Form 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
September 30, 1995 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
______ to _______
Commission File Number 0-14120
Advanta Corp.
(Exact name of registrant as specified in its charter)
Delaware 23-1462070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Brandywine Corporate Center, 650 Naamans Rd., Claymont, DE 19703
(Address of Principal Executive Offices) (Zip Code)
(302) 791-4400
(Registrant's telephone number, including area code)
____________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No ____
* Applicable only to issuers involved in bankruptcy proceedings
during the preceding five years:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No ____
* Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class A Outstanding at November 1, 1995
Common Stock, $.01 par value 17,477,272 shares
Class B Outstanding at November 1, 1995
Common Stock, $.01 par value 23,977,263 shares
<PAGE>
Table of Contents
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Income Statements 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
Part II - Other Information 27
<PAGE>
ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
September 30, December 31,
1995 1994
ASSETS (Unaudited)
Cash $ 43,723 $ 43,706
Federal funds sold and interest-bearing
deposits with banks 591,890 352,902
Investments available for sale 445,650 318,759
Loan and lease receivables, net:
Available for sale 570,311 573,076
Other loan and lease receivables, net 1,173,645 1,406,378
Total loan and lease receivables, net 1,743,956 1,979,454
Premises and equipment, net 36,832 33,219
Amounts due from credit card
securitizations 170,554 144,483
Other assets 317,263 240,525
Total assets $3,349,868 $3,113,048
LIABILITIES
Deposits $1,461,036 $1,159,358
Debt and other borrowings 1,103,711 1,403,128
Other liabilities 149,910 108,872
Total liabilities 2,714,657 2,671,358
STOCKHOLDERS' EQUITY
Class A preferred stock, $1,000 par
value: authorized, issued and
outstanding -- 1,010 shares in 1995
and 1994 1,010 1,010
Class B preferred stock, $.01 par
value: authorized -- 1,000,000 shares;
issued -- 25,000 shares in 1995 0 0
Class A common stock, $.01 par value:
authorized -- 200,000,000 shares;
issued -- 17,474,272 shares in 1995
and 17,347,468 in 1994 175 173
Class B common stock, $.01 par value:
authorized -- 200,000,000 shares;
issued -- 23,911,887 in 1995 and
23,131,498 in 1994 239 231
Additional paid in capital, net 275,012 176,465
Retained earnings, net 358,906 263,811
Less: Treasury stock at cost, 5,855
Class B common shares in 1995 (131) 0
Total stockholders' equity 635,211 441,690
Total liabilities and stockholders'
equity $3,349,868 $3,113,048
See Notes to Consolidated Condensed Financial Statements
<PAGE>
ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Unaudited) (Unaudited)
Interest income:
Loans and leases $ 44,218 $ 32,050 $130,787 $ 99,029
Investments 12,264 7,300 33,658 20,346
Total interest income 56,482 39,350 164,445 119,375
Interest expense:
Deposits 18,731 11,091 48,037 35,011
Other debt 22,791 11,528 67,166 29,943
Total interest expense 41,522 22,619 115,203 64,954
Net interest income 14,960 16,731 49,242 54,421
Provision for credit losses 10,603 5,750 28,111 28,013
Net interest income after
provision for credit losses 4,357 10,981 21,131 26,408
Noninterest revenues:
Gain on sale of credit cards 0 0 0 18,352
Other noninterest revenues 136,221 97,202 381,293 266,136
Total noninterest revenues 136,221 97,202 381,293 284,488
Operating expenses:
Amortization of credit card
deferred origination
costs, net 19,283 12,717 51,401 27,364
Other operating expenses 67,013 53,313 196,907 161,700
Total operating expenses 86,296 66,030 248,308 189,064
Income before income taxes 54,282 42,153 154,116 121,832
Provision for income taxes 19,368 15,386 55,019 44,384
Net income $ 34,914 $ 26,767 $ 99,097 $ 77,448
Earnings per common share $ .81 $ .65 $ 2.35 $ 1.88
Weighted average common
shares outstanding 43,133 41,192 42,125 41,095
See Notes to Consolidated Condensed Financial Statements
<PAGE>
ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended
September 30,
1995 1994
OPERATING ACTIVITIES (Unaudited)
Net income $ 99,097 $ 77,448
Adjustments to reconcile net income to net
cash provided by operating activities:
Proceeds from sales/securitizations of
receivables 3,129,521 1,656,566
Equity securities gain (3,844) 0
Purchase of mortgage/lease portfolios (202,014) (129,900)
Principal collected on mortgages 21,240 17,352
Mortgages made to customers (385,497) (337,215)
Depreciation and amortization of intangibles 7,665 5,712
Provision for credit losses 28,111 28,013
Change in other assets and amounts due from
credit card securitizations (79,585) (22,940)
Change in other liabilities 53,963 28,899
Gain on securitization of mortgages and leases (28,821) (20,013)
Net cash provided by operating activities 2,639,836 1,303,922
INVESTING ACTIVITIES
Purchase of investments available for sale (1,771,828) (1,560,723)
Proceeds from sales of investments available
for sale 1,217,497 662,896
Proceeds from maturing investments available
for sale 435,495 901,248
Change in fed funds sold and interest-bearing
deposits (224,864) (61,374)
Change in credit card receivables, excluding (2,228,764) (1,241,494)
sales
Change in premises and equipment (10,975) (12,783)
Excess of cash collections over income recognized
on direct financing leases 18,432 14,458
Equipment purchased for direct financing lease
contracts (170,247) (111,399)
Net change in other loans (1,825) (3)
Net cash used by investing activities (2,737,079) (1,409,174)
FINANCING ACTIVITIES
Change in demand and savings deposits (39,428) 68,431
Proceeds from deposits sold 30,018 0
Proceeds from sales of time deposits 798,227 290,799
Payments for maturing time deposits (487,139) (598,530)
Change in repurchase agreements/other borrowings (330,455) 164,450
Proceeds from issuance of subordinated debt 35,206 22,027
Payments on redemption of subordinated debt (43,098) (44,051)
Proceeds from issuance of medium-term notes 185,039 217,774
Proceeds from issuance of notes payable 416,006 2,300
Repayment of notes payable (550,983) (9,787)
Proceeds from issuance of stock 93,228 3,836
Cash dividends paid (9,361) (6,867)
Net cash provided by financing activities 97,260 110,382
Net increase in cash 17 5,130
Cash at beginning of period 43,706 31,162
Cash at end of period $ 43,723 $ 36,292
See Notes to Consolidated Condensed Financial Statements
<PAGE>
ADVANTA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands)
September 30, 1995
1) In the opinion of management, the accompanying audited and
unaudited consolidated condensed financial statements contain all
adjustments necessary to present fairly the financial position of
Advanta Corp. and Subsidiaries as of September 30, 1995 and
December 31, 1994, the results of their operations for the three
and nine month periods ended September 30, 1995 and 1994, and
their cash flows for the nine month periods ended September 30,
1995 and 1994. The results of operations for the three and nine
month periods ended September 30, 1995 are not necessarily
indicative of the results to be expected for the full year.
