EX-99.2 4 a5918637ex99-2.htm EXHIBIT 99.2 a5918637ex99-2.htm
Exhibit 99.2
 
 
Discover Financial Services
                                          
GAAP Basis
                                          
(unaudited, dollars in thousands, except per
                                          
share statistics)
  
Quarter Ended
    
Feb 28, 2009
  
   
Feb 28, 2009
    
Nov 30, 2008
    
Aug 31, 2008
    
May 31, 2008
    
Feb 29, 2008
    
vs Feb 29, 2008
  
                                           
Earnings Summary
                                          
    Interest Income
   $ 815,793     $ 736,006     $ 681,692     $ 612,063     $ 662,802     $ 152,991       23 %
    Interest Expense
     312,720       329,672       305,643       313,248       339,441       (26,721 )     (8 %)
Net Interest Income
     503,073       406,334       376,049       298,815       323,361       179,712       56 %
Other Income  1
     1,189,956       1,568,901       875,121       844,892       975,544       214,412       22 %
Revenue Net of Interest Expense
     1,693,029       1,975,235       1,251,170       1,143,707       1,298,905       394,124       30 %
Provision for Loan Losses
     937,813       714,176       364,838       210,969       305,632       632,181    
NM
  
    Employee Compensation and Benefits
     219,488       187,306       222,426       218,290       217,370       2,118       1 %
    Marketing and Business Development
     111,433       119,382       137,928       132,038       141,553       (30,120 )     (21 %)
    Information Processing & Communications
     74,897       81,543       76,675       79,449       78,276       (3,379 )     (4 %)
    Professional Fees
     70,123       111,645       82,775       81,392       73,672       (3,549 )     (5 %)
    Premises and Equipment
     18,072       20,676       20,274       19,803       19,641       (1,569 )     (8 %)
    Other Expense
     65,110       73,530       72,469       75,853       71,831       (6,721 )     (9 %)
Total Other Expense
     559,123       594,082       612,547       606,825       602,343       (43,220 )     (7 %)
Income (Loss) Before Income Taxes  1
     196,093       666,977       273,785       325,913       390,930       (194,837 )     (50 %)
Tax Expense
     75,699       223,336       94,885       124,370       152,101       (76,402 )     (50 %)
Income From Continuing Operations  1
     120,394       443,641       178,900       201,543       238,829       (118,435 )     (50 %)
Discontinued Operations, Net of Tax  2
     0       (11,306 )     1,153       32,605       (157,615 )     157,615       100 %
Net Income (Loss)  1, 2
   $ 120,394     $ 432,335     $ 180,053     $ 234,148     $ 81,214     $ 39,180       48 %
                                                         
Effective Tax Rate From Continuing Operations
     38.6 %     33.5 %     34.7 %     38.2 %     38.9 %                
                                                         
Balance Sheet Statistics  3
                                                        
Total Assets
   $ 40,605,873     $ 39,892,382     $ 37,283,548     $ 34,020,245     $ 34,222,732     $ 6,383,141       19 %
Total Equity
   $ 5,998,706     $ 5,915,823     $ 6,000,393     $ 5,849,691     $ 5,654,341     $ 344,365       6 %
Total Tangible Common Equity
   $ 5,541,887     $ 5,457,083     $ 5,539,274     $ 5,538,240     $ 5,341,020     $ 200,867       4 %
Tangible Common Equity/Total Owned Assets 4
     13.8 %     13.8 %     15.0 %     16.4 %     15.8 %                
ROE  1, 2
     8 %     29 %     12 %     16 %     6 %                
ROE from Continuing Operations  1
     8 %     30 %     12 %     14 %     17 %                
                                                         
Allowance for Loan Loss (period end)
   $ 1,878,942     $ 1,374,585     $ 959,769     $ 846,775     $ 860,378     $ 1,018,564       118 %
Change in Loan Loss Reserves
   $ 504,357     $ 414,816     $ 112,994     $ (13,603 )   $ 100,453     $ 403,904    
NM
  
Reserve Rate
     6.70 %     5.45 %     4.41 %     4.28 %     4.16 %     254    
bps
  
Interest-only Strip Receivable (period end)
   $ 198,536     $ 300,120     $ 408,649     $ 447,994     $ 468,059     $ (269,523 )     (58 %)
Net Revaluation of Retained Interests
   $ (98,242 )   $ (116,335 )   $ (33,513 )   $ (44,473 )   $ 74,997     $ (173,239 )  
NM
  
