Exhibit 99.2
| Discover Financial Services | |||||||||||||||||||||||||||
GAAP Basis 1 | |||||||||||||||||||||||||||
| (unaudited, dollars in thousands, except per | |||||||||||||||||||||||||||
| share statistics) | Quarter Ended | Feb 28, 2010 | |||||||||||||||||||||||||
| Feb 28, 2010 | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | vs Feb 28, 2009 | ||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||
| Interest Income | $ | 1,559,150 | $ | 638,086 | $ | 833,217 | $ | 857,984 | $ | 815,793 | $ | 743,357 | 91% | ||||||||||||||
| Interest Expense | 413,724 | 314,158 | 304,401 | 320,005 | 312,720 | 101,004 | 32% | ||||||||||||||||||||
| Net Interest Income | 1,145,426 | 323,928 | 528,816 | 537,979 | 503,073 | 642,353 | 128% | ||||||||||||||||||||
Other Income 2 | 545,876 | 1,253,559 | 1,315,960 | 1,081,120 | 1,189,956 | (644,080 | ) | (54% | ) | ||||||||||||||||||
| Revenue Net of Interest Expense | 1,691,302 | 1,577,487 | 1,844,776 | 1,619,099 | 1,693,029 | (1,727 | ) | (0% | ) | ||||||||||||||||||
| Provision for Loan Losses | 1,387,206 | 399,732 | 380,999 | 643,861 | 937,813 | 449,393 | 48% | ||||||||||||||||||||
| Employee Compensation and Benefits | 195,764 | 191,516 | 208,528 | 208,151 | 219,488 | (23,724 | ) | (11% | ) | ||||||||||||||||||
| Marketing and Business Development | 84,673 | 113,851 | 77,814 | 102,922 | 111,433 | (26,760 | ) | (24% | ) | ||||||||||||||||||
| Information Processing & Communications | 65,418 | 72,192 | 67,679 | 74,441 | 74,897 | (9,479 | ) | (13% | ) | ||||||||||||||||||
| Professional Fees | 75,813 | 92,910 | 83,746 | 74,550 | 70,123 | 5,690 | 8% | ||||||||||||||||||||
| Premises and Equipment | 17,860 | 18,282 | 18,437 | 18,223 | 18,072 | (212 | ) | (1% | ) | ||||||||||||||||||
| Other Expense | 35,276 | 118,748 | 67,634 | 82,341 | 65,110 | (29,834 | ) | (46% | ) | ||||||||||||||||||
| Total Other Expense | 474,804 | 607,499 | 523,838 | 560,628 | 559,123 | (84,319 | ) | (15% | ) | ||||||||||||||||||
Income Before Income Taxes 2 | (170,708 | ) | 570,256 | 939,939 | 414,610 | 196,093 | (366,801 | ) | (187% | ) | |||||||||||||||||
| Tax Expense | (67,170 | ) | 217,719 | 362,485 | 188,810 | 75,699 | (142,869 | ) | (189% | ) | |||||||||||||||||
Net Income 2 | $ | (103,538 | ) | $ | 352,537 | $ | 577,454 | $ | 225,800 | $ | 120,394 | $ | (223,932 | ) | (186% | ) | |||||||||||
Net Income Allocated to Common Stockholders 2, 3 | $ | (122,233 | ) | $ | 330,505 | $ | 552,928 | $ | 206,366 | $ | 118,380 | $ | (240,613 | ) | NM | ||||||||||||
Effective Tax Rate 4 | 39.3% | 38.2% | 38.6% | 45.5% | 38.6% | ||||||||||||||||||||||
| Balance Sheet Statistics | |||||||||||||||||||||||||||
| Total Assets | $ | 66,818,951 | $ | 46,020,987 | $ | 42,698,290 | $ | 41,518,288 | $ | 40,606,518 | $ | 26,212,433 | 65% | ||||||||||||||
Tangible Assets 5 | $ | 66,369,560 | $ | 45,569,930 | $ | 42,245,313 | $ | 41,063,390 | $ | 40,149,699 | $ | 26,219,861 | 65% | ||||||||||||||
| Total Equity | $ | 7,015,048 | $ | 8,435,547 | $ | 8,386,202 | $ | 7,415,640 | $ | 5,999,351 | $ | 1,015,697 | 17% | ||||||||||||||
| Total Common Equity | $ | 5,853,593 | $ | 7,277,481 | $ | 7,231,463 | $ | 6,263,661 | $ | 5,999,351 | $ | (145,758 | ) | (2% | ) | ||||||||||||
| Total Common Equity/Total Assets | 8.8% | 15.8% | 16.9% | 15.1% | 14.8% | ||||||||||||||||||||||
Total Common Equity/Net Loans 6 | 12.8% | 33.3% | 30.6% | 24.6% | 22.9% | ||||||||||||||||||||||
Book Value per share 7 | $ | 12.90 | $ | 15.54 | $ | 15.45 | $ | 15.40 | $ | 12.46 | $ | 0.44 | 4% | ||||||||||||||
ROE 2,8 | (6% | ) | 16% | 28% | 12% | 8% | |||||||||||||||||||||
| Allowance for Loan Loss (period end) | $ | 4,207,360 | $ | 1,757,899 | $ | 1,832,360 | $ | 1,986,473 | $ | 1,878,942 | $ | 2,328,418 | 124% | ||||||||||||||
| Change in Loan Loss Reserves | $ | 305,000 | $ | (74,461 | ) | $ | (154,113 | ) | $ | 107,531 | $ | 504,357 | $ | (199,357 | ) | (40% | ) | ||||||||||
Reserve Rate 9 | 8.40% | 7.44% | 7.19% | 7.24% | 6.70% | 170 | bps | ||||||||||||||||||||
| Per Share Statistics | |||||||||||||||||||||||||||
Basic EPS 2, 10 | $ | (0.22 | ) | $ | 0.61 | $ | 1.08 | $ | 0.43 | $ | 0.25 | $ | (0.47 | ) | (189% | ) | |||||||||||
Diluted EPS 2, 10 | $ | (0.22 | ) | $ | 0.60 | $ | 1.07 | $ | 0.43 | $ | 0.25 | $ | (0.47 | ) | (189% | ) | |||||||||||
| Common Stock Price (period end) | $ | 13.65 | $ | 15.46 | $ | 13.75 | $ | 9.56 | $ | 5.73 | $ | 7.92 | 138% | ||||||||||||||
| Ending Common Shares Outstanding (000's) | 543,777 | 542,922 | 542,749 | 481,676 | 481,459 | 62,318 | 13% | ||||||||||||||||||||
| Weighted Average Common Shares Outstanding (000's) | 543,422 | 542,826 | 513,098 | 481,636 | 480,497 | 62,925 | 13% | ||||||||||||||||||||
| Weighted Average Common Shares Outstanding (fully diluted) (000's) | 543,422 | 551,343 | 517,050 | 481,636 | 480,497 | 62,925 | 13% | ||||||||||||||||||||
| Loan Receivables | |||||||||||||||||||||||||||
| Total Loans | $ | 50,093,516 | $ | 23,625,084 | $ | 25,489,809 | $ | 27,441,514 | $ | 28,034,208 | 22,059,308 | 79% | |||||||||||||||
| Average Total Loans | $ | 51,555,460 | $ | 23,835,598 | $ | 26,380,203 | $ | 28,257,484 | $ | 27,733,143 | 23,822,317 | 86% | |||||||||||||||
Interest Yield 11 | 12.15% | 10.25% | 12.10% | 11.54% | 11.24% | 91 | bps | ||||||||||||||||||||
Net Principal Charge-off Rate 12 | 8.51% | 7.98% | 8.05% | 7.53% | 6.34% | 217 | bps | ||||||||||||||||||||
Delinquency Rate (over 30 days) 13 | 5.05% | 4.92% | 4.86% | 4.87% | 5.04% | 1 | bps | ||||||||||||||||||||
Delinquency Rate (over 90 days) 14 | 2.77% | 2.58% | 2.46% | 2.60% | 2.57% | 20 | bps | ||||||||||||||||||||
| Transactions Processed on Networks (000's) | |||||||||||||||||||||||||||
| Discover Network | 381,562 | 387,350 | 390,643 | 366,315 | 369,647 | 11,915 | 3% | ||||||||||||||||||||
| PULSE Network | 719,906 | 676,817 | 753,201 | 762,175 | 686,527 | 33,379 | 5% | ||||||||||||||||||||
| Total | 1,101,468 | 1,064,167 | 1,143,844 | 1,128,490 | 1,056,174 | 45,294 | 4% | ||||||||||||||||||||
| Volume | |||||||||||||||||||||||||||