Certain prior period amounts have been reclassified to conform
with current year classifications. With respect to operating
expenses, the Company is including the amortization of credit card
deferred origination costs, net of deferred fees, in operating
expenses rather than as a component of interest income as these
net costs are linked to the privilege period of the cards and not
to the credit card receivables.
2) Investments available for sale include securities that the Company
sells from time to time to provide liquidity and in response to
changes in the market. Debt and equity securities classified as
available for sale are reported at market value. Unrealized gains
and losses on these securities (except those held by the Company's
venture capital unit, Advanta Partners LP) are reported as a
separate component of stockholders' equity and included in
retained earnings. Changes in the fair value of Advanta Partners
LP investments are reported in noninterest revenues as equity
securities gains or losses.
3) Loan and lease receivables available for sale represent
receivables currently on the balance sheet that the Company
generally intends to sell or securitize within the next six
months. These receivables are reported at the lower of book or
fair market value.
4) Loan and lease receivables on the balance sheet, including those
available for sale, consisted of the following:
September 30, December 31,
1995 1994
Gross loan and lease receivables $1,722,437 $1,964,444
Add: Deferred origination costs,
net of deferred fees 61,779 56,627
Less: Reserve for credit losses (40,260) (41,617)
Loan and lease receivables, net $1,743,956 $1,979,454
Number of Accounts:
Credit cards 311,638 337,662
Other loans and leases 10,117 14,034
Total 321,755 351,696
<PAGE>
Receivables and accounts serviced for others consisted of the
following:
September 30, December 31,
1995 1994
Receivables:
Credit cards $6,828,152 $4,808,257
Mortgage loans 1,501,649 1,203,226
Leases 258,445 179,310
Total $8,588,246 $6,190,793
Number of Accounts:
Credit cards 4,045,623 3,490,354
Mortgage loans 28,109 24,668
Leases 54,623 35,537
Total 4,128,355 3,550,559
5) The Company accounts for credit card origination costs under
Statement of Financial Accounting Standards No. 91, "Accounting
for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases" ("SFAS 91").
This accounting standard requires certain loan and lease
origination fees and costs to be deferred and amortized over the
life of a loan or lease as an adjustment to interest income.
Origination costs are defined under this standard to include costs
of loan origination associated with transactions with independent
third parties and certain costs relating to underwriting
activities and preparing and processing loan documents. The
Company engages third parties to solicit and originate credit card
account relationships. Amounts deferred under these arrangements
were $49.4 million and $35.2 million in the first nine months of
1995 and 1994, respectively.
The Company amortizes deferred credit card origination costs under
Issue 93-1 of the Emerging Issues Task Force ("EITF Issue 93-1")
of the Financial Accounting Standards Board regarding the
acquisition of individual credit card accounts from independent
third parties. EITF Issue 93-1 stated that credit card accounts
acquired individually should be accounted for as originations
under SFAS 91 and EITF Issue 92-5. Amounts paid to a third party
to acquire individual credit card accounts should be deferred and
netted against the related credit card fee, if any, and the net
amount should be amortized on a straight line basis over the
privilege period. If a significant fee is charged, the privilege
period is the period that the fee entitles the cardholder to use
the card. If there is no significant fee, the privilege period
should be one year. Direct origination costs incurred related to
credit card account originations initiated after EITF Issue 93-1
are deferred and amortized over 12 months. Costs incurred for
originations which were initiated prior to EITF Issue 93-1 will
continue to be amortized over a 60 month period as was the
practice prior to the EITF 93-1 consensus.
<PAGE>
The Company records excess servicing income on credit card
securitizations representing additional cash flow from the
receivables initially sold based on the repayment term, including
prepayments. Prior to the EITF Issue 93-1 consensus, net gains
were not recorded at the time each transaction was completed as
excess servicing income was offset by the write-off of deferred
origination costs and the establishment of recourse reserves.
Subsequent to the prospective adoption discussed above, excess
servicing income has been recorded at a lower level at the time of
each transaction, and is predominantly offset by the establishment
of recourse reserves. The lower level of excess servicing income
corresponds with the discontinuance of deferred origination cost
write-offs upon securitization of receivables. During the
"revolving period" of each securitization, income is recorded
based on additional cash flows from the new receivables which are
sold to the securitization trust on a continual basis to replenish
the investors' interest in trust receivables which have been
repaid by the credit cardholders.
6) The following table shows the changes in the reserve for credit
losses for the periods presented:
Nine Months Ended Year Ended
September 30, December 31,
1995 1994
Balance, beginning of period $ 41,617 $ 31,227
Current provision 28,111 34,198
Transfer of recourse
reserves to on-balance
sheet reserves 1,100 11,485
Net charge-offs (30,568) (35,293)
Balance, end of period $ 40,260 $ 41,617
7) At September 30, 1995 and December 31, 1994, the Company had
$170.6 million and $144.5 million, respectively, of amounts due
from credit card securitizations. These amounts include excess
servicing, accrued interest receivable and other amounts related
to these securitizations and are net of recourse reserves
established. A portion of these amounts is subject to liens held
by the providers of credit enhancement facilities for the
respective securitizations.
<PAGE>
8) Selected Balance Sheet Information
Other Assets September 30, December 31,
1995 1994
Excess mortgage servicing rights $ 95,397 $ 73,223
Prepaid assets 70,167 33,895
Accrued interest receivable 48,254 39,353
Investments in operating leases 11,124 13,123
Deferred costs 11,035 9,500
Excess servicing - leasing 9,102 5,949
Due from trustees - mortgage 8,394 6,295
Goodwill 5,062 5,318
Other real estate owned 4,294 4,564
Current and deferred federal
income taxes 0 18,658
Due from trustees - leasing 2,580 2,010
Other 51,854 28,637
Total other assets $317,263 $240,525
Other Liabilities September 30, December 31,
1995 1994
Deferred fees and other reserves $33,066 $ 42,855
Accounts payable and accrued
expenses 27,202 31,380
Accrued interest payable 36,916 10,640
Current and deferred federal income
taxes 10,142 0
Current and deferred state income
taxes 8,509 6,813
Other 34,075 17,184
Total other liabilities $149,910 $108,872
9) Income tax expense reflects an effective tax rate of approximately
35.7% for the three and nine month periods ended September 30,
1995, compared to 36.5% for both comparable 1994 periods. The
Company accounts for income taxes under the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109").
