Discover 2009 Annual Report Download - page 78

Rate/Volume Variance Analysis(1)
2009 vs. 2008 2008 vs. 2007
Volume Rate Total Volume Rate Total
(in thousands)
Increase/(decrease) in net interest income due to changes in:
Interest-earning assets:
Cash and cash equivalents .................................................................... $ 11,964 $(182,684) $(170,720) $126,630 $(154,674) $ (28,044)
Other short-term investments.................................................................. 3,883 — 3,883 — — —
Investment securities ............................................................................. 30,871 (13,522) 17,349 40,150 693 40,843
Loan receivables:
Credit card ...................................................................................... 424,401 165,647 590,048 78,371 33,160 111,531
Other.............................................................................................. 116,236 (27,414) 88,822 67,089 6,164 73,253
Total loan receivables ........................................................................... 540,637 138,233 678,870 145,460 39,324 184,784
Other interest-earning assets.................................................................. (12,896) (63,969) (76,865) (23,809) (65,613) (89,422)
Total interest income ...................................................................... 574,459 (121,942) 452,517 288,431 (180,270) 108,161
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits ................................................................................... 166,390 (111,735) 54,655 240,645 (29,892) 210,753
Money market deposits...................................................................... (9,950) (61,766) (71,716) 34,890 (90,008) (55,118)
Other interest-bearing deposits ........................................................... 4,204 505 4,709 107 (880) (773)
Total interest-bearing deposits ......................................................... 160,644 (172,996) (12,352) 275,642 (120,780) 154,862
Borrowings:
Short-term borrowings .......................................................................... 2,572 (377) 2,195 (48,003) (40,973) (88,976)
Long-term borrowings........................................................................... (11,433) (15,130) (26,563) 24,254 (25,406) (1,152)
Total borrowings ........................................................................... (8,861) (15,507) (24,368) (23,749) (66,379) (90,128)
Total interest expense ..................................................................... 151,783 (188,503) (36,720) 251,893 (187,159) 64,734
Net interest income ........................................................................ $422,666 $ 66,571 $ 489,237 $ 36,227 $ 7,200 $ 43,427
(1) The rate/volume variance for each category has been allocated on a consistent basis between rate and volume variances based on the percentage of the rate or volume variance to the sum of the
two absolute variances.
Loan Quality
Loan receivables consist of the following (dollars in thousands):
November 30,
2009
November 30,
2008
November 30,
2007
November 30,
2006
November 30,
2005
Loans held for sale .................................................................. $ — $ — $ — $ 1,056,380 $ 2,437,060
Loan portfolio:
Credit card loans:
Discover Card(1) ............................................................... 19,826,153 23,348,134 20,345,787 19,582,675 18,000,767
Discover Business Card ..................................................... 404,149 466,173 234,136 59,088 —
Total credit card loans.................................................... 20,230,302 23,814,307 20,579,923 18,641,763 18,000,767
Other consumer loans:
Personal loans ................................................................. 1,394,379 1,028,093 165,529 24,968 52,837
Student loans................................................................... 1,932,266 299,929 12,820 155 242
Other ............................................................................. 68,137 74,282 72,845 66,978 120,400
Total other consumer loans ............................................. 3,394,782 1,402,304 251,194 92,101 173,479
Total loan portfolio ........................................................ 23,625,084 25,216,611 20,831,117 19,733,864 18,174,246
Total loan receivables .................................................... 23,625,084 25,216,611 20,831,117 20,790,244 20,611,306
Allowance for loan losses ......................................................... (1,757,899) (1,374,585) (759,925) (703,917) (795,722)
Net loan receivables...................................................... $21,867,185 $23,842,026 $20,071,192 $20,086,327 $19,815,584
(1) Amounts include $9.9 billion and $14.8 billion of the Company’s seller’s interest in credit card securitizations at November 30, 2009 and 2008, respectively. See Note 6: Credit Card
Securitization Activities to our consolidated financial statements for further information.
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