Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Discover Financial Services | a6650619ex99-1.htm |
| 8-K - DISCOVER FINANCIAL SERVICES 8-K - Discover Financial Services | a6650619.htm |
Exhibit 99.2
|
DISCOVER FINANCIAL SERVICES
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EARNINGS SUMMARY
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||||||||||||||||||||||||||||
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(unaudited, in millions, except per share statistics)
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||||||||||||||||||||||||||||
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Quarter Ended
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February 28, 2011
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Feb 28, 2011
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Nov 30, 2010
|
Aug 31, 2010
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May 31, 2010
|
Feb 28, 2010
|
vs. February 28, 2010
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|||||||||||||||||||||||
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EARNINGS SUMMARY
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||||||||||||||||||||||||||||
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Interest Income
|
$1,553 | $1,499 | $1,536 | $1,552 | $1,559 | ($6 | ) | (0 | %) | |||||||||||||||||||
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Interest Expense
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383 | 375 | 389 | 405 | 414 | (31 | ) | (7 | %) | |||||||||||||||||||
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Net Interest Income
|
1,170 | 1,124 | 1,147 | 1,147 | 1,145 | 25 | 2 | % | ||||||||||||||||||||
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Discount and Interchange Revenue
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261 | 250 | 274 | 269 | 262 | (1 | ) | (0 | %) | |||||||||||||||||||
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Fee Products Revenue
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108 | 103 | 104 | 101 | 104 | 4 | 4 | % | ||||||||||||||||||||
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Loan Fee Income
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86 | 72 | 92 | 70 | 105 | (19 | ) | (18 | %) | |||||||||||||||||||
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Transaction Processing Revenue
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43 | 40 | 40 | 36 | 33 | 10 | 30 | % | ||||||||||||||||||||
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Other Income
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65 | 7 | 54 | 37 | 42 | 23 | 55 | % | ||||||||||||||||||||
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Total Other Income
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563 | 472 | 564 | 513 | 546 | 17 | 3 | % | ||||||||||||||||||||
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Revenue Net of Interest Expense
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1,733 | 1,596 | 1,711 | 1,660 | 1,691 | 42 | 2 | % | ||||||||||||||||||||
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Provision for Loan Losses
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418 | 383 | 713 | 724 | 1,387 | (969 | ) | (70 | %) | |||||||||||||||||||
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Employee Compensation and Benefits
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213 | 200 | 204 | 203 | 196 | 17 | 9 | % | ||||||||||||||||||||
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Marketing and Business Development
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136 | 150 | 131 | 98 | 85 | 51 | 60 | % | ||||||||||||||||||||
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Information Processing & Communications
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65 | 67 | 62 | 63 | 65 | 0 | 0 | % | ||||||||||||||||||||
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Professional Fees
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90 | 104 | 85 | 78 | 76 | 14 | 18 | % | ||||||||||||||||||||
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Premises and Equipment
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17 | 17 | 18 | 18 | 18 | (1 | ) | (6 | %) | |||||||||||||||||||
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Other Expense
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74 | 90 | 66 | 54 | 35 | 39 | 111 | % | ||||||||||||||||||||
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Total Other Expense
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595 | 628 | 566 | 514 | 475 | 120 | 25 | % | ||||||||||||||||||||
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Income Before Income Taxes
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720 | 585 | 432 | 422 | (171 | ) | 891 |
NM