| PULSE Network | $ | 27,617,635 | $ | 24,667,926 | $ | 28,051,978 | $ | 29,128,044 | $ | 27,454,173 | $ | 163,462 | 1% | ||||||||||||||
| Third-Party Issuers | 1,561,929 | 1,522,269 | 1,446,308 | 1,340,532 | 1,362,446 | 199,483 | 15% | ||||||||||||||||||||
Diners Club International 15 | 6,554,504 | 7,172,809 | 6,465,990 | 6,240,604 | 6,293,574 | 260,930 | 4% | ||||||||||||||||||||
Total Payment Services 16 | 35,734,068 | 33,363,004 | 35,964,276 | 36,709,180 | 35,110,193 | 623,875 | 2% | ||||||||||||||||||||
Discover Network - Proprietary 17 | 23,172,534 | 22,712,600 | 23,579,434 | 21,972,596 | 22,424,367 | 748,167 | 3% | ||||||||||||||||||||
| Total | $ | 58,906,602 | $ | 56,075,604 | $ | 59,543,710 | $ | 58,681,776 | $ | 57,534,560 | $ | 1,372,042 | 2% | ||||||||||||||
| Discover Financial Services | |||||||||||||||||||||||||||
| As Adjusted Basis (for 2009 data) | |||||||||||||||||||||||||||
| (unaudited, dollars in thousands, except per | |||||||||||||||||||||||||||
share statistics) | Quarter Ended | Feb 28, 2010 | |||||||||||||||||||||||||
| Feb 28, 2010 | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | vs Feb 28, 2009 | ||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||
| Interest Income | $ | 1,559,150 | $ | 1,576,442 | $ | 1,660,787 | $ | 1,595,066 | $ | 1,602,857 | $ | (43,707 | ) | (3% | ) | ||||||||||||
| Interest Expense | 413,724 | 393,160 | 382,238 | 403,219 | 426,882 | (13,158 | ) | (3% | ) | ||||||||||||||||||
| Net Interest Income | 1,145,426 | 1,183,282 | 1,278,549 | 1,191,847 | 1,175,975 | (30,549 | ) | (3% | ) | ||||||||||||||||||
| Other Income | 545,876 | 550,229 | 575,717 | 513,260 | 546,858 | (982 | ) | (0% | ) | ||||||||||||||||||
| Revenue Net of Interest Expense | 1,691,302 | 1,733,511 | 1,854,266 | 1,705,107 | 1,722,833 | (31,531 | ) | (2% | ) | ||||||||||||||||||
| Provision for Loan Losses | 1,387,206 | 1,258,261 | 1,085,209 | 1,302,476 | 1,477,084 | (89,878 | ) | (6% | ) | ||||||||||||||||||
| Employee Compensation and Benefits | 195,764 | 191,516 | 208,528 | 208,151 | 219,488 | (23,724 | ) | (11% | ) | ||||||||||||||||||
| Marketing and Business Development | 84,673 | 113,851 | 77,814 | 102,922 | 111,433 | (26,760 | ) | (24% | ) | ||||||||||||||||||
| Information Processing & Communications | 65,418 | 72,192 | 67,679 | 74,441 | 74,897 | (9,479 | ) | (13% | ) | ||||||||||||||||||
| Professional Fees | 75,813 | 92,910 | 83,746 | 74,550 | 70,123 | 5,690 | 8% | ||||||||||||||||||||
| Premises and Equipment | 17,860 | 18,282 | 18,437 | 18,223 | 18,072 | (212 | ) | (1% | ) | ||||||||||||||||||
| Other Expense | 35,276 | 89,756 | 67,634 | 82,341 | 65,110 | (29,834 | ) | (46% | ) | ||||||||||||||||||
| Total Other Expense | 474,804 | 578,507 | 523,838 | 560,628 | 559,123 | (84,319 | ) | (15% | ) | ||||||||||||||||||
| Income Before Income Taxes | (170,708 | ) | (103,257 | ) | 245,219 | (157,997 | ) | (313,374 | ) | 142,666 | 46% | ||||||||||||||||
| Tax Expense | (67,170 | ) | (44,037 | ) | 94,655 | (25,697 | ) | (117,046 | ) | 49,876 | 43% | ||||||||||||||||
| Net Income | $ | (103,538 | ) | $ | (59,220 | ) | $ | 150,564 | $ | (132,300 | ) | $ | (196,328 | ) | $ | 92,790 | 47% | ||||||||||
Net Income Allocated to Common Stockholders 3 | $ | (122,233 | ) | $ | (77,855 | ) | $ | 130,954 | $ | (148,854 | ) | $ | (196,328 | ) | $ | 74,095 | 38% | ||||||||||
Effective Tax Rate 4 | 39.3% | 42.6% | 38.6% | 16.3% | 37.4% | ||||||||||||||||||||||
| Balance Sheet Statistics | |||||||||||||||||||||||||||
| Total Assets | $ | 66,818,951 | $ | 67,116,359 | $ | 63,929,520 | $ | 62,796,303 | $ | 61,242,736 | $ | 5,576,215 | 9% | ||||||||||||||
Tangible Assets 5 | $ | 66,369,560 | $ | 66,665,302 | $ | 63,476,543 | $ | 62,341,405 | $ | 60,785,917 | $ | 5,583,643 | 9% | ||||||||||||||
| Total Equity | $ | 7,015,048 | $ | 7,102,991 | $ | 7,148,275 | $ | 6,344,804 | $ | 4,990,974 | $ | 2,024,074 | 41% | ||||||||||||||
| Total Common Equity | $ | 5,853,593 | $ | 5,944,925 | $ | 5,993,536 | $ | 5,192,826 | $ | 4,990,974 | $ | 862,619 | 17% | ||||||||||||||
Tangible Common Equity 18 | $ | 5,404,202 | $ | 5,493,868 | $ | 5,540,559 | $ | 4,737,928 | $ | 4,534,155 | $ | 870,047 | 19% | ||||||||||||||
Tangible Common Equity/Tangible Assets 18, 19 | 8.1% | 8.2% | 8.7% | 7.6% | 7.5% | ||||||||||||||||||||||
Tangible Common Equity/Net Loans 6, 18, 20 | 11.8% | 11.7% | 11.7% | 10.0% | 9.6% | ||||||||||||||||||||||
Tangible Common Equity per share 18, 21 | $ | 9.94 | $ | 10.12 | $ | 10.21 | $ | 9.84 | $ | 9.42 | $ | 0.52 | 6% | ||||||||||||||
ROE 8 | (6% | ) | (3% | ) | 9% | (8% | ) | (15% | ) | ||||||||||||||||||
Net Yield on Loan Receivables 22 | 9.01% | 9.38% | 9.95% | 9.25% | 9.20% | (19 | ) | bps | |||||||||||||||||||
Return on Loan Receivables 23 | (0.81% | ) | (0.47% | ) | 1.17% | (1.03% | ) | (1.54% | ) | 73 | bps | ||||||||||||||||
| Allowance for Loan Loss (period end) | $ | 4,207,360 | $ | 3,902,360 | $ | 3,707,571 | $ | 3,700,901 | $ | 3,402,126 | $ | 805,234 | 24% | ||||||||||||||
| Change in Loan Loss Reserves | $ | 305,000 | $ | 194,789 | $ | 6,670 | $ | 298,775 | $ | 647,769 | $ | (342,769 | ) | (53% | ) | ||||||||||||
Reserve Rate 9 | 8.40% | 7.67% | 7.28% | 7.25% | 6.69% | 171 | bps | ||||||||||||||||||||
Reserve Rate (excluding guaranteed student loans) 24 | 8.73% | 7.87% | 7.41% | 7.32% | 6.73% | 200 | bps | ||||||||||||||||||||
| Per Share Statistics | |||||||||||||||||||||||||||
Basic EPS 10 | $ | (0.22 | ) | $ | (0.14 | ) | $ | 0.26 | $ | (0.31 | ) | $ | (0.41 | ) | $ | 0.19 | 46% | ||||||||||
Diluted EPS 10 | $ | (0.22 | ) | $ | (0.14 | ) | $ | 0.25 | $ | (0.31 | ) | $ | (0.41 | ) | $ | 0.19 | 46% | ||||||||||
| Common Stock Price (period end) | $ | 13.65 | $ | 15.46 | $ | 13.75 | $ | 9.56 | $ | 5.73 | $ | 7.92 | 138% | ||||||||||||||
| Ending Common Shares Outstanding (000's) | 543,777 | 542,922 | 542,749 | 481,676 | 481,459 | 62,318 | 13% | ||||||||||||||||||||
| Weighted Average Common Shares Outstanding (000's) | 543,422 | 542,826 | 513,098 | 481,636 | 480,497 | 62,925 | 13% | ||||||||||||||||||||
