Discover 2010 Annual Report Download - page 157

The following tables present segment data on a GAAP basis for the year ended November 30, 2010 and on a
managed basis with a reconciliation to a GAAP presentation for the years ended November 30, 2009 and 2008 (dollars
in thousands):
GAAP Basis
For the Years Ended
Direct
Banking
Payment
Services Total
2010
Interest income .............................................................................................. $6,146,199 $ 19 $6,146,218
Interest expense............................................................................................. 1,582,745 243 1,582,988
Net interest income ..................................................................................... 4,563,454 (224) 4,563,230
Provision for loan losses.................................................................................. 3,206,705 — 3,206,705
Other income................................................................................................ 1,827,414 267,585 2,094,999
Other expense............................................................................................... 2,056,685 125,980 2,182,665
Income before income tax expense................................................................ $1,127,478 $141,381 $1,268,859
Managed Basis
Securitization
Adjustment(2)
GAAP
Basis
Direct
Banking
Payment
Services(1) Total Total
2009
Interest income .............................................................................................. $6,459,974 $ 1,098 $6,461,072 $(3,315,992) $3,145,080
Interest expense............................................................................................. 1,648,198 222 1,648,420 (397,136) 1,251,284
Net interest income ..................................................................................... 4,811,776 876 4,812,652 (2,918,856) 1,893,796
Provision for loan losses.................................................................................. 4,358,341 — 4,358,341 (1,995,936) 2,362,405
Other income(3) ............................................................................................. 3,677,881 239,794 3,917,675 922,920 4,840,595
Other expense............................................................................................... 2,116,962 134,126 2,251,088 — 2,251,088
Income before income tax expense................................................................ $2,014,354 $106,544 $2,120,898 $ — $2,120,898
2008
Interest income .............................................................................................. $6,542,664 $ 3,165 $6,545,829 $(3,853,266) $2,692,563
Interest expense............................................................................................. 2,356,836 83 2,356,919 (1,068,915) 1,288,004
Net interest income ..................................................................................... 4,185,828 3,082 4,188,910 (2,784,351) 1,404,559
Provision for loan losses.................................................................................. 3,068,604 — 3,068,604 (1,472,989) 1,595,615
Other income(3) ............................................................................................. 2,773,896 179,200 2,953,096 1,311,362 4,264,458
Other expense............................................................................................... 2,314,926 100,871 2,415,797 — 2,415,797
Income from continuing operations before income tax expense .......................... $1,576,194 $ 81,411 $1,657,605 $ — $1,657,605
(1) Diners Club was acquired on June 30, 2008.
(2) The Securitization Adjustment column presents the effect of loan securitizations by recharacterizing as securitization income the portions of the following items that relate to the securitized loans:
interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues. Securitization income is reported in other income.
(3) The years ended November 30, 2009 and 2008 include $1.9 billion and $0.9 billion, respectively, of income related to the Visa and MasterCard antitrust litigation settlement, which is included in
the Direct Banking segment. See Note 21: Litigation.
25. Related Party Transactions
In the ordinary course of business, the Company offers consumer loan products to its directors, executive officers and
certain members of their families. These products are offered on substantially the same terms as those prevailing at the
time for comparable transactions with unrelated parties, and these receivables are included in the loan receivables in the
Company’s consolidated statements of financial condition. They were not material to the Company’s financial position or
results of operations.
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