Income tax expense consisted of the following components:
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Current:
Federal $10,210 $12,106 $42,298 $42,582
State 1,329 790 4,847 5,286
Total current 11,539 12,896 47,145 47,868
Deferred:
Federal 7,667 2,791 7,138 (3,433)
State 162 (301) 736 (51)
Total deferred 7,829 2,490 7,874 (3,484)
Total tax expense $19,368 $15,386 $55,019 $44,384
<PAGE>
The reconciliation of the statutory federal income tax to the
consolidated tax expense is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Statutory federal
income tax $19,014 $14,739 $53,956 $42,640
State income taxes 969 317 3,629 3,402
Tax-free income (227) (289) (821) (858)
Other (388) 619 (1,745) (800)
Consolidated tax
expense $19,368 $15,386 $55,019 $44,384
The net deferred tax asset is comprised of the following:
September 30, December 31,
1995 1994
Deferred taxes:
Gross assets $70,638 $ 78,602
Gross liabilities (61,850) (52,344)
Total deferred taxes $ 8,788 $ 26,258
The Company did not record any valuation allowances against
deferred tax assets at September 30, 1995 and December 31, 1994.
The tax effect of significant temporary differences representing
deferred tax assets and liabilities is as follows:
September 30, December 31,
1995 1994
SFAS 91 $(21,087) $(20,034)
Loan losses 26,821 14,965
Mortgage banking income 2,296 10,174
Securitization income (34,278) (28,949)
Leasing income 29,979 42,473
Other 5,057 7,629
Net deferred tax asset $ 8,788 $ 26,258
<PAGE>
10) The Company has adopted several management incentive plans
designed to provide incentives to participating employees to
remain in the employ of the Company and devote themselves to its
success. Under these plans, certain eligible employees were
required and others were given the opportunity to elect to take
portions of their anticipated or "target" bonus payments for
future years in the form of restricted shares of common stock.
The restricted shares are subject to forfeiture should the
employee terminate employment with the Company prior to vesting.
The shares become unrestricted over time, which can be accelerated
if certain performance criteria are met. At September 30, 1995, a
total of 1,335,447 shares issued under these plans were subject to
restrictions and were included in the number of shares
outstanding. These shares are considered common stock equivalents
in the calculation of earnings per common share.
Deferred compensation of $21.8 million and $14.2 million related to
these shares of restricted stock is reflected as a reduction of
equity at September 30, 1995 and December 31, 1994, respectively.
11) In April 1994, the Company, through its subsidiary, Colonial
National Bank USA ("Colonial National" or the "Bank"), reached an
agreement with NationsBank of Delaware, N.A., to sell certain
credit card customer relationships which at that time represented
approximately $150 million of securitized credit card receivables
(less than 4% of the Company's managed credit card receivables as
of June 30, 1994). In the second quarter of 1994, the Company
recorded an $18.4 million pretax gain on the sale related to the
value associated with the customer relationships. In addition,
the Company deferred a portion of the proceeds related to the
excess spread of the receivables over the remaining life of the
securitization trust, which terminated in the second quarter of
1995. These proceeds were recognized as securitization income
over the related period. While the accounts related to these
customer relationships were transferred to NationsBank upon
termination of the securitization trust, these accounts were
serviced by Colonial National at market rates until the systems
conversion to NationsBank was completed, which occurred in July
1995.
12) On August 21,1995,in a public offering, the Company sold 2,500,000
depositary shares each representing a one-hundredth interest in a
share of Stock Appreciation Income Linked Securities ("SAILS").
The SAILS constitute a series of the Company's Class B Preferred
Stock, designated as 6 3/4% Convertible Class B Preferred Stock,
Series 1995 (SAILS). Proceeds from the offering, net of
underwriting discount, were approximately $90 million. The
Company will use the proceeds of the offering for general
corporate purposes, including financing the growth of its
subsidiaries.
<PAGE>
13) The following table shows the calculation of earnings per common
share:
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Net income $34,914 $26,767 $99,097 $77,448
less: preferred
dividends 0 0 (141) (141)
Net income available
to common shares $34,914 $26,767 $98,956 $77,307
Average common
stock outstanding 39,811 38,985 39,669 38,838
Common stock
equivalents 3,322 2,207 2,456 2,257
Weighted average
common shares
outstanding
(in thousands) 43,133 41,192 42,125 41,095
Earnings per common
share $ .81 $ .65 $ 2.35 $ 1.88
<PAGE>
ADVANTA CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Net income for the three months ended September 30, 1995 was
$34.9 million, an $8.1 million or 30% increase from the $26.8 million
reported for the third quarter of 1994. Earnings per share for the
third quarter of 1995 were $.81, a 25% increase from $.65 per share
for the same period last year. The third quarter 1995 earnings per
share figure reflects a 5% increase in shares primarily due to the
issuance of mandatorily convertible preferred stock in August 1995
(see Note 12 of Notes to Consolidated Condensed Financial Statements).
Earnings increased in the third quarter of 1995 primarily as a result
of a 58% increase in average managed receivables, partially offset by
an approximate 17% contraction in the managed net interest margin,
reflecting the Company's growth strategy of utilizing low introductory
rate pricing on credit cards. The Company continues to securitize a
majority of its receivables and report the performance of the
securitized receivables as noninterest revenues. Noninterest revenues
increased $39.0 million, or 40%, to $136.2 million in the third
quarter of 1995 from $97.2 million in the comparable 1994 period.
This increase was due to the 58% increase in average securitized
receivables. Disciplined cost management reduced the operating
expense ratio to 2.7% of average managed receivables in the third
quarter of 1995, compared to 3.4% in the third quarter of 1994.
For the nine months ended September 30, 1995, net income was
$99.1 million, a 28% increase over the $77.4 million for the
comparable year earlier period. Earnings per share for the nine
months ended September 30, 1995 increased 25% to $2.35 from $1.88 for
the comparable 1994 period.
