer will be responsible for any direct damages or lost profits incurred by D&B as a result of Customer’s breach of this paragraph 9.1.

9.2          Customer and D&B will not (i) use any trademark, service mark or trade name of each other or any of their affiliated companies, except that D&B and its affiliates may include Customer’s trade names in the data base of business information included within the Services it offers to Customer and others or otherwise as permitted by law, or (ii) publish any press releases regarding this Agreement or any Order.

9.3          D&B will treat all information that Customer designates in writing to be proprietary in the same manner as D&B treats its own proprietary information. D&B agrees not to use such identified proprietary information except for the purposes of performing its obligations to Customer and for internal analytical purposes (i.e., analyzing such data to improve D&B’s products and services). Such proprietary information shall not include information that (i) is or becomes a part of the public domain through no act or omission of D&B; (ii) was in D&B’s lawful possession prior to Customer’s disclosure to D&B; (iii) is lawfully disclosed to D&B by a third-party with the right to disclose such information and without restriction on such disclosure; or (iv) is independently developed by D&B without use of or reference to the proprietary information.

9.4          D&B represents and warrants to Customer that, to D&B’s knowledge, the Software and Information, when used in accordance with this Agreement, do not violate any existing U.S. copyrights, patents, trademarks, or other intellectual property rights of any third party. The foregoing warranty does not apply to the extent Customer modifies the Software or Information in any way or combines the Software or Information with material from third parties.

10.     Termination

10.1          In the event of material breach (including, without limitation, an assignment in violation of paragraph 13.2 hereof) by Customer or D&B, the non-breaching party may immediately terminate this Agreement or particular Orders without prior notice. In addition, D&B may terminate this Agreement or particular Orders upon 30 days’ prior written notice; provided that if D&B terminates this Agreement or particular Orders other than for cause, D&B will refund to Customer the unused balance of any amounts paid under the relevant Orders. If Customer terminates this Agreement or particular Orders due to a material breach by D&B pursuant to this section, D&B will refund to Customer the unused balance of any amounts paid under the relevant Orders so long as such material breach is proved in any judicial proceeding.

10.2          If Customer has no Orders in effect during a period of six consecutive months, then D&B may terminate this Agreement at the end of such six-month period by sending written notice to Customer.

10.3          The provisions set forth in paragraphs 2, 3, 4, 6, 7, 8, 9, 10.3, 10.4, 10.5, 11 and 12 will survive the termination of this Agreement.

10.4          If, without D&B’s written permission, Customer continues after termination to obtain Services covered by a terminated Order or Agreement, Customer will be liable to D&B for the undiscounted fees for such Services in effect on the date of such termination.

10.5          Upon termination of a Term with respect to particular Information or Software, or upon receipt of Software or Information that is intended to supersede previously obtained Software or Information, unless D&B instructs Customer otherwise, Customer will immediately delete or destroy all originals and copies (other than archival copies permitted by paragraph 3) of the Information or Software, and upon request, provide D&B with certification thereof.

10.6          Termination of this Agreement will result in a termination of all outstanding Orders.

11.     Limitation of Liability

11.1          NEITHER D&B NOR CUSTOMER WILL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF THIS AGREEMENT OR THE DELIVERY, USE, SUPPORT OR OPERATION OF THE SERVICES, EXCEPT AS OTHERWISE PROVIDED HEREIN.

11.2          D&B’s LIABILITY FOR A PARTICULAR CLAIM WILL NOT EXCEED THE AMOUNT PAID BY CUSTOMER TO D&B FOR THE PARTICULAR INFORMATION OR SOFTWARE UPON WHICH THE CLAIM IS BASED OR $20,000, WHICHEVER IS GREATER. ANY CLAIMS AGAINST D&B WILL BE BROUGHT, IN ACCORDANCE WITH THIS AGREEMENT, WITHIN 12 MONTHS OF DISCOVERY OF THE FIRST OCCURRENCE GIVING RISE TO SUCH CLAIMS, BUT IN NO CASE MORE THAN TWENTY-FOUR (24) MONTHS FROM THE FIRST OCCURRENCE, OR SUCH CLAIMS WILL BE FOREVER BARRED.

12.     Choice of Law; Disputes

12.1          This Agreement is governed by and construed in accordance with the laws of the State of New Jersey, without regard to choice of law provisions. Any disputes arising out of this Agreement that cannot be resolved by the parties will be brought in state or federal court located in Newark, New Jersey.

12.2          Each party shall bear its own costs and expenses, including reasonable attorneys’ fees incurred in any action to enforce the obligations of the other party under this Agreement, however, Customer will reimburse D&B for all costs and expenses (including all reasonable attorneys’ fees and costs as well as all damages incurred) in D&B’s enforcement of the Customer-Related Companies compliance with this Agreement.

13.     Miscellaneous

13.1          This Agreement, all Orders, addenda and schedules, and D&B’s published policies and procedures referred to herein and in effect from time to time, including those published on D&B’s web site, constitute the entire agreement between D&B and Customer regarding the Services. Unless an Order states otherwise, where there is a conflict between the terms of any addenda or schedules and this Agreement, the terms of the Agreement shall control with respect to the Services. Where there is a conflict between the terms of any Order and this Agreement, the terms of the Order shall control with respect to the Services set forth in such Order and solely to the extent of the conflict. Any amendments of or waivers relating to this Agreement or any Order must be in writing signed by both parties.

13.2          This Agreement binds and inures to the benefit of the parties and their successors and assigns, except that neither party will assign this Agreement without the prior written consent of the other party; however, either party may assign the Agreement (i) to an affiliate controlled by, controlling or under common control with that party; provided such affiliate is not a direct competitor of D&B, or (ii) in connection with a merger or consolidation (so long as the assignment is to the newly merged or consolidated entity) or the sale of substantially all of its assets (so long as the assignment is to the newly merged or consolidated entity). Notwithstanding the foregoing, with respect to an assignment pursuant to (ii) above, the non-assigning party may terminate this agreement upon thirty (30) days written notice if such party objects to the assignment.

14     Indemnification

          D&B shall defend or settle at its expense any claim, suit or proceeding arising from or alleging: (a) infringement of any existing U.S. copyrights, patents, trademarks, or other intellectual property rights of any third party (“Intellectual Property Right”) by Service or part thereof furnished under this Agreement; (b) property damage or personal injury, including death, directly caused by or personal injury, including death, directly caused by or sustained in connection with the performance of the Services or any activities of D&B in connection therewith; and (c) a breach of the warranties and representations made by D&B in this Agreement. D&B shall indemnify and hold Customer harmless from and pay any and all losses, costs and damages, including royalties and license fees, reasonable counsel fees attributable to such claim, suit or proceeding. Customer shall give D&B prompt notice of, and the parties shall cooperate in, the defense of any such claim, suit or proceeding, including appeals, negotiations and any settlement or compromise thereof, provided that the Customer shall approve the terms of any settlement or compromise.

If any Service or part thereof furnished under this Agreement, including without limitation Software, system design, equipment or Documentation, becomes or in the Customer’s or D&B’s reasonable opinion is likely to become, the subject of any claim, suit, or proceeding arising from or alleging infringement of, or in the event of any adjudication that such Service or part thereof infringes on, any Intellectual Property Right, D&B, at its own expense shall take the following actions in the listed order of preference: (i) secure for the Customer the right to continue using the Service or part thereof; or (ii) if efforts are unavailing, replace or modify the Service or part thereof to make it non-infringing; provided, however, that such modification or replacement shall not degrade the operation or performance of the Service

EX-10.S.2

Exhibit 10-s.2

Pursuant to 17 CFR 240.24b-2, confidential portions of this document have been omitted; such confidential portions have been filed separately with the Securities and Exchange Commission (the “Commission”) pursuant to a Confidential Treatment Application filed with the Commission. The redacted portions of this exhibit are marked by a [***].

TWENTY THIRD AMENDMENT TO SERVICE AGREEMENT

     This Twenty Third Amendment (this “Amendment”) to the Service Agreement dated as of January 1, 2002, as amended (the “Service Agreement”) is made and entered into this 18th day of December, 2006 (the “Execution Date”) by and between Advanta Bank Corp. (“Customer”) and First Data Resources, LLC (formerly known as First Data Resources Inc.) (“FDR”). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Customer and FDR agree as follows:

     1. Except as otherwise specified herein, all terms set forth in this Amendment are effective as of January 1, 2007.

     2. In the event that this Amendment is executed by the parties on or before December 31, 2006, then FDR agrees to provide Customer with a “Processing Fee Credit” in the amount of [***]. The Processing Fee Credit will be provided to Customer [***], and [***]. Anything in this Amendment or the Service Agreement to the contrary notwithstanding, in the event that [***], then [***].

     3. Section 2.4 (Programming Services) of the Service Agreement is hereby deleted and replaced with the following:

“2.4 Programming Services.

     (a) In connection with the services provided by FDR pursuant to the terms of this Agreement, FDR shall perform, at its expense, up to 1,000 hours of computer programming services in each Processing Year during the Term of this Agreement after Processing Year 5 (as defined in Section 8.1)(the ‘Free Programming’). Unused hours of Free Programming from one Processing Year shall not be carried forward into any other Processing Year.

     (b) In addition to the Free Programming set forth in Section 2.4(a) above, FDR agrees to make available to Customer an additional programming credit (the ‘Additional Programming Credit’) during the period commencing on January 1, 2007 and ending on the earlier of (i) December 31, 2011 or (ii) the termination or expiration of this Agreement (including, without limitation, Customer’s exercise of its right to terminate this Agreement for convenience pursuant to Section 9.2(d)). The Additional Programming Credit is defined as a pool of [***],

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available for the period specified in the preceding sentence, that may be applied by Customer against the fees for any computer programming service hours (including but not limited to computer programming service hours associated with the ‘PCF Change Report,’ ‘Insurance Screens’ and ‘1099 Flexibility’ projects which are, at the time of the execution of this Amendment, currently being reviewed by the parties) incurred by Customer during such period which are in excess of the Free Programming hours set forth in Section 2.4(a) above. Subject to the provisions of this paragraph (b), the Additional Programming Credit will expire [***]. Upon the conclusion of each applicable Processing Year, Customer will be eligible to receive a credit to Customer’s invoice (the ‘Processing Fee Credit’) for any unused portion of the [***] Additional Programming Credit available for such Processing Year at a rate of $125 per unused hour up to a maximum of [***]. (The following examples have been provided for clarification: (A) If in a single applicable Processing Year, [***]; (B) If in a single applicable Processing Year, [***]; and (C) If in a single applicable Processing Year, [***].

     (c) FDR shall charge, and Customer shall pay, $125 per hour for each hour of computer programming services provided by FDR at the request of Customer which exceed or are not covered by either the Free Programming or the Additional Programming Credit.”

     4. Article 2 (Services) of the Service Agreement is hereby amended by the addition of a Section 2.9 to read as follows:

“2.9 System Optimization Project. At any time, but only once, during the period commencing on January 1, 2007 and ending December 31, 2011, Customer may request that FDR perform a System Optimization Analysis for Customer. The System Optimization Analysis shall consist of a review of Customer’s use of the FDR System and the Services under this Agreement with respect to Customer’s servicing of its Cardholder Account programs, and written recommendations by FDR to Customer, based upon such analysis, which shall provide suggestions to improve Customer’s efficiency in such servicing and more effective use of the FDR System and the Services. Customer and FDR shall mutually agree upon the specific areas of focus to be included in the System Optimization Analysis.”

Customer and FDR hereby agree that, as of the Execution Date of this Amendment, the System Optimization Analysis described in this Paragraph 3 of this Amendment is already in progress.

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     5. In Paragraph (a) of Section 3.1 (Sole and Exclusive Provider) of the Service Agreement, the first instance of subparagraph (iii) which is in the first sentence of Paragraph (a) is hereby amended to read as follows:

“(iii) Customer shall not agree with any third party to have such third party perform or provide, in North America, any Core Processing Services to Customer, provided, however, that in no event shall the provisions of this subparagraph (iii) be deemed to prohibit Customer, during the remaining Term of this Agreement, from negotiating and signing with any third party any agreement to have such third party perform or provide any services to Customer for any periods following the expiration or termination by Customer as set forth in Section 9.2, including termination for convenience by Customer set forth in Section 9.2(d) of this Agreement.”

     6. Section 3.4 (Acquisition of Portfolios or Entities Not Serviced by FDR) of the Service Agreement is hereby deleted in its entirety.

     7. In Section 4.2 (Price Increases) of the Service Agreement, Paragraph (a) is hereby deleted and replaced with the following:

"(a) During each Processing Year after Processing Year 5, FDR may, by notice to Customer, increase as follows only those Processing Fees set forth in Section IV of Exhibit ‘A’ which are associated with certain production services (as marked with a ‘P’ in Section IV of Exhibit ‘A’); provided, however, that FDR shall not be allowed to increase such Processing Fees at any time while this Agreement is in effect, unless the percentage change in the Consumer Price Index (“CPI”) during the calculation period described below for any applicable Processing Year is greater than four percent (4%), in which case FDR may increase the Processing Fees which were in effect for the immediately preceding Processing Year (the ‘Old Year’) by an amount not to exceed in the aggregate three quarters (3/4) of the percentage change in the CPI over four percent (4%) during a period described below, and in no event shall such increase be less than 0% nor more than 6%. For purposes of this paragraph, the CPI shall be the index compiled by the United States Department of Labor’s Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers (CPI-U) having a base of 100 in 1982-84, using that portion of the index which appears under the caption ‘All Items.’ The CPI percentage shall be communicated to Customer within forty-five (45) days of the end of each applicable Processing Year. The CPI will be expressed as a percentage determined by simple average over a twelve (12) month period of the prior year. Any such adjustment to the Processing Fees will be effective on the first day of each Processing Year.”

     8. Section 4.5 (Minimum Fees) of the Service Agreement is hereby deleted and replaced with the following:

“4.5 Minimum Fees.

(a) In each Processing Year during the Term of this Agreement after Processing Year 5 (as defined in Section 8.1), Customer will require and shall pay FDR for processing services sufficient

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to generate aggregate Processing Fees at least equal to the greater of (i) 80% of the Processing Fees paid during the immediately preceding Processing Year and (ii) $7,000,000 (the ‘Minimum Processing Fees’). FDR shall calculate the total Processing Fees paid by Customer in respect of services performed during each Processing Year (the ‘Total Annual Processing Fees’) within ninety (90) days after the end of each Processing Year and will, after ten (10) days written notice to Customer, draw upon Customer’s account pursuant to Section 4.3 for the amount, if any, by which the Minimum Processing Fees for the Processing Year exceed the Total Annual Processing Fees for the Processing Year (such amount a ‘Minimum Fee Shortfall’).

     (b) If in any Processing Year during the remaining Term of this Agreement, Customer migrates substantially all of its [***], then FDR hereby agrees that for both (i) the Processing Year in which the [***] is effected by Customer (the ‘Migration Year’) and (ii) the Processing Year immediately following the Migration Year, FDR shall remove from calculation of both the Minimum Processing Fees due and the Total Annual Processing Fees paid for such Processing Year all of the fees paid or payable by Customer pursuant to this Agreement for the list of FDR billing elements set forth below:

Element
Number	Item Name
[***]		[***]

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In no event, however, shall the Minimum Processing Fees due FDR by Customer pursuant to this Section 4.5 be less than $7,000,000 for any Processing Year.”

     9. The schedule of Adjusted Gross Processing Fees and corresponding Credit as set forth in Section 4.7 (Growth Credit) of the Service Agreement is hereby deleted and replaced with the following:

"Adjusted Gross Processing Fees	Credit
[***]	[***]

In no event, however, shall the total amount of any Growth Credit payable to Customer by FDR pursuant to this Section 4.7 for any [***] exceed [***].”

     10. Article 4 (Payment for Services) of the Service Agreement is hereby amended by the addition of a Section 4.9 to read as follows:

4.9 New Product Incentive. In each Processing Year, after Processing Year 5, during the remaining Term of this Agreement, FDR agrees to provide Customer with a usage incentive for each New Product which Customer commences to use during the Processing Year. Such usage incentive shall consist of [***]. For the avoidance of doubt, the parties agree that the usage incentive set forth in this Section 4.9 shall not apply with respect to any Special Fees associated with the implementation of a New Product (including but not limited to any set-up fees or development charges associated with the New Product). For purposes of this Section 4.9, a New

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Product shall mean either (a) a product or service which was already included in Exhibit A of this Agreement on or before the commencement of Processing Year 6, but was not previously used by Customer, or (b) a product or service which has been added to Exhibit A of this Agreement by written amendment after the commencement of Processing Year 6.”

     11. Sections 8.1 (Term) and 8.2 (Renewal) of the Service Agreement is hereby deleted and replaced with the following:

“8.1 Term. Except as otherwise provided for in this Article 8, the Term of this Agreement shall continue in effect for an additional period of five (5) Processing Years (Years 6, 7, 8, 9 and 10), commencing on January 1, 2007 and expiring on December 31, 2011 (hereinafter referred to as the ‘Renewal Period’). For purposes of this Agreement, a Processing Year means each twelve (12) month period commencing on the first day of January and ending on the last day of December. Processing Year 6 of the Term shall commence on January 1, 2007 and continue through December 31, 2007.

“8.2 Extension. Upon the expiration of the Renewal Period, the Term of this Agreement shall automatically be extended for one (1) period of one (1) Processing Year (the ‘Extension Period’) unless either party gives the other party written notice at least six (6) months prior to the termination date of the Renewal Period that the Agreement will not be extended.”

     12. Section 9.2 (Termination by Customer) of the Service Agreement is hereby amended by the addition of a subsection (d) to read as follows:

     “(d) For Customer’s convenience upon the conclusion of Processing Year 8 (December 31, 2009), provided that Customer gives FDR written notice, on or before September 30, 2009, of its intention to so terminate this Agreement.”

     13. The first sentence of Section 9.6 (Deconversion) of the Service Agreement is hereby deleted and replaced with the following:

     “Upon the termination for any reason or the expiration of this Agreement, Customer and FDR shall mutually, expeditiously and in good faith proceed to agree upon and document a Deconversion project plan, which the parties contemplate may involve an up to eighteen (18) month time frame for completion and implementation.”