                                                         
Per Share Statistics
                                                        
Basic EPS  1, 2
   $ 0.25     $ 0.90     $ 0.38     $ 0.49     $ 0.17     $ 0.08       47 %
Basic EPS from Continuing Operations 1
   $ 0.25     $ 0.92     $ 0.38     $ 0.42     $ 0.50     $ (0.25 )     (50 %)
Diluted EPS  1, 2
   $ 0.25     $ 0.89     $ 0.37     $ 0.48     $ 0.17     $ 0.08       47 %
Diluted EPS from Continuing Operations  1
   $ 0.25     $ 0.92     $ 0.37     $ 0.42     $ 0.50     $ (0.25 )     (50 %)
Stock Price (period end)
   $ 5.73     $ 10.23     $ 16.45     $ 17.15     $ 15.09     $ (9.36 )     (62 %)
Tangible Common Equity
   $ 11.51     $ 11.37     $ 11.55     $ 11.55     $ 11.15     $ 0.36       3 %
Book Value
   $ 12.46     $ 12.32     $ 12.51     $ 12.20     $ 11.80     $ 0.66       6 %
Ending Shares Outstanding (000's)
     481,459       479,987       479,764       479,346       479,127       2,332       0 %
Weighted Average Shares Outstanding (000's)
     480,497       479,931       479,618       479,270       478,518       1,979       0 %
Weighted Average Shares Outstanding (fully diluted) (000's)
     485,043       484,558       484,128       483,753       481,744       3,299       1 %
                                                         
Loan Receivables  3
                                                        
Total Loans - Owned
   $ 28,034,208     $ 25,216,611     $ 21,767,483     $ 20,502,063     $ 21,042,681     $ 6,991,527       33 %
Average Total Loans - Owned
   $ 27,733,143     $ 22,945,494     $ 21,053,804     $ 19,890,330     $ 21,523,606     $ 6,209,537       29 %
                                                         
Interest Yield
     11.24 %     11.36 %     11.41 %     10.40 %     10.34 %     90    
bps
  
Net Principal Charge-off Rate
     6.34 %     5.25 %     4.76 %     4.49 %     3.83 %     251    
bps
  
Delinquency Rate (over 30 days)
     5.04 %     4.35 %     3.58 %     3.54 %     3.63 %     141    
bps
  
Delinquency Rate (over 90 days)
     2.57 %     2.06 %     1.73 %     1.81 %     1.82 %     75    
bps
  
                                                         
Transactions Processed on Networks (000's)
                                                        
Discover Network
     369,647       377,356       388,504       370,596       378,912       (9,265 )     (2 %)
PULSE Network
     686,527       644,045       713,791       703,404       621,072       65,455       11 %
Total
     1,056,174       1,021,401       1,102,295       1,074,000       999,984       56,190       6 %
                                                         
Volume
                                                        
PULSE Network
   $ 27,454,173     $ 25,033,235     $ 28,364,575     $ 27,830,403     $ 24,783,895     $ 2,670,278       11 %
Third-Party Issuers
     1,362,446       1,538,013       1,711,617       1,603,006       1,545,943       (183,497 )     (12 %)
Diners Club International  5
     6,293,574       7,457,893       5,227,795       -       -       6,293,574    
NM
  
     Total Third-Party Payments
     35,110,193       34,029,141       35,303,987       29,433,409       26,329,838       8,780,355       33 %
Discover Network - Proprietary 6
     22,424,367       22,875,272       25,117,321       23,621,519       24,074,331       (1,649,964 )     (7 %)
Total
   $ 57,534,560     $ 56,904,413     $ 60,421,308     $ 53,054,928     $ 50,404,169     $ 7,130,391       14 %
                                                         
                                                         
1 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
  
                                                         
2 The quarter ended May 31, 2008 includes income from discontinued operations, net of tax of $32.6 million consisting of a $21 million gain related to disposition of the Goldfish business and income of $12 million related to the Goldfish business operations. The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations.
  
                                                         
3 Based on Continuing Operations except equity and ROE. Equity is based on company's equity.
        
                                                         
4 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.
          
                                                         
5 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.
  