| Weighted Average Common Shares Outstanding (fully diluted) (000's) | 543,422 | 542,826 | 517,050 | 481,636 | 480,497 | 62,925 | 13% | ||||||||||||||||||||
| Loan Receivables | |||||||||||||||||||||||||||
| Total Loans | $ | 50,093,516 | $ | 50,854,146 | $ | 50,896,596 | $ | 51,017,887 | $ | 50,875,614 | (782,098 | ) | (2% | ) | |||||||||||||
| Average Total Loans | $ | 51,555,460 | $ | 50,585,332 | $ | 50,957,954 | $ | 51,120,498 | $ | 51,866,776 | (311,316 | ) | (1% | ) | |||||||||||||
Interest Yield 11 | 12.15% | 12.35% | 12.79% | 12.18% | 12.26% | (11 | ) | bps | |||||||||||||||||||
Net Principal Charge-off Rate 12 | 8.51% | 8.43% | 8.40% | 7.79% | 6.48% | 203 | bps | ||||||||||||||||||||
Delinquency Rate (over 30 days) 13 | 5.05% | 5.31% | 5.11% | 5.08% | 5.26% | (21 | ) | bps | |||||||||||||||||||
Delinquency Rate (over 90 days) 14 | 2.77% | 2.78% | 2.60% | 2.73% | 2.69% | 8 | bps | ||||||||||||||||||||
| Segment - Income Before Income Taxes | |||||||||||||||||||||||||||
Direct Banking 25 | $ | (207,665 | ) | $ | (127,028 | ) | $ | 218,080 | $ | (184,705 | ) | $ | (342,300 | ) | $ | 134,635 | 39% | ||||||||||
Payment Services 16 | 36,957 | 23,771 | 27,139 | 26,708 | 28,926 | 8,031 | 28% | ||||||||||||||||||||
| Total | $ | (170,708 | ) | $ | (103,257 | ) | $ | 245,219 | $ | (157,997 | ) | $ | (313,374 | ) | $ | 142,666 | 46% | ||||||||||
Note: As adjusted basis (non-GAAP) data is presented to show how the Company's financial data would be presented for each of the fiscal quarters in the year ended November 30, 2009 if the trusts used in the Company’s securitization activities were consolidated into the Company’s financial statements for such periods. As adjusted income statement data also excludes the impact of income received in connection with the settlement of the Company's antitrust litigation with Visa and MasterCard in each quarter of 2009 and the income statement impact of the Morgan Stanley special dividend agreement dispute in the fourth quarter of 2009. For reconciliation of comparable GAAP measures see Reconciliatio n of GAAP to As Adjusted data.
| Discover Financial Services | |||||||||||||||||||||||||||
Direct Banking Segment 25 | |||||||||||||||||||||||||||
Managed Basis 26 | |||||||||||||||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||||||||||||||
| Quarter Ended | Feb 28, 2010 | ||||||||||||||||||||||||||
| Feb 28, 2010 | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | vs Feb 28, 2009 | ||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||
| Interest Income | $ | 1,559,147 | $ | 1,585,612 | $ | 1,663,886 | $ | 1,607,114 | $ | 1,603,362 | $ | (44,215 | ) | (3% | ) | ||||||||||||
| Interest Expense | 413,686 | 403,266 | 392,592 | 414,002 | 438,338 | (24,652 | ) | (6% | ) | ||||||||||||||||||
| Net Interest Income | 1,145,461 | 1,182,346 | 1,271,294 | 1,193,112 | 1,165,024 | (19,563 | ) | (2% | ) | ||||||||||||||||||
| Other Income | 480,341 | 924,499 | 1,055,529 | 834,630 | 863,223 | (382,882 | ) | (44% | ) | ||||||||||||||||||
| Revenue Net of Interest Expense | 1,625,802 | 2,106,845 | 2,326,823 | 2,027,742 | 2,028,247 | (402,445 | ) | (20% | ) | ||||||||||||||||||
| Provision for Loan Losses | 1,387,206 | 989,009 | 924,427 | 1,111,232 | 1,333,673 | 53,533 | 4% | ||||||||||||||||||||
| Total Other Expense | 446,261 | 571,351 | 489,596 | 528,608 | 527,407 | (81,146 | ) | (15% | ) | ||||||||||||||||||
| Income Before Income Taxes | $ | (207,665 | ) | $ | 546,485 | $ | 912,800 | $ | 387,902 | $ | 167,167 | $ | (374,832 | ) | NM | ||||||||||||
Net Yield on Loan Receivables 22 | 9.01% | 9.37% | 9.90% | 9.26% | 9.11% | (10 | ) | bps | |||||||||||||||||||
Pretax Return on Loan Receivables 27 | (1.63% | ) | 4.33% | 7.10% | 3.01% | 1.31% | (294 | ) | bps | ||||||||||||||||||
| Loan Receivables | |||||||||||||||||||||||||||
| Total Loans | $ | 50,093,516 | $ | 50,860,372 | $ | 50,903,845 | $ | 51,032,382 | $ | 50,888,704 | $ | (795,188 | ) | (2% | ) | ||||||||||||
| Average Total Loans | $ | 51,555,460 | $ | 50,590,846 | $ | 50,971,056 | $ | 51,132,761 | $ | 51,877,845 | $ | (322,385 | ) | (1% | ) | ||||||||||||
Interest Yield 11 | 12.15% | 12.34% | 12.73% | 12.19% | 12.17% | (2 | ) | bps | |||||||||||||||||||
Net Principal Charge-off Rate 12 | 8.51% | 8.43% | 8.39% | 7.79% | 6.48% | 203 | bps | ||||||||||||||||||||
Delinquency Rate (over 30 days) 13 | 5.05% | 5.31% | 5.10% | 5.08% | 5.25% | (20 | ) | bps | |||||||||||||||||||
Delinquency Rate (over 90 days) 14 | 2.77% | 2.78% | 2.60% | 2.73% | 2.69% | 8 | bps | ||||||||||||||||||||
| Credit Card Loans | |||||||||||||||||||||||||||
| Credit Card Loans | $ | 45,761,239 | $ | 47,465,590 | $ | 48,135,639 | $ | 48,903,632 | $ | 49,011,177 | $ | (3,249,938 | ) | (7% | ) | ||||||||||||
| Average Credit Card Loans | $ | 47,646,479 | $ | 47,429,775 | $ | 48,641,890 | $ | 49,108,321 | $ | 50,254,235 | $ | (2,607,756 | ) | (5% | ) | ||||||||||||
Interest Yield 11 | 12.70% | 12.75% | 12.99% | 12.37% | 12.28% | 42 | bps | ||||||||||||||||||||
Net Principal Charge-off Rate 12 | 9.00% | 8.81% | 8.63% | 7.99% | 6.61% | 239 | bps | ||||||||||||||||||||
Delinquency Rate (over 30 days) 13 | 5.39% | 5.60% | 5.31% | 5.23% | 5.41% | (2 | ) | bps | |||||||||||||||||||
Delinquency Rate (over 90 days) 14 | 2.98% | 2.94% | 2.72% | 2.82% | 2.78% | 20 | bps | ||||||||||||||||||||
| Total Discover Card Volume | $ | 23,844,456 | $ | 23,335,440 | $ | 23,955,402 | $ | 24,336,751 | $ | 23,964,577 | $ | (120,121 | ) | (1% | ) | ||||||||||||
| Discover Card Sales Volume | $ | 22,399,675 | $ | 21,903,694 | $ | 22,768,927 | $ | 21,494,174 | $ | 21,293,757 | $ | 1,105,918 | 5% | ||||||||||||||
| Discover Financial Services | |||||||||||||||||||||||||||
Direct Banking Segment 25 | |||||||||||||||||||||||||||
| As Adjusted Basis (for 2009 data) | |||||||||||||||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||||||||||||||
| Quarter Ended | Feb 28, 2010 | ||||||||||||||||||||||||||
| Feb 28, 2010 | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | vs Feb 28, 2009 | ||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||