     14. Section 11.2 (Customer’s Representations) of the Service Agreement is hereby amended by the addition of a paragraph (e) to read as follows:

“(e) Customer represents and warrants that the account records and/or address lists in reliance upon which FDR will provide mailing services to Customer, together with any other mail matter provided to FDR, satisfy the requirements established by the United States Postal Service (‘USPS’) for First-Class Mail presorted and automation rates, including but not limited to the Move Update

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requirements for addresses. In that regard, Customer has provided to FDR an executed copy of Postal Service Form 6014, Certification of Move Update Compliance, or its current equivalent and agrees to update it as necessary to maintain its accuracy. If the Customer is not the mail owner, it is the Customer’s responsibility to obtain Postal Service Form 6014 or equivalent assurances from the mail owners so that it can provide the required Postal Service Form 6014 or equivalent to FDR for the mail matter it requests FDR to process. Customer acknowledges that in reliance upon the forgoing, FDR will certify to the USPS, on behalf of Customer, that Customer’s mail complies with all applicable USPS standards for receiving discounts and Customer agrees that it will be liable for any revenue deficiencies assessed with respect to mailings on its behalf. Customer further agrees that, if at any time during the life of this contract Customer discontinues taking the steps needed to satisfy the USPS requirements identified above in this paragraph, Customer will notify FDR in advance in writing. Customer also agrees that, if at any time during the life of this contract FDR requests Customer to confirm its compliance with USPS requirements, it will do so in writing within ten (10) days after FDR’s request and, if it does not, FDR in its discretion may cease processing Customer’s mail as discount mail and Customer is responsible for any increased costs.”

     15 Section 13.2 (b) (Performance Reports) of the Service Agreement is hereby deleted and replaced with the following:

“13.2 (b) Performance Reports. The Performance Standards set forth in Exhibit “C” are divided into two Categories. FDR’s performance with respect to the Performance Standards in each Category during the just concluded calendar month will be managed as follows: i) Category I — Achievement by FDR of [***] Category I Incentive Level Performance Standards and [***] Category II Standard Performance Standards constitutes a Successful Month for which Customer will pay FDR a service level agreement (“SLA”) incentive payment equal to [***]; failure by FDR to achieve [***] of the Category I Performance Standards constitutes a Failed Month for which FDR will pay Customer an SLA remedy payment equal to [***]; and ii) Category II — Achievement by FDR of [***] Category II Incentive Level Performance Standards and [***] Category I Standard Performance Standards constitutes a Successful Month for which Customer will pay FDR and SLA incentive payment equal to [***]; failure by FDR to achieve [***] of the Category II Performance Standards constitutes a Failed Month for which FDR will pay Customer a remedy payment equal to [***]. All SLA incentive payments payable by Customer and all SLA remedy payments payable by FDR with respect to any month will be netted. Any resulting net SLA incentive payment will be billed and any resulting net SLA remedy payment will be credited to Customer on Customer’s next monthly invoice following quarter end. ”

     16. Section 14.10 (Audit) of the Service Agreement is hereby deleted and replaced with the following:

“14.10 Audit. At least annually during the remaining Term of this Agreement, FDR will provide

7

for a third party to perform an audit of the electronic data processing environment maintained by FDR to provide the services set forth in this Agreement. Such audit will conform to the Statement of Auditing Standards No. 70, for Type II reviews (‘SAS-70,’ or any successor substitute statement adopted by the American Institute of Certified Public Accountants). FDR shall provide Customer with a copy of the SAS-70 report associated with such audit, as well as any plans for addressing deficiencies therein, if Customer requests a copy in writing. In addition, Customer, its authorized agents and/or its federal or state regulatory authorities may audit FDR for compliance with this Agreement relating to the confidentiality and security of information relating to Customer’s customers, subject to any reasonable confidentiality requirements of FDR. FDR agrees to comply with all reasonable requests (including without limitation requests to visit FDR’s facilities) in connection with any such audit; provided that (a) FDR shall be given at least thirty (30) days’ prior written notice of such audit, (b) such audit shall be performed during FDR’s normal business hours, and (c) such audit shall be performed at Customer’s expense.”

     17. Article 14 of the Service Agreement is hereby amended by the addition of Sections 14.19 and 14.20 to read as follows:

“14.19 FDR Insurance. FDR currently has and will maintain, at a minimum, the insurance coverage set forth in Exhibit E to this Agreement. FDR agrees to name Customer as an additional insured on those policies so indicated in Exhibit E. FDR will provide to Customer, at such times as Customer may reasonably request, certificates of evidence of insurance setting forth the types and amounts of insurance which FDR then has in effect.”

“14.20 Regulation AB Compliance. At the request of Customer, FDR shall, and shall cause any subcontractors providing services hereunder to, use reasonable efforts to cooperate with Customer in order for Customer to meet its compliance requirements under Regulation AB (17 C.F.R. Sections 226.1100-1123 as may be amended from time to time relating to Asset Backed Securities) to the extent that the Services provided pursuant to the this Service Agreement may be covered by such requirements and are disclosed to FDR by Customer. In no event, however, shall FDR be required to incur additional costs in connection with this cooperation unless Customer and FDR mutually agree in advance on a written plan for the reimbursement of such costs by Customer.

     18. Exhibit “A”, Section IV (Processing Fee Definitions/Prices) of the Service Agreement is hereby deleted and replaced with the price schedule set forth in Attachment I hereto, which is hereby incorporated into this Amendment.

     19. Exhibit “A”, Section IX of the Service Agreement is hereby deleted in its entirety.

     20. Exhibit “C” (FDR Performance Standards for Customer) of the Service Agreement is hereby deleted and replaced with a new Exhibit “C” to read as set forth in Attachment II hereto, which is hereby incorporated into this Amendment.

     21. Unless otherwise specified in this Amendment, any capitalized terms used in this

8

Amendment shall have the meanings assigned to them in the Service Agreement.

     22. As hereby amended and supplemented, the Service Agreement shall remain in full force and effect.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Service Agreement the day and year first above written.

FIRST DATA RESOURCES, LLC		ADVANTA BANK CORP.
By:	/s/ Sandra Dasenbrock	By:	/s/ Anne Howley
Title:	Senior Vice President	Title:	Senior Vice President

9

ATTACHMENT I

Price Schedule

Exhibit A, Section IV (Processing Fee Definitions/Prices)

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
	63		MERCHANT TICKET — TAPE ENTRY	Each sale slip, cash advance slip or returned merchandise slip (“Ticket”) from Customer’s Merchant that is transacted by a Cardholder from any Bank Identification Number (BIN), Interbank Card Association (ICA) or other Transaction Card system identification number, and entered via magnetic tape or tape transmission to FDR by Customer or a third party acting on Customer’s behalf.		/item
	73		MERCHANT TICKET — CRT ENTRY	Each sale slip, cash advance slip or returned merchandise slip (“Ticket”) from Customer’s Merchant that is transacted by a Cardholder from any Bank Identification Number (BIN), Interbank Card Association (ICA) or other Transaction Card system identification number, and entered remotely from Customer’s terminal(s) by Customer or a third party acting on Customer’s behalf.		/item
	84		MERCHANT TICKET — MANUAL ENTRY	Each sale slip, cash advance slip or returned merchandise slip (“Ticket”) from Customer’s Merchant that is transacted by a Cardholder from any Bank Identification Number (BIN), Interbank Card Association (ICA) or other Transaction Card system identification number and entered by FDR on Customer’s behalf.		/item
	98		RETRIEVAL	Each manual fulfillment provided by FDR in response to a request for a Merchant Ticket or copy of the same stored at FDR on behalf of Customer.		/retrieval
	101		INCOMING INTERCHANGE TICKET	Each Ticket (sales slip, cash advance slip or returned merchandise slip) transacted by Customer’s Cardholders at any Merchant with a BIN, ICA or other Transaction Card system identification number other than the number to which the Cardholder is signed.		/item
	125		PAYMENT — TAPE ENTRY BY CUSTOMER	Posting, from a tape medium delivered to FDR by Customer, of a transaction to a Cardholder Account of Customer evidencing the receipt of money from a Cardholder.		/payment
	126		PAYMENT — CRT ENTRY BY CUSTOMER	Posting, from a CRT transmission delivered to FDR by Customer, of a transaction to a Cardholder Account of Customer evidencing the receipt of money from a Cardholder.		/payment
	130		ACCD DOWNLOADED ACCOUNT	Each selected Cardholder Account of Customer which is transmitted to Customer, or any other third party		/account

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

10

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
				acting on Customer’s behalf, for collection purposes in connection with Customer’s Automated Customer Calling Device (ACCD)
	144		FIRST ACTIVITY NOTICE	A brief notification to a Cardholder of Customer prepared by FDR’s computer at the request of Customer based upon Customer’s Product Control File or a CRT entry request made by an employee of Customer which addresses the first use of the new account.		/notice
	147		DELINQUENCY NOTICE	A brief notification to a Cardholder of Customer prepared by FDR’s computer at the request of Customer based upon Customer’s Product Control File or a CRT entry request made by an employee of Customer which addresses a delinquency with respect to the account.		/notice
	151		NON-DUAL CARDHOLDER STATEMENT	Each periodic summarization of activity (whether printed or otherwise) associated with a Transaction Card issued by Customer.		/statement
	155		DUAL CARDHOLDER STATEMENT	A Cardholder Statement which includes information on both MasterCard and VISA account activity.		/statement
	202		BATCH HEADER — MANUAL ENTRY	Each summarization of Merchant Tickets deposited by the Merchant, or by Customer, and entered by FDR via hardcopy received from Customer.		/header
	207		BATCH HEADER — CRT ENTRY	Each summarization of Merchant Tickets deposited by Customer’s Merchant or by Customer (Batch Header), and entered remotely from Customer’s terminal(s) by Customer or a third party acting on Customer’s behalf.		/header
	208		BATCH HEADER — TAPE ENTRY	Each summarization of Merchant Tickets deposited by Customer’s Merchant or by Customer (Batch Header), and transmitted electronically to FDR via magnetic tape or tape transmission from Customer or a third party acting on Customer’s behalf.		/header
	209		MERCHANT ADVICE OF CHARGE (ACH) TAPE	Monthly tape indicating Automated Clearing House (ACH) discount amounts with respect to a Merchant of Customer.		/tape
	218		CARDHOLDER ANNUAL CHARGE	The fee assessed yearly to a Cardholder in connection with a Cardholder Account of Customer.		/account
	227		ASSISTANCE REQUEST (VOICE)	Each miscellaneous customer assistance request from a Merchant that is received by FDR’s voice authorization center.		/ Call
	228		ASSISTANCE REQUEST (VOICE)	Each miscellaneous customer assistance request from a Cardholder that is received by FDR’s voice authorization center.		/ Call
	242		RMS HARDCOPY REPORT	This element identifies the charge for each page of First Data Reports Management System (RMS) reports, in excess of the default setting, provided via hard copy. This element includes any preparation required for delivery.		/ page
	249		RMS RJE/NDM REPORT	Each FDR Reports Management System (RMS) report provided to Customer by FDR in remote job entry (RJE) or network data mover (NDM) format. For purposes of the billing of RMS Reports: (i) if the standard (or default) setting for a particular report is		/page

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

11

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
				“0”, then all pages of RMS On-Line View and RMS RJE of such report provided by FDR to Customer shall be billed to Customer at the prices above, or (ii) if the standard (or default) setting for a particular report is a value other than “0”, then each page of the RMS On-Line View of such report provided by FDR to Customer shall be at no charge and each page of RMS RJE of such report shall be billed to Customer at the prices above.
	259		MERCHANT ELECTRONIC REPORTING	Each Merchant which is set up to receive, via electronic transmission, a file containing daily and weekly Merchant deposit activity confirmations and reports.		/merchant
	260		ETC CONFIRMATION	Each daily report prepared by FDR for use by Merchant of Customer to confirm all Ticket transactions received from Customer’s Merchant and processed the previous day via Electronic Ticket Capture (ETC) or tape. Service includes any preparation required for delivery. ETC is FDR’s proprietary product for electronic data capture at the point of sale.		/letter
	262		ETC HEADQUARTERS REPORT	Each daily or weekly report sent to a headquarters’ location of a Merchant of Customer’s, which contains ETC or tape transaction information for its individual Merchant location(s). Service includes any preparation required for delivery.		/report
	264		SERVICE PLUS HELP CALL	Each instance in which a Merchant of Customer calls the Service Plus Help Center.		/call
	265		SERVICE PLUS HELP CALL	Each instance in which a Merchant of Customer calls the Service Plus Help Center.		/call
	266		SERVICE PLUS REGISTERED MERCHANT	Each Merchant location of Customer participating in the Service Plus Help Center program.		/merchant location
	267		BEHAVIOR SCORE/ ADAPTIVE CONTROL ACCOUNTS	This element identifies the charge for the number of accounts that are assigned a behavior score and/or are processed by the Adaptive Control System (ACS). The Behavior Score is a portfolio management tool that summarizes the level of risk an individual account possesses. The Adaptive Control System is a decision support tool that performs automatic actions for account management in the following areas. Delinquent collections, Overlimit collections, Authorizations, Credit line management, Reissue, Warning bulletin management.		/unit
	270		ETC TICKET	Each Electronic Ticket Capture (ETC) sales slip, cash advance slip or returned merchandise slip from a Merchant of Customer that is captured by means of an electronic process and forwarded to FDR for processing and reporting.		/item
	280		ETC BATCH HEADER	Each electronic summarization of ETC Ticket transactions deposited by Customer or Customer’s Merchant and delivered to FDR.		/header
	281		ADDRESS	Each instance in which the Cardholder records of		/inquiry

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

12

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
			VERIFICATION — ISSUING	Customer located at FDR are accessed for Address Verification.
	293		LOST OR STOLEN REPORT — FDR ENTERED	Each report of a lost or stolen Transaction Card from the Cardholder of Customer which is processed by FDR’s Fraud Management Voice Operations. Reports entered on-line immediately change the external status and block authorization requests on the Cardholder Account. Service includes lost/stolen reports received via collect call, telegram and telex.		/report
	294		SPECIAL RMS REPORT PREMIUM	The additional charge to Customer for each non-standard or unique RMS report provided to Customer at Customer’s request.		/report
	343		REGULATION Z STATEMENT MESSAGE	Each line of notification, included on a Cardholder Statement, informing the Cardholder of the renewal of the Cardholder Account and assessment of an annual fee therefore.		/line
	506		CARDHOLDER ACCOUNT ON FILE	Each account of a Cardholder of Customer (including but not limited to charged off, authorization only and debit accounts) that remains on Customer’s master file at FDR on the last processing day of the calendar month as defined on the CD-121 Ledger Activity Report or the equivalent report.		/account per month
	577		PLASTICARD CONTACTLESS CHIP PERSONALIZATION	The operational expense of personalizing the contactless chip in Radio Frequency plastics.		/ Plastic
	601		FIRST CLASS MAIL — CARDHOLDER STATEMENT	Each Cardholder Statement which is prepared by FDR for delivery to the United States Postal Service (USPS) for mailing.		/statement
	603		FIRST CLASS MAIL — FIRST ACTIVITY NOTICE	Each First Activity Notice which is prepared by FDR for delivery to the USPS for mailing.		/notice
	604		FIRST CLASS MAIL — DELINQUENCY NOTICE	Each Delinquency Notice which is prepared by FDR for delivery to the USPS for mailing.		/notice
	605		FIRST CLASS MAIL — ETC CONFIRMATION LETTER	Each ETC Confirmation Letter which is prepared by FDR for delivery to the USPS for mailing.		/letter
	660		AUTOMATIC ACTION ENTRY	A system generated entry made to a Cardholder Account of Customer which appears on Customer’s collection screens indicating a collection-related activity, including but not limited to external status changes, account re-ages and charge-offs.		/item
	700		CIS INQUIRY	Each transaction accessing the Statement, Detail or Memo information in the FDR System regarding a Cardholder Account.		/transaction
	760		CIS STATEMENT	Each set of statement information regarding Customer’s Cardholder Accounts that is stored on the FDR system and accessible by Customer via Customer’s CRT terminals. CIS Statement information includes the information set forth on a Cardholder Statement such as, but not limited to, the name, address, account		/statement stored per month

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

13

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
				number, statement date, payment date, cycle days, annual percentage rates, and monthly periodic rates.
	770		CIS DETAIL	Each item of information regarding transactions that have posted or will post to a Cardholder Statement such as charges, payments, credits and authorizations not aged off the Cardholder’s file, Cardholder payment history, and real-time authorizations.		/detail stored per month
	780		CIS MEMO	Each summary item, not individually exceeding 65 positions, that is stored with the Customer’s Cardholder Account information and is accessible by Customer via Customer’s CRT terminals.		/memo stored per month
	1301		FUNDS AVAILABILITY	Each payment which is processed through the FDR Payment Defender/Available Funds decisioning system allowing Customer to limit the risk on such Account associated with the increased ‘open to buy’ created by a payment. This system places a hold (float) on all or a portion of the payment for a specified number of days, restricting the ‘open to buy’ available to the Cardholder.		/ Payment Transaction
	1414		MERCHANT HOT CALL	Each Hot Call from a Merchant of Customer in connection with a non-FDR processed financial institution’s Transaction Card for which FDR takes a Hot Call report.		/call
	1415		MERCHANT CODE 10	The charge for processing an authorization referral for a non-First Data cardholder generated by merchant using First Data Fraud Management Service this referral is initiated when a merchant is suspicious of the plastic or the presenter.		/call
	1570		MASTERCOM/VISA RFC ACQUIRER EXTERNAL RETRIEVAL	Following receipt by FDR of a request on the Mastercom/VISA RFC System for a facsimile of a Ticket previously acquired by Customer and stored away from FDR’s premises, FDR will (a) mail a request to the custodian of the Ticket and (b) utilizing a Mastercom/VISA RFC workstation located at FDR’s premises forward an image of such Ticket to the requesting party.		/retrieval
	1571		MASTERCOM/VISA RFC ACQUIRER INTERNAL RETRIEVAL	Following receipt by FDR of a request on the Mastercom/VISA RFC System for a facsimile of a Ticket previously acquired by Customer and stored at FDR, FDR will retrieve the Ticket or a facsimile thereof and forward an image of such Ticket to the requesting party utilizing a Mastercom/VISA RFC workstation located at FDR’s premises.		/retrieval
	1572		MASTERCOM/VISA RFC ISSUER RETRIEVAL	FDR will (a) receive, via a Mastercom/VISA RFC workstation located at FDR’s premises, a copy of a Ticket image previously requested from an Acquirer by Customer or a notification from MasterCard/VISA that the Acquirer has failed to return a Ticket image within the time period permitted by MasterCard/VISA rules, (b) mail a copy of the Ticket image or notification to Customer and (c) transmit Customer’s acceptance or rejection of each Ticket to MasterCard/VISA following receipt of Customer’s written instructions on acceptance or rejection of such Ticket.		/retrieval

