Discover 2009 Annual Report Download - page 116

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At November 30, 2009, the Company had $6.1 million of net unrealized losses on its held-to-maturity investment
securities in states and political subdivisions of states, compared to $17.0 million of net unrealized losses at
November 30, 2008. The Company believes the unrealized loss on these investments is the result of changes in interest
rates subsequent to the Company’s acquisitions of these securities and that the reduction in value is temporary.
Additionally, the Company expects to collect all amounts due according to the contractual terms of these securities.
The Company had no investment securities classified as trading during the years ended November 30, 2009 and
2008.
For the year ended November 30, 2009, the Company received $72.9 million of proceeds, and recorded $5.4 million
of gross realized gains and no gross realized losses, from the sale of credit card asset-backed securities of other issuers.
There were no sales of available-for-sale securities during 2008 and 2007. For the years ended November 30, 2009,
2008 and 2007, the Company recorded net unrealized losses of $14.1 million, $79.3 million and $5.2 million ($8.5
million, $50.2 million and $3.3 million net of tax), respectively, in other comprehensive income. For the same periods, the
amounts recorded in other comprehensive income were net of 1.2 million, $0.7 million and $0, respectively, of
unrealized losses that had been included in other comprehensive income at the end of the previous year, but were
subsequently reclassified into earnings either due to sale or recognition of an other-than-temporary impairment.
For the year ended November 30, 2009, the loss on investment securities recorded in the consolidated statement of
income consisted of $9.2 million in other-than-temporary impairments (“OTTI”) on investment securities, offset by realized
gains of $5.4 million from the sale of credit card asset-backed securities of other issuers. For the years ended
November 30, 2008 and 2007, the losses on investment securities of $50.2 million and $11.4 million, respectively, were
entirely attributable to OTTI as there were no investment securities sold during 2008 or 2007. The OTTI recorded in
earnings is detailed further in the tables below for the years ended November 30, 2009, 2008 and 2007 (dollars in
thousands):
November 30, 2009 November 30, 2008 November 30, 2007
Asset-
backed
Commercial
Paper(1)
Equity
Securities
Held-To-
Maturity
Debt
Securities
Total
OTTI
Asset-
backed
Commercial
Paper(1)
Equity
Securities
Held-To-
Maturity
Debt
Securities
Total
OTTI
Asset-
backed
Commercial
Paper(1)
Equity
Securities
Held-To-
Maturity
Debt
Securities
Total
OTTI
Total realized and
unrealized
OTTI losses........ $(8,249) $(801) $(189) $(9,239) $(49,095) $(1,184) $(15) $(50,294) $(11,404) $— $ (5) $(11,409)
Portion of
unrealized losses
recognized in
other
comprehensive
income (before
taxes)............... — — — — — — — — — — — —
Net impairment
losses
recognized in
earnings ........... $(8,249) $(801) $(189) $(9,239) $(49,095) $(1,184) $(15) $(50,294) $(11,404) $— $ (5) $(11,409)
(1) For additional information on the Company’s valuation methods related to this investment, see Note 24: Fair Value Disclosures.
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