Discover 2014 Annual Report Download - page 121

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Net Charge-offs
Information related to the net charge-offs in the Company’s loan portfolio is shown below by each class of loan
receivables except for mortgage loans held for sale and PCI student loans, which is shown under the heading
“— Purchased Credit-Impaired Loans” (dollars in millions):
For the Calendar Years Ended December 31, For the Fiscal Year
Ended November 30,
2012
For the One Month
Ended December 31,
2012
2014 2013
Net
Charge-
offs
Net
Charge-
off Rate
Net
Charge-
offs
Net
Charge-
off Rate
Net
Charge-
offs
Net
Charge-
off Rate
Net
Charge-
offs
Net
Charge-
off Rate
Credit card loans ....................................... $ 1,191 2.27% $ 1,100 2.21% $ 1,240 2.62% $ 106 2.47%
Other loans:
Personal loans ....................................... 94 2.04% 79 2.13% 69 2.33% 7 2.52%
Private student loans (excluding PCI)........ 57 1.29% 46 1.30% 19 0.73% 2 0.81%
Other ................................................... 3 0.76% 1 1.96% — 0.10% — —%
Total other loans (excluding PCI) ......... 154 1.63% 126 1.67% 88 1.52% 9 1.61%
Net charge-offs as a percentage of
total loans (excluding PCI)............. $ 1,345 2.17% $ 1,226 2.14% $ 1,328 2.50% $ 115 2.37%
Net charge-offs as a percentage of
total loans (including PCI) ............. $ 1,345 2.04% $ 1,226 1.98% $ 1,328 2.29% $ 115 2.19%
As part of credit risk management activities, on an ongoing basis the Company reviews information related to the
performance of a customer’s account with the Company as well as information from credit bureaus, such as FICO or
other credit scores, relating to the customer’s broader credit performance. FICO scores are generally obtained at
origination of the account and are refreshed monthly or quarterly thereafter to assist in predicting customer
behavior. Historically, the Company has noted that a significant proportion of delinquent accounts have FICO scores
below 660.
The following table provides the most recent FICO scores available for the Company’s customers as a percentage
of each class of loan receivables:
Credit Risk Profile by FICO
Score
660 and
Above Less than 660 or No Score
At December 31, 2014
Credit card loans .......................................................................................................................................... 83%17%
Personal loans .............................................................................................................................................. 96% 4%
Private student loans (excluding PCI)(1) ............................................................................................................. 96% 4%
At December 31, 2013
Credit card loans .......................................................................................................................................... 83%17%
Personal loans .............................................................................................................................................. 97% 3%
Private student loans (excluding PCI)(1) ............................................................................................................. 95% 5%
(1) PCI loans are discussed under the heading "— Purchased Credit-Impaired Loans."
For private student loans, additional credit risk management activities include monitoring the amount of loans in
forbearance. Forbearance allows borrowers experiencing temporary financial difficulties and willing to make payments
the ability to temporarily suspend payments. Eligible borrowers have a lifetime cap on forbearance of 12 months. At
December 31, 2014 and 2013, there were $49 million and $110 million of private student loans, including PCI, in
forbearance, respectively. In addition, at December 31, 2014 and 2013, there were 0.8% and 1.9% of private student
loans in forbearance as a percentage of student loans in repayment and forbearance, respectively. At December 31,
2014, the dollar amount of loans in forbearance and loans in forbearance as a percentage of private student loans in
repayment and forbearance were lower due to the implementation of temporary reduced payment programs, which