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

14

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
	2408		ON-LINE CREDIT BUREAU REPORT REQUEST	The transmission by Customer of credit application or existing account information via video display terminals at Customer’s location to any of the supported principal credit bureaus with which Customer has established a written relationship that is in effect at all times during the term of this Agreement in order to determine the credit worthiness of an applicant/account. Anything in this Agreement to the contrary notwithstanding, in the event that Customer’s relationship(s) with all of the principal credit bureaus supported pursuant to this Agreement should be terminated at any time during the term of this Agreement, then FDR’s obligation to provide On-Line Credit Bureau Report Requests shall automatically be terminated, without penalty or financial obligation of any type or kind to FDR, on the effective date of the termination of Customer’s relationship(s) with such principal credit bureaus		/request
	2411		PINPOINT INQUIRY	Each transaction selection (more than one selection may be made during a call) made by a Cardholder of Customer which accesses the Cardholder’s account records for selected information by the use of a touch-tone telephone.		/inquiry
	2413		CIS DETAIL-PAYMENT HISTORY	Each CIS Detail regarding a Cardholder’s payment history.		/detail stored per month
	2415		ENHANCED PINPOINT INQUIRY	This element identifies the charge for your cardholders to use custom options for information through a full range of voice response unit (VRU) capabilities.		/unit
	2418		ENHANCED PINPOINT — AUTOFAX	This element identifies the charge for each set of statement information for your cardholder accounts that is stored on the First Data System to provide you with access to the information.		/unit
	2519		ATM BALANCE INQUIRY	Each inquiry into the account records of a Cardholder of Customer by the Cardholder via an automated teller machine (“ATM”).		/inquiry
	2553		DELINQUENCY STATEMENT	An alternative form to the delinquency notice, which form notifies a Cardholder of Customer of a past-due amount.		/statement
	2573		ETC DEPOSIT SUMMARY	Each weekly report sent to a Merchant of Customer confirming each deposit made during the week by such Merchant. Service includes any preparation required for delivery.		/summary
	2574		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.		/account
	2575		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which		/account

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

15

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
				either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.
	2576		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.		/account
	2577		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.		/account
	2578		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.		/account
	2579		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.		/account
	2580		ICS — TRANSMISSION LOAD	The transmission to MasterCard and VISA of selected information of each Cardholder of Customer which either: (i) has applied for a MasterCard or VISA Transaction Card; or (ii) has experienced unauthorized usage of its MasterCard or VISA Transaction Card, all in accordance with the operating regulations of MasterCard and VISA.		/account
	2581		ICS — ON-LINE TRANSACTION	An inquiry into FDR’s ICS on-line files utilizing FDR’s ICS on-line transactions by an employee of Customer via Customer’s CRT terminals.		/transaction
	2608		XQR COLLECTION TRANSACTION	An entry made by an employee of Customer to reassign collection accounts to alternative employees’ work queues.		/transaction
	2629		DES-PIN ACCESS CHARGE	This element identifies the charge for start-up of the Data Encryption Standard Personal Identification Number (DES PIN) product.		/unit
	2666		FIRST CLASS MAIL — DELINQUENCY STATEMENT	Each Delinquency Statement which is prepared by FDR for delivery to the USPS for mailing.		/statement

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

16

						Price Per
Elem					Price	Item
#	[***]1	Item Name	Item Definition		[***]1	Description
2670		STANDARD DATABASE MANAGEMENT FEE	The monthly charge for the standard DataChoiceSM Services, which consist of giving Customer access to a system with the ability to create, store, maintain and execute scheduled and ad hoc queries from numerous available data sources. These data sources include current and historical master file data and transaction and statement detail. Access to the system presently is via an internet browser. The basic unit of measure used in connection with the DataChoiceSM Services is the Database Management Unit, a unit of measure equivalent to a gigabyte of data. The standard DataChoiceSM Services includes the following components:
			(i) updating of Customer selected, subject oriented sections (each, a ‘Section’) of the DataChoiceSM data model;
			(ii) access to such Sections of the DataChoiceSM data warehouse model;
			(iii) access to standard templates developed for specific analysis results;
			(iv) ability to create and process customized reports and analysis; and
			(v) ability to create and process customized data file extracts from the DataChoiceSM warehouse.
			The standard fee for this service includes the following limits on update frequency, number of database ID’s and volume of historical data storage:
			(a) update frequency is limited as described in the FDR published default refresh frequency and historical retention schedule (subject to change at FDR’s sole discretion) (the ‘Default Values’);
			(b) access to the DataChoiceSM is limited to no more than the following numbers of Customer’s database ID’s (based upon the number of Database Management Units to be utilized by Customer) per month:
			Database Management Units Utilized by Customer For Such Calendar Month	Number of Database ID’s Utilized by Customer For Such Calendar Month
			[***]	[***]
			(c) historical secondary warehouse storage within the

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

17

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
				DataChoiceSM is limited to the Default Values.   If such limits are exceeded for any calendar month, then Customer will be assessed additional charges for the applicable items which are in excess of such limits. Volumes:		Monthly Minimum (2 units) / Database Management Unit per Month
				[***]
	2671		ALTERNATE DATABASE MANAGEMENT FEE	The substituted monthly charge for each DataChoiceSM Section which Customer elects to upgrade, with respect to the frequency of data updating, beyond the Default Values for the applicable Section.		/ Database Management Unit per month
	2672		SECONDARY DATABASE MANAGEMENT FEE	The monthly charge for each Database Management Unit of data in excess of the published standard Default Value for historical warehouse storage.		/ Additional Database Management Unit per month
	2673		ADDITIONAL DATABASE IDS	The monthly charge for each database ID in excess of the limits set forth in the description of the DataChoiceSM — Monthly Standard Database Management Fee (IN-2670).		/ Additional Database ID’s per month
	2703		DEMAND ACH CASH ADVANCE	This element identifies the charge for using the NM* 759, Demand ACH transaction, subtransaction 02. NM*759, subtransaction 02 is the ACH transaction that enables you to post a one-time cash advance directly to your cardholder’s checking or saving account.   Volumes:
				[***]
						/payment
	2708		DEMAND ACH PAYMENT	Each initiation of a Demand ACH transaction to post a one-time payment directly from Cardholder’s checking or saving Account.   Volumes:
				[***]		/ Transaction
	2720		WARNING BULLETIN TRANSACTION — AUTOMATIC ENTRY	The system-automated, initial generation of a MasterCard Warning Bulletin, MasterCard Authorization File or VISA Warning Bulletin account entry transaction; the account listing and region(s) shall be as dictated by Customer.		/transaction

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

18

						Price Per
Elem					Price	Item
#		[***]1	Item Name	Item Definition	[***]1	Description
	2722		AUTOMATED ACCOUNT TRANSFER — ACCOUNT TRANSFERRED	The set-up of each new account for a Cardholder Account of Customer which is reported Lost or Stolen. Account history is moved from one account and rebuilt on a new one.		/account
	2723		AUTOMATED ACCOUNT TRANSFER — PLASTIC REISSUED	A transferred Cardholder Account of Customer, which has been evaluated against Customer’s reissue criteria and approved by Customer, is issued a new plastic(s).		/account
	2724		AUTOMATED ACCOUNT TRANSFER — PLASTIC REISSUE SUSPENDED	A transferred Cardholder Account of Customer, which has been evaluated against Customer’s reissue criteria and not approved by Customer, is suspended for review by Customer’s personnel.		/account
	2725		AUTOMATED ACCOUNT TRANSFER — SUSPENDED ACCOUNT STORAGE	The storage of each suspended account of Customer on the FDR system awaiting review and disposition by Customer.		/account
	2726		CLIENT-DEFINED SCREENS — TRANSACTION	Each on-line transaction entered by Customer using a CDS Screen. This charge is in addition to any other applicable monetary, non-monetary or on-line transaction charge which may apply with respect to the transaction type.		/transaction
	2729		ON-LINE CREDIT BUREAU REPORT REQUEST	The transmission by Customer of credit application or existing account information via video display terminals at Customer’s location to any of the supported principal credit bureaus with which Customer has established a written relationship that is in effect at all times during the term of this Agreement in order to determine the credit worthiness of an applicant/account. Anything in this Agreement to the contrary notwithstanding, in the event that Customer’s relationship(s) with all of the principal credit bureaus supported pursuant to this Agreement should be terminated at any time during the term of this Agreement, then FDR’s obligation to provide On-Line Credit Bureau Report Requests shall automatically be terminated, without penalty or financial obligation of any type or kind to FDR, on the effective date of the termination of Customer’s relationship(s) with such principal credit bureaus.		/request
	2737		CIS DETAIL — REALTIME AUTHORIZATION	Each CIS Detail regarding a CDA transactions which allow research on declined authorizations and for determining pay-off balances on a Cardholder Account.		/detail stored per month
	2738		CIMS REGULAR WORKCASES	Each Workcase that, for whatever reason, requires review, task completion, and/or follow-up by customer’s personnel in order to resolve a Customer Inquiry.		/workcase
	2739		CIMS LOG ONLY WORKCASES	Each Workcase that is entered into CIMS by Customer for internal reporting purposes only; no follow-up is required by Customer’s personnel.		/workcase
	2740		CIMS ACTIONS	Each task which is performed in the resolution of a Regular Workcase.		/action

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

19

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
2742		CARDHOLDER SELECTED PIN SERVICE DOWNLOADED ACCOUNT	Customer shall contract with a third party for certain Personal Identification Number (PIN) services in connection with the authorization of a Cardholder Account. FDR shall download certain Cardholder Accounts of Customer onto a tape to be sent to such a third party.		/account downloaded
2743		ON-LINE CHECK RE-ORDER	Periodic downloading and transmission of Cardholder account data to a third party vendor selected by Customer for the production of check re-orders.		/account
2744		COMMON AUTHORIZATION	The fee associated with the point-of-sale authorization of a transaction to an account of Customer by a third party where notice of such authorization is delivered to FDR via a transmission medium from the third party.		/inquiry
2746		FIRST CLASS MAIL — MERCHANT STATEMENT	Each Merchant Statement which is prepared by FDR for delivery to the United States Postal Service (USPS) for mailing.		/statement
2754		SECURITY DETAILS WORKED ONLINE	Each Cardholder Account of Customer which is statused lost or stolen and which is automatically identified and reported to an online work queue.		/account
2755		FRAUD DETAIL SCREEN TRANSACTION — AFFIDAVIT	Each transaction entered on-line using FDR’s Fraud Detail Screens in order to generate an affidavit regarding an account.		/transaction
2756		ON-LINE DETAIL STORAGE	The daily, on-line retention of security detail records (monetary items posting to a Lost or Stolen Account) from the Security Detail Transaction (“SDT”) File.		/item per day
2770		LETTER	Each letter prepared by FDR’s computer, in accordance with Customer’s Product Control File settings or CRT entry requests made by employees of Customer. Each such Letter shall have on-line composition and editorial features and options including signatures, logos, multiple type faces and additional page letter generation. Service includes any preparation required for delivery.		/letter
2771		LETTER	Each letter prepared by FDR’s computer, in accordance with Customer’s Product Control File settings or CRT entry requests made by employees of Customer. Each such Letter shall have on-line composition and editorial features and options including signatures, logos, multiple type faces and additional page letter generation. Service includes any preparation required for delivery.		/letter
2772		LETTER — DUPLEX PRINTING	Each Letter for which printing is made on the back of the initial page and any additional pages.		/letter
2773		LETTER — ADDITIONAL PAGE	Each printed output on the reverse side of a Letter (duplex printing) or each side of each sheet of 8 1/2” by 11” 24 lb. bond stock accompanying a Letter.		/printed page
2774		LETTER — PRIORITY MAILING	Each Letter, with or without Letter Insert, which is handled separately from Customer’s first class mailings to provide next day delivery of said item.		/letter
2776		EMERGENCY	Each monthly Cardholder Account on File which is		/Cardholder

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

20

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
		SERVICES — FILE PROCESSING	entitled to receive Emergency Service.		Account on File per month
2777		FRAUD DETAIL SCREEN TRANSACTION — ADJUSTMENT	Each transaction (2 transactions are required in order to generate a single adjustment) entered on-line using FDR’s Fraud Detail Screens in order to generate an adjustment to an account.		/transaction
2779		AUTOMATIC CHARGEBACK	Each automatic initiation of a chargeback by the FDR System based upon predefined parameters, including but not limited to transactions involving expired account plastics, accounts listed in the Combined Warning Bulletin, and accounts which exceed presentment parameters.		/chargeback initiated
2780		AUTOMATIC CHARGEBACK	Each automatic initiation of a chargeback by the FDR System based upon predefined parameters, including but not limited to transactions involving expired account plastics, accounts listed in the Combined Warning Bulletin, and accounts which exceed presentment parameters.		/chargeback initiated
2781		SCREEN ENTERED RETRIEVALS	This element identifies the charge for each retrieval request generated for a cardholder account that has a lost or stolen status.		/ Retrieval Request
2782		FRAUD DETAIL SCREEN TRANSACTION — CHARGEBACK	Each transaction entered on-line using FDR’s Fraud Detail Screens in order to generate a Chargeback.		/transaction
2784		SECURITY FRAUD RESEARCH-OPT 2	This element identifies the charge for the following fraud research and investigation services. Lost/stolen account research, Identification of fraudulent accounts, Fraud reporting, Affidavits, Retrieval requests, Chargebacks, Investigations, Account maximum monetary recovery of accounts reported fraudulent. You can use this service to help minimize your losses once an account’s status is lost or stolen.		/unit
2806		ADDRESS VERIFICATION — ACQUIRING	Each electronic request for an Address Verification by a Merchant of Customer.		/inquiry
2809		RMS ON-LINE REPORT	Each FDR Reports Management System (RMS) report provided to Customer by FDR in an online view form. For purposes of the billing of RMS Reports: (i) if the standard (or default) setting for a particular report is “0”, then all pages of RMS On-Line View and RMS RJE of such report provided by FDR to Customer shall be billed to Customer at the prices above, or (ii) if the standard (or default) setting for a particular report is a value other than “0”, then each page of the RMS On-Line View of such report provided by FDR to Customer shall be at no charge and each page of RMS RJE of such report shall be billed to Customer at the prices above.		/page
2810		ON-LINE TELEPHONE NUMBER UPDATE	The automatic update of a telephone number on Customer’s Cardholder masterfile at FDR which is caused by an update of the same telephone number via		/update

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

21

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			a “SL” transaction in connection with a Lost/Stolen Report.
2811		AUTOMATED ADJUSTMENT/APPROVAL	Each automatic, on-line completed adjustment or reversal of monetary detail items such as late fees, overlimit fees, item charges, finance charges, charge-off transactions and credit adjustments within Customer Inquiry System.		/adjustment
2812		AIRLINE ITINERARY ON STATEMENT	Up to four (4) legs of detailed airline itinerary displayed on a Cardholder Statement.		/statement
2813		COMPANY CARD SERVICE MAIL PREPARATION	The preparation of each set of reports prepared for mailing in the USPS to a company designated by Customer in connection with those services provided by FDR in order to support commercial card accounts of Customer. For purposes of this Agreement, a set of reports shall mean all reports of a single company which are placed in a single envelope for mailing.		/set of reports
2814		CIS TRANSACTION REGISTER	A reprint of information from a CIS Statement currently stored on-line which reprint is delivered to a Cardholder of Customer at Customer’s request.		/register
2816		ACS NON-MON TRANSACTION CREDIT BUREAU SCORE	Each Non-monetary 160 Transaction which is posted to a Cardholder Account. This transaction is used to update the Cardholder Account with credit bureau information.		/Non mon transaction posted
2820		CONVENIENCE CHECK	Periodic downloading and transmission of Cardholder account data to a third party vendor selected by Customer for the production of convenience checks.		/account
2821		CREDIT BALANCE REFUND CHECK	Periodic downloading and transmission of Cardholder account data to a third party vendor selected by Customer for the production of credit balance refund checks.		/account
2823		ON-LINE WARNING BULLETIN STORAGE	The daily, on-line retention of Customer’s Cardholder Accounts contained on the Combined Warning Bulletin File.		/account per day
2825		ACCOUNT RELATIONSHIP STORAGE	A match of certain values from two separate Cardholder Accounts within Customer’s Transaction Card portfolio, indicating a relationship between the accounts.		/Cardholder Account on File per month
2826		ADAPTIVE CTRL AUTHS	This element identifies the charge for using the Adaptive Control System (ACS) authorization decision area. The ACS authorization decision area is priced separately from all other ACS decision areas. The ACS authorization decision area allows you to establish decision criteria for authorization requests resulting in approval, decline, or referral.		/unit
2829		MTT SCREEN DETAIL STORAGE	Each Merchant ACH deposit activity record which is stored by FDR for on-line viewing.		/record
2835		RETAIL ON-LINE TRANSACTION	Each entry of information or inquiry into the computer records of Customer and its Cardholders with promotional purchases on file by an employee of Customer by the use of a terminal located at Customer’s office.		/transaction