NET INTEREST INCOME
Net interest income for the third quarter of 1995 decreased
$1.7 million, or 11%, to $15.0 million from $16.7 million for the same
period of 1994. This resulted from a decline in the owned net
interest margin to 2.35% for the third quarter of 1995 from 3.71% for
the third quarter of 1994, partially offset by an $814 million
increase in average interest earning assets. The lower owned net
interest margin resulted from a significant increase in the proportion
of credit card receivables earning low introductory rates, reflecting
the success of the Company's marketing campaigns. The credit cards
earning introductory rates reprice upwards after an introductory
period of up to one year. Due to the substantial volume of new low
introductory rate credit cards being originated in 1995, it is not
anticipated that the net interest margin will widen in the last
quarter of 1995. A large number of credit cards will reprice upwards
in the first quarter of 1996. Most of the receivables on those credit
cards will have been securitized, and consequently, the enhanced
revenues on those receivables will be recorded primarily as increased
<PAGE>
noninterest revenues (securitization income) and will not affect the
owned net interest margin, although it is expected that they will
positively impact the managed net interest margin.
The following table provides an analysis of both owned and managed
interest income and expense data, average balance sheet data, net
interest spread (the difference between the yield on interest earning
assets and the average rate paid on interest-bearing liabilities), and
net interest margin (the difference between the yield on interest
earning assets and the average rate paid to fund interest earning
assets) for the three and nine month periods ended September 30, 1995
and 1994. Average owned loan and lease receivables and the related
interest revenues include certain loan fees.
<PAGE>
<TABLE>
INTEREST RATE ANALYSIS
<CAPTION> Three Months Ended September 30,
1995 1994
Average Yield/ Average Yield/
Balance (1) Interest Rate Balance (1) Interest Rate
<S> <C> <C> <C> <C> <C> <C>
On-balance sheet
Credit cards $1,526,171 $ 37,705 9.88% $1,115,229 $ 28,200 10.11%
Mortgage loans 193,336 4,706 9.66 88,125 1,751 7.88
Leases 77,295 2,116 10.95 66,042 2,256 13.66
Other loans 5,951 110 7.33 3,679 70 7.55
Gross receivables 1,802,753 44,637 9.89 1,273,075 32,277 10.13
Investments (2) 894,524 12,546 5.57 610,034 7,726 5.03
Total interest earning
assets $2,697,277 $ 57,183 8.46% $1,883,109 $ 40,003 8.48%
Interest-bearing
liabilities $2,532,780 $ 41,522 6.45% $1,716,698 $ 22,619 5.18%
Net interest spread 2.01% 3.30%
Net interest margin 2.35% 3.71%
Off-balance sheet
Credit cards $6,430,565 $3,699,734
Mortgage loans 1,384,683 1,147,447
Leases 251,568 146,020
Total average
securitized receivables $8,066,816 $4,993,201
Total average managed
receivables $9,869,569 $6,266,276
Managed Net Interest
Analysis (3):
Interest earning assets $9,127,842 $274,090 12.00% $5,582,843 $170,863 12.24%
Interest-bearing
liabilities $8,963,345 $145,365 6.46% $5,416,432 $ 76,243 5.60%
Net interest spread 5.54% 6.64%
Net interest margin 5.64% 6.79%
<FN>
(1)Includes assets held and available for sale and nonaccrual loans and
leases.
(2)Interest and average rate for tax-free securities computed on a tax
equivalent basis using a statutory rate of 35%.
(3)Combination of owned interest earning assets/owned interest-bearing
liabilities and securitized credit card assets/liabilities.
</TABLE>
<PAGE>
<TABLE>
INTEREST RATE ANALYSIS
<CAPTION> Nine Months Ended September 30,
1995 1994
Average Yield/ Average Yield/
Balance (1) Interest Rate Balance (1) Interest Rate
<S> <C> <C> <C> <C> <C> <C>
On-balance sheet
Credit cards $1,441,478 $ 111,840 10.34% $1,115,515 $ 86,410 10.33%
Mortgage loans 172,889 11,946 9.24 113,924 7,112 8.35
Leases 84,567 7,970 12.57 54,982 5,909 14.33
Other loans 5,396 290 7.19 3,698 205 7.41
Gross receivables 1,704,330 132,046 10.33 1,288,119 99,636 10.32
Investments (2) 802,324 34,752 5.77 605,270 21,638 4.77
Total interest earning
assets $2,506,654 $166,798 8.87% $1,893,389 $121,274 8.54%
Interest-bearing
liabilities $2,381,647 $115,203 6.40% $1,736,875 $ 64,954 4.94%
Net interest spread 2.47% 3.60%
Net interest margin 2.73% 3.95%
Off-balance sheet
Credit cards $5,788,039 $3,202,809
Mortgage loans 1,302,537 1,087,963
Leases 218,204 134,819
Total average
securitized receivables $7,308,780 $4,425,591
Total average managed
receivables $9,013,110 $5,713,710
Managed Net Interest
Analysis (3):
Interest earning assets $8,294,693 $763,649 12.28% $5,096,198 $463,533 12.13%
Interest-bearing
liabilities $8,169,686 $400,044 6.51% $4,939,684 $195,126 5.25%
Net interest spread 5.77% 6.88%
Net interest margin 5.85% 7.02%
<FN>
(1)Includes assets held and available for sale and nonaccrual loans and
leases.
(2)Interest and average rate for tax-free securities computed on a tax
equivalent basis using a statutory rate of 35%.
(3)Combination of owned interest earning assets/owned interest-bearing
liabilities and securitized credit card assets/liabilities.
</TABLE>
<PAGE>
MANAGED PORTFOLIO DATA
The following table provides selected information on a managed basis, as
well as a summary of the effects of credit card securitizations on selected
line items of the Company's consolidated income statements as of and for
the nine months ended September 30, 1995 and 1994.
Nine Months Ended
September 30,
1995 1994
Balance sheet data:
Average managed receivables $ 9,013,110 $5,713,710
Managed receivables 10,310,682 6,641,892
Total managed assets 11,938,114 7,627,457
Managed net interest margin
(on a fully tax equivalent basis) 5.85% 7.02%
As a percentage of gross managed
receivables:
Total loans 30 days or more
delinquent 3.0% 2.9%
Net charge-offs 2.2% 2.4%
Effects of credit card
securitizations on:
Net interest income $ (312,009) $ (212,087)
Provision for credit losses 109,059 68,165
With respect to the above information on the effects of credit card
securitizations, net interest income represents the amount by which net
interest income would have been higher had the securitized receivables
remained on the balance sheet. In addition, provision for credit losses
represents the amount by which the provision for credit losses would have
been higher had the securitized receivables remained as owned and the
provision for credit losses been equal to charge-offs. The effects on
both net interest income and the provision for credit losses described
above are netted and included in other noninterest revenues in the
Consolidated Condensed Income Statements.
