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Pricing Supplement dated November 5, 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
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
$5,000 - $49,999 $50,000 PLUS
Annual Annual
Percentage Percentage
Term Interest Rate Yield* Interest Rate Yield*
---- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
91 days 8.25% 8.60% 8.25% 8.60%
6 month 10.08% 10.60% 10.30% 10.85%
12 month 10.66% 11.25% 10.89% 11.50%
18 month 10.75% 11.35% 10.97% 11.59%
24 month 11.11% 11.75% 11.33% 11.99%
30 month 11.15% 11.79% 11.38% 12.05%
48 month 11.20% 11.85% 11.42% 12.10%
60 month 11.24% 11.89% 11.47% 12.15%
</TABLE>
REDIRESERVE VARIABLE RATE CERTIFICATES**
<TABLE>
<CAPTION>
Annual
Percentage
Tier Interest Rate Yield*
---- ------------- ------
<S> <C> <C>
$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%
</TABLE>
Minimum Investment $5,000
RECENT DEVELOPMENTS
On October 24, 2000 Advanta Corp. (the "Company" or "Advanta") announced that it
has accepted a proposal to sell its Mortgage business to a major financial
institution in a cash transaction for a price in excess of book value and is
negotiating an agreement with this party.
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Under the terms of the proposal, the Company expects to receive proceeds that
will result in excess liquidity when added to the Company's existing cash and
equivalent position. As a result, the Company intends to use a portion of this
liquidity to pay off all institutional medium term notes currently outstanding.
The Company also intends to seek shareholder approval for the transaction. While
there can be no assurance that a definitive agreement will be reached and a
number of items remain to be negotiated, if the transaction is consummated under
the terms of the proposal, it will result in the sale of virtually all mortgage
assets which represent 33% of owned assets at September 30, 2000.
The Company is also actively pursuing strategic alternatives for its Leasing
business, and indicated that the initial due diligence has been completed with
respect to its leasing business and bids are being solicited from interested
parties.
Advanta also announced its final results for the third quarter of 2000. Net
income for the quarter was $15.7 million, or $0.62 per share on a diluted basis
for Class A and Class B shares combined. Pro forma operating income was
$464,000, or $0.02 per share on a diluted basis for Class A and Class B shares
combined, reflecting income for Advanta Mortgage that is essentially the same as
a portfolio lender. As previously announced, results for the quarter include $23
million of provisions and charges which consist of a charge of approximately $10
million in the leasing business due to continued charge-offs largely
concentrated within certain unprofitable segments of this business from prior
periods; an increase of approximately $10 million in reserve coverage for the
business credit card unit, approximately $6 to $8 million of which strengthened
on-balance sheet reserves and is attributable to a revision of the methodology
for estimating loan losses as a result of recent discussions with the Federal
Deposit Insurance Corporation relating to the implementation of the agreement
between Advanta Bank Corp. and the FDIC that was previously disclosed on June 2,
2000, with the remainder due to the maturing and growth of this portfolio; and a
charge of approximately $3 million in the insurance business relating to a large
policy claim settled during the quarter. Excluding these items, earnings per
share for the third quarter would have been $1.53 per share on a diluted basis
and operating earnings for the third quarter would have been $0.58.
At September 30, 2000, Advanta National Bank ("ANB") was in compliance with the
increased capital ratios required by the agreement with its regulator that was
announced on June 2, 2000. In accordance with its capital management plan, the
Company achieved these ratios through a combination of decreasing the assets at
ANB and making aggregate capital and other investments in ANB of approximately
$70 million.
The Company has pursued aggressive remedial initiatives in the leasing business,
including the addition of experienced leadership to oversee collections. The
Company has also implemented its plan to discontinue lease originations from the
unprofitable segments of the broker channel and improve the yields on new
originations.
On October 24, 2000, the Company also provided a growth outlook for its Business
Card operations for 2001. Next year, Advanta plans to grow its managed business
credit card receivables by 30% to 50%. Guidance for the Company as a whole for
2001 will be provided
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upon the resolution of the strategic alternatives process and will include the
Company's strategy to achieve a targeted efficiency ratio upon the conclusion of
the strategic alternatives process.
On October 9, 2000, the Company announced that it had revised its outlook for
the remainder of the year. Although the Company anticipates moderate improvement
in results for the fourth quarter, it expects pro forma operating results for
the second half of the year will be below its previously announced estimates of
between $0.90-$1.10 per share because it anticipates that the factors impacting
third quarter results for the mortgage and leasing businesses will continue into
the fourth quarter.
In addition, on October 9, 2000, the Company announced that it has received
notice that one of its largest mortgage subservicing clients will move aspects
of its servicing in-house and will terminate its subservicing contract with the
Company effective during the fourth quarter. The Company expects to collect a
termination fee, which will partially offset the financial impact of the
cancellation of this contract.
On August 2, 2000 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
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 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.
On July 31, 2000, the Company announced that its bank subsidiary, ANB, had
concluded discussions and signed an agreement with 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. 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, 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 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 as of September
30, 2000 ANB achieve increased capital ratios. The agreements also required the
Company to change its charge-off policy for delinquent mortgages to 180 days
and, as discussed above, modify its accounting processes and methodology for its
allowance for loan losses and valuation of residual assets.
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