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

22

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
2836		TRANSACTION LEVEL PROCESSING (TLP) PROMOTIONAL BALANCE ON FILE	Each promotional purchase balance, associated with a Cardholder Account of Customer (several promotional purchase balances may exist at the same time for the same Cardholder Account), which remains on the FDR System on the last processing day of the calendar month, as defined on the CD-121 Ledger Activity Report or the equivalent report (e.g. — the CD-621 Report).		/Account with promotional balance per month
2839		TRANSACTION LEVEL FEE	Each transaction posted to a Cardholder Account of Customer evidencing a fee assessed to the Cardholder Account, but for which a Transaction Level Processing (TLP) promotional balance (flap) is not created in connection with the fee.		/Transaction
2842		MERCHANT CHARGEBACK SUMMARY SCREEN	The on-line storage of summaries for pending Incoming Chargebacks posted to Merchant Accounts for access by employees of Customer.		/chargeback stored per month
2843		MERCHANT RETRIEVAL SUMMARY SCREEN	The on-line storage of summaries for pending Retrieval requests for access by employees of Customer.		/retrieval stored per day
2844		REFERRAL QUEUE	Authorization Referrals to which the Merchant failed to respond are recorded in a real-time on-line work queue for review by Customer to initiate the appropriate action. The service is charged on a per account in queue per day basis, but calculated on a monthly basis.		/account
2845		AUTOMATED ICS FRAUD REPORT TRANSACTION	The automatic reporting of a fraud account to the Issuer’s Clearinghouse Service (ICS) by the FDR System each time a Cardholder Account is set to fraud via an “SL” or “SN” transaction.		/transaction
2849		LETTER — CERTIFIED MAIL HANDLING	Each Letter, with or without Letter Insert, which is handled separately from Customer’s first class mailings to provide certified delivery of said item. This does not include postage.		/letter
2855		WARNING BULLETIN RECORD QUEUE	The queuing of internally or externally statused Cardholder Accounts of Customer for review and possible listing on the MasterCard Warning Bulletin, the MasterCard Authorization File or the VISA Warning Bulletin by Customer’s personnel. The service is charged on a per account in queue per day basis, but calculated on a monthly basis.		/account
2860		LETTER — GROUP SAMPLES	Each individual or set of Letters prepared by FDR’s computer, in accordance with Customer’s Product Control File settings or CRT entry requests made by employees of Customer, which is printed and mailed to Customer in a draft format for Customer’s review and approval.		/item
2864		DEBIT SUMMARY FILE TRANSACTION	Each Merchant debit transaction received from Customer, or a third party acting on Customer’s behalf, and reported by FDR.		/transaction
2868		CARD ACTIVATION —ARU CALL-FDR	Each initiation of an on-line transaction by the confirmation of Customer requested data captured from Customer’s Cardholder, via an audio response unit (ARU), changing the status of a Cardholder Account		/transaction

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

23

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			associated with certain newly issued or reissued plastics (as determined by Customer), from “inactive” (under certain parameters) to “active” for transaction authorization purposes.
2869		CARD ACTIVATION —VOICE CALL-FDR	Each entry of an on-line transaction by FDR, on behalf of Customer, in conjunction with the confirmation of Customer requested data obtained from the Customer’s Cardholder via a voice call, changing the status of a Cardholder Account associated with certain newly issued or reissued plastics (as determined by Customer), from “inactive” (under certain parameters) to “active” for transaction authorization purposes.		/Call Taken
2870		CARD ACTIVATION —CUSTOMER PROCESSED	Each entry of an on-line transaction by Customer to change the status of a Cardholder Account associated with certain newly issued or reissued plastics (as determined by Customer), from “inactive” (under certain parameters) to “active” for transaction authorization purposes.		/transaction
2874		MERCHANT 12B LETTER	A letter sent directly to a Merchant of Customer requesting a Retrieval.		/letter
2883		AUTO PIN CHANGE	Each call made by a Cardholder of Customer requesting a change to the Personal Identification Number (PIN) associated with the Cardholder’s Transaction Card by the use of a touch-tone telephone.		/call
3025		MAIL-INSERTING	Any advertising or other item of information not contained on a Cardholder Statement, which item is mailed along with the Cardholder Statement; inserts required by state or federal law do not apply.		/insert
3314		COMMERCIAL CREDIT BUREAU REPORTING	The billing element reflects the companies or their associated account’s credit information that is sent to each Commercial Credit Bureau of the client’s choice which will be billed per Bureau/per record reported. Each record of information regarding a Commercial Card Cardholder Account of Customer (either at the company level or at the account level) which is reported by FDR at Customer’s request to credit bureaus selected by Customer for receipt of such information.		/Account on File / Bureau
3343		FIRST DATA 2WAY-CONNECT STARTUP FEE	The charge for each First Data Xpedite application (such as, but not limited to the fraud application or the collections application) utilized by Customer. The First Data Xpedite Services — Set-Up Fee includes (I) a kick-off meeting with Customer (including travel and expenses), (ii) product design, (iii) design coding, (iv) end-to-end testing, (v) studio time/recording talent, (vi) administration of solution-password set-up and voice file library creation, (vii) pre-production calls and (viii) overall project management. Such fee does not include (and Customer shall reimburse FDR pursuant to the applicable fees in the Service Agreement) any custom development services required in connection with Customer’s use of the First Data Xpedite Services.		/Application

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

24

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
3516		PREMIER AUTHORIZATION INQUIRY	Each interactive touch tone authorization inquiry serviced by FDR for Merchants of Customer. Customer shall pay FDR for each instance during which FDR has electronic contact with a Merchant of Customer and receives the Merchant number. In addition, if a Premier authorization inquiry results in a Voice Authorization Inquiry, Merchant request for assistance or a security action, Customer will pay FDR for the Premier authorization and the appropriate voice and/or security action charge as provided in this Agreement.		/inquiry
3519		ADDRESS VERIFICATION — VOICE	Each voice inquiry request received by FDR from a Merchant requesting a confirmation of the address of a Cardholder.		/request
3534		COMMERCIAL VENDOR LIST	A list of vendors for which Cardholders utilizing a Customer issued Commercial Card may present the Commercial Card for payment.		/average number of vendors on file per month
3701		2WAY-CONNECT FRAUD MONTHLY FEE	This element identifies the monthly fee for the estimated volume of cardholder accounts submitted for each month and/or each day in conjunction with the Fraud Application. The customer shall initially select a monthly price based upon the estimated monthly and daily Account volume for an application strategy. Volumes — Monthly Accounts Submitted: Band A — [***] Band B — [***] Band C — [***] Band D — [***] Band E — [***] Band F — [***] Band G * — [***] * For Band levels beyond those described in the tiers above, Customer and FDR shall mutually agree on the Monthly Accounts Submitted and the Monthly Service Fee for any such Band Levels prior to the commencement of services		/month
3702		2WAY-CONNECT FRAUD EXCESS ACCT FEE	This element identifies the fee for each Account submitted in excess of either (a) the applicable maximum number of accounts submitted per month if the Customer exceeds the maximum number of accounts submitted per month associated with the monthly price selected by the Customer within the Fraud Application or (b) on any day during the applicable month, the applicable daily threshold account submitted volume associated with the monthly price selected by the Customer within the Fraud Application. Volumes — Monthly Accounts Submitted: Band A — [***] Band B — [***] Band C — [***]		/Excess Account Submitted
s

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

25

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			Band D — [***] Band E — [***] Band F — [***] Band G * — [***] * For Band levels beyond those described in the tiers above, Customer and FDR shall mutually agree on the Monthly Accounts Submitted and the Monthly Service Fee for any such Band Levels prior to the commencement of services
4001	P	PLASTICARD STANDARD EMBOSSING SERVICES	Each plastic card for which FDR has mechanically raised personalized characters prepared at the request of Customer based upon Customer’s Product Control File or a CRT entry request made by an employee of Customer, or in response to a receipt of a magnetic tape or transmission from Customer of embossing files in a format defined by FDR. Includes up to three lines of alpha-numeric font and one line of OCR font on a “.030” plastic, the recording and verifying of data on the Transaction Card’s magnetic stripe (high or low coercivity), the tipping of the plastic through the placement of a contrasting color plastic film on the raised embossed characters, the printing of variable card carrier information on a Customer-specified card carrier form and the insertion of a card carrier containing a merged Cardholder plastic into an envelope, and the electronic matching of plastic to the related card carrier. An FDR generic card carrier and envelope are included at no charge, provided, however, that due to increased inventory cost, if Customer uses its own materials, Customer will not be entitled to receive a price discount. FDR will generate embossing information based upon Customer’s Product Control File (or, at Customer’s option, receive embossing information via tape from Customer), use such information to prepare the embossed plastic and mail the embossed plastic on behalf of Customer to its Cardholder at the Cardholder’s then current address.		/plastic embossed
4002		PLASTICARD STANDARD EMBOSSING SERVICES	Each plastic card for which FDR has mechanically raised personalized characters prepared at the request of Customer based upon Customer’s Product Control File or a CRT entry request made by an employee of Customer, or in response to a receipt of a magnetic tape or transmission from Customer of embossing files in a format defined by FDR. Includes up to three lines of alpha-numeric font and one line of OCR font on a “.030” plastic, the recording and verifying of data on the Transaction Card’s magnetic stripe (high or low coercivity), the tipping of the plastic through the placement of a contrasting color plastic film on the raised embossed characters, the printing of variable card carrier information on a Customer-specified card carrier form and the insertion of a card carrier		/plastic embossed

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

26

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			containing a merged Cardholder plastic into an envelope, and the electronic matching of plastic to the related card carrier. An FDR generic card carrier and envelope are included at no charge, provided, however, that due to increased inventory cost, if Customer uses its own materials, Customer will not be entitled to receive a price discount. FDR will generate embossing information based upon Customer’s Product Control File (or, at Customer’s option, receive embossing information via tape from Customer), use such information to prepare the embossed plastic and mail the embossed plastic on behalf of Customer to its Cardholder at the Cardholder’s then current address.
4008		PLASTICARD PIN MAILER PROCESSING	Each plastic card Personal Identification Number (PIN), and associated PIN notice form, related to Customer’s Cardholder.		/mailer
4009		PLASTICARD POST MAILER PROCESSING	Each plastic card mail verification form (POST Mailer), related to Customer’s Cardholder.		/mailer
4011		PLASTICARD SPECIAL MAIL PREP	Mail preparation and handling fees associated with non-first class mailings of Customer’s Cardholder and Merchant plastics.		/Carrier
4012		PLASTICARD PULL (PURGING)	Each removal of a card carrier and/or printed PIN/POST Mailer from the delivery/mail stream prior to delivery to Customer or Customer’s Cardholder. This includes but is not limited to “pull and destroys”, “pull and mail to different address” and “pull and mail overnight” (3 day turnaround).		/carrier
4013		PLASTICARD PULL (PURGING)	Each removal of a card carrier and/or printed PIN/POST Mailer from the delivery/mail stream prior to delivery to Customer or Customer’s Cardholder. This includes but is not limited to “pull and destroys”, “pull and mail to different address” and “pull and mail overnight” (3 day turnaround).		/carrier
4014		PLASTICARD INSERTING	The inserting of each accompanying piece of materials into a #10 windowed envelope along with a pre-folded card carrier containing a merged Cardholder plastic. Excludes inserts required by state or Federal law. Customer supplies inserts.		/insert
4015		PLASTICARD INSERTING	The inserting of each accompanying piece of materials into a #10 windowed envelope along with a pre-folded card carrier containing a merged Cardholder plastic. Excludes inserts required by state or Federal law. Customer supplies inserts.		/insert
4016		PLASTICARD INSERTING	The inserting of each accompanying piece of materials into a #10 windowed envelope along with a pre-folded card carrier containing a merged Cardholder plastic. Excludes inserts required by state or Federal law. Customer supplies inserts.		/insert
4017		PLASTICARD INSERTING	The inserting of each accompanying piece of materials into a #10 windowed envelope along with a pre-folded card carrier containing a merged Cardholder plastic. Excludes inserts required by state or Federal law. Customer supplies inserts.		/insert

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

27

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
4019		PLASTICARD SPECIAL EMBOSSING — NEXT DAY MAILING	Rush servicing of cards from hard copy (fax or mail) reports or requests. Includes manual embossing, carrier printing and hand inserting, and applies to any pieces pulled out of normal process. Cards will be mailed the day following the date the request is received if received by 5:00 p.m. CTZ.		/ Card
4020		PLASTICARD EMBOSSING SET-UP	Each instance in which a change is made to any or all of (i) Customer’s prin level (if prin level billing for set-ups is required), (ii) the plastic stock number, (iii) card carrier, (iv) tipping foil, (v) card activation flag and sticker and/or (vi) ultragraphic color in connection with Customer’s plastic cards.		/change
4023		PLASTICARD MERCHANT PLASTIC	Each plastic card for which FDR has mechanically raised personalized characters in accordance with Customer’s Product Control File settings and Merchant masterfile.		/plastic
4024		PLASTICARD MERCHANT PLATE	Each metal plate for which FDR has mechanically raised personalized characters in accordance with Customer’s Product Control File settings and Merchant masterfile.		/plate
4025		PLASTICARD VAULT STORAGE	The inventory and storage of plastics, procured through a source other than FDR, for a period of six (6) months from receipt of shipment.		/plastic, levied upon receipt of shipment
4028		PLASTICARD SPECIAL EMBOSSING — SAME DAY MAILING	Rush servicing of cards from hard copy (fax or mail) reports or requests. Includes manual embossing, carrier printing and hand inserting, and applies to any pieces pulled out of normal process. Cards will be mailed the same day as the request is received if received by 10:00 a.m. CTZ.		/ Card
4029		PLASTICARD SPECIAL EMBOSSING — TWO DAY MAILING	Rush servicing of cards from hard copy (fax or mail) reports or requests. Includes manual embossing, carrier printing and hand inserting, and applies to any pieces pulled out of normal process. Cards will be mailed the second day following the date the request is received if received by 5:00 p.m. CTZ.		/ Card
4053		PLASTICARD INSERTING	The inserting of each accompanying piece of materials into a #10 windowed envelope along with a pre-folded card carrier containing a merged Cardholder plastic. Excludes inserts required by state or Federal law. Customer supplies inserts.		/insert
4061		POST MAILERS — FIRST CLASS	Each Mail verification form (POST mailer), related to Customer’s Cardholder. Service includes any preperation required for delivery including generic form and the mailing of the Post Mailer via First Class mail.		/unit
4062		PURGE-PIN/POST MAILER	Each removal of a card carrier and/or printed PIN/POST Mailer from the production process prior to delivery to Customer or Customer’s Cardholder.		/unit
4083		PLASTICARD MAIL INTEGRATION	The mixture by FDR of a mail item containing an embossed plastic with several other types of mailing		/item

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

28

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			items prior to their delivery to the United States Postal Service for mailing. Anything in this Agreement to the contrary notwithstanding, Customer understands and agrees that, with respect to any embossed plastics for which FDR provides PlastiCard Mail Integration Services, the normal turnaround for the mailing of such embossed plastics shall, for purposes of this Agreement, be delayed by one (1) business day.
4097		POST MAILERS	This element identifies the charge for each post mailer, related to your cardholder that is mailed using a non-indicia method. The mailing method could be, but is not limited to, metered, bulk shipped, or Airborne.		/unit
4098		PIN MAILERS	This element identifies the charge for each PIN mailer, related to your cardholder that is mailed using a non-indicia method. The mailing method could be, but is not limited to metered, bulk shipped, or Airborne.		/unit
4111		PLASTICARD AGENT/STRATEGY INSERTING SET-UP	Each instance in which a change is made to any or all of (i) Customer’s system level (if system level billing for set-ups is required), (ii) Customer’s prin level (if prin level billing for set-ups is required), (iii) the envelope, (iv) inserts, (v) mail integration, (vi) multi/foreign flag and/or (vii) mail code in connection with Customer’s plastic cards.		/change
4112		STRATEGY LEVEL SETUP	This element identifies the charge for each instance in which a change is made to any or all of the following.* system-level setups (if system-level billing for setups is required) * principal-level setups (if principal-level billing for setups is required) * envelopes * inserts * mail integration * multis/foreign flags * mail code in connection with your plastics		/change
4206		PLASTICARD ULTRAGRAPHICS — FRONT SIDE	Each image placed on the front and/or back of a plastic using a thermal image process.		/plastic
4218		PLASTICARD CVV/CVC VERIFICATION GENERATION	The calculation and encoding and/or indent printing of the VISA Card Verification Value (CVV) or MasterCard Card Validation Code (CVC).		/calculated value
4233		BULK PACKAGING	This element identifies the charge for bulk mailing your credit cards to a single address.		/unit
4331		REPORT RETRIEVAL FEE	Each page of an IDP report section not available in Customer’s IDP Topic indexes accessed by FDR in the process of pulling report pages requested by Customer.		/ Page
4334		REPORT PULL OVER 6 MONTHS	This element identifies the charge for the first 25 pages of any report First Data pulls for you for report dates beyond the past six months. A report pull indicates that FDR uses the Onlune Reports System, the Online Access and Retrieval Systems (OARS), or the Information Delivery Platform (IDP) to retrieve a copy of the report. An individual report pll request is based on each report, date, and system/principal combination and is billed separately.		/unit
4335		REPORT PULL	Each group of up to 25 pages per report beyond the		/unit

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

29

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
		ADDITIONAL PAGES	initial 25 pages, that the Customer requests FDR to pull. A report pull indicates that FDR uses the Onlune Reports System, the Online Access and Retrieval Systems (OARS), or the Information Delivery Platform (IDP) to retrieve a copy of the report. An individual report pll request is based on each report, date, and system/principal combination and is billed separately.
4337		RESPOOL BILLING	Each file requested by Customer to be resent to Customer, either through transmission or physical tape, when research confirms that the file was previously sent and for which generation archival is available.		/ Request
4339		WAREHOUSE REWORK HANDLING FEE	The charge associated with managing of a Customer’s product that was received at FDR’s warehouse that does not meet FDR specifications and needs to be reworked.		/unit
4352		CD-ROM STATEMENT DATA PAGE	Each data page of statement information on CD-ROM which is provided to Customer or to a party on behalf of Customer. CD-ROM Sevices in the storage, on Compact Disc-Read Only Memory (‘CD-ROM’), of statements and reports for purposes of record retention, accessing and archival purposes. Customer, at its option, may elect to utilize the CD-ROM Services and/or On-Line Report Services for the same items. Notwithstanding anything in this Agreement to the contrary, Customer is responsible for determining the acceptance of the CD-ROM Services under state and Federal regulations, including but not limited to obligations to retain information for a specified period of time, signature verification and the admissibility of documents into evidence. It is Customer’s responsibility to keep records on other media, if such are required under state and Federal regulations because of the limited acceptance or admissibility of the CD-ROM Services of the technology to be used under this Agreement to provide the CD-ROM Services.		/data page
4353		CD-ROM — OTHER SERVICES	Any of the following CD-ROM services: duplicate copies, new form overlays, retro work charges, summary charges, master file charges, programming. CD-ROM Services in the storage, on Compact Disc-Read Only Memory (‘CD-ROM’), of statements and reports for purposes of record retention, accessing and archival purposes. Customer, at its option, may elect to utilize the CD-ROM Services and/or On-Line Report Services for the same items. Notwithstanding anything in this Agreement to the contrary, Customer is responsible for determining the acceptance of the CD-ROM Services under state and Federal regulations, including but not limited to obligations to retain information for a specified period of time, signature verification and the admissibility of documents into evidence. It is Customer’s responsibility to keep records on other media, if such are required under state		/ Item