                                                         
6 Gross proprietary sales volume on the Discover Network.
                  
 
 
 
Discover Financial Services
                                          
Managed Basis 1
                                          
(unaudited, dollars in thousands)
                                          
   
Quarter Ended
    
Feb 28, 2009
  
   
Feb 28, 2009
    
Nov 30, 2008
    
Aug 31, 2008
    
May 31, 2008
    
Feb 29, 2008
    
vs Feb 29, 2008
  
                                           
Earnings Summary
                                          
    Interest Income
   $ 1,603,849     $ 1,682,267     $ 1,638,250     $ 1,572,697     $ 1,652,615     $ (48,766 )     (3 %)
    Interest Expense
     438,417       602,450       534,887       550,629       668,953       (230,536 )     (34 %)
Net Interest Income
     1,165,432       1,079,817       1,103,363       1,022,068       983,662       181,770       18 %
Other Income  2
     923,457       1,287,213       536,997       492,207       636,679       286,778       45 %
Revenue Net of Interest Expense
     2,088,889       2,367,030       1,640,360       1,514,275       1,620,341       468,548       29 %
Provision for Loan Losses
     1,333,673       1,105,971       754,028       581,537       627,068       706,605       113 %
    Employee Compensation and Benefits
     219,488       187,306       222,426       218,290       217,370       2,118       1 %
    Marketing and Business Development
     111,433       119,382       137,928       132,038       141,553       (30,120 )     (21 %)
    Information Processing & Communications
     74,897       81,543       76,675       79,449       78,276       (3,379 )     (4 %)
    Professional Fees
     70,123       111,645       82,775       81,392       73,672       (3,549 )     (5 %)
    Premises and Equipment
     18,072       20,676       20,274       19,803       19,641       (1,569 )     (8 %)
    Other Expense
     65,110       73,530       72,469       75,853       71,831       (6,721 )     (9 %)
Total Other Expense
     559,123       594,082       612,547       606,825       602,343       (43,220 )     (7 %)
Income (Loss) Before Income Taxes  2
     196,093       666,977       273,785       325,913       390,930       (194,837 )     (50 %)
Tax Expense
     75,699       223,336       94,885       124,370       152,101       (76,402 )     (50 %)
Income From Continuing Operations  2
     120,394       443,641       178,900       201,543       238,829       (118,435 )     (50 %)
Discontinued Operations, Net of Tax   2, 3
     0       (11,306 )     1,153       32,605       (157,615 )     157,615       100 %
Net Income (Loss)  2, 3
   $ 120,394     $ 432,335     $ 180,053     $ 234,148     $ 81,214     $ 39,180       48 %
                                                         
Balance Sheet Statistics 4
                                                        
Total Assets
   $ 63,231,013     $ 65,620,476     $ 65,632,825     $ 62,148,577     $ 61,937,501     $ 1,293,512       2 %
Total Equity  5
   $ 5,998,706     $ 5,915,823     $ 6,000,393     $ 5,849,691     $ 5,654,341     $ 344,365       6 %
Total Tangible Common Equity  5
   $ 5,541,887     $ 5,457,083     $ 5,539,274     $ 5,538,240     $ 5,341,020     $ 200,867       4 %
Tangible Common Equity/Net Managed Receivables
     11.3 %     11.0 %     11.2 %     11.8 %     11.5 %                
Tangible Common Equity/Total Managed Assets 6
     8.8 %     8.4 %     8.5 %     9.0 %     8.7 %                
                                                         
Net Yield on Loan Receivables
     9.11 %     8.56 %     8.95 %     8.57 %     8.10 %     101    
bps
  
Return on Loan Receivables 2
     0.94 %     3.52 %     1.45 %     1.69 %     1.97 %     (103 )  
bps
  
                                                         
Loan Receivables 4
                                                        
Total Loans - Managed
   $ 50,888,704     $ 51,095,278     $ 50,427,305     $ 47,841,491     $ 47,500,410     $ 3,388,294       7 %
Average Total Loans - Managed
   $ 51,877,845     $ 50,707,090     $ 49,019,083     $ 47,472,077     $ 48,863,166     $ 3,014,679       6 %
                                                         
Managed Interest Yield
     12.17 %     12.65 %     12.67 %     12.41 %     12.70 %     (53 )  
bps
  
Managed Net Principal Charge-off Rate
     6.48 %     5.48 %     5.20 %     4.99 %     4.33 %     215    
bps
  