| Interest Income | $ | 1,559,147 | $ | 1,576,364 | $ | 1,660,592 | $ | 1,594,728 | $ | 1,602,370 | $ | (43,223 | ) | (3% | ) | ||||||||||||
| Interest Expense | 413,686 | 393,128 | 382,188 | 403,158 | 426,803 | (13,117 | ) | (3% | ) | ||||||||||||||||||
| Net Interest Income | 1,145,461 | 1,183,236 | 1,278,404 | 1,191,570 | 1,175,567 | (30,106 | ) | (3% | ) | ||||||||||||||||||
| Other Income | 480,341 | 490,356 | 514,481 | 454,809 | 486,624 | (6,283 | ) | (1% | ) | ||||||||||||||||||
| Revenue Net of Interest Expense | 1,625,802 | 1,673,592 | 1,792,885 | 1,646,379 | 1,662,191 | (36,389 | ) | (2% | ) | ||||||||||||||||||
| Provision for Loan Losses | 1,387,206 | 1,258,261 | 1,085,209 | 1,302,476 | 1,477,084 | (89,878 | ) | (6% | ) | ||||||||||||||||||
| Total Other Expense | 446,261 | 542,359 | 489,596 | 528,608 | 527,407 | (81,146 | ) | (15% | ) | ||||||||||||||||||
| Income Before Income Taxes | $ | (207,665 | ) | $ | (127,028 | ) | $ | 218,080 | $ | (184,705 | ) | $ | (342,300 | ) | $ | 134,635 | 39% | ||||||||||
Net Yield on Loan Receivables 22 | 9.01% | 9.38% | 9.95% | 9.25% | 9.19% | (18 | ) | bps | |||||||||||||||||||
Pretax Return on Loan Receivables 27 | (1.63% | ) | (1.01% | ) | 1.70% | (1.43% | ) | (2.68% | ) | 105 | bps | ||||||||||||||||
| Loan Receivables | |||||||||||||||||||||||||||
| Total Loans | $ | 50,093,516 | $ | 50,854,146 | $ | 50,896,596 | $ | 51,017,887 | $ | 50,875,614 | $ | (782,098 | ) | (2% | ) | ||||||||||||
| Average Total Loans | $ | 51,555,460 | $ | 50,585,332 | $ | 50,957,954 | $ | 51,120,498 | $ | 51,866,776 | $ | (311,316 | ) | (1% | ) | ||||||||||||
Interest Yield 11 | 12.15% | 12.35% | 12.79% | 12.18% | 12.26% | (11 | ) | bps | |||||||||||||||||||
Net Principal Charge-off Rate 12 | 8.51% | 8.43% | 8.40% | 7.79% | 6.48% | 203 | bps | ||||||||||||||||||||
Delinquency Rate (over 30 days) 13 | 5.05% | 5.31% | 5.11% | 5.08% | 5.26% | (21 | ) | bps | |||||||||||||||||||
Delinquency Rate (over 90 days) 14 | 2.77% | 2.78% | 2.60% | 2.73% | 2.69% | 8 | bps | ||||||||||||||||||||
| Credit Card Loans | |||||||||||||||||||||||||||
| Credit Card Loans | $ | 45,761,239 | $ | 47,459,364 | $ | 48,128,390 | $ | 48,889,136 | $ | 48,998,087 | $ | (3,236,848 | ) | (7% | ) | ||||||||||||
| Average Credit Card Loans | $ | 47,646,479 | $ | 47,424,261 | $ | 48,628,789 | $ | 49,096,058 | $ | 50,243,166 | $ | (2,596,687 | ) | (5% | ) | ||||||||||||
Interest Yield 11 | 12.70% | 12.76% | 13.05% | 12.36% | 12.37% | 33 | bps | ||||||||||||||||||||
Net Principal Charge-off Rate 12 | 9.00% | 8.81% | 8.63% | 7.99% | 6.62% | 238 | bps | ||||||||||||||||||||
Delinquency Rate (over 30 days) 13 | 5.39% | 5.60% | 5.31% | 5.23% | 5.41% | (2 | ) | bps | |||||||||||||||||||
Delinquency Rate (over 90 days) 14 | 2.98% | 2.94% | 2.72% | 2.82% | 2.78% | 20 | bps | ||||||||||||||||||||
| Total Discover Card Volume | $ | 23,844,456 | $ | 23,335,440 | $ | 23,955,402 | $ | 24,336,751 | $ | 23,964,577 | $ | (120,121 | ) | (1% | ) | ||||||||||||
| Discover Card Sales Volume | $ | 22,399,675 | $ | 21,903,694 | $ | 22,768,927 | $ | 21,494,174 | $ | 21,293,757 | $ | 1,105,918 | 5% | ||||||||||||||
Note: As adjusted basis (non-GAAP) data is presented to show how the Company's financial data would be presented for each of the fiscal quarters in the year ended November 30, 2009 if the trusts used in the Company’s securitization activities were consolidated into the Company’s financial statements for such periods. As adjusted income statement data also excludes the impact of income received in connection with the settlement of the Company's antitrust litigation with Visa and MasterCard in each quarter of 2009 and the income statement impact of the Morgan Stanley special dividend agreement dispute in t he fourth quarter of 2009. For reconciliation of comparable GAAP measures see Reconciliation of GAAP to As Adjusted data.
| Discover Financial Services | |||||||||||||||||||||||||||
Payment Services Segment 16 | |||||||||||||||||||||||||||
| (unaudited, dollars in thousands) | |||||||||||||||||||||||||||
| Quarter Ended | Feb 28, 2010 | ||||||||||||||||||||||||||
| Feb 28, 2010 | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | vs Feb 28, 2009 | ||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||
| Interest Income | $ | 3 | $ | 78 | $ | 195 | $ | 338 | $ | 487 | $ | (484 | ) | (99% | ) | ||||||||||||
| Interest Expense | 38 | 32 | 50 | 61 | 79 | (41 | ) | (52% | ) | ||||||||||||||||||
| Net Interest Income | (35 | ) | 46 | 145 | 277 | 408 | (443 | ) | (109% | ) | |||||||||||||||||
| Other Income | 65,535 | 59,873 | 61,236 | 58,451 | 60,234 | 5,301 | 9% | ||||||||||||||||||||
| Revenue Net of Interest Expense | 65,500 | 59,919 | 61,381 | 58,728 | 60,642 | 4,858 | 8% | ||||||||||||||||||||
| Provision for Loan Losses | - | - | - | - | - | - | NM | ||||||||||||||||||||
| Total Other Expense | 28,543 | 36,148 | 34,242 | 32,020 | 31,716 | (3,173 | ) | (10% | ) | ||||||||||||||||||
| Income Before Income Taxes | $ | 36,957 | $ | 23,771 | $ | 27,139 | $ | 26,708 | $ | 28,926 | $ | 8,031 | 28% | ||||||||||||||
| Volume | |||||||||||||||||||||||||||
| PULSE Network | $ | 27,617,635 | $ | 24,667,926 | $ | 28,051,978 | $ | 29,128,044 | $ | 27,454,173 | $ | 163,462 | 1% | ||||||||||||||
| Third-Party Issuers | 1,561,929 | 1,522,269 | 1,446,308 | 1,340,532 | 1,362,446 | 199,483 | 15% | ||||||||||||||||||||
Diners Club International 15 | 6,554,504 | 7,172,809 | 6,465,990 | 6,240,604 | 6,293,574 | 260,930 | 4% | ||||||||||||||||||||
Total Payment Services 16 | $ | 35,734,068 | $ | 33,363,004 | $ | 35,964,276 | $ | 36,709,180 | $ | 35,110,193 | $ | 623,875 | 2% | ||||||||||||||
| Transactions Processed on PULSE Network (000's) | 719,906 | 676,817 | 753,201 | 762,175 | 686,527 | 33,379 | 5% | ||||||||||||||||||||
DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO AS ADJUSTED DATA
The following pages present a reconciliation for certain information disclosed in the financial data supplement.
