Discover 2015 Annual Report Download - page 127

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The following table provides changes in accretable yield for the acquired loans during each period (dollars in
millions):
For the Years Ended December 31,
2015 2014 2013
Balance at beginning of period ............................................................................................. $ 1,341 $ 1,580 $2,072
Accretion into interest income ............................................................................................ (220) (260) (272)
Other changes in expected cash flows ................................................................................ (156) 21 (220)
Balance at end of period ...................................................................................................... $ 965 $ 1,341 $1,580
Periodically the Company updates the estimate of cash flows expected to be collected based on management's
latest expectations of future credit losses, borrower prepayments and certain other assumptions that affect cash flows.
During the years ended December 31, 2015 and 2013, the Company recorded $8 million and $28 million of provision
expense, respectively, due to higher expected losses on its pools. No provision expense was recorded during the year
ended December 31, 2014. The allowance for PCI loan losses at December 31, 2015 and 2014 was $36 million and
$28 million, respectively. For the year ended December 31, 2015, the changes to the expected cash flow assumptions
resulted in a decrease in accretable yield due primarily to changes in expected future prepayments based on model
updates and assumptions changes as well as actual borrower prepayments. For the years ended December 31, 2014
and 2013, the changes in expected cash flow assumptions resulted in an increase and decrease, respectively, related to
expected life of the loans. Changes to accretable yield are recognized prospectively as an adjustment to yield over the
remaining life of the pools.
At December 31, 2015, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student
loans (which includes loans not yet in repayment) were 2.53% and 0.88%, respectively. At December 31, 2014, the 30
or more days delinquency and 90 or more days delinquency rates on PCI student loans (which includes loans not yet in
repayment) were 2.35% and 0.75%, respectively. These rates include private student loans that are greater than 120
days delinquent that are covered by an indemnification agreement or insurance arrangements through which the
Company expects to recover a substantial portion of the loan. The net charge-off rate on PCI student loans for the years
ended December 31, 2015, 2014 and 2013 was 0.55%, 0.64% and 1.36%, respectively.
Mortgage Loans Held For Sale
The following table provides a summary of the initial unpaid principal balance of mortgage loans sold during
each period, by type of loan (dollars in millions):
For the Years Ended December 31,
2015 2014 2013
Amount % Amount % Amount %
Conforming(1) ........................................... $ 2,307 87.52% $ 2,484 90.79% $ 2,721 67.77%
FHA(2) ...................................................... 308 11.68 212 7.75 1,290 32.13
Jumbo(3) ................................................... 6 0.23 34 1.24 4 0.10
VA(4) ........................................................ 15 0.57 6 0.22 — —
Total ........................................................ $ 2,636 100.00% $ 2,736 100.00% $ 4,015 100.00%
(1) Conforming loans are loans that conform to Government-Sponsored Enterprises guidelines.
(2) FHA loans are loans that are insured by the Federal Housing Administration and are typically made to borrowers with low down payments. The initial loan amount
must be within certain limits.
(3) Jumbo loans are loans with an initial amount larger than the limits set by a Government-Sponsored Enterprise.
(4) VA loans are loans that are insured by and conform to the Department of Veteran Affairs guidelines.