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Tax Expense
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255 | 235 | 171 | 164 | (67 | ) | 322 |
NM
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Net Income
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$465 | $350 | $261 | $258 | ($104 | ) | $569 |
NM
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Net Income Allocated to Common Stockholders 1
|
$459 | $347 | $258 | $185 | ($122 | ) | $581 |
NM
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Effective Tax Rate 2
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35.4 | % | 40.3 | % | 39.7 | % | 38.9 | % | 39.3 | % | ||||||||||||||||||
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Net Interest Margin 3
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9.22 | % | 9.28 | % | 9.16 | % | 9.14 | % | 9.01 | % | 21 |
bps
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||||||||||||||||
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ROE 4
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28 | % | 22 | % | 17 | % | 16 | % | (6 | %) | ||||||||||||||||||
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Ending Common Shares Outstanding
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545 | 545 | 545 | 544 | 544 | 1 | 0 | % | ||||||||||||||||||||
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Weighted Average Common Shares Outstanding
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545 | 545 | 544 | 544 | 543 | 2 | 0 | % | ||||||||||||||||||||
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Weighted Average Common Shares Outstanding (fully diluted)
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546 | 545 | 547 | 552 | 543 | 3 | 1 | % | ||||||||||||||||||||
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PER SHARE STATISTICS
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Basic EPS 5
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$0.84 | $0.64 | $0.47 | $0.34 | ($0.22 | ) | $1.06 |
NM
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Diluted EPS 5
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$0.84 | $0.64 | $0.47 | $0.33 | ($0.22 | ) | $1.06 |
NM
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Common Stock Price (period end)
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$21.75 | $18.28 | $14.51 | $13.45 | $13.65 | $8.10 | 59 | % | ||||||||||||||||||||
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Dividend per share
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$0.06 | $0.02 | $0.02 | $0.02 | $0.02 | $0.04 | 200 | % | ||||||||||||||||||||
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Book Value per share 6
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$12.65 | $11.85 | $11.22 | $11.10 | $12.90 | ($0.25 | ) | (2 | %) | |||||||||||||||||||
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SEGMENT- INCOME BEFORE INCOME TAXES
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Direct Banking
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$677 | $554 | $395 | $386 | ($208 | ) | $885 |
NM
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Payment Services
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43 | 31 | 37 | 36 | 37 | 6 | 16 | % | ||||||||||||||||||||
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Total
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$720 | $585 | $432 | $422 | ($171 | ) | $891 |
NM
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TRANSACTIONS PROCESSED ON NETWORKS
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Discover Network
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410 | 413 | 418 | 393 | 382 | 28 | 7 | % | ||||||||||||||||||||
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PULSE Network
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929 | 901 | 882 | 805 | 720 | 209 | 29 | % | ||||||||||||||||||||
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Total
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1,339 | 1,314 | 1,300 | 1,198 | 1,102 | 237 | 22 | % | ||||||||||||||||||||
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NETWORK VOLUME
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PULSE Network
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$34,380 | $31,334 | $30,582 | $28,646 | $27,618 | $6,762 | 24 | % | ||||||||||||||||||||
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Third-Party Issuers
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1,772 | 1,768 | 1,794 | 1,678 | 1,562 | 210 | 13 | % | ||||||||||||||||||||
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Diners Club International 7
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6,998 | 7,328 | 6,542 | 6,708 | 6,554 | 444 | 7 | % | ||||||||||||||||||||
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Total Payment Services
