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EX-99.3 - EXHIBIT 99.3 - Discover Financial Servicesdfspres4q16ex993.htm
EX-99.1 - EXHIBIT 99.1 - Discover Financial Servicesdfs-earningsreleasex4q16ex.htm
8-K - 8-K - Discover Financial Servicesa4q168k.htm


DISCOVER FINANCIAL SERVICES
 
 
 
 
 
Exhibit 99.2
 
 
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
(unaudited, in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
 
Twelve Months Ended
 
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
 
Dec 31, 2016
 
Dec 31, 2015
 
2016 vs. 2015
 
EARNINGS SUMMARY
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Income

$2,258

 

$2,184

 

$2,090

 

$2,084

 

$2,061

 

$197

 
10
%
 

$8,616

 

$7,945

 

$671

8
%
 
Interest Expense
366

 
359

 
339

 
334

 
329

 
37

 
11
%
 
1,398

 
1,263

 
135

11
%
 
Net Interest Income
1,892

 
1,825

 
1,751

 
1,750

 
1,732

 
160

 
9
%
 
7,218

 
6,682

 
536

8
%
 
Discount/Interchange Revenue
665

 
631

 
636

 
565

 
635

 
30

 
5
%
 
2,497

 
2,397

 
100

4
%
 
Rewards Cost
411

 
368

 
371

 
292

 
372

 
39

 
10
%
 
1,442

 
1,280

 
162

13
%
 
Discount and Interchange Revenue, net
254

 
263

 
265

 
273

 
263

 
(9
)
 
(3
%)
 
1,055

 
1,117

 
(62
)
(6
%)
 
Protection Products Revenue
59

 
60

 
59

 
61

 
60

 
(1
)
 
(2
%)
 
239

 
261

 
(22
)
(8
%)
 
Loan Fee Income
93

 
91

 
79

 
80

 
87

 
6

 
7
%
 
343

 
335

 
8

2
%
 
Transaction Processing Revenue
40

 
40

 
39

 
36

 
38

 
2

 
5
%
 
155

 
159

 
(4
)
(3
%)
 
Other Income
20

 
22

 
23

 
24

 
25

 
(5
)
 
(20
%)
 
89

 
185

 
(96
)
(52
%)
 
Total Other Income
466

 
476

 
465

 
474

 
473

 
(7
)
 
(1
%)
 
1,881

 
2,057

 
(176
)
(9
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue Net of Interest Expense
2,358

 
2,301

 
2,216

 
2,224

 
2,205

 
153

 
7
%
 
9,099

 
8,739

 
360

4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for Loan Losses
578

 
445

 
412

 
424

 
484

 
94

 
19
%
 
1,859

 
1,512

 
347

23
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Compensation and Benefits
352

 
342

 
340

 
345

 
333

 
19

 
6
%
 
1,379

 
1,327

 
52

4
%
 
Marketing and Business Development
176

 
195

 
198

 
162

 
196

 
(20
)
 
(10
%)
 
731

 
745

 
(14
)
(2
%)
 
Information Processing & Communications
81

 
81

 
89

 
88

 
87

 
(6
)
 
(7
%)
 
339

 
349

 
(10
)
(3
%)
 
Professional Fees
152

 
143

 
150

 
160

 
170

 
(18
)
 
(11
%)
 
605

 
610

 
(5
)
(1
%)
 
Premises and Equipment
23

 
25

 
23

 
24

 
24

 
(1
)
 
(4
%)
 
95

 
95

 

%
 
Other Expense
113

 
109

 
106

 
107

 
123

 
(10
)
 
(8
%)
 
435

 
489

 
(54
)
(11
%)
 
Total Other Expense
897

 
895

 
906

 
886

 
933

 
(36
)
 
(4
%)
 
3,584

 
3,615

 
(31
)
(1
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income Before Income Taxes
883

 
961

 
898

 
914

 
788

 
95

 
12
%
 
3,656

 
3,612

 
44

1
%
 
Tax Expense
320

 
322

 
282

 
339

 
288

 
32

 
11
%
 
1,263

 
1,315

 
(52
)
(4
%)
 
Net Income

$563

 

$639

 

$616

 

$575

 

$500

 

$63

 
13
%
 

$2,393

 

$2,297

 

$96

4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income Allocated to Common Stockholders
$550

 

$625

 

$602

 

$562

 

$488

 

$62

 
13
%
 

$2,339

 

$2,246

 

$93

4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
36.3
%
 
33.5
%
 
31.4
%
 
37.1
%
 
36.5
%
 
 
 
 
 