The trusts used in the securitization activities of Discover Financial Services (the "Company") are included in the Company's consolidated financial results beginning with the fiscal quarter ending February 28, 2010, in accordance with the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140 ("Statement No. 166") (codifi ed under the FASB Accounting Standards Codification ("ASC") Section 860, Transfers and Servicing ) and Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretations No. 46(R) ("Statement No. 167") (codified under ASC Section 810, Consolidation ), which were effective for the Company at the beginning of its current fiscal year, December 1, 2009.
The Company did not retrospectively adopt Statements No. 166 and 167 and, therefore, financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for 2010 and beyond will reflect the new accounting requirements, but the historical GAAP financial statements for periods ending on or before November 30, 2009 will continue to reflect the accounting applicable prior to the Company’s adoption of Statem ents No. 166 and 167.
To allow for a more meaningful historical comparison in analyzing financial data presented in 2010 and beyond, the Company has prepared financial statements showing how the Company's financial data would have been presented if the trusts used in the Company's securitization activities were consolidated into the Company's financial statements for such periods. In preparing the financial statements, the Company made securitization and as a djusted adjustments for each period. Securitization adjustments reverse the effect of loan securitization by recharacterizing securitization income to report interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues in the same lines as non-securitized loans. As adjusted adjustments include additional amounts necessary to reflect results as if the trusts used in our securitization activities had been fully consolidated in our historical results and adjustments to exclude the impact of income received in connection with the settlement of the Company's antitru st litigation with Visa and MasterCard in each quarter of 2009 and the income statement impact of the Morgan Stanley special dividend agreement dispute in the fourth quarter of 2009.
Tangible common equity ("TCE"), a non-GAAP financial measure, represents common equity less goodwill and intangibles. A reconcilation of TCE to common equity, a GAAP financial measure, is shown on the pages that follow. Other financial services companies may also use TCE and definitions may vary, so we advise users of this information to exercise caution in comparing TCE of different companies. TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful valuation to investors of the true net asset value of the company.
Reserve rate (excluding guaranteed student loans), a non-GAAP financial measure, represents the allowance for loan losses as a percentage of total loans excluding guaranteed student loans. A reconciliation of total loans, a GAAP financial measure, to loans excluding the guaranteed portion of student loans is shown on the pages that follow. A portion of the Company's student loans are 97% guaranteed by the federal government under the Federal Family Education Loan Program. These guaranteed student loans carry little default risk and therefore, are reserved at a significantly lower rate than the remaining portfolio. Management believes that a reserve rate excluding the government guaranteed portion of student loans is a more meaningful valuation to investors of the portion of the portfolio that has a risk of loss.
| Discover Financial Services | ||||||||||||||||||||
| Reconciliation of GAAP to As Adjusted Data | ||||||||||||||||||||
(unaudited, dollars in thousands, except per share statistics) | ||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||
| Feb 28, 2010 | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | ||||||||||||||||
| GAAP Total Common Equity | $ | 5,853,593 | $ | 7,277,481 | $ | 7,231,463 | $ | 6,263,661 | $ | 5,999,351 | ||||||||||
As Adjusted Adjustments 28 | 0 | (1,332,556 | ) | (1,237,927 | ) | (1,070,835 | ) | (1,008,377 | ) | |||||||||||
| As Adjusted Total Common Equity | 5,853,593 | 5,944,925 | 5,993,536 | 5,192,826 | 4,990,974 | |||||||||||||||
| Less: Goodwill | (255,421 | ) | (255,421 | ) | (255,421 | ) | (255,421 | ) | (255,421 | ) | ||||||||||
| Less: Intangibles | (193,970 | ) | (195,636 | ) | (197,556 | ) | (199,477 | ) | (201,398 | ) | ||||||||||
| As Adjusted Tangible Common Equity | $ | 5,404,202 | $ | 5,493,868 | $ | 5,540,559 | $ | 4,737,928 | $ | 4,534,155 | ||||||||||
| GAAP Book Value per share | $ | 12.90 | $ | 15.54 | $ | 15.45 | $ | 15.40 | $ | 12.46 | ||||||||||
| Less: As Adjusted Adjustment | 0.00 | (2.45 | ) | (2.28 | ) | (2.22 | ) | (2.09 | ) | |||||||||||
| As Adjusted Book Value per share | 12.90 | 13.09 | 13.17 | 13.18 | 10.37 | |||||||||||||||
| Less: Goodwill | (0.47 | ) | (0.47 | ) | (0.47 | ) | (0.53 | ) | (0.53 | ) | ||||||||||
| Less: Intangibles | (0.36 | ) | (0.36 | ) | (0.36 | ) | (0.41 | ) | (0.42 | ) | ||||||||||
| Less: Preferred Stock | (2.14 | ) | (2.13 | ) | (2.13 | ) | (2.39 | ) | 0.00 | |||||||||||
| As Adjusted Tangible Common Equity per share | $ | 9.94 | $ | 10.12 | $ | 10.21 | $ | 9.84 | $ | 9.42 | ||||||||||
| GAAP Total Loans | $ | 50,093,516 | $ | 23,625,084 | $ | 25,489,809 | $ | 27,441,514 | $ | 28,034,208 | ||||||||||
Securitization Adjustments 29 | NA | 27,235,288 | 25,414,036 | 23,590,868 | 22,854,496 | |||||||||||||||
| Managed Basis | 50,093,516 | 50,860,372 | 50,903,845 | 51,032,382 | 50,888,704 | |||||||||||||||
| As Adjusted Adjustments | 0 | (6,226 | ) | (7,249 | ) | (14,495 | ) | (13,090 | ) | |||||||||||
| As Adjusted Total Loans | 50,093,516 | 50,854,146 | 50,896,596 | 51,017,887 | 50,875,614 | |||||||||||||||
| Less: Guaranteed portion of student loans | (1,910,889 | ) | (1,274,453 | ) | (889,963 | ) | (448,648 | ) | (334,847 | ) | ||||||||||
| As Adjusted Total Loans Less: Guaranteed portion of student loans | $ | 48,182,627 | $ | 49,579,693 | $ | 50,006,633 | $ | 50,569,239 | $ | 50,540,767 | ||||||||||
| Reserve Rate | ||||||||||||||||||||
| GAAP Basis | 8.40% | 7.44% | 7.19% | 7.24% | 6.70% | |||||||||||||||
Adjustments 30 | 0.00% | 0.23% | 0.09% | 0.01% | (0.01% | ) | ||||||||||||||
| As Adjusted | 8.40% | 7.67% | 7.28% | 7.25% | 6.69% | |||||||||||||||
| Adjustments (to exclude guaranteed student loans) | 0.33% | 0.20% | 0.13% | 0.07% | 0.04% | |||||||||||||||
| As Adjusted (excluding guaranteed student loans) | 8.73% | 7.87% | 7.41% | 7.32% | 6.73% | |||||||||||||||
| Total Company | ||||||||||||||||||||
| Interest Income | ||||||||||||||||||||
| GAAP Basis | $ | 638,086 | $ | 833,217 | $ | 857,984 | $ | 815,793 | ||||||||||||
| Securitization Adjustments | 947,604 | 830,864 | 749,468 | 788,056 | ||||||||||||||||