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43,150 | 40,430 | 38,918 | 37,032 | 35,734 | 7,416 | 21 | % | ||||||||||||||||||||
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Discover Network - Proprietary 8
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24,784 | 24,075 | 24,880 | 23,632 | 23,173 | 1,611 | 7 | % | ||||||||||||||||||||
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Total
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$67,934 | $64,505 | $63,798 | $60,664 | $58,907 | $9,027 | 15 | % | ||||||||||||||||||||
1
|
DISCOVER FINANCIAL SERVICES
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BALANCE SHEET STATISTICS
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(unaudited, in millions)
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Quarter Ended
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February 28, 2011
|
|||||||||||||||||||||||||||
|
Feb 28, 2011
|
Nov 30, 2010
|
Aug 31, 2010
|
May 31, 2010
|
Feb 28, 2010
|
vs. February 28, 2010
|
|||||||||||||||||||||||
|
BALANCE SHEET SUMMARY
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Assets
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Cash and Investment Securities
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$11,463 | $11,913 | $10,209 | $12,467 | $17,317 | ($5,854 | ) | (34 | %) | |||||||||||||||||||
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Total Loan Receivables
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51,663 | 48,836 | 50,131 | 50,025 | 50,094 | 1,569 | 3 | % | ||||||||||||||||||||
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Allowance for Loan Losses
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(3,033 | ) | (3,304 | ) | (3,744 | ) | (3,931 | ) | (4,208 | ) | 1,175 | 28 | % | |||||||||||||||
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Net Loan Receivables
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48,630 | 45,532 | 46,387 | 46,094 | 45,886 | 2,744 | 6 | % | ||||||||||||||||||||
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Premises and Equipment, net
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459 | 461 | 457 | 469 | 483 | (24 | ) | (5 | %) | |||||||||||||||||||
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Goodwill and Intangible Assets, net
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449 | 444 | 446 | 448 | 449 | 0 | 0 | % | ||||||||||||||||||||
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Other Assets
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2,506 | 2,435 | 2,559 | 2,676 | 2,684 | (178 | ) | (7 | %) | |||||||||||||||||||
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Total Assets
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$63,507 | $60,785 | $60,058 | $62,154 | $66,819 | ($3,312 | ) | (5 | %) | |||||||||||||||||||
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Liabilities & Stockholders' Equity
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Direct to Consumer and Affinity Deposits
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$21,795 | $20,597 | $19,069 | $17,527 | $14,833 | $6,962 | 47 | % | ||||||||||||||||||||
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Brokered Deposits and Other Deposits
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13,065 | 13,816 | 15,178 | 17,495 | 20,219 | (7,154 | ) | (35 | %) | |||||||||||||||||||
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Deposits
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34,860 | 34,413 | 34,247 | 35,022 | 35,052 | (192 | ) | (1 | %) | |||||||||||||||||||
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Borrowings
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19,090 | 17,706 | 17,709 | 18,311 | 22,392 | (3,302 | ) | (15 | %) | |||||||||||||||||||
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Accrued Expenses and Other Liabilities
|
2,658 | 2,209 | 1,991 | 2,783 | 2,360 | 298 | 13 | % | ||||||||||||||||||||
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Total Liabilities
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56,608 | 54,328 | 53,947 | 56,116 | 59,804 | (3,196 | ) | (5 | %) | |||||||||||||||||||
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Total Equity
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6,899 | 6,457 | 6,111 | 6,038 | 7,015 | (116 | ) | (2 | %) | |||||||||||||||||||
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Total Liabilities and Stockholders' Equity
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$63,507 | $60,785 | $60,058 | $62,154 | $66,819 | ($3,312 | ) | (5 | %) | |||||||||||||||||||
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BALANCE SHEET STATISTICS
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Total Common Equity
