Discover 2009 Annual Report Download - page 82

Maturities and Sensitivities of Loan Receivables to Changes in Interest Rates
Our loan receivables had the following maturity distribution(1) at November 30, 2009 (dollars in thousands):
Due One
Year or
Less
Due After
One Year
Through
Five Years
Due After
Five Years Total
Credit card loans ............................................................................................................. $4,854,184 $10,235,498 $5,140,620 $20,230,302
Other consumer loans....................................................................................................... 2,174 869,912 2,522,696 3,394,782
Total loan receivables .................................................................................................... $4,856,358 $11,105,410 $7,663,316 $23,625,084
(1) Because of the uncertainty regarding loan repayment patterns, the above amounts have been calculated using contractually required minimum payments. Historically, actual loan repayments have
been higher than such minimum payments, and therefore, the above amounts may not necessarily be indicative of our actual loan repayments.
At November 30, 2009, approximately $9.9 billion of our loan receivables due after one year had interest rates tied
to an index and approximately $8.9 billion were fixed rate loans.
Other Income
The principal component of other income is securitization income. The following table presents the components of other
income for the periods presented (dollars in thousands):
For the Years Ended November 30,
2009 vs. 2008
increase (decrease)
2008 vs. 2007
increase (decrease)
2009 2008 2007 $ % $ %
Securitization income..................................................................... $1,879,304 $2,429,158 $2,323,623 $ (549,854) (23%) $105,535 5%
Loan fee income............................................................................ 247,267 262,576 338,053 (15,309) (6%) (75,477) (22%)
Discount and interchange revenue(1) ................................................. 222,835 187,657 241,070 35,178 19% (53,413) (22%)
Fee products................................................................................. 295,066 249,805 214,572 45,261 18% 35,233 16%
Merchant fees ............................................................................... 44,248 67,027 92,518 (22,779) (34%) (25,491) (28%)
Transaction processing revenue ....................................................... 125,201 115,914 99,653 9,287 8% 16,261 16%
Loss on investment securities............................................................ (3,826) (50,294) (11,409) 46,468 92% (38,885) NM
Antitrust litigation settlement. ........................................................... 1,891,698 863,634 — 1,028,064 119% 863,634 100%
Other income................................................................................ 138,802 138,981 78,602 (179) 0% 60,379 77%
Total other income...................................................................... $4,840,595 $4,264,458 $3,376,682 $ 576,137 14% $887,776 26%
(1) Net of rewards, including Cashback Bonus rewards, of $669.5 million, $709.7 million and $721.9 million for the years ended November 30, 2009, 2008 and 2007, respectively.
Total other income increased $576.1 million, or 14%, for the year ended November 30, 2009, as compared to the
year ended November 30, 2008, primarily as a result of $1.0 billion of higher income related to the Visa and
MasterCard antitrust litigation settlement, partially offset by lower securitization income. For the year ended
November 30, 2008, total other income increased $887.8 million, or 26%, as compared to November 30, 2007,
primarily as a result of an $862.5 million payment from MasterCard for its portion of the Visa and MasterCard antitrust
litigation settlement and higher securitization income, partially offset by a decline in loan fee income. These key drivers as
well as other factors are discussed in more detail below.
Securitization Income
Through November 30, 2009, the issuance of asset-backed securities to investors, referred to as securitization, has the
effect of removing the owned loan receivables from our consolidated statements of financial condition. Securitization
income is a significant source of our income and is derived through the securitization and continued servicing of a portion
of the credit card loan receivables we originate. Also, portions of net interest income, provision for loan losses and
certain components of other income related to the securitized loans against which beneficial interests have been issued
are no longer reported in our statements of income; however, they remain significant factors in determining securitization
income we receive on our residual interests in those transactions. We allocate the cash flows derived from interest and
loan fee revenue and, in recent years, merchant discount and interchange revenue earned on securitized loans (see
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