PROVISION FOR CREDIT LOSSES
The provision for credit losses for the third quarter of 1995 totalled
$10.6 million compared to $5.8 million for the comparable period of 1994.
The provision increased $4.8 million primarily due to the Company's
desire to maintain a targeted level of reserve coverage of impaired
assets on credit cards. For the nine month period ended September 30,
1995, the provision for credit losses was $28.1 million, flat with the
nine months of 1994. The owned impaired asset level was $36.6 million or
2.1% of receivables at September 30, 1995 down from $47.2 million or 3.5%
of receivables a year ago. The higher 1994 level was due to the
repurchase of approximately $50 million of nonperforming mortgage loans
from the securitization trusts during the first nine months of 1994. In
connection with these repurchases, the Company also transferred $12
million of off-balance sheet recourse reserves to on-balance sheet
reserves. These repurchases increased the owned impaired asset level
while having no impact on either the level of managed impaired assets or
<PAGE>
the provision for credit losses (see also Asset Quality below). At
September 30, 1995, approximately $13 million of the loans that had been
repurchased during 1994 remained on the balance sheet as either
nonperforming loans or other real estate owned.
ASSET QUALITY
The reserve for credit losses is maintained for on-balance sheet
receivables. The reserve is intended to cover credit losses inherent in
the owned loan portfolio. With regard to securitized assets, anticipated
losses and related recourse reserves are reflected in the calculations of
securitization income, amounts due from credit card securitizations and
other assets. Recourse reserves are intended to cover all probable
credit losses over the life of the receivables securitized. The Company
periodically evaluates its on-balance sheet and recourse reserve
requirements and, as appropriate, effects transfers between these
accounts.
The reserve for credit losses on a consolidated owned basis was
$40.3 million or 2.3% of receivables at September 30, 1995 compared to
$41.6 million or 2.1% of receivables at December 31, 1994 and $47.2
million or 3.5% of receivables at September 30, 1994. The consolidated
reserve coverage of impaired assets was 110.1% at September 30, 1995 up
from 96.1% at year end 1994 and 100.0% at September 30, 1994.
On the total managed portfolio, impaired assets were $127.6 million or
1.2% of receivables at September 30, 1995, compared to $102.4 million or
1.3% of receivables at December 31, 1994 and $92.9 million or 1.4% of
receivables at September 30, 1994. The 30 day and over delinquency rate on
managed credit cards was 3.0% at September 30, 1995, slightly higher than
the 2.9% at September 30, 1994.
On the total owned portfolio, impaired assets were $36.6 million or 2.1% of
receivables at September 30, 1995, compared to $43.3 million or 2.2% of
receivables and $47.2 million or 3.5% of receivables at December 31, 1994
and September 30, 1994, respectively.
The total managed charge-off rate for the nine months of 1995 was 2.2%,
down from 2.3% for the full year of 1994 and 2.4% for the nine months of
1994. The charge-off rate on managed credit cards was 2.5% for the nine
months of 1995, flat with the full year of 1994 and down from 2.6% for the
comparable 1994 period. The charge-off rate on managed mortgage loans was
.9% for the nine months of 1995, down from 1.7% for the comparable 1994
period.
The charge-off rate on consolidated owned receivables was 2.4% of average
receivables for the nine months of 1995, down from 2.6% for the full year
of 1994 and 2.5% for the year ago period. The charge-off rate on owned
credit cards was 2.3% for the nine months of 1995, compared to 1.9% for the
full year of 1994 and 2.0% for the comparable 1994 period.
<PAGE>
The following tables provide a summary of impaired assets, delinquencies
and charge-offs, as of and for the year-to-date periods indicated.
September December September
30, 31, 30,
CONSOLIDATED - MANAGED 1995 1994 1994
Nonperforming assets $ 73,515 $ 61,587 $ 60,917
Accruing loans past due 90 days or
more 54,120 40,837 31,986
Impaired assets 127,635 102,424 92,903
Total loans 30 days or more
delinquent 305,118 220,390 193,009
As a percentage of gross receivables:
Nonperforming assets .7% .8% .9%
Accruing loans past due 90 days or more .5 .5 .5
Impaired assets 1.2 1.3 1.4
Total loans 30 days or more delinquent 3.0 2.7 2.9
Net charge-offs:
Amount $148,445 $139,676 $102,556
As a percentage of average gross
receivables(annualized) 2.2% 2.3% 2.4%
CREDIT CARDS - MANAGED
Nonperforming assets $ 20,328 $ 14,227 $ 13,199
Accruing loans past due 90 days or
more 53,893 40,721 31,860
Impaired assets 74,221 54,948 45,059
Total loans 30 days or more
delinquent 194,457 133,121 107,325
As a percentage of gross receivables:
Nonperforming assets .2% .2% .3%
Accruing loans past due 90 days or more .7 .6 .6
Impaired assets .9 .8 .9
Total loans 30 days or more delinquent 2.3% 2.0% 2.1%
Net charge-offs:
Amount $134,020 $115,218 $ 84,500
As a percentage of average gross
receivables(annualized) 2.5% 2.5% 2.6%
MORTGAGE LOANS - MANAGED
Nonperforming assets $ 50,050 $ 44,678 $ 46,006
Total loans 30 days or more
delinquent 82,472 65,966 68,914
As a percentage of gross receivables:
Nonperforming assets 3.0% 3.3% 3.5%
Total loans 30 days or more delinquent 4.9 4.9 5.3
Net charge-offs:
Amount $ 10,385 $ 20,709 $ 15,448
As a percentage of average gross
receivables(annualized) .9% 1.7% 1.7%
LEASES - MANAGED
Nonperforming assets $ 3,137 $ 2,682 $ 1,712
Total loans 30 days or more
delinquent 27,732 20,972 16,507
As a percentage of receivables:
Nonperforming assets .9% 1.0% .7%
Total loans 30 days or more delinquent 8.1 7.9 7.1
Net charge-offs:
Amount $ 4,053 $ 3,747 $ 2,602
As a percentage of average
receivables (annualized) 1.8% 2.0% 1.8%
<PAGE>
September December September
30, 31, 30,
CONSOLIDATED - OWNED 1995 1994 1994
Reserve for credit losses $40,260 $41,617 $47,190
Nonperforming assets 25,744 31,949 38,323
Accruing loans past due 90 days or more 10,834 11,354 8,865
Impaired assets 36,578 43,303 47,188