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$6,899 | $6,457 | $6,111 | $6,038 | $5,854 | $1,045 | 18 | % | ||||||||||||||||||||
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Total Common Equity/Total Assets
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10.9 | % | 10.6 | % | 10.2 | % | 9.7 | % | 8.8 | % | ||||||||||||||||||
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Total Common Equity/Net Loans
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14.2 | % | 14.2 | % | 13.2 | % | 13.1 | % | 12.8 | % | ||||||||||||||||||
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Tangible Assets 9
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$63,058 | $60,341 | $59,612 | $61,706 | $66,370 | ($3,312 | ) | (5 | %) | |||||||||||||||||||
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Tangible Common Equity 10
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$6,450 | $6,013 | $5,665 | $5,590 | $5,405 | $1,045 | 19 | % | ||||||||||||||||||||
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Tangible Common Equity/Tangible Assets 10,11
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10.2 | % | 10.0 | % | 9.5 | % | 9.1 | % | 8.1 | % | ||||||||||||||||||
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Tangible Common Equity/Net Loans 10,12
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13.3 | % | 13.2 | % | 12.2 | % | 12.1 | % | 11.8 | % | ||||||||||||||||||
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Tangible Common Equity per share 10,13
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$11.83 | $11.04 | $10.40 | $10.28 | $9.94 | $1.89 | 19 | % | ||||||||||||||||||||
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REGULATORY CAPITAL RATIOS
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Total Risk Based Capital Ratio 14
|
16.0 | % | 15.9 | % | 15.5 | % | 15.3 | % | 16.2 | % | ||||||||||||||||||
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Tier 1 Risk Based Capital Ratio 14
|
12.4 | % | 12.2 | % | 11.7 | % | 11.6 | % | 13.4 | % | ||||||||||||||||||
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Tier 1 Leverage Ratio 14
|
10.2 | % | 9.9 | % | 9.5 | % | 9.0 | % | 9.7 | % | ||||||||||||||||||
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LIQUIDITY
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Liquidity Investment Portfolio 15
|
$10,232 | $10,132 | $9,111 | $10,862 | $12,643 | ($2,411 | ) | (19 | %) | |||||||||||||||||||
|
Undrawn Credit Facilities 16
|
14,414 | 12,492 | 11,659 | 12,098 | 9,517 | 4,897 | 51 | % | ||||||||||||||||||||
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Total Liquidity
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$24,646 | $22,624 | $20,770 | $22,960 | $22,160 | $2,486 | 11 | % | ||||||||||||||||||||
2
|
DISCOVER FINANCIAL SERVICES
|
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LOAN STATISTICS
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(unaudited, in millions)
|
||||||||||||||||||||||||||||
|
Quarter Ended
|
February 28, 2011
|
|||||||||||||||||||||||||||
|
Feb 28, 2011
|
Nov 30, 2010
|
Aug 31, 2010
|
May 31, 2010
|
Feb 28, 2010
|
vs. February 28, 2010
|
|||||||||||||||||||||||
|
TOTAL LOAN RECEIVABLES
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||||||||||||||||||||||||||||
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Ending Loans 17,18
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$51,663 | $48,836 | $50,131 | $50,025 | $50,094 | $1,569 | 3 | % | ||||||||||||||||||||
|
Average Loans 17, 18
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$51,488 | $48,597 | $49,687 | $49,819 | $51,555 | ($68 | ) | (0 | %) | |||||||||||||||||||
|
Interest Yield 19
|
12.10 | % | 12.24 | % | 12.16 | % | 12.25 | % | 12.15 | % | (5 | ) |
bps
|
|||||||||||||||
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Net Principal Charge-off Rate 20
|
5.42 | % | 6.58 | % | 7.18 | % | 7.97 | % | 8.51 | % | (309 | ) |
bps
|
|||||||||||||||
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Net Principal Charge-off Rate Excluding PCI Loans 20, 23
|
5.64 | % | 6.58 | % | 7.18 | % | 7.97 | % | 8.51 | % | (287 | ) |
bps
|
|||||||||||||||
|
Delinquency Rate (over 30 days) 21, 23
|
3.44 | % | 3.89 | % | 4.16 | % | 4.52 | % | 5.05 | % | (161 | ) |
bps
|
|||||||||||||||
|
Delinquency Rate (over 90 days) 22, 23
|
1.88 | % | 2.03 | % | 2.19 | % | 2.45 | % | 2.77 | % | (89 | ) |
bps
|
|||||||||||||||
|
Net Charge-off Dollars
|
$689 | $797 | $900 | $1,001 | $1,082 | ($393 | ) | (36 | %) | |||||||||||||||||||
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Loans Delinquent Over 30 Days 23
|
$1,673 | $1,902 | $2,083 | $2,264 | $2,530 | ($857 | ) | (34 | %) | |||||||||||||||||||
|
Loans Delinquent Over 90 Days 23
|
$915 | $994 | $1,099 | $1,225 | $1,386 | ($471 | ) | (34 | %) | |||||||||||||||||||
|
Allowance for Loan Loss (period end)