| Managed Basis | 1,585,690 | 1,664,081 | 1,607,452 | 1,603,849 | ||||||||||||||||
| As Adjusted Adjustments | (9,248 | ) | (3,294 | ) | (12,386 | ) | (992 | ) | ||||||||||||
| As Adjusted | $ | 1,576,442 | $ | 1,660,787 | $ | 1,595,066 | $ | 1,602,857 | ||||||||||||
| Interest Expense | ||||||||||||||||||||
| GAAP Basis | $ | 314,158 | $ | 304,401 | $ | 320,005 | $ | 312,720 | ||||||||||||
| Securitization Adjustments | 89,140 | 88,241 | 94,058 | 125,697 | ||||||||||||||||
| Managed Basis | 403,298 | 392,642 | 414,063 | 438,417 | ||||||||||||||||
| As Adjusted Adjustments | (10,138 | ) | (10,404 | ) | (10,844 | ) | (11,535 | ) | ||||||||||||
| As Adjusted | $ | 393,160 | $ | 382,238 | $ | 403,219 | $ | 426,882 | ||||||||||||
| Net Interest Income | ||||||||||||||||||||
| GAAP Basis | $ | 323,928 | $ | 528,816 | $ | 537,979 | $ | 503,073 | ||||||||||||
| Securitization Adjustments | 858,464 | 742,623 | 655,410 | 662,359 | ||||||||||||||||
| Managed Basis | 1,182,392 | 1,271,439 | 1,193,389 | 1,165,432 | ||||||||||||||||
| As Adjusted Adjustments | 890 | 7,110 | (1,542 | ) | 10,543 | |||||||||||||||
| As Adjusted | $ | 1,183,282 | $ | 1,278,549 | $ | 1,191,847 | $ | 1,175,975 | ||||||||||||
| Other Income | ||||||||||||||||||||
| GAAP Basis | $ | 1,253,559 | $ | 1,315,960 | $ | 1,081,120 | $ | 1,189,956 | ||||||||||||
| Securitization Adjustments | (269,187 | ) | (199,195 | ) | (188,039 | ) | (266,499 | ) | ||||||||||||
| Managed Basis | 984,372 | 1,116,765 | 893,081 | 923,457 | ||||||||||||||||
| As Adjusted Adjustments | (434,143 | ) | (541,048 | ) | (379,821 | ) | (376,599 | ) | ||||||||||||
| As Adjusted | $ | 550,229 | $ | 575,717 | $ | 513,260 | $ | 546,858 | ||||||||||||
| Revenue Net of Interest Expense | ||||||||||||||||||||
| GAAP Basis | $ | 1,577,487 | $ | 1,844,776 | $ | 1,619,099 | $ | 1,693,029 | ||||||||||||
| Securitization Adjustments | 589,277 | 543,428 | 467,371 | 395,860 | ||||||||||||||||
| Managed Basis | 2,166,764 | 2,388,204 | 2,086,470 | 2,088,889 | ||||||||||||||||
| As Adjusted Adjustments | (433,253 | ) | (533,938 | ) | (381,363 | ) | (366,056 | ) | ||||||||||||
| As Adjusted | $ | 1,733,511 | $ | 1,854,266 | $ | 1,705,107 | $ | 1,722,833 | ||||||||||||
| Provision for Loan Losses | ||||||||||||||||||||
| GAAP Basis | $ | 399,732 | $ | 380,999 | $ | 643,861 | $ | 937,813 | ||||||||||||
| Securitization Adjustments | 589,277 | 543,428 | 467,371 | 395,860 | ||||||||||||||||
| Managed Basis | 989,009 | 924,427 | 1,111,232 | 1,333,673 | ||||||||||||||||
| As Adjusted Adjustments | 269,252 | 160,782 | 191,244 | 143,411 | ||||||||||||||||
| As Adjusted | $ | 1,258,261 | $ | 1,085,209 | $ | 1,302,476 | $ | 1,477,084 | ||||||||||||
| Discover Financial Services | ||||||||||||||||
| Reconciliation of GAAP to As Adjusted Data | ||||||||||||||||
(unaudited, dollars in thousands, except per share statistics) | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | |||||||||||||
| Other Expense | ||||||||||||||||
| GAAP Basis | $ | 118,748 | $ | 67,634 | $ | 82,341 | $ | 65,110 | ||||||||
| As Adjusted Adjustments | (28,992 | ) | 0 | 0 | 0 | |||||||||||
| As Adjusted | $ | 89,756 | $ | 67,634 | $ | 82,341 | $ | 65,110 | ||||||||
| Total Other Expense | ||||||||||||||||
| GAAP Basis | $ | 607,499 | $ | 523,838 | $ | 560,628 | $ | 559,123 | ||||||||
| As Adjusted Adjustments | (28,992 | ) | 0 | 0 | 0 | |||||||||||
| As Adjusted | $ | 578,507 | $ | 523,838 | $ | 560,628 | $ | 559,123 | ||||||||
| Income Before Income Taxes | ||||||||||||||||
| GAAP Basis | $ | 570,256 | $ | 939,939 | $ | 414,610 | $ | 196,093 | ||||||||
| As Adjusted Adjustments | (673,513 | ) | (694,720 | ) | (572,607 | ) | (509,467 | ) | ||||||||
| As Adjusted | $ | (103,257 | ) | $ | 245,219 | $ | (157,997 | ) | $ | (313,374 | ) | |||||
| Tax Expense | ||||||||||||||||
| GAAP Basis | $ | 217,719 | $ | 362,485 | $ | 188,810 | $ | 75,699 | ||||||||
| As Adjusted Adjustments | (261,756 | ) | (267,830 | ) | (214,507 | ) | (192,745 | ) | ||||||||
| As Adjusted | $ | (44,037 | ) | $ | 94,655 | $ | (25,697 | ) | $ | (117,046 | ) | |||||
| Net Income | ||||||||||||||||
| GAAP Basis | $ | 352,537 | $ | 577,454 | $ | 225,800 | $ | 120,394 | ||||||||
| As Adjusted Adjustments | (411,757 | ) | (426,890 | ) | (358,100 | ) | (316,722 | ) | ||||||||
| As Adjusted | $ | (59,220 | ) | $ | 150,564 | $ | (132,300 | ) | $ | (196,328 | ) | |||||
| Net Income Allocated to Common Stockholders | ||||||||||||||||
| GAAP Basis | $ | 330,505 | $ | 552,928 | $ | 206,366 | $ | 118,380 | ||||||||
| As Adjusted Adjustments | (408,360 | ) | (421,974 | ) | (355,220 | ) | (314,708 | ) | ||||||||
| As Adjusted | $ | (77,855 | ) | $ | 130,954 | $ | (148,854 | ) | $ | (196,328 | ) | |||||
| Total Assets | ||||||||||||||||
| GAAP Basis | $ | 46,020,987 | $ | 42,698,290 | $ | 41,518,288 | $ | 40,606,518 | ||||||||
| Securitization Adjustments | 26,968,289 | 25,096,019 | 23,328,536 | 22,625,139 | ||||||||||||
| Managed Basis | 72,989,276 | 67,794,309 | 64,846,824 | 63,231,657 | ||||||||||||
| As Adjusted Adjustments | (5,872,917 | ) | (3,864,789 | ) | (2,050,521 | ) | (1,988,921 | ) | ||||||||
| As Adjusted | $ | 67,116,359 | $ | 63,929,520 | $ | 62,796,303 | $ | 61,242,736 | ||||||||
| Tangible Assets | ||||||||||||||||
| GAAP Basis | $ | 45,569,930 | $ | 42,245,313 | $ | 41,063,390 | $ | 40,149,699 | ||||||||
| Securitization Adjustments | 26,968,289 | 25,096,019 | 23,328,536 | 22,625,139 | ||||||||||||
| Managed Basis | 72,538,219 | 67,341,332 | 64,391,926 | 62,774,838 | ||||||||||||
| As Adjusted Adjustments | (5,872,917 | ) | (3,864,789 | ) | (2,050,521 | ) | (1,988,921 | ) | ||||||||
| As Adjusted | $ | 66,665,302 | $ | 63,476,543 | $ | 62,341,405 | $ | 60,785,917 | ||||||||
| Total Equity | ||||||||||||||||
| GAAP Basis | $ | 8,435,547 | $ | 8,386,202 | $ | 7,415,640 | $ | 5,999,351 | ||||||||
| As Adjusted Adjustments | (1,332,556 | ) | (1,237,927 | ) | (1,070,836 | ) | (1,008,377 | ) | ||||||||
| As Adjusted | $ | 7,102,991 | $ | 7,148,275 | $ | 6,344,804 | $ | 4,990,974 | ||||||||
| Allowance for Loan Losses | ||||||||||||||||
| GAAP Basis | $ | 1,757,899 | $ | 1,832,360 | $ | 1,986,473 | $ | 1,878,942 | ||||||||
| As Adjusted Adjustments | 2,144,461 | 1,875,211 | 1,714,428 | 1,523,184 | ||||||||||||
| As Adjusted | $ | 3,902,360 | $ | 3,707,571 | $ | 3,700,901 | $ | 3,402,126 | ||||||||
| Change in Loan Loss Reserves | ||||||||||||||||
| GAAP Basis | $ | (74,461 | ) | $ | (154,113 | ) | $ | 107,531 | $ | 504,357 | ||||||
| As Adjusted Adjustments | 269,250 | 160,783 | 191,244 | 143,412 | ||||||||||||
| As Adjusted | $ | 194,789 | $ | 6,670 | $ | 298,775 | $ | 647,769 | ||||||||
| Loan Receivables | ||||||||||||||||
| Average Total Loans | ||||||||||||||||
| GAAP Basis | $ | 23,835,598 | $ | 26,380,203 | $ | 28,257,484 | $ | 27,733,143 | ||||||||
| Securitization Adjustments | 26,755,248 | 24,590,853 | 22,875,277 | 24,144,702 | ||||||||||||