Managed Delinquency Rate (over 30 days)
     5.25 %     4.56 %     3.85 %     3.81 %     3.90 %     135    
bps
  
Managed Delinquency Rate (over 90 days)
     2.69 %     2.17 %     1.88 %     1.96 %     1.96 %     73    
bps
  
                                                         
Total Discover Card Volume
   $ 23,964,577     $ 25,318,553     $ 28,611,680     $ 25,596,794     $ 26,207,028     $ (2,242,451 )     (9 %)
Discover Card Sales Volume
   $ 21,293,757     $ 22,025,264     $ 24,601,611     $ 22,457,651     $ 23,155,253     $ (1,861,496 )     (8 %)
                                                         
Segment - Income Before Income Taxes
                                                        
U.S. Card
   $ 167,167     $ 646,427     $ 245,241     $ 309,123     $ 375,403     $ (208,236 )     (55 %)
Third-Party Payments
     28,926       20,550       28,544       16,790       15,527       13,399       86 %
Total
   $ 196,093     $ 666,977     $ 273,785     $ 325,913     $ 390,930     $ (194,837 )     (50 %)
                                                         
                                                         
1 Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule.
  
                                                         
2 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
  
                                                         
3 The quarter ended May 31, 2008 includes income from discontinued operations, net of tax of $32.6 million consisting of a $21 million gain related to disposition of the Goldfish business and income of $12 million related to the Goldfish business operations. The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations.
  
                                                         
4 Based on Continuing Operations. Equity is based on company's equity.
          
                                                         
5 Balance on a GAAP and Managed basis is the same.
                  
                                                         
6 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.
  
 
 
 
 
Discover Financial Services
                                          
U.S. Card Segment
                                          
Managed Basis1
                                          
(unaudited, dollars in thousands)
                                          
   
Quarter Ended
    
Feb 28, 2009
  
   
Feb 28, 2009
    
Nov 30, 2008
    
Aug 31, 2008
    
May 31, 2008
    
Feb 29, 2008
    
vs Feb 29, 2008
  
                                           
Earnings Summary
                                          
Interest Income
   $ 1,603,362     $ 1,680,925     $ 1,637,588     $ 1,572,164     $ 1,651,987     $ (48,625 )     (3 %)
Interest Expense
     438,338       602,386       534,870       550,629       668,951       (230,613 )     (34 %)
Net Interest Income
     1,165,024       1,078,539       1,102,718       1,021,535       983,036       181,988       19 %
Other Income 2
     863,223       1,234,100       482,311       455,074       602,411       260,812       43 %
Revenue Net of Interest Expense
     2,028,247       2,312,639       1,585,029       1,476,609       1,585,447       442,800       28 %
Provision for Loan Losses
     1,333,673       1,105,971       754,028       581,537       627,068       706,605       113 %
Total Other Expense
     527,407       560,241       585,760       585,949       582,976       (55,569 )     (10 %)
Income (Loss) Before Income Taxes  2
   $ 167,167     $ 646,427     $ 245,241     $ 309,123     $ 375,403     $ (208,236 )     (55 %)
                                                         
Net Yield on Loan Receivables
     9.11 %     8.55 %     8.95 %     8.56 %     8.09 %     102    
bps
  
Pretax Return on Loan Receivables  2
     1.31 %     5.13 %     1.99 %     2.59 %     3.09 %     (178 )  
bps
  
                                                         
Loan Receivables
                                                        
Total Loans
   $ 50,888,704     $ 51,095,278     $ 50,427,305     $ 47,841,491     $ 47,500,410     $ 3,388,294       7 %
Average Total Loans
   $ 51,877,845     $ 50,707,090     $ 49,019,083     $ 47,472,077     $ 48,863,166     $ 3,014,679       6 %
                                                         
Managed Interest Yield
     12.17 %     12.65 %     12.67 %     12.41 %     12.70 %     (53 )  
bps
  
Managed Net Principal Charge-off Rate
     6.48 %     5.48 %     5.20 %     4.99 %     4.33 %     215    
bps
  
Managed Delinquency Rate (over 30 days)
     5.25 %     4.56 %     3.85 %     3.81 %     3.90 %     135    
bps
  
Managed Delinquency Rate (over 90 days)
     2.69 %     2.17 %     1.88 %     1.96 %     1.96 %     73    
bps
  