|
$3,033 | $3,304 | $3,744 | $3,931 | $4,208 | ($1,175 | ) | (28 | %) | |||||||||||||||||||
|
Change in Loan Loss Reserves
|
($271 | ) | ($414 | ) | ($187 | ) | ($277 | ) | $305 | ($576 | ) | (189 | %) | |||||||||||||||
|
Reserve Rate 24
|
5.87 | % | 6.77 | % | 7.47 | % | 7.86 | % | 8.40 | % | (253 | ) |
bps
|
|||||||||||||||
|
Reserve Rate Excluding PCI Loans 23, 24
|
6.23 | % | 6.77 | % | 7.47 | % | 7.86 | % | 8.40 | % | (217 | ) |
bps
|
|||||||||||||||
|
CREDIT CARD LOANS
|
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|
Ending Loans
|
$44,317 | $45,157 | $45,248 | $45,328 | $45,761 | ($1,444 | ) | (3 | %) | |||||||||||||||||||
|
Average Loans
|
$45,443 | $44,670 | $44,905 | $45,280 | $47,646 | ($2,204 | ) | (5 | %) | |||||||||||||||||||
|
Interest Yield 19
|
12.65 | % | 12.68 | % | 12.86 | % | 12.93 | % | 12.70 | % | (5 | ) |
bps
|
|||||||||||||||
|
Net Principal Charge-off Rate 20
|
5.96 | % | 6.95 | % | 7.73 | % | 8.56 | % | 9.00 | % | (304 | ) |
bps
|
|||||||||||||||
|
Delinquency Rate (over 30 days) 21
|
3.59 | % | 4.06 | % | 4.39 | % | 4.85 | % | 5.39 | % | (180 | ) |
bps
|
|||||||||||||||
|
Delinquency Rate (over 90 days) 22
|
1.99 | % | 2.12 | % | 2.35 | % | 2.63 | % | 2.98 | % | (99 | ) |
bps
|
|||||||||||||||
|
Net Charge-off Dollars
|
$668 | $774 | $875 | $977 | $1,058 | ($390 | ) | (37 | %) | |||||||||||||||||||
|
Loans Delinquent Over 30 Days
|
$1,590 | $1,831 | $1,986 | $2,196 | $2,467 | ($878 | ) | (36 | %) | |||||||||||||||||||
|
Loans Delinquent Over 90 Days
|
$882 | $958 | $1,062 | $1,193 | $1,365 | ($482 | ) | (35 | %) | |||||||||||||||||||
|
Allowance for Loan Loss (period end)
|
$2,939 | $3,209 | $3,647 | $3,826 | $4,092 | ($1,153 | ) | (28 | %) | |||||||||||||||||||
|
Change in Loan Loss Reserves
|
($270 | ) | ($412 | ) | ($179 | ) | ($266 | ) | $300 | ($570 | ) | (190 | %) | |||||||||||||||
|
Reserve Rate 24
|
6.63 | % | 7.11 | % | 8.06 | % | 8.44 | % | 8.94 | % | (231 | ) |
bps
|
|||||||||||||||
|
Total Discover Card Volume
|
$25,759 | $25,054 | $25,553 | $24,247 | $23,844 | $1,915 | 8 | % | ||||||||||||||||||||
|
Discover Card Sales Volume
|
$23,990 | $23,219 | $23,993 | $22,859 | $22,400 | $1,590 | 7 | % | ||||||||||||||||||||
|
FEDERAL STUDENT LOANS
|
||||||||||||||||||||||||||||
|
Ending Loans 25
|
$767 | $789 | $2,247 | $2,239 | $2,027 | ($1,260 | ) | (62 | %) | |||||||||||||||||||
|
PRIVATE STUDENT LOANS
|
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|
Ending Loans
|
$4,545 | $999 | $881 | $820 | $791 | $3,754 |
NM
|
|||||||||||||||||||||
|
Average Loans
|
$3,310 | $962 | $838 | $808 | $697 | $2,613 |
NM
|
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|
Ending PCI Loans 18
|
$3,011 | - | - | - | - | - |
NM
|
|||||||||||||||||||||
|
Average PCI Loans 18
|
$2,016 | - | - | - | - | - |
NM
|
|||||||||||||||||||||
|
Interest Yield 19
|
7.40 | % | 6.04 | % | 5.81 | % | 5.82 | % | 5.18 | % | 222 |
bps
|
||||||||||||||||
|
Net Principal Charge-off Rate 20
|
0.11 | % | 0.63 | % | 0.31 | % | 0.12 | % | 0.20 | % | (9 | ) |
bps
|
|||||||||||||||
|
Net Principal Charge-off Rate Excluding PCI Loans 20, 23
|
0.29 | % | 0.63 | % | 0.31 | % | 0.12 | % | 0.20 | % | 9 |
bps
|
||||||||||||||||
|
Delinquency Rate (over 30 days) 21, 23
|
0.72 | % | 0.50 | % | 0.80 | % | 0.24 | % | 0.31 | % | 41 |
bps
|
||||||||||||||||
|
Delinquency Rate (over 90 days) 22, 23
|
0.11 | % | 0.14 | % | 0.07 | % | 0.06 | % | 0.03 | % | 8 |
bps
|
||||||||||||||||
|
Reserve Rate 24
|
0.43 | % | 1.86 | % | 1.67 | % | 1.55 | % | 2.38 | % | (195 | ) |
bps
|
|||||||||||||||
|
Reserve Rate Excluding PCI Loans 23, 24
|
1.29 | % | 1.86 | % | 1.67 | % | 1.55 | % | 2.38 | % | (109 | ) |
bps
|
|||||||||||||||
|
PERSONAL LOANS
|
||||||||||||||||||||||||||||
|
Ending Loans
|
$2,020 | $1,878 | $1,707 | $1,573 | $1,447 | $573 | 40 | % | ||||||||||||||||||||
|
Average Loans
|
$1,941 | $1,793 | $1,639 | $1,510 | $1,426 | $515 | 36 | % | ||||||||||||||||||||
|
Interest Yield 19
|
11.71 | % | 11.59 | % | 11.40 | % | 11.32 | % | 11.27 | % | 44 |
bps
|
||||||||||||||||
|
Net Principal Charge-off Rate 20
|
4.10 | % | 4.70 | % | 5.67 | % | 5.97 | % | 6.79 | % | (269 | ) |
bps
|
|||||||||||||||
|
Delinquency Rate (over 30 days) 21
|
1.20 | % | 1.57 | % | 1.75 | % | 2.12 | % | 2.14 | % | (94 | ) |
bps
|
|||||||||||||||
|
Delinquency Rate (over 90 days) 22
|
0.43 | % | 0.57 | % | 0.57 | % | 0.76 | % | 0.70 | % | (27 | ) |
bps
|
|||||||||||||||
|
Reserve Rate 24
|
3.68 | % | 4.05 | % | 4.70 | % | 5.73 | % | 6.53 | % | (285 | ) |
bps
|
|||||||||||||||
3
|
DISCOVER FINANCIAL SERVICES
|
||||||||||||||||||||||||||||
|
SEGMENT RESULTS
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(unaudited, in millions)
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Quarter Ended
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February 28, 2011