| Managed Basis | 50,590,846 | 50,971,056 | 51,132,761 | 51,877,845 | ||||||||||||
| As Adjusted Adjustments | (5,514 | ) | (13,102 | ) | (12,263 | ) | (11,069 | ) | ||||||||
| As Adjusted | $ | 50,585,332 | $ | 50,957,954 | $ | 51,120,498 | $ | 51,866,776 | ||||||||
| Discover Financial Services | ||||||||||||||||
| Reconciliation of GAAP to As Adjusted Data | ||||||||||||||||
(unaudited, dollars in thousands, except per share statistics) | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| Direct Banking Earnings Summary | Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | ||||||||||||
| Interest Income | ||||||||||||||||
| Managed | $ | 1,585,612 | $ | 1,663,886 | $ | 1,607,114 | $ | 1,603,362 | ||||||||
| As Adjusted Adjustments | (9,248 | ) | (3,294 | ) | (12,386 | ) | (992 | ) | ||||||||
| As Adjusted | $ | 1,576,364 | $ | 1,660,592 | $ | 1,594,728 | $ | 1,602,370 | ||||||||
| Interest Expense | ||||||||||||||||
| Managed | $ | 403,266 | $ | 392,592 | $ | 414,002 | $ | 438,338 | ||||||||
| As Adjusted Adjustments | (10,138 | ) | (10,404 | ) | (10,844 | ) | (11,535 | ) | ||||||||
| As Adjusted | $ | 393,128 | $ | 382,188 | $ | 403,158 | $ | 426,803 | ||||||||
| Net Interest Income | ||||||||||||||||
| Managed | $ | 1,182,346 | $ | 1,271,294 | $ | 1,193,112 | $ | 1,165,024 | ||||||||
| As Adjusted Adjustments | 890 | 7,110 | (1,542 | ) | 10,543 | |||||||||||
| As Adjusted | $ | 1,183,236 | $ | 1,278,404 | $ | 1,191,570 | $ | 1,175,567 | ||||||||
| Other Income | ||||||||||||||||
| Managed | $ | 924,499 | $ | 1,055,529 | $ | 834,630 | $ | 863,223 | ||||||||
| As Adjusted Adjustments | (434,143 | ) | (541,048 | ) | (379,821 | ) | (376,599 | ) | ||||||||
| As Adjusted | $ | 490,356 | $ | 514,481 | $ | 454,809 | $ | 486,624 | ||||||||
| Revenue Net of Interest Expense | ||||||||||||||||
| Managed | $ | 2,106,845 | $ | 2,326,823 | $ | 2,027,742 | $ | 2,028,247 | ||||||||
| As Adjusted Adjustments | (433,253 | ) | (533,938 | ) | (381,363 | ) | (366,056 | ) | ||||||||
| As Adjusted | $ | 1,673,592 | $ | 1,792,885 | $ | 1,646,379 | $ | 1,662,191 | ||||||||
| Provision for Loan Losses | ||||||||||||||||
| Managed | $ | 989,009 | $ | 924,427 | $ | 1,111,232 | $ | 1,333,673 | ||||||||
| As Adjusted Adjustments | 269,252 | 160,782 | 191,244 | 143,411 | ||||||||||||
| As Adjusted | $ | 1,258,261 | $ | 1,085,209 | $ | 1,302,476 | $ | 1,477,084 | ||||||||
| Total Other Expense | ||||||||||||||||
| Managed | $ | 571,351 | $ | 489,596 | $ | 528,608 | $ | 527,407 | ||||||||
| As Adjusted Adjustments | (28,992 | ) | 0 | 0 | 0 | |||||||||||
| As Adjusted | $ | 542,359 | $ | 489,596 | $ | 528,608 | $ | 527,407 | ||||||||
| Income Before Income Taxes | ||||||||||||||||
| Managed | $ | 546,485 | $ | 912,800 | $ | 387,902 | $ | 167,167 | ||||||||
| As Adjusted Adjustments | (673,513 | ) | (694,720 | ) | (572,607 | ) | (509,467 | ) | ||||||||
| As Adjusted | $ | (127,028 | ) | $ | 218,080 | $ | (184,705 | ) | $ | (342,300 | ) | |||||
| Pretax Return on Loan Receivables | ||||||||||||||||
| Managed | 4.33% | 7.10% | 3.01% | 1.31% | ||||||||||||
| Adjustments | (5.34% | ) | (5.40% | ) | (4.44% | ) | (3.99% | ) | ||||||||
| As Adjusted | (1.01% | ) | 1.70% | (1.43% | ) | (2.68% | ) | |||||||||
| Credit Card Loans | ||||||||||||||||
| Credit Card Loans | ||||||||||||||||
| GAAP Basis | $ | 20,230,302 | $ | 22,721,603 | $ | 25,312,764 | $ | 26,156,681 | ||||||||
| Securitization Adjustments | 27,235,288 | 25,414,036 | 23,590,868 | 22,854,496 | ||||||||||||
| Managed Basis | 47,465,590 | 48,135,639 | 48,903,632 | 49,011,177 | ||||||||||||
| As Adjusted Adjustments | (6,226 | ) | (7,249 | ) | (14,496 | ) | (13,090 | ) | ||||||||
| As Adjusted | $ | 47,459,364 | $ | 48,128,390 | $ | 48,889,136 | $ | 48,998,087 | ||||||||
| Average Credit Card Loans | ||||||||||||||||
| GAAP Basis | $ | 20,674,527 | $ | 24,051,037 | $ | 26,233,044 | $ | 26,109,533 | ||||||||
| Securitization Adjustments | 26,755,248 | 24,590,853 | 22,875,277 | 24,144,702 | ||||||||||||
| Managed Basis | 47,429,775 | 48,641,890 | 49,108,321 | 50,254,235 | ||||||||||||
| As Adjusted Adjustments | (5,514 | ) | (13,101 | ) | (12,263 | ) | (11,069 | ) | ||||||||
| As Adjusted | $ | 47,424,261 | $ | 48,628,789 | $ | 49,096,058 | $ | 50,243,166 | ||||||||
| Total Company Ratios | ||||||||||||||||
| Effective Tax Rate | ||||||||||||||||
| GAAP Basis | 38.2% | 38.6% | 45.5% | 38.6% | ||||||||||||
| Adjustments | 4.5% | 0.0% | (29.3% | ) | (1.3% | ) | ||||||||||
| As Adjusted | 42.6% | 38.6% | 16.3% | 37.4% | ||||||||||||
| Tangible Common Equity/Tangible Assets | ||||||||||||||||
| GAAP Basis | 15.0% | 16.0% | 14.1% | 13.8% | ||||||||||||
| Adjustments | (6.8% | ) | (7.3% | ) | (6.5% | ) | (6.3% | ) | ||||||||
| As Adjusted | 8.2% | 8.7% | 7.6% | 7.5% | ||||||||||||
| Tangible Common Equity/Net Loans | ||||||||||||||||
| GAAP Basis | 31.2% | 28.7% | 22.8% | 21.2% | ||||||||||||
| Adjustments | (19.5% | ) | (17.0% | ) | (12.8% | ) | (11.7% | ) | ||||||||
| As Adjusted | 11.7% | 11.7% | 10.0% | 9.5% | ||||||||||||
| Discover Financial Services | ||||||||||||||||
| Reconciliation of GAAP to As Adjusted Data | ||||||||||||||||
(unaudited, dollars in thousands, except per share statistics) | ||||||||||||||||
| Quarter Ended | ||||||||||||||||
| Nov 30, 2009 | Aug 31, 2009 | May 31, 2009 | Feb 28, 2009 | |||||||||||||
| ROE | ||||||||||||||||
| GAAP Basis | 16% | 28% | 12% | 8% | ||||||||||||
| Adjustments | (19% | ) | (19% | ) | (20% | ) | (23% | ) | ||||||||
| As Adjusted | (3% | ) | 9% | (8% | ) | (15% | ) | |||||||||
| Net Yield on Loan Receivables | ||||||||||||||||
| GAAP Basis | 5.45% | 7.95% | 7.55% | 7.36% | ||||||||||||
| Adjustments | 3.93% | 2.00% | 1.70% | 1.84% | ||||||||||||
| As Adjusted | 9.38% | 9.95% | 9.25% | 9.20% | ||||||||||||
| Return on Loan Receivables | ||||||||||||||||
| GAAP Basis | 5.93% | 8.68% | 3.17% | 1.76% | ||||||||||||
| Adjustments | (6.40% | ) | (7.51% | ) | (4.20% | ) | (3.30% | ) | ||||||||
| As Adjusted | (0.47% | ) | 1.17% | (1.03% | ) | (1.54% | ) | |||||||||
| Basic EPS | ||||||||||||||||
| GAAP Basis | $ | 0.61 | $ | 1.08 | $ | 0.43 | $ | 0.25 | ||||||||
| Adjustments | (0.75 | ) | (0.82 | ) | (0.74 | ) | (0.65 | ) | ||||||||
| As Adjusted | $ | (0.14 | ) | $ | 0.26 | $ | (0.31 | ) | $ | (0.41 | ) | |||||
| Diluted EPS | ||||||||||||||||
| GAAP Basis | $ | 0.60 | $ | 1.07 | $ | 0.43 | $ | 0.25 | ||||||||
| Adjustments | (0.74 | ) | (0.82 | ) | (0.74 | ) | (0.65 | ) | ||||||||
| As Adjusted | $ | (0.14 | ) | $ | 0.25 | $ | (0.31 | ) | $ | (0.41 | ) | |||||
| Loan Receivables Ratios | ||||||||||||||||
| Interest Yield | ||||||||||||||||
| GAAP Basis | 10.25% | 12.10% | 11.54% | 11.24% | ||||||||||||
| Adjustments | 2.10% | 0.69% | 0.65% | 1.01% | ||||||||||||
| As Adjusted | 12.35% | 12.79% | 12.18% | 12.26% | ||||||||||||
| Net Principal Charge-off Rate | ||||||||||||||||
