Discover 2009 Annual Report Download - page 80

The following table provides changes in the Company’s allowance for credit card loan losses for the years presented
(dollars in thousands):
For the Years Ended November 30,
2009 2008 2007 2006 2005
Balance at beginning of year............................................................................. $ 1,317,811 $ 750,786 $ 701,162 $ 790,346 $ 899,969
Additions:
Provision for loan losses ................................................................................ 2,240,232 1,540,507 726,632 606,455 812,410
Deductions:
Charge-offs................................................................................................. (2,096,573) (1,139,176) (837,210) (848,645) (1,066,785)
Recoveries................................................................................................... 185,616 165,694 160,202 153,006 144,752
Net charge-offs ........................................................................................ (1,910,957) (973,482) (677,008) (695,639) (922,033)
Balance at end of year ..................................................................................... $ 1,647,086 $ 1,317,811 $ 750,786 $ 701,162 $ 790,346
The following table provides changes in the Company’s allowance for other consumer loan losses for the years
presented (dollars in thousands):
For the Years Ended November 30,
2009 2008 2007 2006 2005
Balance at beginning of year ................................................................................................... $ 56,774 $ 9,139 $ 2,755 $ 5,376 $10,292
Additions:
Provision for loan losses....................................................................................................... 122,173 55,108 7,255 310 3,787
Deductions:
Charge-offs........................................................................................................................ (69,080) (8,065) (1,882) (3,991) (9,394)
Recoveries ......................................................................................................................... 946 592 1,011 1,060 890
Net charge-offs ............................................................................................................... (68,134) (7,473) (871) (2,931) (8,504)
Translation adjustments and other ............................................................................................. — — — — (199)
Balance at end of year ............................................................................................................ $110,813 $56,774 $ 9,139 $ 2,755 $ 5,376
Net Charge-offs
Our net charge-offs include the principal amount of losses charged off less principal recoveries and exclude
charged-off interest and fees, recoveries of interest and fees and fraud losses. Charged-off and recovered interest and
fees are recorded in interest and loan fee income for loan receivables and in securitization income for securitized loans
while fraud losses are recorded in other expense. Credit card loan receivables are charged off at the end of the month
during which an account becomes 180 days contractually past due, except in the case of customer bankruptcies and
probate accounts. Customer bankruptcies and probate accounts are charged off at the end of the month 60 days
following the receipt of notification of the bankruptcy or death but not later than the 180-day contractual time frame. The
net charge-off rate is calculated by dividing net charge-offs for the period by the average loan receivables for the period.
The following table presents amounts and rates of net charge-offs of loan receivables (dollars in thousands):
For the Years Ended November 30,
2009 2008 2007 2006 2005
$ %$%$%$%$%
Credit card loans ................................................ $1,910,957 7.87% $973,482 4.73% $677,008 3.41% $695,639 3.64% $922,033 4.95%
Other consumer loans.......................................... 68,134 2.98% 7,473 0.96% 871 0.85% 2,931 2.22% 8,504 3.69%
Total net charge-offs ............................................ $1,979,091 7.45% $980,955 4.59% $677,879 3.40% $698,570 3.63% $930,537 4.93%
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