Reserve as a percentage of impaired 110.1% 96.1% 100.0%
assets
As a percentage of gross receivables:
Reserve 2.3% 2.1% 3.5%
Nonperforming assets 1.5 1.6 2.8
Accruing loans past due 90 days or .6 .6 .7
more
Impaired assets 2.1 2.2 3.5
Net charge-offs:
Amount $30,568 $35,293 $24,519
As a percentage of average gross
receivables(annualized) 2.4% 2.6% 2.5%
CREDIT CARDS - OWNED
Reserve for credit losses $27,640 $27,486 21,628
Nonperforming assets 4,109 3,502 2,910
Accruing loans past due 90 days or more 10,607 11,238 8,739
Impaired assets 14,716 14,740 11,649
Reserve as a percentage of impaired 187.8% 186.5% 185.7%
assets
As a percentage of gross receivables:
Reserve 1.9% 1.6% 1.9%
Nonperforming assets .3 .2 .3
Accruing loans past due 90 days or more .7 .6 .8
Impaired assets 1.0 .9 1.0
Net charge-offs:
Amount $24,961 $22,688 $16,335
As a percentage of average gross
receivables(annualized) 2.3% 1.9% 2.0%
MORTGAGE LOANS - OWNED (1)
Reserve for credit losses $ 2,334 $ 5,164 $ 9,046
Nonperforming assets 20,895 27,379 34,930
Reserve as a percentage of impaired assets 11.2% 18.9% 25.9%
As a percentage of gross receivables:
Reserve 1.4% 3.6% 6.2%
Nonperforming assets 12.2 19.2 24.1
Net charge-offs:
Amount $ 4,696 $11,689 $ 7,580
As a percentage of average gross
receivables(annualized) 3.6% 9.7% 8.9%
LEASES - OWNED
Reserve for credit losses $ 1,182 $ 1,076 $ 1,278
Nonperforming assets 740 1,068 483
Reserve as a percentage of impaired
assets 159.7% 100.7% 264.6%
As a percentage of receivables:
Reserve 1.4% 1.2% 1.9%
Nonperforming assets .9 1.2 .7
Net charge-offs:
Amount $ 924 $ 914 $ 598
As a percentage of average receivables
(annualized) 1.5% 1.5% 1.5%
(1) Beginning March 1994, the Company initiated a program for repurchasing
nonperforming assets from the securitized portfolios (see "Provision for
Credit Losses").
<PAGE>
NONINTEREST REVENUES
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Gain on sale of credit
cards $ 0 $ 0 $ 0 $ 18,35
2
Other noninterest revenues:
Credit card securitization
income 43,818 38,210 130,553 107,131
Credit card servicing
income 30,572 18,554 83,371 47,690
Credit card interchange
income 23,258 18,109 64,808 48,684
Income from mortgage
banking activities 15,886 9,780 38,033 26,572
Leasing revenues, net 9,733 5,151 27,628 15,531
Insurance revenues, net 7,138 3,149 19,413 9,115
Equity securities gain 375 0 4,178 0
Other 4,24 13,309 11,41
5,441 9 3
Total other noninterest
revenues $136,221 $97,202 $381,293 $266,13
Total noninterest revenues $136,221 $97,202 $381,293 $284,48
For the third quarter of 1995, noninterest revenues increased 40% to
$136.2 million from $97.2 million for the same period of 1994. Credit card
securitization income increased $5.6 million or 15% to $43.8 million as a
result of a 74% increase in average securitized credit card receivables
partially offset by a contraction in the net interest margin. For the 1994
periods, securitized interchange income has been reclassified from credit
card securitization income to credit card interchange income. Credit card
interchange income, which represents approximately 1.4% of credit card
purchases, increased $5.2 million to $23.3 million. Credit card servicing
income increased $12.0 million due to higher securitized balances. Leasing
revenues, net, increased $4.6 million to $9.7 million primarily due to a
72% growth in average securitized lease receivables from the comparable
quarter of 1994. Insurance revenues, net, were $7.1 million for the third
quarter of 1995, up from $3.1 million for last year's third quarter. This
growth is due to the successful marketing of insurance products in the
credit card, mortgage and leasing businesses.
For the nine month period ended September 30, 1995, noninterest revenues
rose to $381.3 million from $284.5 million for the comparable 1994 period,
a 34% increase. This improvement resulted primarily from an 81% growth in
average securitized credit card receivables and increased securitization
activity with respect to mortgage banking and leasing, partially offset by
1994's gain on the sale of credit card customer relationships.
<PAGE>
OPERATING EXPENSES
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Amortization of credit card
deferred origination
costs, net $19,283 $12,717 $51,401 $27,364
Other operating expenses:
Salaries and employee
benefits 29,124 21,913 80,186 63,936
External processing 7,739 6,133 20,018 16,139
Marketing 5,584 3,443 19,867 21,803
Postage 4,683 3,069 13,413 8,822
Professional fees 4,248 2,583 9,813 6,159
Credit card fraud losses 3,957 4,306 12,483 12,550
Equipment expense 3,244 2,379 8,951 6,725
Telephone expense 3,000 2,413 8,354 6,010
Occupancy expense 2,462 2,254 6,727 6,117
Credit and collection
expense 2,286 2,293 6,762 5,728
Other 686 2,527 10,333 7,711
Total other operating
expenses $67,013 $53,313 $196,907 $161,700
Total operating expenses $86,296 $66,030 $248,308 $189,064
The amortization of credit card deferred origination costs, net, increased
from $12.7 million for the third quarter of 1994 to $19.3 million for the
third quarter of 1995. This increase resulted primarily from amortization
related to the $76.5 million of credit card origination costs that have
been deferred since the third quarter of 1994. Costs incurred for credit
card originations initiated after May 1993 are being amortized over 12
months, rather than pursuant to the previous policy of 60 months. Total
other operating expenses of $67.0 million for the three months ended
September 30, 1995 increased 26% from $53.3 million for the same period of
1994. Other operating expenses as a percentage of average managed
receivables were 2.7% for the third quarter of 1995, down from 3.4% in the
comparable 1994 period. The increase in total other operating expenses is
attributable, in part, to a 28% increase in the number of employees from
1,744 at September 30, 1994 to 2,226 at September 30, 1995 to effectively
service the current and anticipated account growth. Other expenses,
including marketing, external processing, postage and telephone expense
showed increases consistent with the increase in the number of credit card
accounts managed.
