Discover 2011 Annual Report Download - page 128

116
Geographical Distribution of Loans
The Company originates credit card and other consumer loans throughout the United States. The geographic distribution
of the Company's loan receivables was as follows (dollars in thousands):
California
New York
Texas
Pennsylvania
Illinois
Florida
Ohio
New Jersey
Michigan
Georgia
Other States
Total Loan Portfolio
November 30, 2011
$
5,127,162
4,726,479
4,241,506
3,277,797
3,231,129
3,118,242
2,428,496
2,286,338
1,843,670
1,619,912
25,436,204
57,336,935
%
8.9%
8.2
7.4
5.7
5.6
5.4
4.2
4.0
3.2
2.8
44.6
100.0%
November 30, 2010
$
$ 4,473,200
3,259,953
3,848,684
2,540,852
2,747,706
2,902,083
2,147,238
1,823,938
1,555,896
1,466,863
22,070,000
$ 48,836,413
%
9.2%
6.7
7.9
5.2
5.6
5.9
4.4
3.7
3.2
3.0
45.2
100.0%
7. Credit Card and Student Loan Securitization Activities
Credit Card Securitization Activities
The Company accesses the term asset securitization market through the Discover Card Master Trust I (“DCMT”) and the
Discover Card Execution Note Trust (“DCENT”), which are trusts into which credit card loan receivables are transferred (or, in
the case of DCENT, into which beneficial interests in DCMT are transferred) and from which beneficial interests are issued to
investors.
The DCMT structure consists of Class A, triple-A rated certificates and Class B, single-A rated certificates held by third
parties. Credit enhancement is provided by the subordinated Class B certificates, cash collateral accounts, and more
subordinated Series 2009-CE certificates that are held by a wholly-owned subsidiary of Discover Bank. The DCENT debt
structure consists of four classes of securities (DiscoverSeries Class A, B, C and D notes), with the most senior class generally
receiving a triple-A rating. In this structure, in order to issue senior, higher rated classes of notes, it is necessary to obtain the
appropriate amount of credit enhancement, generally through the issuance of junior, lower rated or more highly subordinated
classes of notes. The majority of these more highly subordinated classes of notes are held by subsidiaries of Discover Bank. In
addition, during the year ended November 30, 2011 there was another series of certificates (Series 2009-SD) issued by DCMT
which provided increased excess spread levels to all other outstanding securities of the trusts. The Series 2009-SD certificates
were held by a wholly-owned subsidiary of Discover Bank. In January 2010, the Company increased the size of the Class D
(2009-1) note by $527.2 million and the Series 2009-CE certificate by $536.4 million to further support the more senior
securities of the trusts. The Company was not contractually required to provide this incremental level of credit enhancement but
did so pursuant to the trusts’ governing documents in order to maintain the credit ratings of the securities issued by the trusts
and to preserve the Company’s ability to participate in the credit card asset-backed securitization markets. The Series 2009-SD
balance of $346.4 million matured on January 17, 2012, automatically triggering a higher required level of the Class D
(2009-1) note. Accordingly, the size of the Class D (2009-1) note was increased by $241.7 million. The credit-related risk of
loss associated with trust assets as of the balance sheet date to which the Company is exposed through the retention of these
subordinated interests is fully captured in the allowance for loan losses recorded by the Company.
The Company’s credit card securitizations are accounted for as secured borrowings and the trusts are treated as
consolidated subsidiaries of the Company. The Company’s retained interests in the assets of the trusts, principally consisting of
investments in DCMT certificates and DCENT notes held by subsidiaries of Discover Bank, constitute intercompany positions
which are eliminated in the preparation of the Company’s consolidated statement of financial condition.
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