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

30

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			and Federal regulations because of the limited acceptance or admissibility of the CD-ROM Services of the technology to be used under this Agreement to provide the CD-ROM Services.
4354		CD-ROM REPORT DATA PAGE	Each data page of report information on CD-ROM which is provided to Customer or to a party on behalf of Customer. CD-ROM Sevices in the storage, on Compact Disc-Read Only Memory (‘CD-ROM’), of statements and reports for purposes of record retention, accessing and archival purposes. Customer, at its option, may elect to utilize the CD-ROM Services and/or On-Line Report Services for the same items. Notwithstanding anything in this Agreement to the contrary, Customer is responsible for determining the acceptance of the CD-ROM Services under state and Federal regulations, including but not limited to obligations to retain information for a specified period of time, signature verification and the admissibility of documents into evidence. It is Customer’s responsibility to keep records on other media, if such are required under state and Federal regulations because of the limited acceptance or admissibility of the CD-ROM Services of the technology to be used under this Agreement to provide the CD-ROM Services.		/data page
4356		PEP CARRIER ARCHIVAL	Each PlastiCard Enterprise Presentation (PEP) carriers processed and archived on media by Digital ROM Services.		/ Page per month
4435		POSTAL DISCOUNT PROCESSING FEE	This element identifies the charge for providing U.S Postal Zip-Sort services for your cardholder statements, notices, letters, and other first class mailings. This element does not include plastic counts.		/ First Class Mail Piece sent through Zip Sorter
4495		PL — POSTAGE CREDIT — PROCESSING FEE	This element identifies the charge for providing U.S Postal Zip-Sort services for your plastics first class mailings. This element includes plastic counts only.		/ First Class Mail Piece sent through Zip Sorter
4722		DQ ENHANCED DECISIONING	The number of Accounts processed through the enhanced decisioning capability. Enhanced decisioning provides the Customer the ability to compare decision element IDs, the ability to evaluate against a current date, and the ability to build rules and offer items once and then to have them propagated across decision areas. Enhanced Decisioning also includes the ability to compare drivers. Monthly Volumes:
			[***]		/ Decisioned Account
5015		RECURRING RUNS	This element identifies the charge for each scheduled daily, weekly, or monthly production of a data set on your behalf that is in addition to the standard data		/run

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

31

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			output produced by the First Data System.
5071		RMS ON-LINE REPORT — RESTORE	Each page of an RMS Report for which Customer requires access later than eight (8) days following the date that such report is first made available to Customer.		/page
5072		RMS ON-LINE REPORT — SPLITTING	Each RMS Report which is split into component parts by FDR at the request of Customer.		/report
5073		ONLINE REPORT — OVER 50 SIGN-ONS	This element identifies the charge for Online Report System sign-ons that exceed the 50 covered in the Online Report System start up fee.		/sign-on
5075		RMS ONLINE REPORT — REPORT PRINTING	Each page of an RMS Online Report printed at Customer’s location.		/page
5082		INTERFACE SERVICES — RJE/NDM	Each transmission to, or receipt by, FDR of Customer’s data via a central processing unit to central processing unit transmission using Remote Job Entry or Network Data Mover (RJE or NDM).		/transmission
5083		RJE — AUTH ONLY DCA	Each transmission to, or receipt by, FDR of Customer’s data via a central processing unit to central processing unit transmission using Remote Job Entry or Network Data Mover (RJE or NDM).		/transmission
5085		RJE/NDM-AUTH ONLY MERCHANT	This element identifies the charge for First Data to transmit or receive your data via CPU-to-CPU transmission using Remote Job Entry (RJE) or Network Data Mover (NDM).		/ Transmission
5086		RJE-EMBOSSING FILES	This element identifies the charge for each transmission of embossing data to you or receipt of embossing data from you by First Data via CPU-to-CPU using remote job entry (RJE).		/ Transmission
5087		RJE/NDM-SSNOMO FILES	This element identifies the charge for each transmission of SSNOMO data to you or receipt of SSNOMO data from you by First Data via CPU-to-CPU using remote job entry (RJE).		/ Transmission
5088		RJE/NDM-TAPTRANS FILES	Each transmission to, or receipt by, FDR of Customers data via a central processing unit to central processing unit transmission using Remote Job Entry or Network Data Mover (RJE or NDM).		/ Transmission
5089		RJE-DEBIT CARD ACH	This element identifies the charge for each transmission of debit card automated clearinghouse (ACH) data to you or receipt of debit card ACH data from you by First Data via CPU-to-CPU using remote job entry (RJE).		/ Transmission
5090		RJE-AUTH FILES	This element identifies the charge for each transmission of authorization file data to you or receipt of authorization file data from you by First Data via CPU-to-CPU using remote job entry (RJE).		/ Transmission
5091		RJE-BATCH AUTH	This element identifies the charge for each transmission of batch authorization data to you or receipt of batch authorization data from you by First Data via CPU-to-CPU using remote job entry (RJE).		/ Transmission
5095		INTERFACE SERVICES	Each transmission to, or receipt by, FDR of Customer’s		/transmission

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

32

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
		— TAPE TO TAPE — MOHAWK	data via a central processing unit to central processing unit transmission using a tape to tape interface.
5104		INTERFACE SERVICES — TAPE TO TAPE — TRACS	Each transmission to, or receipt by, FDR of Customer’s data via a central processing unit to central processing unit transmission using a tape to tape interface.		/transmission
5110		MISC-RJE	This element identifies the charge for each transmission of miscellaneous data to you or receipt of miscellaneous data from you by First Data via CPU-to-CPU using remote job entry (RJE).		/ Transmission
5114		NJE FILES	This element identifies the charge for each transmission of network job entry (NJE) files to you or receipt of NJE files from you by First Data via CPU-to-CPU using NJE.		/ Transmission
5123		NDM-BATCH AUTH	This element identifies the charge for each transmission of batch authorization data to you or receipt of batch authorization data from you by First Data via CPU-to-CPU using network data mover (NDM).		/ Transmission
5124		Misc. NDM/Cyberfusion	Each transmission or receipt of customer data by FDR via CPU-to-CPU using Network Data Mover (NDM), or the CyberFusion product.		/ Transmission
5125		RJE/NDM-CREDIT CARD APPS	This element identifies the charge for each transmission of credit card application data to you or receipt of credit card application data from you by First Data via CPU-to-CPU using remote job entry (RJE) or network data mover (NDM).		/ Transmission
5126		RJE/NDM-COMMON AUTH FILES	This element identifies the charge for each transmission of common authorization data to you or receipt of common authorization data from you by First Data via CPU-to-CPU using remote job entry (RJE) or network data mover (NDM).		/ Transmission
5127		RJE/NDM-AAA FILES	Each transmitting or receipt of Customer’s AAA data by FDR via a central processing unit to central processing unit transmission via Remote Job Entry (RJE)/Network Data Mover (NDM).		/Transmission
5321		COMPUTER LETTER SET-UPS — LOGOS	This element identifies the charge for each addition, deletion, or change of a digitized logo on a letter completed by First Data on your behalf.		/half hour
5322		COMPUTER LETTER SET-UPS — SIGNATURES	This element identifies the charge for each addition, deletion, or change of a digitized signature on a letter completed by First Data on your behalf.		/half hour
5323		LETTER — INSERT	Each inserting of advertising or other item of information not contained on a Letter, including but not limited to generic reply envelopes, into a windowed envelope containing a Letter.		/insert
5324		LETTER — SET-UP, REVISION OR DELETION	Each addition, deletion or change, performed by FDR on behalf of Customer, of a Customer’s Letter format or inputs including but not limited to digitized signatures and logos of Customer.		/half hour
5397		DISKETTES	This element identifies the charge for First Data to receive and handle data on diskette, sent by you or a		/ Diskette

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

33

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			third party acting on your behalf. It also identifies the charge for each time First Data forwards a diskette via mail or courier to you or a third party you designate.
5399		TAPE HANDLING-IN	This element identifies the charge for each receipt by First Data of data on magnetic tape from you or a third party vendor.		/ Tape
5400		TAPE HANDLING-OUT	This element identifies the charge for each time First Data forwards data on magnetic tape via courier or mail to you or a third party vendor you designate.		/ Tape
5401		TAPE HANDLING REQ-OUT	This element identifies the charge for each time First Data forwards magnetic tape data that is created by First Data outside of production. The magnetic tape data is sent to you, or a third party vendor you designate, via courier or mail.		/ Tape
5414		IRS 1099C	This element identifies the charge for each Internal Revenue Service (IRS) Form 1099-C prepared by the First Data System. The charge is based on your Report Record File (which addresses cardholder discharge of debt), and is printed and mailed to your cardholders. This service includes creating a tape for your use in reporting cardholder information to the IRS.		/unit
5420		MERCHANT COMPUTER LETTER	Each Letter to a Merchant of Customer prepared by FDR’s computer at the request of Customer based upon Customer’s Product Control File or CRT entry requests made by employees of Customer. Each such Letter shall have on-line composition and editorial features and the option of multiple page letter generation. This service includes any preparation required for delivery.		/letter
5421		MERCHANT COMPUTER LETTER — INSERT	Each inserting of advertising or other item of information not contained on a Merchant Computer Letter, including but not limited to generic reply envelopes, into a windowed envelope containing a Merchant Computer Letter.		/insert
5422		MERCHANT COMPUTER LETTER — ADDITIONAL PAGE	Each printed output on the reverse side of a Merchant Computer Letter (duplex printing) or each side of each sheet of 8 1/2” by 11” 24 lb. bond stock accompanying a Merchant Computer Letter.		/page
5464		CIS EXTENDED SERVICE	An enhancement to the standard CIS Services which provides access to Customer Inquiry System during hours of the week in which the CIS is not otherwise available for access.		/statement stored
5608		COMMERCIAL SMARTDATA SUPPORT	FDR shall provide Customer with daily file transmission and/or downloading services in connection with its support of MasterCard’s SmartData product. Such files shall contain transaction information, account balances, non-monetary changes and company specific information, such as reporting levels. The applicable information shall be transmitted to the association or downloaded by Customer for transmission by Customer to the association, as applicable. The service is billed to Customer monthly		/ Monthly Fee

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

34

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			based upon the applicable number of association products (SmartData and/or VISA’s Infospan product) Customer is then currently utilizing
5709		DISPUTE DOCUMENTATION SENDING	This element identifies the charge for Image Services outsourced to FDR. FDR will electronically route dispute documentation on behalf of issuers and acquirers. FDR will send documentation using the Ease Image System which interfaces with the MasterCom®, VisaNet® Copy Request & Fulfillment Service (VCRFS), and Visa® Resolve systems. Customer is charged for each item that is sent on its behalf.		/Chargeback Record
5710		DISPUTE DOCUMENTATION RECEIVING	This element identifies the charge for Image Services outsourced to FDR. FDR will electronically route dispute documentation on behalf of issuers and acquirers. FDR will receive documentation using the Ease Image System which interfaces with the MasterCom, VisaNet Copy Request & Fulfillment Service (VCRFS), and Visa Resolve systems. Customer is charged for each page of documentation that is received on its behalf.		/Page
5734		CASE FILINGS	This element identifies the charge for each case where FDR is providing MasterCom® arbitration, pre-compliance, and compliance case filing services through the MasterCom image system, or Visa® arbitration and compliance case filing services through Visa Resolve Online. This service includes sending documentation electronically through MasterCom® or Visa® Resolve Online for those issuers and acquirers who wish to file a case with MasterCard or Visa. The service also includes receiving documentation electronically through MasterCom® or Visa® Resolve Online for those issuers and acquirers who have a case being filed against them. During both the sending and receiving process, FDR will provide notification to its clients of case rulings as MasterCard or Visa communicates them to FDR.		/unit
5774		MERCHANT CLIENT WORKSTATION TRANSACTION	This element identifies the charge for each view and/or update transaction completed by a user into the Merchant Online Systems using the internet.		/unit
5777		MERCHANT LETTER PERFORATIONS	This element identifies the charge for each merchant letter perforated during processing at your request.		/unit
5781		REAL TIME MERCHANT FRAUD EXCEPTIONS	Customer may monitor a Merchant’s activity prior to the processing of tickets and suspend batches of tickets from processing and delay or delete the monetary settlement of known fraudulent activity.		/number of daily transactions suspended within the queue
5787		SUMMARY CD-ROM	Information collected and placed on a summary CD-ROM. Information collected includes any of the following: Cardholder statements, Enterprise statements, Merchant statements or Report information.		/ Summary CD
5792		ENTERPRISE	This element identifies the charge for Enterprise		/ Page

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

35

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
			STATEMENTS CD-ROM	statements processed and placed on CD-ROM for you for archival purposes.
	5794		STATEMENT PULLS	Each statement pulled by Digital-ROM Services with a statement date within the last six months.		/ Page Pulled
	5795		STATEMENT PULLS OVER 6 MONTHS	Each statement pulled by Digital-ROM Services with a statement date over six months old.		/ Page Pulled
	5797		EASE IMAGE	Each document image which is sent or received by Customer utilizing FDR’s Ease Image system. Ease Image is an internet based dispute documentation routing product which interfaces with the MasterCom, VisaNet Copy Request & Fulfillment Service (VCRFS), Visa Resolve and FDR mainframe systems. The product supports the sending and receiving of dispute related documentation, such as retrieval fulfillments and chargeback, pre-arbitration and pre-compliance documentation.		/ Image
	5811		TERMINATED PROGRAM STORAGE	This element identifies the monthly charge for storing rewards program account records that meet all of the following billing criteria. The program’s TERM PROG RETENT MONTHS parameter is set to a number of months greater than three. The program account record has been terminated for a number of months equal to or greater than this program parameter setting. The program is not part of the account’s current strategy.		/unit
	6500		ANNUAL ACTIVITY SUMMARY	Each annual summarization of activity associated with a Transaction Card issued by Customer.		/summary
	6501		ANNUAL ACTIVITY SUMMARY DETAIL STORAGE	Each Cardholder Account for which annual activity summary detail is stored in an electronic format.		/account
	6575		HISTORICAL ADDRESSES ON FILE	This element identifies the monthly charge for each address record stored in the Address History table on the FDR system.		/unit
	6601		ARU AUTHORIZATION—  LOCAL LINE INQUIRY	Each audio response unit (ARU) authorization service provided to a Merchant of Customer by the use of a touch-tone telephone and local line telecommunication services. Customer shall pay FDR for each instance during which FDR has electronic contact with a Merchant of Customer and receives the Merchant number. In addition, if an audio response unit authorization inquiry results in a voice inquiry, Merchant request for assistance or a security action, Customer will pay FDR for the audio response unit authorization and the appropriate voice and/or security action charge as provided in this Agreement. If a Merchant of Customer attempts to use its normal line to obtain an authorization and the Merchant is unable to use such line and uses another line, Customer shall pay FDR at the rate charged for the line used by the Merchant. Local lines for authorization services are available in the cities listed on-line under a TC-400 transaction.		/inquiry

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

36

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
	6602		ARU AUTHORIZATION —  INTRASTATE WATS LINE INQUIRY	Each audio response unit (ARU) authorization service provided to a Merchant of Customer by the use of a touch-tone telephone and intrastate WATS line telecommunication services. Customer shall pay FDR for each instance during which FDR has electronic contact with a Merchant of Customer and receives the Merchant number. In addition, if an audio response unit authorization inquiry results in a voice inquiry, Merchant request for assistance or a security action, Customer will pay FDR for the audio response unit authorization and the appropriate voice and/or security action charge as provided in this Agreement. If a Merchant of Customer attempts to use its normal line to obtain an authorization and the Merchant is unable to use such line and uses another line, Customer shall pay FDR at the rate charged for the line used by the Merchant.		/inquiry
	6603		ARU AUTHORIZATION — INTERSTATE WATS LINE INQUIRY	Each audio response unit (ARU) authorization service provided to a Merchant of Customer by the use of a touch-tone telephone and interstate WATS line telecommunication services. Customer shall pay FDR for each instance during which FDR has electronic contact with a Merchant of Customer and receives the Merchant number. In addition, if an audio response unit authorization inquiry results in a voice inquiry, Merchant request for assistance or a security action, Customer will pay FDR for the audio response unit authorization and the appropriate voice and/or security action charge as provided in this Agreement. If a Merchant of Customer attempts to use its normal line to obtain an authorization and the Merchant is unable to use such line and uses another line, Customer shall pay FDR at the rate charged for the line used by the Merchant.		/inquiry
	6604		POS LOCAL LINE AUTHORIZATION INQUIRY	Each dial-up point-of-sale terminal inquiry serviced by FDR for Merchants of Customer by the use of a dial-up point-of-sale terminal and local line telecommunication services. Customer shall pay FDR for each instance during which FDR had electronic contact with a Merchant of Customer and receives the Merchant number. If a Merchant of Customer attempts to use its normal line to obtain an authorization and the Merchant is unable to use such line and uses another line, Customer shall pay FDR at the rate charged for the line used by the Merchant. Local lines for authorization services are available in the cities listed on-line under a TC-400 transaction.		/inquiry
	6605		POS INTRASTATE AUTHORIZATION INQUIRY	Each dial-up point-of-sale terminal inquiry serviced by FDR for Merchants of Customer by the use of a dial-up point-of-sale terminal and intrastate WATS line telecommunication services. Customer shall pay FDR for each instance during which FDR had electronic		/inquiry