For the first nine months of 1995, total operating expenses increased
31% to $248.3 million from $189.1 million for the same 1994 period.
Average managed receivables grew 58% over the same period of time. Other
operating expenses as a percentage of average managed receivables were 2.9%
for the nine months ended September 30, 1995, down from 3.8% for the nine
months ended September 30, 1994.
As a result of continued investments in developmental initiatives, the
Company entered into a joint venture agreement with The Royal Bank of
Scotland ("RBS"), for the purpose of issuing credit cards in the United
<PAGE>
Kingdom. This new company, RBS Advanta, first began issuing bankcards in
October 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's goal is to maintain an adequate level of liquidity, both
long- and short-term, through active management of both assets and
liabilities. During the first nine months of 1995, the Company, through
its subsidiaries, securitized $2.3 billion of credit card receivables,
$492 million of mortgage loans and $118 million of equipment lease
receivables. Cash generated from these transactions was temporarily
invested in short-term, high quality investments at money market rates
awaiting redeployment to pay down borrowings and to fund future credit
card, mortgage and lease receivable growth. At September 30, 1995, the
Company had approximately $570 million of loan and lease receivables and
$446 million of investments available for sale which could be sold to
generate additional liquidity.
The debt securities of Advanta Corp. achieved investment-grade ratings from
the nationally recognized rating agencies in 1993. These ratings have
allowed the Company to further diversify its funding sources. As a result,
in 1994 the Company obtained revolving credit facilities totaling $255
million from a consortium of banks and $200 million in money market bid
lines. In the second quarter of 1995, the Company's revolving credit
facilities were consolidated into one facility and doubled in size to $510
million. The Company may also sell up to $325 million of medium-term notes
as needed.
In April 1994, the Company, through its subsidiary, Colonial National Bank
USA, reached an agreement with NationsBank of Delaware, N.A., to sell
certain credit card customer relationships which at that time represented
approximately $150 million of securitized credit card receivables (less
than 4% of the Company's managed credit card receivables as of June 30,
1994). While the accounts related to these customer relationships were
transferred to NationsBank upon termination of the securitization trust in
the second quarter of 1995, these accounts were serviced by Colonial
National at market rates until the systems conversion to NationsBank was
completed, which occurred in July 1995.
On August 21, 1995, in a public offering, the Company sold 2,500,000
depositary shares each representing a one-hundredth interest in a share
of Stock Appreciation Income Linked Securities ("SAILS"). The SAILS
constitute a series of the Company's Class B Preferred Stock,
designated as 6 3/4% Convertible Class B Preferred Stock, Series 1995
(SAILS). Proceeds from the offering, net of underwriting discount,
were approximately $90 million. The Company will use the proceeds of the
offering for general corporate purposes, including financing the growth of
its subsidiaries.
On September 29, 1995, the Company's subsidiaries, Colonial National Bank
USA and Advanta National Bank, established a $2.25 billion bank note
program, pursuant to which these banks may issue an aggregate of $2 billion
of senior bank notes and $250 million of subordinated bank notes. These
notes may have maturities ranging from seven days to fifteen years from
date of issuance. Subsequent to quarter end, Advanta National Bank issued
$175 million of senior notes under this program.
<PAGE>
INTEREST RATE SENSITIVITY
Interest rate sensitivity refers to net interest income variability
resulting from mismatches between asset and liability indices (basis risk)
and the effects which these changes in market interest rates have on asset
and liability maturity mismatches (gap risk).
The Company attempts to minimize the impact of market interest rate
fluctuations on net interest income and net income by regularly evaluating
the risk inherent in its asset and liability structure, including
securitized assets. This risk arises from continuous changes in the
Company's asset/liability mix, market interest rates, the yield curve,
prepayment trends and the timing of cash flows. Computer simulations are
used to evaluate net interest income volatility under varying rate, spread
and volume projections over monthly time periods of up to two years.
Beginning in the first quarter of 1995, the Company's credit card marketing
efforts were weighted heavily towards variable rate cards priced at a
spread over LIBOR rather than a spread over the prime rate. The Company
believes that this shift will prospectively reduce the basis risk to which
the Company has been subject as the result of maintaining credit card
portfolios indexed to the prime rate while funding certain on-balance sheet
liabilities and securitizing a majority of the credit card receivables at
a spread over LIBOR.
In managing its interest rate sensitivity position, the Company
periodically securitizes, sells and purchases assets, alters the mix and
term structure of its funding base, changes its investment portfolio and
short-term investment position, and uses derivative financial instruments.
Derivative financial instruments are used for the express purpose of
managing exposure to changes in interest rates and, by policy, are not used
for any speculative purposes (see discussion under "Derivatives
Activities"). The Company has primarily utilized variable rate funding in
pricing its credit card securitization transactions in an attempt to match
the variable rate pricing dynamics of the underlying receivables sold to
the trusts. Variable rate funding is also used on the balance sheet as
well, in support of unsecuritized receivables which carry variable rates.
Although credit card receivable rates are generally set at a spread over
a floating rate index, they often contain interest rate floors. These floors
have the impact of converting the credit card receivables to fixed rate
receivables in a low interest rate environment. In addition, the Company
at times offers fixed rate pricing to consumers for the introductory rate
period of its credit cards. In instances when a significant portion of
credit card receivables are at fixed rates or their contractual floors, the
Company may convert part of the underlying funding to a fixed rate by using
interest rate hedges, swaps, collars and fixed rate securitizations. In
pricing mortgage and lease securitizations, both fixed rate and variable
rate funding are used depending upon the characteristics of the underlying
receivables.
<PAGE>
Additionally, basis risk exists in on-balance sheet funding as well as in
securitizing credit card receivables at a spread over LIBOR when the rate
on the underlying assets is indexed to the prime rate. The underlying
liability or coupon on a securitization is often indexed to LIBOR, and
LIBOR does not perfectly correlate to movements in the prime rate. The
Company measures the basis risk resulting from potential variability in the
spread between prime and LIBOR and incorporates such risk into the asset
and liability management process. During 1994, $425 million in prime-LIBOR
corridors were executed in order to provide protection against narrowing of
these spreads. During the first nine months of 1995 there were no
additional prime-LIBOR corridors executed.
Interest rate fluctuations affect net interest income at virtually all
financial institutions. While interest rate volatility does have an effect
on net interest income, other factors also contribute significantly to
changes in net interest income. Specifically, within the credit card
portfolio, pricing decisions and customer behavior regarding convenience
usage affect the yield on the portfolio. These factors may counteract or
exacerbate income changes due to fluctuating interest rates. The Company
closely monitors interest rate movements, competitor pricing and consumer
behavioral changes in its ongoing analysis of net interest income
sensitivity.
