Discover 2011 Annual Report Download - page 13

1
Part I.
Item 1. Business
Introduction
Discover Financial Services is a direct banking and payment services company. We are a bank holding company under
the Bank Holding Company Act of 1956 and a financial holding company under the Gramm-Leach-Bliley Act, subject to
oversight, regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). We
offer credit cards, student loans, personal loans and deposit products through our Discover Bank subsidiary. We had $57.3
billion in loan receivables and $26.2 billion in deposits issued through direct-to-consumer channels and affinity relationships at
November 30, 2011. We operate the Discover Network, our credit card payments network; the PULSE network (“PULSE”),
our automated teller machine (“ATM”), debit and electronic funds transfer network; and Diners Club International (“Diners
Club”), our global payments network.
On December 31, 2010, we acquired The Student Loan Corporation (“SLC”) in a merger transaction for $600 million.
We received a purchase price closing adjustment, resulting in a net cash outlay of approximately $401 million for the
acquisition. We acquired SLC's ongoing private student loan business and approximately $4.2 billion of private student loans
and other assets, along with assuming approximately $3.4 billion of SLC's existing asset-backed securitization debt funding and
other liabilities. In addition, on September 30, 2011, we purchased approximately $2.5 billion of additional private student
loans from Citibank, N.A. ("Citi") for a purchase price equal to 99% of the outstanding aggregate principal and accrued interest
balance of the purchased loans (excluding certain charged-off loans) through the closing date. These portfolio acquisitions were
accretive to income for the year ended November 30, 2011. In addition, the SLC acquisition provided us with a developed
student loan origination platform, additional school relationships, experienced personnel and SLC's website.
In May 2011, we agreed to acquire substantially all of the operating and related assets of Home Loan Center, Inc., a
subsidiary of Tree.com, Inc., for approximately $55.9 million, which will add a residential mortgage lending component to our
direct banking business. The acquisition is subject to closing conditions, including regulatory approvals.
Available Information
We make available, free of charge through the investor relations page of our internet site http://
www.discoverfinancial.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
proxy statements, Forms 3, 4 and 5 filed by or on behalf of directors and executive officers, and any amendments to those
documents filed with or furnished to the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange
Act of 1934. These filings are available as soon as reasonably practicable after they are filed with or furnished to the SEC.
In addition, the following information is available on the investor relations page of our internet site: (i) our Corporate
Governance Policies; (ii) our Code of Ethics and Business Conduct; and (iii) the charters of the Audit and Risk, Compensation,
and Nominating and Governance Committees of our Board of Directors. These documents are also available in print without
charge to any person who requests them by writing or telephoning our principal executive offices: Discover Financial Services,
Office of the Corporate Secretary, 2500 Lake Cook Road, Riverwoods, Illinois 60015, U.S.A., telephone number
[phone].
Operating Model
We manage our business activities in two segments: Direct Banking and Payment Services. Our Direct Banking segment
includes Discover card-branded credit cards issued to individuals and small businesses on the Discover Network and other
consumer banking products and services, including personal loans, student loans, prepaid cards and other consumer lending and
deposit products offered through our Discover Bank subsidiary. Our Payment Services segment includes PULSE, Diners Club
and our third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third
parties.
We are principally engaged in providing products and services to customers in the United States, although the royalty
and licensee revenue we receive from Diners Club licensees is derived from sources outside of the United States. For
quantitative information concerning our geographic distribution, see Note 6: Loan Receivables to our consolidated financial
statements, and for quantitative information concerning our royalty revenue, see Note 16: Other Income and Other Expense.
Below are descriptions of the principal products and services of each of our reportable segments. For additional financial
information relating to our business and our operating segments, see Note 24: Segment Disclosures to our consolidated
financial statements.
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