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

37

						Price	Price Per Item
Elem #		[***]1	Item Name		Item Definition	[***]1	Description
					contact with a Merchant of Customer and receives the Merchant number. If a Merchant of Customer attempts to use its normal line to obtain an authorization and the Merchant is unable to use such line and uses another line, Customer shall pay FDR at the rate charged for the line used by the Merchant.
	6606			POS INTERSTATE AUTHORIZATION INQUIRY	Each dial-up point-of-sale terminal inquiry serviced by FDR for Merchants of Customer by the use of a dial-up point-of-sale terminal and interstate WATS line telecommunication services. Customer shall pay FDR for each instance during which FDR had electronic contact with a Merchant of Customer and receives the Merchant number. If a Merchant of Customer attempts to use its normal line to obtain an authorization and the Merchant is unable to use such line and uses another line, Customer shall pay FDR at the rate charged for the line used by the Merchant.		/inquiry
	6607			CPU AUTHORIZATION INQUIRY	Each authorization inquiry received in FDR protocol via a computer to computer (CPU-to-CPU) interface between FDR’s computer and the computer of Customer or Customer’s Merchant.		/inquiry
	6610			CPU LEASED LINE AUTHORIZATION INQUIRY	Each computer to computer authorization inquiry received from a Merchant of Customer via a leased line.		/inquiry
	6611			BATCH AUTHORIZATION INQUIRY	Each inquiry processed for Merchants of Customer and sent to FDR via magnetic tape, tape to tape transmission or remote job entry (RJE) transmission from Customer or Customer’s Merchant.		/inquiry
	6612			CPU AUTHORIZATION INQUIRY WITH PIN VERIFICATION	Each CPU Authorization Inquiry where the Cardholder’s Personal Identification Number (PIN) is verified during the authorization process.		/inquiry
	6615			CPU REMOTE LOCAL AUTHORIZATION INQUIRY	Each computer to computer authorization inquiry received from a Merchant of Customer via a CRT.		/inquiry
	6621			VOICE AUTHORIZATION INQUIRY	Each Merchant authorization request received by FDR through voice inquiries from Merchants of Customer, including collect calls, or via telegrams and telexes from countries outside of the United States.		/inquiry
	6622			INTRA SYSTEM-REG CHD	This element identifies the charge for each normal authorization performed when the cardholder and merchant are within the same system.		/Inquiry
	6623			INTRA SYSTEM- PIN/AUTH	This element identifies the charge for each PIN verification received by a merchant as part of the normal authorization, or as a separate PIN verification request, when the cardholder and merchant are within the same system.		/Inquiry
	6625			INTRA FDR-REG CHD	This element identifies the charge for normal, intra-FDR, authorization processing. Intra-FDR processing occurs when the cardholder and merchant are processed by different financial institutions within the First Data System.		/Inquiry

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

38

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
	6626		INTRA FDR-PIN/AUTH	This element identifies the charge for normal, intra-FDR, personal identification number (PIN) authorization processing. Intra-FDR processing occurs when the cardholder and merchant are processed by different financial institutions within the First Data System.		/Inquiry
	6628		INTERCHANGE-REG CHD	This element identifies the charge for processing incoming interchange authorization requests. Incoming interchange processing occurs when First Data processes for the cardholder, but not for the merchant.		/Inquiry
	6629		INTERCHANGE-PIN/AUTH	This element identifies the charge for processing normal, incoming interchange personal identification number (PIN) authorization requests. Incoming interchange processing occurs when First Data processes for the cardholder, but not for the merchant.		/Inquiry
	6632		REFERRAL	Each referral authorization message handled by FDR on behalf of Customer’s Merchant.		/referral
	7003		HOT CALL — LOST/STOLEN	Each Hot Call where the Cardholder Account is statused Lost or Stolen. FDR will instruct the Merchant to pick up the card and, at Customer’s option based upon predefined criteria, FDR shall investigate and dispatch the police to the Merchant location.		/call
	7004		HOT CALL — CARD PICKUP	Each Hot Call where the Cardholder Account is statused as credit related. FDR will instruct the Merchant to pick up the card.		/call
	7009		WARNING BULLETIN TRANSACTION — MANUAL ENTRY BY FDR	Each entry or change made to the MasterCard Warning Bulletin, MasterCard Authorization File or VISA Warning Bulletin by FDR personnel; the account listing and region(s) shall be as dictated by Customer.		/transaction
	7010		STATUS CODE CHANGE — MANUAL ENTRY BY FDR	A change by FDR personnel to the external status code or credit limit of a Cardholder Account of Customer made upon Customer’s request.		/transaction
	7011		PKI DIGITAL CERTIFICATE	This is a digital identity that is required to access FDR web based products.		/unit
	7013		HOT CALL — POSITIVE ID CHECK	Each Hot Call where an authorization attempt exceeds Customer’s predetermined parameters. The presenter of Customer’s card is checked for positive ID and the card is checked for counterfeiting. Positive ID checks can be initiated for: (i) excessive activity (number of transactions and/or dollar amount) per account per day, (ii) first use of a new or reissued card exceeding a specified amount, and/or (iii) excessive dollar amount for a single purchase as specified by Customer.		/call
	7014		HOT CALL — EXCESSIVE TRANS	Each Hot Call where an authorization attempt exceeds Customer’s predetermined parameters. The presenter of Customer’s card is checked for positive ID and the card is checked for counterfeiting. Positive ID checks can be initiated for: (i) excessive activity (number of transactions and/or dollar amount) per account per day, (ii) first use of a new or reissued card exceeding a specified amount, and/or (iii) excessive dollar amount for a single purchase as specified by Customer.		/call

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

39

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
	7015		HOT CALL — LOST/STOLEN	Each Hot Call where the Cardholder Account is statused Lost or Stolen. FDR will instruct the Merchant to pick up the card and, at Customer’s option based upon predefined criteria, FDR shall investigate and dispatch the police to the Merchant location.		/call
	7016		EMERGENCY SERVICE — TRANSACTION FEE	The fee charged for each instance in which a Cardholder of Customer utilizes the Emergency Services offered hereunder.		/transaction
	7018		EMERGENCY SERVICE — ONE-TIME START-UP FEE	Each Cardholder Account on File which is loaded to the FDR System in connection with the Emergency Service.		/Cardholder Account on File
	7020		CARDHOLDER EXCEPTION RESEARCH	FDR shall: (i) research Cardholder exception transactions on revoked, closed and charged-off accounts; (ii) initiate chargebacks in accordance with MasterCard and VISA rules and regulations; (iii) handle chargeback representments on reversed chargebacks, when notified by Customer; and (iv) deliver good faith letters to Merchant banks where applicable.		/transaction plus 6% of chargeback funds recovered by FDR
	7021		HOT CALL — CODE 10	Each Positive ID Check or other Hot Call in which the use of the Transaction Card is suspected of being fraudulent or counterfeit.		/call
	7022		HOT CALL — POSITIVE ID CHECK	Each Hot Call where an authorization attempt exceeds Customer’s predetermined parameters. The presenter of Customer’s card is checked for positive ID and the card is checked for counterfeiting. Positive ID checks can be initiated for: (i) excessive activity (number of transactions and/or dollar amount) per account per day, (ii) first use of a new or reissued card exceeding a specified amount, and/or (iii) excessive dollar amount for a single purchase as specified by Customer.		/call
	7030		AUTH TRACK ONE NAME EDIT	Each attempt to match the name presented on track 1 of the magnetic stripe on authorization requests from a certified merchant (POS entry mode 90) to the Cardholder Account records stored on the FDR System. Volumes: [***]		/Authorization attempt
	7031		EXCESSIVE TRANSACTION RESEARCH	Each Cardholder Account of Customer for which FDR personnel, in connection with Excessive Transaction Monitoring, research and verify transactions warranting further review, and if fraud is involved, the account will be statused.		/account
	7103		MERCHANT STATEMENT ONLINE	This element identifies the charge for each set of merchant statement summary and detail information about your merchant accounts that is stored on the First Data System that you can access using your terminals.		/unit

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

40

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				Online merchant statement information includes the information that appears on a merchant statement including, but not limited to, the following items. Account number, Address, Card and miscellaneous fees and discounts, Deposit amounts, Interchange fees, Monetary batches, Name, Statement date.
	7113		RAPID SERVICES - REROUTED TO CARDHOLDER	Each plastic which is able to be resent to the Cardholder at the Cardholder’s new address as a result of the RAPID Services.		/ Plastic
	7114		RAPID SERVICES - DESTROYED	Each plastic which is destroyed as a result of the RAPID Services.		/ Plastic
	7154		DECISIONQUEST STATEMENTS	The number of Accounts passed through the statement DecisionQuest decision engine. This fee includes the use of the GUI front-end to build offer items and the business rules for those offer items. Volumes: [***]		/ Decisioned Account
	7155		DECISIONQUEST PLASTICS	The number of Accounts passed through the plastic DecisionQuest decision engine. This fee includes the use of the GUI front-end to build offer items and the business rules for those offer items. Volumes: [***]		/ Account Processed
	7161		CRF STATEMENT PRODUCTION RESULTS	The number of mailed statement records on the Communication Results File (CRF.) The CRF record displays all items actually included in a mailed statement package. Volumes: [***]		/ Record
	7164		CRF STATEMENT DECISIONQUEST DECISIONING	This item counts the number of qualified statement records that came from the First Data DecisionQuest platform on the CRF. The S0 CRF record displays all items that qualified to be included in a statement package; however, not all items qualified are actually mailed due to weight and white space management.		/ account per segment
	7167		CRF STATEMENTS DMM DECISIONING	This item counts the number of qualified statement records that came from the First Data DMM platform on the CRF. The S1 CRF record displays all items that qualified to be included in a statement package; however, not all items qualified are actually mailed due to weight and white space management. Volumes: [***]		/ Record

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

41

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
	7179		ALA ELEMENTS / FORMULAS	The client is being billed for the addition of a new element or formula to ALA product. A decision element is a data field on the master file used to direct accounts to a specific process flow. A decision formula is a computation process in which the sum is used to direct the account to a specific process flow. * New Decision Element * New Formula		/install /install
	7184		RECOVERY 1 PROCESSING FEE	This element identifies the charge for monthly fees for using the Recovery 1 ® system, billed by the number of accounts on file, including the following: Activity for all the notes, Financial transactions posting to accounts in Recovery 1, Execution of Decision Master saves and Residency fees for accounts on file. Volumes: [***]		/ Recovery One Account
	7186		BACKERS, MESSAGE PAGE AND LETTERS	The charge for each overlay created by FDR on Customer’s behalf for use as a backer, message page or letter. This service includes an original proof, two proof revisions and a final proof to be approved by Customer to move information into production.		/ Overlay
	7187		CHECKS, COUPONS AND AD MESSAGES	This element identifies the charge for creating checks, coupons, and advertising messages used on statements. This service includes the production of proof copies, revisions, and all related activities to move information into production.		/unit
	7188		SCANNING OF LOGOS AND SIGNATURES	Each logo or signature image scanned and prepared for processing. This includes the creation of an original proof, one proof revision and a final proof for Customer approval.		/ Image Scanned
	7189		REVISIONS OF PAGE SEGMENTS OR OVERLAYS	This element identifies the charge for any revisions made to page segments or overlays beyond the revisions that are included in the package price. Revisions includes backer, message page, letter, check, coupon, ad message and logo, not just page segments or overlays.		/unit
	7190		EP DESIGN	This element identifies the charge for digitizing and printing company logos on Enterprise Presentation statements.		/unit
	7197		ENTERPRISE PRESENTATION CH STATEMENT-DUPLEX FIRST PAGE	Each first physical page of an Enterprise Presentation statement which is printed in duplex mode. Enterprise Presentation Cardholder Statement is each Cardholder Statement produced by FDR on behalf of Customer utilizing the Enterprise Presentation feature. Enterprise Presentation is the system which allows Customer the flexibility to electronically arrange the statement form		/ Duplex page

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

42

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				(including payment coupon placement), create and place logos and graphics and select from numerous font types and sizes on the Cardholder Statement. Customer understands and agrees that Enterprise Presentation Cardholder Statement data may only be stored for archival use on CD-ROM.
	7198		ENTERPRISE PRESENTATION CH STATEMENT-SIMPLEX SUBSEQUENT PAGE	Each one-side-printed page of a Cardholder statement produced by FDR using the Enterprise Presentation statement service. This charge is in addition to the charge for the first physical page of the statement, if applicable.		/ Print Page
	7199		ENTERPRISE PRESENTATION CH STATEMENT-DUPLEX SUBSEQUENT PAGE	Each physical page after the first physical page of an Enterprise Presentation statement which is printed in duplex mode.		/ Print Page
	7244		ODS SELECT TRANSACTIONS	This element identifies the charge for Open Data Streams read-only, view select transactions. Fees are calculated on a per transaction basis. Volumes: [***]		Transaction
	7248		CS VRU CALLS	This element identifies the charge for inbound telephone calls handled by a voice response unit (VRU).		/unit
	7260		ACCOUNT-LEVEL PROCESSING (ALP) — CARDHOLDER PRICING ACCOUNT ON FILE	Each account of a Cardholder of Customer using Account-Level Processing that remains on Customer’s masterfile on the last processing day of the calendar month as defined on the CD-121 Ledger Activity Report or the equivalent report. ALP Services-Cardholder Pricing allows Customer the ability to set, change and monitor pricing parameters (including but not limited to annual percentage rate, penalty fees, minimum payment calculations and annual charges) on a Cardholder Account automatically at the level of the individual Account based upon decision tables built by Customer.		/ Account Using Product
	7269		MC TAPTRANS RPS FORMAT	Each payment transaction created from the MasterCard Remote Payment and Presentment Service tape and posted to cardholder accounts by First Data.		/ Payment Transaction
	7276		NATIONAL CHANGE OF ADDRESS (NCOA) SYSTEM	The periodic updating of Customer’s Cardholder Account from the USPS National Change of Address file. The FDR System will, once every six (6) months, electronically update the addresses of all of Customer’s Cardholder Accounts using this information. At Customer’s option, FDR will either (i) provide Customer with reports from which Customer may enter the necessary non-monetary transactions to update

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

43

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				Customer’s Cardholder master files on the FDR System, or (ii) automatically generate and enter the necessary non-monetary transactions to update Customer’s Cardholder master files on the FDR System. Volumes: [***]		/ Unit
	7279		ACCOUNT LEVEL ACTION-ACCOUNTS REVIEWED	Each Cardholder Account on File reviewed in connection with Account Level Action (ALA). ALA allows Customer the ability to have a set of several non-monetary transactions automatically initiated at the level of the individual Cardholder Account based upon decision tables built by Customer. Volumes: [***]		/ Account Reviewed
	7281		ACCOUNT LEVEL ACTION-ACTION SET SELECTED	Each execution of a set of non-monetary transactions generated for a Cardholder Account in connection with an ALA account review. Volumes: [***]		/ Actions Taken
	7295		1-59 DAYS DELQ/FDR 30,60	This element identifies the charge for each delinquent/overlimit account billing, skiptracing, and related service performed by First Data on your behalf for overlimit accounts, delinquent billing accounts from 1-29 days delinquent, and delinquent billing accounts from 30-59 days delinquent (30 days delinquent/60 days delinquent on the First Data System).		/unit
	7320		DISASTER RCVR SUBSCRIPTION FEE	This element identifies the initial and monthly subscription fees associated with disaster recovery.		/month
	7321		DISASTER DECLARATION FEE	This element identifies the initial fee you are charged after a disaster has been declared.		/declaration
	7330		TRANSACTION LEVEL REWARDS (TLR) ONLY TRANSACTION	Each Cardholder initiated transaction (as indicated on the CD-864 Report or its equivalent), specifically targeted by transaction and Cardholder decision tables, and passed to the FDR rewards system for processing (transactions which have already been posted to a TLP Promotional Balance on File are excluded). Multiple targeted transactions may post to a single Cardholder Account in any one month.		/ Transaction
	7336		COMMERCIALVIEW SOFTWARE LICENSES	One-time fee for each user who is given access to the Infomaker® software.		/ User License
	7337		COMMERCIALVIEW ELEMENT STORAGE	This element identifies the charge for the number of CommercialView ™ accounts stored on the First Data		/unit

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

44

						Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1		Description
				System.
	7338		COMMERCIALVIEW USER IDS	This element identifies the charge for the number of CommercialView ™ user IDs stored on the First Data System. This element includes all IDs that have been created, but not deleted, and all IDs that have been deleted but have accessed the CommercialView system.			/unit
	7400		ONLINE REPORT PRINTING	This element identifies the charge for online report printing. This gives you the ability to transmit FDR ® reports that are available for viewing online from the Information Delivery Platform (IDP) to your printer or file. You will be billed for each report page transmitted to your printer or file.			/unit
	7407		PC REMOTE ACCESS SERVICE — MINUTES	Product by which Customer may access the FDR System via a personal computer at Customer’s office in order to allow employees of Customer to perform certain terminal functions, including but not limited to the accessing of Cardholder or Merchant Account data, the entry of information concerning Customer’s Accounts and the uploading/downloading of data regarding Customer’s Accounts. Volumes: [***]			/Minute per month
	7415		PC REMOTE ACCESS BBS SERVICES	This element identifies the charge for each upload or download of data using the PC Remote Access product. The upload/download is initiated using a personal computer located at your or your affiliate’s office.			/unit
	7416		PC REMOTE ACCESS — USER ID FEE	This element identifies the charge to maintain each PC remote access user ID (QID) that First Data assigns for your use.			/User ID
	7433		OARS 30 DAY VIEW	Each page of Information Delivery Platform (IDP) reports which is stored by FDR for on-line viewing and printing by Customer’s personnel. FDR shall make reports available for reviewing for the period of from four (4) days following daily cycle completion to either thirty (30), sixty (60), seventy five (75) or ninety (90) days following daily cycle completion, at Customer’s option. Customer, at its option, may elect to utilize either or both of the OARS Services and/or CD-ROM Services for the same IDP reports.			/ Page
	7434		OARS 60 DAY VIEW	Each page of Information Delivery Platform (IDP) reports which is stored by FDR for on-line viewing and printing by Customer’s personnel. FDR shall make reports available for reviewing for the period of from four (4) days following daily cycle completion to either thirty (30), sixty (60), seventy five (75) or ninety (90) days following daily cycle completion, at Customer’s option. Customer, at its option, may elect to utilize either or both of the OARS Services and/or CD-ROM Services for the same IDP reports.			/ Page
	7435		OARS 75 DAY VIEW	Each page of Information Delivery Platform (IDP) reports which is stored by FDR for on-line viewing and			/ Page

