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Pricing Supplement dated August 2, 2000 Rule #424(b)(3)
(To Prospectus dated April 6, 2000) File No. 333-33136
ADVANTA CORP.
For use only by residents of:
CA, CO, CT, DE, FL, GA, KS, MA, MD, MN, NJ, NY, OR and PA
ADVANTA INVESTMENT NOTES
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
$5,000 - $49,999 $50,000 PLUS
Annual Annual
Percentage Percentage
Term Interest Rate Yield* Interest Rate Yield*
---- ------------- ------ ------------- ------
91 days 8.16% 8.50% 8.16% 8.50%
6 month 9.85% 10.35% 10.08% 10.60%
12 month 10.44% 11.00% 10.66% 11.25%
18 month 10.53% 11.10% 10.75% 11.35%
24 month 10.89% 11.50% 11.11% 11.75%
30 month 10.93% 11.55% 11.15% 11.79%
48 month 10.97% 11.59% 11.20% 11.85%
60 month 11.02% 11.65% 11.24% 11.89%
REDIRESERVE VARIABLE RATE CERTIFICATES**
Annual
Percentage
Tier Interest Rate Yield*
---- ------------- ------
$100 to $4,999 5.25% 5.39%
$5,000 to $24,999 8.25% 8.60%
$25,000 to $49,999 8.50% 8.87%
$50,000 plus 8.75% 9.14%
Minimum Investment $5,000
RECENT DEVELOPMENTS
On August 2, 2000 Advanta Corp. (the "Company" or "Advanta") announced results
for the second quarter of 2000. Pro forma operating income was $16.6 million, or
$0.65 per share on a diluted basis for Class A and Class B shares combined,
reflecting income for Advanta Mortgage
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that is essentially the same as a portfolio lender and excluding carrying value
adjustments made pursuant to agreements with the Office of the Comptroller of
the Currency that were announced on July 31, 2000 and discussed below. While pro
forma operating income for the Company was up 30% year on year before the
carrying value adjustments, the Company reported a net loss for the quarter of
$192.7 million or $7.64 per share. This was largely because Advanta National
Bank ("ANB") recorded a $214 million non-cash charge resulting from a reduction
in the carrying value of its retained interests in mortgage securitizations and
a $22 million non-cash charge reflecting an increase in mortgage loan loss
reserves.
At June 30, 2000, ANB continued to have capital ratios that meet the levels
defined by statute as "well capitalized," and intends to meet increased capital
ratios at September 30, 2000. As announced on June 2, 2000, ANB is restricted
from taking brokered deposits.
On August 2, 2000 the Company also updated its guidance for the second half of
the year 2000. During the second half of the year, the Company expects pro forma
operating earnings per share to be in the range of $0.90-$1.10. This primarily
reflects the impact of the regulatory agreements on the businesses which operate
through the Company's bank subsidiaries. In particular, this reflects lower
mortgage loan originations partially offset by Business Card results. The
modified guidance also reflects that while Business Cards will continue to grow,
the Company does not anticipate maintaining the same levels of Business Card
growth during the second half of the year as it achieved during the first half
of the year. Together with the pro forma operating results of $1.28 through June
30, 2000, the pro forma operating results for the full year are expected to be
in the range of $2.18-$2.38 per diluted share, a 7% to 17% increase from the
$2.04 earned in 1999.
On July 31, 2000, the Company announced that its bank subsidiary, ANB, has
concluded discussions and signed an agreement with the Office of the
Comptroller of the Currency (the "OCC") regarding the carrying value of ANB's
retained interests in mortgage securitizations and allowance for loan losses.
For ANB's June 30 Call Report, the agreement provides that the retained
interests be calculated based on an 18% discount rate on the interest-only
strip ("I/O") and subordinated trust assets, a 15% discount rate on the
contractual mortgage servicing rights ("CMSR"), a prepayment rate that
represents the average prepayment experience for the six months ended February
29, 2000 and cumulative loss rates as a percentage of original principal
balance of 6% on closed end mortgage loans and 8% for HELOC (open end) mortgage
loans. Consistent with the agreement, ANB recorded a $214 million non-cash
charge to reduce the June 30 carrying value of its retained interests in
mortgage securitizations. Also pursuant to the agreement with the OCC, ANB
recorded a $22 million non-cash charge to increase its allowance for loan
losses at June 30, 2000. At June 30, 2000, the carrying value of retained
interests in mortgage securitizations at the Company's other subsidiaries were
calculated using assumptions comparable to those used for ANB pursuant to the
agreement with the OCC. These non-cash adjustments are reflected in results for
the second quarter, as discussed above.
The agreement announced on July 31, 2000 also contains provisions regarding the
use of similar assumptions for the calculation of the carrying value of the
residual assets in future periods. Beginning with the third quarter of 2000, the
agreement requires ANB to maintain its allowance
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for loan losses at a level of at least 5.38% of the unpaid principal balance of
all loans owned by ANB or reported on its books, less any loans held for sale.
On June 2, 2000, the Company announced that its banking subsidiaries, Advanta
National Bank ("ANB") and Advanta Bank Corp. ("ABC"), had each reached
agreements with their respective bank regulatory agencies, primarily relating to
the banks' subprime lending operations. The agreements outline a series of steps
to modify processes, many of which the banks have already begun, and formalize
and document certain practices and procedures for the banks' subprime lending
operations. The agreements establish temporary asset growth limits at ANB and
deposit growth limits at ABC. In addition, the agreements contain restrictions
on taking brokered deposits at ANB and require that ANB maintain its current
capital ratios.
The agreements also provide that the Company change its charge-off policy for
delinquent mortgages to 180 days and modify its accounting processes and
methodology for its allowance for loan losses and valuation of residual assets,
as described more fully below. The Company anticipates that the limitations and
restrictions imposed by the agreements will decrease the Company's mortgage loan
volume.
On May 17, 2000 Advanta Corp. ("Advanta" or the "Company") announced that it
is evaluating strategic alternatives to maximize shareholder value of its
Mortgage and Leasing businesses. Although there are no specific actions
contemplated at this time, these strategic alternatives could include the sale
of, or strategic alliances or partnerships in respect of, all or a portion of
the Company's mortgage loan origination, mortgage servicing or equipment leasing
businesses.
AN OFFER CAN ONLY BE MADE BY THE PROSPECTUS DATED APRIL 6, 2000, IN CONJUNCTION
WITH THIS PRICING SUPPLEMENT. SEE "RISK FACTORS" BEGINNING AT PAGE 7 OF THE
PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE NOTES AND REDIRESERVE CERTIFICATES. THE
NOTES AND REDIRESERVE CERTIFICATES REPRESENT OBLIGATIONS OF ADVANTA CORP. AND
ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY GOVERNMENTAL OR PRIVATE ENTITY.
* The Annual Percentage Yield assumes all interest reinvested daily at the
stated rate.
* The interest rate we pay on any particular RediReserve Certificate depends on
the tier into which the holder's end-of- the-day balance falls. We will not
pay interest on a RediReserve Certificate for any day on which the
end-of-the-day balance is less than $100. Interest rates and annual percentage
yields for each tier may change from week to week and will apply to
outstanding RediReserve Certificates. We currently set the interest rates each
Sunday and they are effective through Saturday. Interest rates for each one
week period, currently commencing on Sunday, will be at least equal to the
rate on the thirteen week U.S. Treasury Bill auctioned on the immediately
preceding Monday less one percent (1%).
FOR MORE INFORMATION CALL
1-800-223-7074