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Feb 28, 2011
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Nov 30, 2010
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Aug 31, 2010
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May 31, 2010
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Feb 28, 2010
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vs. February 28, 2010
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DIRECT BANKING
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Interest Income
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$1,553 | $1,499 | $1,536 | $1,552 | $1,559 | ($6 | ) | (0 | %) | |||||||||||||||||||
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Interest Expense
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383 | 375 | 389 | 405 | 414 | (31 | ) | (7 | %) | |||||||||||||||||||
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Net Interest Income
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1,170 | 1,124 | 1,147 | 1,147 | 1,145 | 25 | 2 | % | ||||||||||||||||||||
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Other Income
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486 | 404 | 496 | 448 | 480 | 6 | 1 | % | ||||||||||||||||||||
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Revenue Net of Interest Expense
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1,656 | 1,528 | 1,643 | 1,595 | 1,625 | 31 | 2 | % | ||||||||||||||||||||
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Provision for Loan Losses
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418 | 383 | 713 | 724 | 1,387 | (969 | ) | (70 | %) | |||||||||||||||||||
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Total Other Expense
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561 | 591 | 535 | 485 | 446 | 115 | 26 | % | ||||||||||||||||||||
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Income Before Income Taxes
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$677 | $554 | $395 | $386 | ($208 | ) | $885 |
NM
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Net Interest Margin 3
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9.22 | % | 9.28 | % | 9.16 | % | 9.14 | % | 9.01 | % | 21 |
bps
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Pretax Return on Loan Receivables 26
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5.33 | % | 4.57 | % | 3.16 | % | 3.07 | % | (1.63 | %) | 696 |
bps
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PAYMENT SERVICES
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Interest Income
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$- | $- | $- | $- | $- | $- |
NM
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Interest Expense
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- | - | - | - | - | - |
NM
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Net Interest Income
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- | - | - | - | - | - |
NM
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Other Income
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77 | 68 | 68 | 65 | 66 | 11 | 17 | % | ||||||||||||||||||||
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Revenue Net of Interest Expense
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77 | 68 | 68 | 65 | 66 | 11 | 17 | % | ||||||||||||||||||||
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Total Other Expense
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34 | 37 | 31 | 29 | 29 | 5 | 17 | % | ||||||||||||||||||||
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Income Before Income Taxes
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$43 | $31 | $37 | $36 | $37 | $6 | 16 | % | ||||||||||||||||||||
4
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DISCOVER FINANCIAL SERVICES
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FOOTNOTES
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1
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Net Income Allocated to Common Stockholders represents net income less (i) dividends and accretion of discount on shares of preferred stock and (ii) income allocated to participating securities.
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2
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Effective Tax Rate represents tax expense divided by income before income taxes.
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3
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Net Interest Margin represents net interest income (annualized) divided by average total loans for the period.
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4
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Return on Equity represents net income (annualized) divided by average total equity for the reporting period.