                                                         
Credit Card Loans
                                                        
Credit Card Loans - Managed
   $ 49,011,177     $ 49,692,974     $ 49,348,507     $ 47,124,842     $ 47,014,539     $ 1,996,638       4 %
Average Credit Card Loans - Managed
   $ 50,254,235     $ 49,420,412     $ 48,168,124     $ 46,857,480     $ 48,487,812     $ 1,766,423       4 %
                                                         
Managed Interest Yield
     12.28 %     12.72 %     12.70 %     12.43 %     12.72 %     (44 )  
bps
  
Managed Net Principal Charge-off Rate
     6.61 %     5.59 %     5.28 %     5.05 %     4.37 %     224    
bps
  
Managed Delinquency Rate (over 30 days)
     5.41 %     4.66 %     3.92 %     3.85 %     3.93 %     148    
bps
  
Managed Delinquency Rate (over 90 days)
     2.78 %     2.22 %     1.92 %     1.99 %     1.98 %     80    
bps
  
                                                         
Total Discover Card Volume
   $ 23,964,577     $ 25,318,553     $ 28,611,680     $ 25,596,794     $ 26,207,028     $ (2,242,451 )     (9 %)
Discover Card Sales Volume
   $ 21,293,757     $ 22,025,264     $ 24,601,611     $ 22,457,651     $ 23,155,253     $ (1,861,496 )     (8 %)
                                                         
                                                         
1 Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule.
  
                                                         
                                                         
2 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
  
                                                         
                                                         
 
 
 
 
Discover Financial Services
                                          
Third-Party Payments Segment
                                          
(unaudited, dollars in thousands)
                                          
   
Quarter Ended
    
Feb 28, 2009
  
   
Feb 28, 2009
    
Nov 30, 2008
    
Aug 31, 2008
    
May 31, 2008
    
Feb 29, 2008
    
vs Feb 29, 2008
  
                                           
Earnings Summary
                                          
Interest Income
   $ 487     $ 1,342     $ 662     $ 533     $ 628     $ (141 )     (22 %)
Interest Expense
     79       64       17       -       2       77       100 %
Net Interest Income
     408       1,278       645       533       626       (218 )     (35 %)
Other Income
     60,234       53,113       54,686       37,133       34,268       25,966       76 %
Revenue Net of Interest Expense
     60,642       54,391       55,331       37,666       34,894       25,748       74 %
Provision for Loan Losses
     -       -       -       -       -       -       0 %
Total Other Expense
     31,716       33,841       26,787       20,876       19,367       12,349       64 %
Income (Loss) Before Income Taxes
   $ 28,926     $ 20,550     $ 28,544     $ 16,790     $ 15,527     $ 13,399       86 %
                                                         
Volume
                                                        
PULSE Network
   $ 27,454,173     $ 25,033,235     $ 28,364,575     $ 27,830,403     $ 24,783,895     $ 2,670,278       11 %
Third-Party Issuers
     1,362,446       1,538,013       1,711,617       1,603,006       1,545,943       (183,497 )     (12 %)
Diners Club International 1
     6,293,574       7,457,893       5,227,795       -       -       6,293,574    
NM
  
     Total Third-Party Payments
   $ 35,110,193     $ 34,029,141     $ 35,303,987     $ 29,433,409     $ 26,329,838     $ 8,780,355       33 %
                                                         
Transactions Processed on PULSE Network (000's)
     686,527       644,045       713,791       703,404       621,072       65,455       11 %
                                                         
                                                         
1 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.
  
                                                         
 
 
 
DISCOVER FINANCIAL SERVICES
                         
RECONCILIATION OF GAAP TO MANAGED DATA
                         
                         
                         
                         
                         
The following pages present a reconciliation for certain information disclosed in the financial data supplement.
    
                         
                         
The data is presented on both a "managed" loan basis and as reported under generally accepted accounting principles ("owned" loan basis). Managed
    
loan data assume that the company's securitized loan receivables have not been sold and presents the results of securitized loan receivables in the same
    
manner as the company's owned loans. The company operates its business and analyzes its financial performance on a managed basis. Accordingly,
    
underwriting and servicing standards are comparable for both owned and securitized loans. The company believes that managed loan information is
    
useful to investors because it provides information regarding the quality of loan origination and credit performance of the entire managed portfolio and
    
allows investors to understand the related credit risks inherent in owned loans and retained interests in securitizations. Managed loan data is also
    
relevant because the company services the securitized and owned loans, and the related accounts, in the same manner without regard to ownership of the
    
loans. In addition, investors often request information on a managed basis which provides a more meaningful comparison to industry competitors.
    