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

45

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				printing by Customer’s personnel. FDR shall make reports available for reviewing for the period of from four (4) days following daily cycle completion to either thirty (30), sixty (60), seventy five (75) or ninety (90) days following daily cycle completion, at Customer’s option. Customer, at its option, may elect to utilize either or both of the OARS Services and/or CD-ROM Services for the same IDP reports.
	7436		OARS 90 DAY VIEW	Each page of Information Delivery Platform (IDP) reports which is stored by FDR for on-line viewing and printing by Customer’s personnel. FDR shall make reports available for reviewing for the period of from four (4) days following daily cycle completion to either thirty (30), sixty (60), seventy five (75) or ninety (90) days following daily cycle completion, at Customer’s option. Customer, at its option, may elect to utilize either or both of the OARS Services and/or CD-ROM Services for the same IDP reports.		/ Page
	7437		OARS DEMANDVIEW PAGES-4 DAY VIEW	Each page of an Information Delivery Platform (IDP) report for which Customer requires on-line view access at a date subsequent to the date on which such IDP report would otherwise normally become unavailable for on-line viewing. Customer shall have the option to have a report restored for either four (4) days or thirty (30) days. The Report Restore feature may not be used for reports which are less than 4 days old, nor more than 180 days old.		/ Page
	7438		OARS DEMANDVIEW PAGES-30 DAY VIEW	Each page of an Information Delivery Platform (IDP) report for which Customer requires on-line view access at a date subsequent to the date on which such IDP report would otherwise normally become unavailable for on-line viewing. Customer shall have the option to have a report restored for either four (4) days or thirty (30) days. The Report Restore feature may not be used for reports which are less than 4 days old, nor more than 180 days old.		/ Page
	7455		EVOLVE-CUSTOMER SERVICE-GROSS ACTIVE FEE	The Customer Service Application will consist of a template of core customer service functions typically handled in an inbound customer service call center, including a graphical user interface (GUI), workflow engine, rules based decisioning and an ad hoc reporting tool. Use of the Customer Service Application will be billed based upon the number of Customer’s gross Active Accounts on file for the applicable month, subject to indicated limitations/exclusions. For purposes of the Customer Service Application, “Gross Active Accounts on File” shall mean those of Customer’s Cardholder Accounts which generated, during the applicable month, (I) a Cardholder statement (whether printed or otherwise), (ii) a Cardholder Monetary Transaction, or (iii) an authorization inquiry. Volumes:

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

46

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				[***]		/ Gross Active Account on File / Month
	7475		PREDICTIVE MODEL — EVENT MANAGER	Each numeric value which is created for a Cardholder Account of Customer processed through the Integrated Analytic (IAC) service platform with respect to any single Predictive Model implemented by FDR on behalf of Customer. Volumes: [***]		/ Score Posted
	7494		REPORT ORGANIZER AND WRITER (ROW) — IDP	The FDR System and services which allow Customer the ability to customize the presentation, on Customer’s screens, of selected information from Customer’s Information Delivery Platform (IDP) reports by the use of a graphical user interface. Entire reports or selected fields within reports may, using the FDR ROW Services, be exported to a database/analysis tool that can sort, graph, manipulate and/or export data to spreadsheets or other documents. In addition, repetitive applications may be scripted and automated for regular use. Volumes: [***]		Monthly Minimum / Page
TBD			EVOLVE CUST SERVICE — EXCESS CONCURRENT USERS	For each concurrent User of the Customer Service Application in excess of the allowed number during a calendar month. For purposes of the Customer Services Application, Concurrent Users shall mean the total peak number of users simultaneously signed on to the Customer Service Application at any time during the month. Any excess Concurrent User charge with respect to the Customer Service application will be billed at least one month in arrears.		/Concurrent users in excess of allowed number during month
	7498		EVOLVE COLLECTION—AVG ACCTS	The Collections Application consists of a customizable template of core collection service functions typically handled in a credit card collections operation, including, but not limited to (I) a primary composite screen with the ability to designate and systematically

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

47

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				note “template available” or “client customized” actions taken on an Account, (ii) secondary display screens that show such items as payment history, Cardholder history, calendar and statement information, and (iii) supervisory functions such as work/collector assignments and collector productivity. The Collections Application also includes a graphical user interface (GUI), workflow engine, rules based decisioning and an ad hoc reporting tool. With certain exceptions, the Collections Application includes “basic dialer interface” functionality with most major dialers. The Collections Application is billed based upon the Average Number of Accounts In Collections Application during the applicable month, subject to indicated limitations/exclusions. For purposes of this service, “Average Number of Accounts In Collections Application” means the sum of the total number of Cardholder Accounts resident in the Evolve System - Collections Application for each business day of the month divided by the number of business days in such month. Volumes: [***]		/ Average number of accounts in Collections Application / Month
	7519		EVOLVE COLLECTIONS — EXCESS CONCURRENT USERS	For each concurrent User of the Collections Application in excess of the allowed number during a calendar month. For purposes of the Collections Application, Concurrent Users shall mean the total peak number of users simultaneously signed on to the Collections Application at any time during the month. Any excess Concurrent User charge with respect to the Collections application will be billed at least one month in arrears.		/Concurrent users in excess of allowed number during month
	7520		COMPUTER LETTER BASE COMPOSITION	This element identifies the charge for creating letterhead for 81/2x11-inch paper. The letterhead includes graphic components such as logos, text composition, and graphic art. This element includes a maximum of one hour of composition time, two paper proofs, and one negative.		/ Unit
	7521		HOURLY COMPOSITION	Hourly pre-press charge for FDR to complete Customer requested edits and revisions.		/ Hour
	7522		IMAGE COMPOSITION RUSH	Each image requested on a priority (rush) basis that does not meet the following standard FDR delivery timeframes: Eight days from the time Image Composition receives the request to completion of the first set of proofs, Three days for changes after the first set of proofs have been created, Three days for creating negatives. Turn around times for laser-printed		/ Request

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

48

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				products/services from Advanced Function Presentation are as follows. Fifteen days lead time from submission of request form, Three days for revision
	7622		CARD ACTIVATION LABELING — GENERAL USE	Each affixation of a sticker to each embossed plastic identified by Customer.		/ Plastic
	7623		CARD ACTIVATION LABELING — SELECTIVE USE	Each affixation of a sticker to each embossed plastic identified by Customer.		/plastic
	7633		PLASTICARD BULK PACKAGING — 3 DIGIT SORT	The separation from the production run of accounts from individual systems, principals, agents or grouping of zip codes. Includes sorting to a 3-digit level.		/carrier
	7634		PLASTICARD BULK PACKAGING — 5 DIGIT SORT	The separation from the production run of accounts from individual systems, principals, agents or grouping of zip codes. Includes sorting to a 5-digit level.		/carrier
	7638		PLASTICARD FREE FORM TEXT	Each mailer containing up to 25 customized alpha numeric printed characters of free form text. The text will print on a predesigned area of a generic mailer.		/mailer
	7639		PLASTICARD IMAGE SCANNING	Each logo or other image stored by FDR as a digitized image on a data base for up to five (5) years.		/ Image
	7647		POSTAL DISCOUNT PROCESSING FEE — PLASTICARD	Postage pre-sort discount generating services for Customer’s PlastiCard Mailers.		/mailer
	7663		PLASTICARD DES PIN GENERATION	Each Data Encryption System (DES) Personal Identification Number (PIN) created by the FDR System in connection with a plastic card produced by FDR on behalf of Customer.		/ DES PIN generated
	7667		PLASTICARD PHOTOCARD PHOTO TRANSFER (2” X 2”)	Each plastic for which FDR provides affixation of a digitized photographic image (2” x 2”) to a plastic Transaction Card. Volumes: [***]		/ Image Transfer
	7668		PLASTICARD PHOTOCARD PHOTO SCANNING AND DIGITIZATION (2” X 2”)	Each image for which FDR (i) scans a photograph (2” x 2”), (ii) cleans/crops the photograph and (iii) stores such photograph as a digitized image on a data base for up to five (5) years. Volumes: [***]		/ Photo Scanned
	7669		PLASTICARD PHOTOCARD PHOTO IMAGE HANDLING AND MERGE (2” X 2”)	Each plastic for which FDR provides handling and merging of images (2” x 2”) with corresponding data to create an output file. Volumes: [***]		/ Image Merged
	7670		MAILER PRODUCTION	The edit functions performed on a PIN/Post Mailer		/ Mailer

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

49

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
			EDITS	before printing. The service includes Mailer method changes, Mailer address changes, Mailer mail date changes and Mailer deletions.
	7677		PLASTICARD LASER PIN/POST MAILER PROCESSING	Each PIN/POST mailer or acknowledgement mailer created by laser printing or other similar technology and which is pressure sealed in connection with a Cardholder of the Customer.		/ Mailer
	7678		PLASTICARD SAME DAY EMBOSSINGTM (PSD)	Each embossed Cardholder plastic where FDR mails or delivers the plastic to a courier during the same day of Customer’s request via an on-line screen. The service includes standard embossing, carrier printing, inserting and other services required to prepare the plastic for delivery. Requests for PlastiCard Same Day EmbossingTM must be received by 1400 hours Central Time Zone.		/ Plastic
	7682		PLASTICARD ENTERPRISE PRES. ADD’L PAGE	The process of printing personalized information onto one additional document other than the card carrier and matching this document to a corresponding personalized document for insertion into an envelope.		/ Add’l Page
	7684		PLASTICARD SAMPLE PLASTICS	Each physical plastic card, either blank or embossed with sample information to resemble a real plastic, which is provided to an Issuer. Each such plastic shall be intentionally damaged or voided by FDR to prevent fraudulent use.		/plastic
	7689		PLASTICARD TEMPLATE CREATION	Labor required of FDR to create, paint or revise an overlay template used to print onto a page for a card carrier and/or mailer.		/ Half hour
	7702		PLASTICARD OBSOLETE PLASTIC FEE	Monthly charge for the storage, inventorying and physical management of Customer’s plastics that remain unused after six (6) months from the date of receipt.		/ Fee per Plastic per Month
	7703		PLASTICARD OBSOLETE PAPER FEE	Monthly charge for the storage, inventorying and physical management of Customer’s plasticard service related paper materials that remain unused after six (6) months from the date of receipt.		/ Per Piece per Month
	7705		PLASTICARD ENTERPRISE PRES. CHECK/COUPON	Managing a plastic-related document that contains feature(s), such as check information or check security/authenticity features, that require heightened accountability or security due to the nature of the feature(s). Volumes: [***]		/ Number of checks that accompany a plastic
	7706		PLASTICARD OUTPUT PAPER STORAGE FEE	The charge for storing, conducting inventory, and physically managing paper materials from an individual shipment that have not been exhausted within six months of the date the shipment was received at FDR. These charges will be assessed each month until the		/ Paper Piece

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

50

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				inventory for the shipment is consumed, destroyed, or shipped to a destination of the customer’s choice.
	7740		PLASTICARD PLASTICS OVERSTOCK FEE	Monthly charge for storage, inventorying, and physical management of plastics from an individual shipment that have not been exhausted in a six-month timeframe. Overstock charges will continue each month until the inventory for the shipment is consumed, destroyed, or shipped to a destination you choose.		/ Plastic
	7741		PLASTICARD PAPER OVERSTOCK FEE	Monthly charge for the storage, inventorying, and physical management of Customer’s plastics from an individual shipment which have not been exhausted within six(6) months from the date of receipt.		/ Paper Piece
	7742		OUTPUT PAPER OVERSTOCK FEE	The charge for storing, conducting inventory, and physically managing paper materials from an individual shipment that have not been exhausted within six months of the date the shipment was received at FDR. These charges will be assessed each month until the inventory for the shipment is consumed, destroyed, or shipped to a destination you choose.		/ Per Piece per Month
	7795		DIGITAL CARD PRINT IMAGING SERVICES	This Element identifies each half hour of labor required of FDR to create, digitize, or revise an image or logo used to print onto a plastic.		/ Half Hour
	7796		DIGITAL CARD PRINTING IMAGE APPLICATION	This Element identifies the application of each digitally prepared image edge-to-edge on a transaction card.		/ Image Application
	7797		DIGITAL CARD PRINT — CARDHOLDER LEVEL	This element identifies the application of each cardholder level digitally prepared image edge-to-edge on a transaction card.		/ Unit
	7804		Print and Mail Prep. 11” Duplex — Addl. Page Cont.	This element identifies the charge for each 11” duplex additional page printed and prepared for mailing. The charge is applicable to each page in addition to the first physical page and is incremental to the charge for the Cont. Page 1 Duplex 11” Print.		/ Add’l page
	7813		Print 11” Duplex - Page 1 Cont.	This element identifies the charge for each 11” duplex document page 1 printed. The document printing service includes all the processes necessary to laser print a document on a continuous form.		/ Page One
	7815		Insert Continuous Form	Each insert of advertising or other item of information not contained on a document inserted into an envelope containing a continuous form document. Excluding the first Return Envelope.		/ Insert
	7841		MAIL PREP 11” — PAGE 1 CONT	This element identifies the charge for each 11” document page 1 prepared for mailing. The mail preparation service includes all the processes necessary to prepare the cont. form document for delivery.		/ Page One
	7919		FRAUD MANAGEMENT/FRAUD DETECTION (FALCON) SERVICES — MONTHLY GROSS	Each Cardholder Account processed through the Falcon system which Cardholder Account had a balance or any monetary posting for the month billed, as determined by FDR for Customer.		/ Gross Active Account

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

51

					Price	Price Per
Elem #		[***]1	Item Name	Item Definition	[***]1	Item Description
			ACTIVE CREDIT CARD ACCOUNT
	7923		CARD ACTIVATION— ANI CALL-FDR	Each automatic initiation of an on-line transaction in conjunction with an Automatic Number Identification (ANI) process via an audio response unit (ARU), changing the status of a Cardholder Account associated with certain newly issued or reissued plastics (as determined by Customer), from “inactive” (under certain parameters) to “active” for transaction authorization purposes.		/ Transaction
	7926		NUMBER OF TRAN RECORDS LOGGED	The charge for Footprints, an internal fraud detection system that allows Customer to monitor transactions that employees of Customer enter on Cardholder Accounts. This service enables Customer to monitor internal customer service representatives’ (CSRs) work activity. Customer’s charge is based on the number of transactions tracked during the month. Volumes: [***]		/ Transaction
	7928		EMERGENCY CASH/CARD REQUESTED-FDR	Each temporary Cardholder Account plastic replacement or emergency cash disbursement authorized on Customer’s behalf by FDR’s Fraud Management Services.		/ Request
	7934		RETURN ACCOUNT PROCESSING SERVICE	The processing of mailed plastics returned by the United States Postal Service due to undeliverable address. Each such plastic shall be destroyed by FDR and reported to Customer.		/ Returned Plastic
	7936		CARD ACTIVATION — ACCOUNT INFORMATION UPDATE	Each update of Customer’s Cardholder masterfile information in connection with the activation of the Cardholder Account by the Cardholder.		/account
	7943		NRI RETURNED RECORDS IN QUEUE	Each record of a Cardholder Account of Customer which is sent to MasterCard and VISA as Not Received as Issued (NRI); such accounts are placed in a queue for review and disposition by Customer.		/ Record
	7947		FRAUD RETURN RECORDS IN FAR QUEUE	Each record of a fraudulent Cardholder Account of Customer which is rejected and returned by MasterCard; such accounts are placed in the FDR Fraud Account Returns (“FAR”) queue for review and disposition by Customer.		/ Record
	7970		RAPID /ATM DESTROY	This element identifies the charge for destroying PIN mailers and ATM cards returned by the U.S. Postal Service that are serviced by First Data’s Returned Account Plastics Immediately Delivered (RAPID) department. First Data will destroy plastics and mailers that are returned due to undeliverable addresses.		/unit
	7971		FRAUD PREDICTOR PLUS — CREDIT	Each cardholder account processed through the Fraud Predictor Plus functionality of the FDR Falcon System.		/ Gross Active Account
	7980		FRAUD	Any Account routed to the FDR Falcon predictive		/ Account

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

52

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
			MANAGEMENT/ FRAUD DETECTION (FALCON) SERVICES — CALL PROCESSING - PREDICTIVE DIALER, DOMESTIC)	dialer and called using the predictive dialer which results in any one or more of the following activities in a single 48-hour period: outgoing/incoming Cardholder phone calls with a maximum of 2 attempts within any single 48-hour period, CIS Memos, Letter generation or Account statusing.		worked
	7982		FRAUD MANAGEMENT/FRAUD DETECTION (FALCON) SERVICES — CALL PROCESSING - MANUAL REVIEW/ DIALING)	Any Cardholder Account routed to the FDR Fraud Detection WorkCenter and called using a manual dialing process that results in any one or more of the following activities in a single 48-hour period: outgoing/incoming Cardholder phone calls with a maximum of 2 attempts within any single 48-hour period, CIS Memos, Letter generation or Account statusing.		/ Account reviewed
	8106		SIFT USER FEE	This element identifies the monthly fee assessed to Customer for each individual SIFT (Secure Internet File Transmission) user ID provided to Customer by FDR.		/ Unit
	8303		DAILY ALA FILE GENERATION	A file is generated using the Daily ALA File Generation option. Volumes: [***]		/unit
	8304		WEEKLY ALA FILE GENERATION	A file is generated using the Weekly ALA File Generation option. Volumes: [***]		/unit
	8305		MONTHLY ALA FILE GENERATION	A file is generated using the Monthly ALA File Generation option. Volumes: [***]		/unit
	8310		STATEMENT-CHECKS AND COUPONS CREATION	The charge for data processing, decision processing, and processing updates of checks and coupons on statements. Volumes: [***]		/ Statement using the product
	8320		MLP AUDIT STORAGE	This element identifies the charge for each Method Level Processing SM (MLP-SM ) audit history record		/audit record in excess of six

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

53

					Price	Price Per Item
Elem #		[***]1	Item Name	Item Definition	[***]1	Description
				retained on the System greater than six.
	8324		MLP METHOD OVERRIDE	Each group of ‘like’ pricing parameters (commonly referred to as a ‘pricing method’) within Customer’s Product Control File (‘PCF’) settings which is placed upon a Cardholder Account of Customer in the MLP subsystem of the FDR System, and which supersedes the overall pricing strategy previously assigned to the Cardholder Account by Customer.		/ Method override per account
	8518		ACS-LETTER TO DATA	Each account contained in a Letters-to-Data file, included based on Customer’s Adaptive Control actions.		/ Record on the file
	8523		PROFITSIGHT - ACTIVE ACCOUNTS	A neutral network based statistical system combined with FDR system technology and complimentary products, e.g., ACS, TLP, ALP designed to predict the future profitability of an existing account by analyzing the past transaction behavior of the cardholder. It consists of a suite of inter-related models that forecasts individual components of cardholder profitability including credit risk, attrition risk and revenue potential. Billing is based on the number of transactions scored, such as auths, payments, payment reversals, new accounts, account transfers, and cycle cuts.		/unit
	8556		PROFITNET BENCHMARKING	ProfitNet is a joint product offering by FDR and Argus Information and Advisory Services Inc. The product is a Credit Card Payment Study or (CCPS).   CCPS is a study which analyzes credit card profitability by means of a quarterly benchmarking report (“CCPS Report(s)”), with follow-up analysis and recommendations (collectively “CCPS Services”) The CCPS Services include: (A) quarterly benchmarks of customer behavior, risk and profitability; (B) an ongoing panel that gives detailed point-in-time and trended information regarding customer behavior; (C) primary research surveys focused specifically on activation, utilization, and product development opportunities; (D) recommendations tailored to each End Client; and (E) modification and enhancements to such services from time to time.		/Portfolio per month
	9950		PLASTICARD ULTRAFORMS	Each laser printed card carrier or form to which a plastic card is affixed by adhesive and which card carrier or form contains personalized information regarding the Cardholder (including but not limited to name, address, Account number and credit limits) using the FDR Ultraform product.		/ Carrier
	9951		PLASTICARD ENT PRES CARD CARRIER — HALF BOWE	Each simplex or duplex laser printed (or similar technology) card carrier (to which a plastic card is affixed by adhesive) sent by FDR on behalf of Customer to a Cardholder which card carrier contains personalized information created by the use of electronic documents or “templates” regarding the Cardholder (including but not limited to name, address,		/ Carrier

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

54

				Price	Price Per Item
Elem #	[***]1	Item Name	Item Definition	[***]1	Description
			account number and credit limits)

“X” indicates those services in the schedule above which are [****].