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5
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Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding.
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6
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Book Value per share represents total equity divided by ending common shares outstanding.
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7
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Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment.
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8
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Gross proprietary sales volume on the Discover Network.
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9
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Tangible Assets represents total assets less goodwill and intangibles.
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10
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Tangible common equity ("TCE"), a non-GAAP financial measure, represents total common equity less goodwill and intangibles. The Company believes TCE is a more meaningful valuation to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of GAAP to Non-GAAP Data schedule.
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11
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Tangible Common Equity/Tangible Assets, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.
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12
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Tangible Common Equity/Net Loans, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by total loans less the allowance for loan loss (period end).
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13
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Tangible Common Equity per Share, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by ending common shares outstanding.
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14
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Capital Ratios are regulatory measures used to evaluate capital adequacy. To be considered "well-capitalized," total risk-based, tier 1 risk-based, and tier 1 leverage ratios of 10%, 6% and 5% respectively must be maintained. Total Risk Based Capital Ratio represents total capital divided by risk-weighted assets. Tier 1 Capital Ratio represents tier 1 capital divided by risk-weighted assets. Tier 1 Leverage Ratio represents tier 1 capital divided by average total assets.
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15
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Liquidity Investment Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments.
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16
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Undrawn Credit Facilities represents asset-backed conduit funding facilities, committed unsecured credit facility and Federal Reserve discount window (excluding $1.1 billion of investments pledged to the Federal Reserve, which is included within the liquidity investment portolio).
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17
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Total Loans includes mortgages and other loans.
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18
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Purchased Credit Impaired ("PCI") loans were acquired in The Student Loan Corporation transaction on December 31, 2010. PCI loans are loans for which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables.
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19
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Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period.
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20
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Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period.
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21
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Delinquency Rate (Over 30 Days) represents loans delinquent over thirty days divided by ending loans (total or respective loans, as appropriate).
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22
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Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided by ending loans (total or respective loans, as appropriate).
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23
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Excludes PCI loans (described above) that were acquired as part of The Student Loan Corporation transaction which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the company is recognizing interest income on a pool of loans, it is all considered to be performing.
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24
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Reserve Rate represents the allowance for loan losses divided by total loans. The Reserve Rate includes federal student loans held for sale.
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25
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Federal Student Loans are held-for-sale as of November 30, 2010.
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26
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Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by total average loans for the period.
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5
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DISCOVER FINANCIAL SERVICES
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RECONCILIATION OF GAAP TO NON-GAAP DATA
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(unaudited, in millions)
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Quarter Ended
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Feb 28, 2011
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Nov 30, 2010
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Aug 31, 2010
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May 31, 2010
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Feb 28, 2010
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GAAP Total Common Equity
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$6,899 | $6,457 | $6,111 | $6,038 | $5,854 | |||||||||||||||
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Less: Goodwill
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(255 | ) | (255 | ) | (255 | ) | (255 | ) | (255 | ) | ||||||||||
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Less: Intangibles
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(194 | ) | (189 | ) | (191 | ) | (193 | ) | (194 | ) | ||||||||||
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Tangible Common Equity 10
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$6,450 | $6,013 | $5,665 | $5,590 | $5,405 | |||||||||||||||
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GAAP Book Value per share
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$12.65 | $11.85 | $11.22 | $11.10 | $12.90 | |||||||||||||||
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Less: Goodwill
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(0.47 | ) | (0.47 | ) | (0.47 | ) | (0.47 | ) | (0.47 | ) | ||||||||||
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Less: Intangibles
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(0.35 | ) | (0.34 | ) | (0.35 | ) | (0.35 | ) | (0.36 | ) | ||||||||||
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Less: Preferred Stock
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0.00 | 0.00 | 0.00 | 0.00 | (2.13 | ) | ||||||||||||||
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Tangible Common Equity per share 10,13
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$11.83 | $11.04 | $10.40 | $10.28 | $9.94 | |||||||||||||||
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Tangible common equity ("TCE"), a non-GAAP financial measure, represents common equity less goodwill and intangibles. A reconciliation of TCE to common equity, a GAAP financial measure, is shown above. Other financial services companies may also use TCE and definitions may vary, so we advise users of this information to exercise caution in comparing TCE of different companies. TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful valuation to investors of the true net asset value of the company.
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6