| GAAP Basis | 7.98% | 8.05% | 7.53% | 6.34% | ||||||||||||
| Adjustments | 0.45% | 0.35% | 0.26% | 0.14% | ||||||||||||
| As Adjusted | 8.43% | 8.40% | 7.79% | 6.48% | ||||||||||||
| Delinquency Rate (over 30 days) | ||||||||||||||||
| GAAP Basis | 4.92% | 4.86% | 4.87% | 5.04% | ||||||||||||
| Adjustments | 0.39% | 0.25% | 0.21% | 0.22% | ||||||||||||
| As Adjusted | 5.31% | 5.11% | 5.08% | 5.26% | ||||||||||||
| Delinquency Rate (over 90 days) | ||||||||||||||||
| GAAP Basis | 2.58% | 2.46% | 2.60% | 2.57% | ||||||||||||
| Adjustments | 0.20% | 0.14% | 0.13% | 0.12% | ||||||||||||
| As Adjusted | 2.78% | 2.60% | 2.73% | 2.69% | ||||||||||||
| Credit Card Ratios | ||||||||||||||||
| Interest Yield | ||||||||||||||||
| GAAP Basis | 10.86% | 12.56% | 11.81% | 11.39% | ||||||||||||
| Adjustments | 1.90% | 0.49% | 0.54% | 0.97% | ||||||||||||
| As Adjusted | 12.76% | 13.05% | 12.36% | 12.37% | ||||||||||||
| Net Principal Charge-off Rate | ||||||||||||||||
| GAAP Basis | 8.77% | 8.48% | 7.88% | 6.58% | ||||||||||||
| Adjustments | 0.04% | 0.15% | 0.11% | 0.04% | ||||||||||||
| As Adjusted | 8.81% | 8.63% | 7.99% | 6.62% | ||||||||||||
| Delinquency Rate (over 30 days) | ||||||||||||||||
| GAAP Basis | 5.52% | 5.27% | 5.15% | 5.32% | ||||||||||||
| Adjustments | 0.08% | 0.04% | 0.08% | 0.09% | ||||||||||||
| As Adjusted | 5.60% | 5.31% | 5.23% | 5.41% | ||||||||||||
| Delinquency Rate (over 90 days) | ||||||||||||||||
| GAAP Basis | 2.92% | 2.70% | 2.77% | 2.73% | ||||||||||||
| Adjustments | 0.02% | 0.02% | 0.05% | 0.05% | ||||||||||||
| As Adjusted | 2.94% | 2.72% | 2.82% | 2.78% | ||||||||||||
1 GAAP data is presented in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards ("FAS") No. 140 for quarters ended February 28, 2009, May 31, 2009, August 31, 2009 and November 30, 2009. GAAP data for the quarter ended February 28, 2010 is presented in accordance with FAS No. 166, Accounting for Transfers of Financial Assets – an amendment of FAS No. 140 and FAS No. 167, Amendments to FASB Interpretations No. 46(R), which were effective for the Company at the beginning of its current fiscal year, December 1, 2009.
2 The quarters ended February 28, 2009, May 31, 2009, August 31, 2009 and November 30, 2009 include $475 million pre-tax (estimated $297 million after-tax), $473 million pre-tax (estimated $295 million after-tax), $472 million pre-tax (estimated $287 million after-tax), and $472 million (estimated $285 million after-tax), respectively related to the Visa/MasterCard anti-trust litigation settlement.
3 Net Income Allocated to Common Stockholders represents net income less (i) dividends and accretion of discount on shares of preferred stock and (ii) income allocated to participating securities.
4 Effective Tax Rate represents tax expense divided by income before income taxes.
5 Tangible Assets represents total assets less goodwill and intangibles.
6 Net Loans represents total loans less the allowance for loan loss (period end).
7 Book Value per share represents total equity divided by ending common shares outstanding.
8 Return on Equity represents net income (annualized) divided by average total equity for the reporting period.
9 Reserve Rate represents the allowance for loan losses divided by total loans less loans held for sale.
10 Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding.
11 Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period.
12 Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period.
13 Delinquency Rate (Over 30 Days) represents the total dollar amount of loans delinquent greater than thirty days divided by ending loans (total or credit card loans, as appropriate).
14 Delinquency Rate (Over 90 Days) represents the total dollar amount of loans delinquent greater than ninety days divided by ending loans (total or credit card loans, as appropriate).
15 Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment.
16 Payment Services segment was formerly referred to as the Third-Party Payments segment.
17 Gross proprietary sales volume on the Discover Network.
18 Tangible common equity ("TCE"), a non-GAAP financial measure, represents total common equity less goodwill and intangibles. The Company believes TCE is a more meaningful valuation to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of GAAP to As Adjusted data schedule.
19 Tangible Common Equity/Tangible Assets, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.
20 Tangible Common Equity/Net Loans, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by total loans less the allowance for loan loss (period end).
21 Tangible Common Equity per Share, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by ending common shares outstanding.
22 Net Yield on Loan Receivables represents net interest income (annualized) divided by average total loans for the period.
23 Return on Loan Receivables represents net income (annualized) divided by average total loans for the period.
24 Reserve Rate (excluding guaranteed student loans), a non-GAAP financial measure, represents the allowance for loan losses as a percentage of total loans excluding guaranteed student loans. The Company believes that a reserve rate excluding the government guaranteed portion of student loans is a more meaningful valuation to investors of the portion of the portfolio that has a risk of loss. For a corresponding reconciliation of loans excluding the guaranteed portion of student loans to a GAAP financial measure, see Reconciliation of GAAP to As Adjusted data schedule.
25 Direct Banking segment was formerly referred to as the U.S. Card segment.
26 Managed basis assumes that loans that have been securitized were not sold and presents financial information regarding these loans in a manner similar to the presentation of financial information regarding loans that have not been sold.
27 Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by average total loans for the period.
28 As adjusted adjustments include additional amounts necessary to reflect results as if the trusts used in our securitization activities had been fully consolidated in our historical results. Also included are adjustments to exclude the impact of income received in connection with the settlement of the Company's antitrust litigation with Visa and MasterCard in each quarter of 2009 and the income statement impact of the Morgan Stanley special dividend agreement dispute in the fourth quarter of 2009.
29 Securitization Adjustments reverse the effect of loan securitization by recharacterizing securitization income to report interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues in the same lines as non-securitized loans. Beginning December 1, 2009, securitization adjustments are no longer applicable as the trust assets are consolidated in GAAP reporting.
30 Adjustments represent the difference between GAAP basis and As Adjusted basis.