Discover 2014 Annual Report Download - page 76

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• The level and composition of loan receivables, including the proportion of credit card loans to other loans, as
well as the proportion of loan receivables bearing interest at promotional rates as compared to standard
rates;
• The credit performance of our loans, particularly with regard to charge-offs of finance charges, which reduce
interest income;
• The terms of long-term borrowings and certificates of deposit upon initial offering, including maturity and
interest rate;
• The level and composition of other interest-bearing assets and liabilities, including our liquidity portfolio;
• Changes in the interest rate environment, including the levels of interest rates and the relationships among
interest rate indices, such as the prime rate, the Federal Funds rate and the London Interbank Offered Rate
("LIBOR");
• The effectiveness of interest rate swaps in our interest rate risk management program; and
• The difference between the carrying amount and future cash flows expected to be collected on PCI loans.
For the Year Ended December 31, 2014 compared to the Year Ended December 31, 2013
Net interest margin increased for the year ended December 31, 2014 as compared to the year ended December
31, 2013 primarily driven by an increase in the yield on total loan receivables combined with lower interest rates on
funding. The increase in loan receivable yields was driven by higher interest rates and growth in non-promotional
revolving balances, partially offset by a decline in higher rate balances along with growth in credit card promotional
balances.
Interest income increased during the year ended December 31, 2014 as compared to the year ended December
31, 2013 primarily due to higher average balances of credit card loans, personal loans and private student loans
resulting from growth across these products. The increase was also attributable to higher yields on credit card loans and
PCI student loans, partially offset by a decrease in yield on personal loans along with a decrease in PCI student loan
balances.
Interest expense was relatively flat during the year ended December 31, 2014 as compared to the year ended
December 31, 2013, as lower interest expense on deposits attributable to lower yields was offset by higher interest
expense resulting from increase in borrowings.
For the Calendar Year Ended December 31, 2013 compared to the Fiscal Year Ended November 30, 2012
Net interest margin increased for the calendar year ended December 31, 2013 as compared to the fiscal year
ended November 30, 2012 primarily driven by decreased funding costs and growth in loan receivables, partially offset
by lower yields on loan receivables. The decrease in loan receivable yields was driven by growth in credit card
promotional balances and a decline in higher rate balances, partially offset by growth in customers with revolving
balances.
Interest income increased during the calendar year ended December 31, 2013 as compared to the fiscal year
ended November 30, 2012 primarily due to higher interest income from credit card loans, personal loans and private
student loans resulting from growth across these products combined with lower credit card loan interest charge-offs. The
increase in interest income from these products was partially offset by a decrease in yield on credit card loan
receivables along with a decrease in PCI student loan balances.
Interest expense declined during the calendar year ended December 31, 2013 as compared to the fiscal year
ended November 30, 2012 primarily due to the combination of deposits bearing higher interest rates maturing and
being replaced by deposits bearing lower interest rates and maturities of borrowings and certain asset-backed
securities.