“P” indicates those production services in the schedule above for which [***].

"*” indicates those services in the schedule above for which [***].

¹ The information contained in this column of Attachment 1 — Exhibit A is confidential and has been omitted pursuant to 17 CFR 240-24b-2; such confidential portions have been filed separately with the Commission pursuant to a Confidential Treatment Application filed with the Commission.

55

ATTACHMENT II
EXHIBIT C

FDR Performance Standards for Customer

Category I Performance Standards

			Financial
	Measurement	Standard	Incentive	Remedy	Termination
1.	Cardholder Statements*	Cardholder Statements will be Accurate** and will be mailed by the end of the second business day following cycle date for 100% of each month’s cardholder statement volume. Hold and Rerun situations primarily caused by Customer will be excluded from this measurement.	[***]	[***]	[***]
2.	Embossing*	Embossed plastics will be Accurate** and will be mailed by the end of the second business day following cycle date for 100% of each month’s embossed plastic orders. Hold and Rerun situations primarily caused by Customer will be excluded from this measurement. This measurement does not include MINT mail time.	[***]	[***]	[***]
3.	Implementations	File, Screen and Report format changes for functionality utilized by Customer or functionality Customer plans to utilize (as indicated on the then current product or project logs) (including standard file layouts) will be communicated in writing to Customer no less than thirty (30) days prior to implementation.	[***]	[***]	[***]
4.	Authorizations	The authorization systems which consists of the acquiring and issuing regions, will be available via primary, backup or tertiary to respond to inquiry 24 hours per day, 7 days per week 99.9% of the total minutes in each month	[***]	[***]	[***]

56

			Financial
	Measurement	Standard	Incentive	Remedy	Termination
5.	Computer Availability	The FDR system will be available for Alpha Look-Up, Balance and Status, Chargebacks, CIS, Non-Monetaries, Collections, Falcon Fraud, Memos, Monetaries, On-Line Letters, Security, Settlement, VRU inquiries, ODS and PCF 24 hours a day, 99. 8% of the time each month.	[***]	[***]	[***]
6.	Outgoing Transmissions Collections ACCD (CCOD0025)	The collection file will be available for transmission by 0630 ETZ each cycle date 100% of the time each month.	[***]	[***]	[***]
7.	Evolve Customer Service On-line Availability	Evolve Customer Service On-lines will be available 24 hours a day, 99% of the time 24 hours a day.	[***]	[***]	[***]
8.	Evolve Collections On-line Availability	Evolve Collections On-lines will be available 24 hours a day, 99% of the time 24 hours a day.	[***]	[***]	[***]

* Any statementing and/or plastic actions (inserts, messages, PCF) received from Customer after established monthly time frames which result in Holds/Reruns will not be considered FDR failures.

**For the Cardholder Statements and Letters Performance Standards, “Accurate” means that [***] of the items are correctly processed and mailed with inserts, envelopes and forms. For the Embossing Performance Standard, “Accurate” means that for [***] of the embossed cards the information from the cardholder system is correctly embossed on the plastic, the card carrier is printed on the correct form and includes the correct inserts and envelopes. Performance will be based upon feedback from Customer and periodic audit and quality checks performed by FDR.

FDR Performance Standards for Advanta Business Cards
Category II Performance Standards

			Financial
	Measurement	Standard	Incentive	Remedy	Termination
1.	Letters	Computer Letters will be Accurate** and will be mailed by the end of the third business day for 100% of each month’s letter volume. Hold and Rerun situations primarily caused by Customer will be excluded from this measurement.	[***]	[***]	[***]
2.	New Accounts	All new accounts received via file transmission prior to 1800 ETZ on a cycle date will be processed within one cycle date of files receipt provided tape/transmission successfully passes all front-end processing edits.	[***]	[***]	[***]

57

			Financial
	Measurement	Standard	Incentive	Remedy	Termination
3.	On-Line Reports — Daily	95% of the daily critical on-line reports will be available for on-line viewing by the target time as noted in the table below. 100% of the daily critical on-line reports will be available for on-line viewing by the target time as noted in the table below.	[***]	[***]	[***]
		*List of Critical On-Line reports attached.
	On-Line Reports — Monthly	100% of the monthly on-line reports included in the below table will be available for on-line viewing by the end of the fifth Business Day following month end.	[***]	[***]	[***]
4.	CD-ROM	The monthly reports and statements will be mailed by the fifth business day following calendar month-end 100% of the time each month.	[***]	[***]	[***]
5.	Custom Interfaces	All custom interfaces will be Accurate** and will be available to Advanta 100% of the time as follows:
	Cardholder Masterfile (CCHM3011)	by end of fifth business day following month-end each month	[***]	[***]	[***]
	MSR (CCHD3066)	95% by 0800 CTZ each business day excluding FDR holidays	[***]	[***]	[***]
	PCF File (CCHM3077)	by end of fifth business day following month-end each month	[***]	[***]	[***]

58

			Financial
	Measurement	Standard	Incentive	Remedy	Termination
	Company Masterfile	by end of fifth business day following month-end each month	[***]	[***]	[***]
	Convenience Checks	by end of second business day following written request	[***]	[***]	[***]
6.	Embossing — PSD Requests (A)/Rush Requests (A)	Cardholder orders entered by 2 p.m. CTZ via the PSD transaction, will be mailed the same day entered for 99% of the month’s volume	[***]	[***]	[***]
		Cardholder embossing orders entered electronically will be mailed within one business day following cycle for 99% of each month’s volume and within two business days following cycle for 100% of each month’s volumes.	[***]	[***]	[***]
7.	Embossing — Reissues (A)	Cardholder reissued account plastics produced as a result of FDR’s monthly reissue programs will be mailed within eight (8) business days after the automatic purge date established by Advanta on the PCF for 100% of cardholder plastics scheduled for reissue each month	[***]	[***]	[***]

**For the Customer Interfaces Performance Standard, “Accurate” means that the file is [***].

[***] are excluded from this standard.

59

DAILY ON-LINE REPORT LIST*

Report	Report Name	95% by Target Time	100% by Target Time
BASEIIB	Visa Interchange Incoming	06:00	08:00
BD-021	Dept Code Table Change Rpt	06:00	08:00
CD-007	Annual Home Equity Corrections Rpt	Noon	14:00
CD-011	Non-monetary Entry List	06:00	08:00
CD-025	INET In Control Report	18:00	20:00
CD-028	Tape Transmittal Accepted	00:00	02:00
CD-029	Tape Transmittal Rejected	00:00	02:00
CD-031	Authorization Log	10:00	Noon
CD-033	INET Misc Transaction Journal	18:00	20:00
CD-033	Direct Settle Report	18:00	20:00
CD-043	Batch Auth requests Not Authorized	00:00	02:00
CD-051	Non-monetary Journal	10:00	Noon
CD-052	Unposted Non Mon Items	10:00	Noon
CD-053	Unposted Monetary Items Report	06:00	08:00
CD-055	Auto Unposted Mon Items Report	06:00	08:00
CD-061	New Accounts Journal	06:00	08:00
CD-063	Daily Embossing	10:00	Noon
CD-072	Report of Adjustments	06:00	08:00
CD-075	Disputed Amounts	06:00	08:00
CD-083	Daily Interchange Log	06:00	08:00
CD-084	Debit Card Transaction Rpt	00:00	02:00
CD-107	Authorization Exception Rpt	06:00	08:00
CD-108	Authorization Exception Rpt	06:00	08:00
CD-109	Authorization Exception Rpt	06:00	08:00
CD-110	Authorization Exception Rpt	06:00	08:00
CD-111	Cardholder Exceptions Rpt -Part1	10:00	Noon
CD-114	Cardholder Exceptions Rpt -Part4	10:00	Noon
CD-115	Cardholder Exceptions Rpt -Part5	10:00	Noon
CD-120	Ledger Activity Report	Noon	18:00
CD-121	Ledger Activity Report	Noon	18:00
CD-124	Daily Portfolio Activity Summary	06:00	08:00
CD-128	Daily Portfolio Activity Summary (sys)	06:00	08:00
CD-132	Daily Charge Off Activity	Noon	14:00
CD-143	Security Detail Update List	06:00	08:00

60

Report	Report Name	95% by Target Time	100% by Target Time
CD-159	Daily Letters Report	14:00	16:00
CD-179	Chargeoff Activity by Reason Code	Noon	14:00
CD-190	Collector Productivity by Hour	06:00	08:00
CD-192	Daily Productivity Report	10:00	Noon
CD-195	Collector Accounts by Cycle	10:00	Noon
CD-204	Collector Report Card	10:00	Noon
CD-216	Retrieval Request Summary List	06:00	08:00
CD-244	Card Recovery Bulletin Report	18:00	20:00
CD-260	Transaction Journal	00:00	02:00
CD-261	Management Summary	00:00	02:00
CD-271	Credit Limit Change Report	06:00	08:00
CD-273	Special Non-mon Report	06:00	08:00
CD-363	Risk Mgmt Transaction List	10:00	Noon
CD-367	Daily Letters Report	14:00	16:00
CD-435	Incoming Fee Collection Journal	18:00	20:00
CD-443	ICS Alerts	18:00	20:00
CD-558	PIN Change Requests Accepted	00:00	02:00
CD-584	ICS Bankruptcy Alerts	18:00	20:00
CD-895	Issuer Daily Copy Requests	18:00	20:00
FD-028	Proprietary	06:00	08:00
MD-027	ETC Transaction History Log	10:00	Noon
MD-028	Daily ETC Deposits	10:00	Noon
MD-038	ETC Headquarters Report	Noon	14:00
MD-050	Daily Merchant Exceptions	10:00	Noon
MD-070	Retained ACH Merchant Deposits	00:00	02:00
MD-072	Dropped ACH Merchant Deposits	00:00	02:00
SD-018	Interchange Fee Recap System	10:00	Noon
SD-031	Merchant Clearing Adjs	06:00	08:00
SD-041	Settlement Advice Parts 1 & 2	10:00	Noon
SD-060	Visa/MasterCard Interchange Report	06:00	08:00
SD-077	ACH Monetary Transaction Journal	10:00	Noon
SD-091	General Ledger Display	10:00	Noon
SD-098	Incoming/Outgoing Chargeback Journal	00:00	02:00
SD-119	Daily Chargeback Activity List	00:00	02:00
SD-890	Fee Income Journal	00:00	02:00

61

Report	Report Name	95% by Target Time	100% by Target Time
SD-891	Intra-FDR Fee Expense Journal	00:00	02:00
SD-902	Misc Settlement	10:00	Noon
SD-904	Misc Settlement — System Order	10:00	Noon
SM-470	BASE II Access Charges	00:00	02:00

MONTHLY REPORT LIST

		Monthly On-Line Reports
Report	Report Name	Performance Standard
CM-051	Cardholder Mgmt Report	End of 5th Business Day following month end
CM-060	Lost/Stolen/Fraud Account	End of 5th Business Day following month end
CM-201	CIMS CSR Resolution Report	End of 5th Business Day following month end
CM-556	Monthly Approval/Turndown Stat Report	End of 5th Business Day following month end
SM-570	MasterCard MIP Fees	End of 5th Business Day following month end

62

ATTACHMENT III

FDR Insurance Coverage

Insurance Policies	Coverage
Comprehensive General Liability*	$1,000,000 per occurrence
	$2,000,000 aggregate
Excess or Umbrella*	$10,000,000 per occurrence
Workers’ Compensation	Statutory
Employers Liability	$100,000 per accident
	$100,000 per employee
	$500,000 per policy year
Errors & Omissions or Professional Liability	$5,000,000 per occurrence
Comprehensive Automobile Liability*	$1,000,000 per occurrence
Employee Dishonesty	$2,000,000 per occurrence

     *Denotes those policies on which FDR agrees to name Customer as an additional insured.

63

EX-12

Exhibit 12

ADVANTA CORP. AND SUBSIDIARIES

Statement setting forth details of computation of ratio
of earnings to fixed charges

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

($ in thousands)	For the years ended December 31,
	2006		2005			2004		2003		2002
Income (loss) from continuing operations	$	84,248	$	116,689		$	44,273	$	30,213	$	(15,572	)
Income tax expense		52,740		40,490			28,034		18,913		17,170
Earnings before income tax expense		136,988		157,179	(1)		72,307		49,126		1,598	(2)
Fixed charges:
Interest on debt, deposits and other borrowings		66,143		48,428			36,419		48,308		47,580
Interest on subordinated debt payable to preferred securities trust (3)		9,167		9,158			9,158		0		0
One-third of all rentals		1,809		1,712			1,827		2,136		1,822
Preferred stock dividend of subsidiary trust (3)		0		0			0		8,990		8,990
Total fixed charges		77,119		59,298			47,404		59,434		58,392
Earnings before income tax expense and fixed charges	$	214,107	$	216,477		$	119,711	$	108,560	$	59,990
Ratio of earnings to fixed charges (4)		2.78x		3.65x			2.53x		1.83x		1.03x

(1)	Earnings before income taxes in 2005 included a $67.7 million gain on the transfer of consumer credit card business related to our May 28, 2004 agreement with Bank of America.
(2)	Earnings before income taxes in 2002 included a charge of $43.0 million related to a ruling in the litigation associated with the transfer of our consumer credit card business in 1998.
(3)	Our adoption of Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51, 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 statements include 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.
(4)	For purposes of computing these ratios, “earnings” represent income (loss) from continuing operations 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.

EX-21

EXHIBIT 21

CURRENT LIST OF SUBSIDIARIES OF REGISTRANT

Advanta Corp. (DE)

Advanta National Corp. (DE)

Advanta National Bank

Advanta Bank Corp. (UT)

Advanta Business Receivables Corp. (NV)

Advanta Credit Card Receivables Corp. (NV)

Advanta GP Corp. (DE)

Advanta Partners LP (PA)

Advanta 101 GP Corp. (DE)

Advanta Partners 101 LP (PA)

Advanta GP II Corp. (DE)

Advanta GCF GP Corp. (DE)

Advanta Growth Capital Fund LP (DE)

Advanta Investment Corp. (DE)

Advanta Investment Corp. II (DE)

GoodCompany.com LLC (PA)

Advanta Information Services, Inc. (DE)

Advanta International Corporation I (DE)

Advanta International Corporation II (DE)

Advanta UK

Advanta Business Services Holding Corp. (DE)

Advanta Business Services Corp. (DE)

Advanta Leasing Receivables Corp. VI (NV)

Advanta Service Corp. (DE)

Advanta Shared Services Corp. (DE)

Advanta Capital LLC (DE)

Coltex Leverage Lease Corporation I (DE)

TSLL Jedobert Cal, Inc. (DE)

Advanta Insurance Company (AZ)

Advanta Life Insurance Company (AZ)

Advanta Insurance Agency Inc. (DE)

First Advanta Insurance Agency Inc. (PA)

Advanta Advertising, Inc. (DE)

ADVANTENNIS Corp. (DE)

Advanta Capital Trust I

Advanta Mortgage Holding Company (DE)

Advanta Auto Finance Corporation (NV)

Advanta Mortgage Corp. USA (DE)

Advanta Finance Corp. (NV)

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Advanta Corp.:

We consent to the incorporation by reference in the registration statements (No. 33-60419, No. 333-05701, No. 333-71995, 333-74575, No. 333-92151, No. 333-33136, No. 333-90642 and No. 333-136724) on Form S-3 and in the registration statements (No. 33-32969, No. 33-53205, No. 33-59219, No. 333-18993, No. 333-49116, No. 333-104031, and No. 333-104014) on Form S-8 of Advanta Corp. and subsidiaries (the “Company”) of our reports dated February 26, 2007, with respect to the consolidated balance sheets of the Company as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of the Company.

Our report dated February 26, 2007, on the consolidated balance sheets of the Company as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006 refers to the Company’s adoption of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” effective January 1, 2006.

/s/ KPMG LLP
Philadelphia, Pennsylvania
February 26, 2007

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 Annual Report on Form 10-K 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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
February 28, 2007

-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 Annual Report on Form 10-K 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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
February 28, 2007

-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 Annual Report on Form 10-K of Advanta Corp. (the “Company”) for the fiscal year ended December 31, 2006 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
February 28, 2007

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 Annual Report on Form 10-K of Advanta Corp. (the “Company”) for the fiscal year ended December 31, 2006 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
February 28, 2007