 
 
 
Discover Financial Services
                  
Reconciliation of GAAP to Managed Data 1
                          
(unaudited, dollars in thousands)
              
                               
                               
   
Quarter Ended
  
   
Feb 28, 2009
    
Nov 30, 2008
    
Aug 31, 2008
    
May 31, 2008
    
Feb 29, 2008
  
                               
Interest Income
                              
GAAP Basis
   $ 815,793     $ 736,006     $ 681,692     $ 612,063     $ 662,802  
Securitization Adjustments 1
     788,056       946,261       956,558       960,634       989,813  
Managed Basis
   $ 1,603,849     $ 1,682,267     $ 1,638,250     $ 1,572,697     $ 1,652,615  
                                         
Interest Expense
                                        
GAAP Basis
   $ 312,720     $ 329,672     $ 305,643     $ 313,248     $ 339,441  
Securitization Adjustments
     125,697       272,778       229,244       237,381       329,512  
Managed Basis
   $ 438,417     $ 602,450     $ 534,887     $ 550,629     $ 668,953  
                                         
Net Interest Income
                                        
GAAP Basis
   $ 503,073     $ 406,334     $ 376,049     $ 298,815     $ 323,361  
Securitization Adjustments
     662,359       673,483       727,314       723,253       660,301  
Managed Basis
   $ 1,165,432     $ 1,079,817     $ 1,103,363     $ 1,022,068     $ 983,662  
                                         
Other Income
                                        
GAAP Basis
   $ 1,189,956     $ 1,568,901     $ 875,121     $ 844,892     $ 975,544  
Securitization Adjustments
     (266,499 )     (281,688 )     (338,124 )     (352,685 )     (338,865 )
Managed Basis
   $ 923,457     $ 1,287,213     $ 536,997     $ 492,207     $ 636,679  
                                         
Revenue Net of Interest Expense
                                        
GAAP Basis
   $ 1,693,029     $ 1,975,235     $ 1,251,170     $ 1,143,707     $ 1,298,905  
Securitization Adjustments
     395,860       391,795       389,190       370,568       321,436  
Managed Basis
   $ 2,088,889     $ 2,367,030     $ 1,640,360     $ 1,514,275     $ 1,620,341  
                                         
Provision for Loan Losses
                                        
GAAP Basis
   $ 937,813     $ 714,176     $ 364,838     $ 210,969     $ 305,632  
Securitization Adjustments
     395,860       391,795       389,190       370,568       321,436  
Managed Basis
   $ 1,333,673     $ 1,105,971     $ 754,028     $ 581,537     $ 627,068  
                                         
Total Assets
                                        
GAAP Basis
   $ 40,605,873     $ 39,892,382     $ 37,283,548     $ 34,020,245     $ 34,222,732  
Securitization Adjustments
     22,625,140       25,728,094       28,349,277       28,128,332       27,714,769  
Managed Basis
   $ 63,231,013     $ 65,620,476     $ 65,632,825     $ 62,148,577     $ 61,937,501  
                                         
Tangible Common Equity/Total Assets
                                        
GAAP Basis
     13.8 %     13.8 %     15.0 %     16.4 %     15.8 %
Securitization Adjustments
     24.5 %     21.2 %     19.5 %     19.7 %     19.3 %
Managed Basis
     8.8 %     8.4 %     8.5 %     9.0 %     8.7 %
                                         
Loan Receivables
                                        
Total Loans
                                        
GAAP Basis
   $ 28,034,208     $ 25,216,611     $ 21,767,483     $ 20,502,063     $ 21,042,681  
Securitization Adjustments
     22,854,496       25,878,667       28,659,822       27,339,428       26,457,729  
Managed Basis    $ 50,888,704     $ 51,095,278     $ 50,427,305     $ 47,841,491     $ 47,500,410  
                                         