DERIVATIVES ACTIVITIES
The Company utilizes derivative financial instruments for the purpose of
managing its interest rate and foreign currency exposure. The Company has a
number of mechanisms in place that enable it to monitor and control both
market and credit risk from these derivatives activities. At the broader
level, all derivatives strategies are managed under the hedging policy
approved by the Board of Directors that details the use of such derivatives
and the individuals authorized to execute derivatives transactions. All
derivatives strategies must be approved by the Company's senior management
(President, Chief Financial Officer and Treasurer).
As part of this approval process, a market risk analysis is completed to
determine the potential impact on the Company from severe negative
(stressed) movements in the market. By policy, derivatives transactions may
only be used to manage the Company's exposure to interest rate and foreign
currency risk and may not be used for speculative purposes. As such, the
impact of any derivatives transaction is calculated using the Company's
asset/liability model to determine its suitability.
Procedures and processes are in place to provide reasonable assurance that
prior to and after the execution of any derivatives strategy, market,
credit and liquidity risks are fully analyzed and incorporated into the
Company's asset/liability and risk measurement models and the proper
accounting treatment for the transaction is identified.
As of September 30, 1995 and December 31, 1994, all of the Company's
derivatives were designated as hedges or synthetic alterations and were
accounted for as such.
<PAGE>
The following table summarizes by notional amounts the Company's derivative
instruments:
September 30, December 31,
1995 1994
Interest rate swaps $ 823,835 $ 459,735
Interest rate options:
Caps written 1,310,000 1,100,000
Caps purchased 220,000 110,000
Corridors/Collars 575,000 425,000
Forward contracts 251,319 39,000
Total notional amount $3,180,154 $2,133,735
The notional amounts of derivatives do not represent amounts exchanged by
the counterparties and, thus, are not a measure of the Company's exposure
through its use of derivatives. The amounts exchanged are determined by
reference to the notional amounts and the other terms of the derivatives
contracts.
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
(a) The Company's Restated Certificate of Incorporation was amended
August 15, 1995 by the filing with the State of Delaware of a Certificate
of Designations, Preferences, Rights and Limitations of the Company's 6
3/4% Convertible Class B Preferred Stock, Series 1995 (Stock Appreciation
Income Linked Securities (SAILS)) (the "SAILS"), authorizing 28,750 shares
of the SAILS. The SAILS rank on a parity with the Company's Class A
Preferred Stock with respect to payment of dividends and distribution of
assets upon liquidation. The SAILS rank senior to the Company's Class A
Common Stock and Class B Common Stock (collectively, the "Common Stock")
and therefore the SAILS are preferred over the Common Stock with respect to
payment of dividends and distribution of assets upon liquidation.
(b) See Item 2(a) above.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following exhibits are being filed with this Report on
Form 10-Q:
Exhibit Number Description of Document
3 Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 4.1
to Pre-Effective Amendment No. 1 to the Company'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 Company's 6 3/4% Convertible
Class B Preferred Stock, Series 1995 (Stock
Appreciation Income Linked Securities (SAILS))
(incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K dated August
15, 1995, filed the same date).
4.1 Specimen of 6 3/4% Convertible Class B Preferred
Stock, Series 1995 (Stock Appreciation Income
Linked Securities (SAILS)) Certificate
(incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K dated August
15, 1995, filed the same date).
4.2 Deposit Agreement, dated as of August 15, 1995,
among Advanta Corp. and Mellon Securities Trust
Company and the Holders from Time to Time of the
Depositary Receipts Described Therein in Respect of
the 6 3/4% Convertible Class B Preferred Stock,
Series 1995 (Stock Appreciation Income Linked
Securities (SAILS))(with form of Depositary Receipt
as an exhibit thereto) (incorporated by reference
to Exhibit 4.10 to the Company's Current Report on
Form 8-K dated August 15, 1995, filed the same
date).
<PAGE>
27 Financial data schedule (incorporated by reference
to Exhibit 27 to the Company's Current Report on
Form 8-K dated October 18, 1995, filed the same
date).
(b) Reports on Form 8-K.
(b)(1) A Current Report on Form 8-K, dated August 15,
1995, was filed by the Company setting forth
certain exhibits to the Company's Registration
Statement on Form S-3 (No. 33-60419) for the
purpose of incorporating such exhibits by reference
into such Registration Statement. No financial
statements were filed as an exhibit to this
Form 8-K.
(b)(2) A Current Report on Form 8-K, dated October 18,
1995, was filed by the Company setting forth the
financial highlights of the Company's results of
operations for the period ended September 30, 1995.
A Financial Data Schedule was included as an exhibit
to this Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereto duly authorized.
Advanta Corp.
(Registrant)
November 10, 1995 By /s/David Wesselink
Senior Vice President and
Chief Financial Officer
November 10, 1995 By /s/John J. Calamari
Vice President, Finance and
Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description
2 Inapplicable.
3 Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit
4.1 to Pre-Effective Amendment No. 1 to the
Company'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
Company's 6 3/4% Convertible Class B Preferred
Stock, Series 1995 (Stock Appreciation Income
Linked Securities (SAILS)) (incorporated by
reference to Exhibit 4.3 to the Company's
Current Report on Form 8-K dated August 15,
1995, filed the same date).
4.1 Specimen of 6 3/4% Convertible Class B
Preferred Stock, Series 1995 (Stock Appreciation
Income Linked Securities (SAILS)) Certificate
(incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K dated
August 15, 1995, filed the same date).
4.2 Deposit Agreement, dated as of August 15, 1995,
among Advanta Corp. and Mellon Securities Trust
Company and the Holders from Time to Time of the
Depositary Receipts Described Therein in Respect
of the 6 3/4% Convertible Class B Preferred Stock,
Series 1995 (Stock Appreciation Income Linked
Securities (SAILS))(with form of Depositary
Receipt as an exhibit thereto) (incorporated
by reference to Exhibit 4.10 to the Company's
Current Report on Form 8-K dated August 15,
1995, filed the same date).
10 Inapplicable.
11 Inapplicable.
15 Inapplicable.
18 Inapplicable.
19 Inapplicable
22 Inapplicable.
23 Inapplicable.
24 Inapplicable.
27 Financial data schedule (incorporated by
reference to Exhibit 27 to the Company's
Current Report on Form 8-K dated October 18,
1995, filed the same date).
99 Inapplicable.