Average Total Loans
                                        
GAAP Basis
   $ 27,733,143     $ 22,945,494     $ 21,053,804     $ 19,890,330     $ 21,523,606  
Securitization Adjustments
     24,144,702       27,761,596       27,965,279       27,581,747       27,339,560  
Managed Basis
   $ 51,877,845     $ 50,707,090     $ 49,019,083     $ 47,472,077     $ 48,863,166  
                                         
 
 
 
Discover Financial Services
                    
Reconciliation of GAAP to Managed Data 1
              
(unaudited, dollars in thousands)
                    
                               
                               
   
Quarter Ended
  
   
Feb 28, 2009
    
Nov 30, 2008
    
Aug 31, 2008
    
May 31, 2008
    
Feb 29, 2008
  
                               
                               
Interest Yield
                              
GAAP Basis
     11.24 %     11.36 %     11.41 %     10.40 %     10.34 %
Securitization Adjustments
     13.24 %     13.71 %     13.61 %     13.86 %     14.56 %
Managed Basis
     12.17 %     12.65 %     12.67 %     12.41 %     12.70 %
                                         
Net Principal Charge-off Rate
                                        
GAAP Basis
     6.34 %     5.25 %     4.76 %     4.49 %     3.83 %
Securitization Adjustments
     6.65 %     5.68 %     5.54 %     5.34 %     4.73 %
Managed Basis
     6.48 %     5.48 %     5.20 %     4.99 %     4.33 %
                                         
Delinquency Rate (over 30 days)
                                        
GAAP Basis
     5.04 %     4.35 %     3.58 %     3.54 %     3.63 %
Securitization Adjustments
     5.52 %     4.77 %     4.06 %     4.01 %     4.11 %
Managed Basis
     5.25 %     4.56 %     3.85 %     3.81 %     3.90 %
                                         
Delinquency Rate (over 90 days)
                                        
GAAP Basis
     2.57 %     2.06 %     1.73 %     1.81 %     1.82 %
Securitization Adjustments
     2.83 %     2.27 %     2.00 %     2.07 %     2.08 %
Managed Basis
     2.69 %     2.17 %     1.88 %     1.96 %     1.96 %
                                         
Credit Card Loans
                                        
Credit Card Loans
                                        
GAAP Basis
   $ 26,156,681     $ 23,814,307     $ 20,688,685     $ 19,785,414     $ 20,556,810  
Securitization Adjustments
     22,854,496       25,878,667       28,659,822       27,339,428       26,457,729  
Managed Basis
   $ 49,011,177     $ 49,692,974     $ 49,348,507     $ 47,124,842     $ 47,014,539  
                                         
Average Credit Card Loans
                                        
GAAP Basis
   $ 26,109,533     $ 21,658,816     $ 20,202,845     $ 19,275,733     $ 21,148,252  
Securitization Adjustments
     24,144,702       27,761,596       27,965,279       27,581,747       27,339,560  
Managed Basis
   $ 50,254,235     $ 49,420,412     $ 48,168,124     $ 46,857,480     $ 48,487,812  
                                         
Interest Yield
                                        
GAAP Basis
     11.39 %     11.45 %     11.45 %     10.40 %     10.35 %
Securitization Adjustments
     13.24 %     13.71 %     13.61 %     13.86 %     14.56 %
Managed Basis
     12.28 %     12.72 %     12.70 %     12.43 %     12.72 %
                                         
Net Principal Charge-off Rate
                                        
GAAP Basis
     6.58 %     5.47 %     4.92 %     4.63 %     3.90 %
Securitization Adjustments
     6.65 %     5.68 %     5.54 %     5.34 %     4.73 %
Managed Basis
     6.61 %     5.59 %     5.28 %     5.05 %     4.37 %
                                         
Delinquency Rate (over 30 days)
                                        
GAAP Basis
     5.32 %     4.55 %     3.72 %     3.63 %     3.69 %
Securitization Adjustments
     5.52 %     4.77 %     4.06 %     4.01 %     4.11 %
Managed Basis
     5.41 %     4.66 %     3.92 %     3.85 %     3.93 %
                                         
Delinquency Rate (over 90 days)
                                        
GAAP Basis
     2.73 %     2.16 %     1.81 %     1.87 %     1.86 %
Securitization Adjustments
     2.83 %     2.27 %     2.00 %     2.07 %     2.08 %
Managed Basis
     2.78 %     2.22 %     1.92 %     1.99 %     1.98 %
                                         
                                         
1 Securitization Adjustments present the effect of loan securitization 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.