34.6
%
 
36.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
10.07
%
 
9.99
%
 
9.94
%
 
9.94
%
 
9.75
%
 
32

 
bps
 
9.99
%
 
9.68
%
 
31

bps
 
Operating Efficiency
38.0
%
 
38.9
%
 
40.9
%
 
39.8
%
 
42.3
%
 
(430
)
 
bps
 
39.4
%
 
41.4
%
 
(200
)
bps
 
ROE
20
%
 
23
%
 
22
%
 
21
%
 
18
%
 
 
 
 
 
21
%
 
21
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Common Shares Outstanding
389

 
396

 
407

 
414

 
422

 
(33
)
 
(8
%)
 
389

 
422

 
(33
)
(8
%)
 
Weighted Average Common Shares Outstanding
392

 
402

 
410

 
417

 
426

 
(34
)
 
(8
%)
 
405

 
437

 
(32
)
(7
%)
 
Weighted Average Common Shares Outstanding (fully diluted)
393

 
402

 
411

 
417

 
426

 
(33
)
 
(8
%)
 
406

 
438

 
(32
)
(7
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PER SHARE STATISTICS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Basic EPS
$1.40

 

$1.56

 

$1.47

 

$1.35

 

$1.15

 

$0.25

 
22
%
 

$5.77

 

$5.14

 

$0.63

12
%
 
Diluted EPS
$1.40

 

$1.56

 

$1.47

 

$1.35

 

$1.14

 

$0.26

 
23
%
 

$5.77

 

$5.13

 

$0.64

12
%
 
Common Stock Price (period end)
$72.09

 

$56.55

 

$53.59

 

$50.92

 

$53.62

 

$18.47

 
34
%
 

$72.09

 

$53.62

 

$18.47

34
%
 
Book Value per share
$29.13

 

$28.62

 

$28.03

 

$27.32

 

$26.74

 

$2.39

 
9
%
 

$29.13

 

$26.74

 

$2.39

9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 
 





DISCOVER FINANCIAL SERVICES
 
 
 
 
 
 
 
EARNINGS SUMMARY
 
 
 
 
 
 
 
(unaudited, in millions)
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
 
Twelve Months Ended
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
 
Dec 31, 2016
 
Dec 31, 2015
 
2016 vs. 2015
SEGMENT- INCOME BEFORE INCOME TAXES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct Banking

$868

 

$931

 

$868

 

$882

 

$767

 

$101

 
13
%
 

$3,549

 

$3,512

 

$37

1
%
Payment Services
15

 
30

 
30

 
32

 
21

 
(6
)
 
(29
%)
 
107

 
100

 
7

7
%
Total

$883

 

$961

 

$898

 

$914

 

$788

 

$95

 
12
%
 

$3,656

 

$3,612

 

$44

1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TRANSACTIONS PROCESSED ON NETWORKS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Discover Network
566

 
535

 
538

 
486

 
546

 
20

 
4
%
 
2,125

 
2,033

 
92

5
%
PULSE Network
891

 
871

 
853

 
841

 
905

 
(14
)
 
(2
%)
 
3,456

 
3,890

 
(434
)
(11
%)
Total
1,457

 
1,406

 
1,391

 
1,327

 
1,451

 
6

 
%
 
5,581

 
5,923

 
(342
)
(6
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NETWORK VOLUME
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
PULSE Network

$35,554

 

$33,913

 

$33,856

 

$34,680

 

$35,902

 

($348
)
 
(1
%)
 

$138,003

 

$150,145

 

($12,142
)
(8
%)
Network Partners 
3,235

 
3,313

 
3,713

 
3,572

 
3,274

 
(39
)
 
(1
%)
 
13,833

 
12,965

 
868

7
%
Diners Club International 1
7,334

 
7,331

 
7,198

 
6,738

 
6,760

 
574

 
8
%
 
28,601

 
26,567

 
2,034

8
%
Total Payment Services
46,123

 
44,557

 
44,767

 
44,990

 
45,936

 
187

 
%
 
180,437

 
189,677

 
(9,240
)
(5
%)
Discover Network - Proprietary  
34,029

 
31,759

 
31,780

 
28,576

 
32,910

 
1,119

 
3
%
 
126,144

 
122,726

 
3,418

3
%
Total

$80,152

 

$76,316

 

$76,547

 

$73,566

 

$78,846

 

$1,306

 
2
%
 

$306,581

 

$312,403

 

($5,822
)
(2
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 





DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
 
Quarter Ended
 
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
BALANCE SHEET SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and Investment Securities

$13,766

 

$15,728

 

$14,236

 

$16,101

 

$12,755

 

$1,011

 
8
%
Total Loan Receivables
77,254

 
73,551

 
71,924

 
70,320

 
72,385

 
4,869

 
7
%
Allowance for Loan Losses
(2,167
)
 
(2,024
)
 
(1,949
)
 
(1,921
)
 
(1,869
)
 
(298
)
 
(16
%)
Net Loan Receivables
75,087

 
71,527

 
69,975

 
68,399

 
70,516

 
4,571

 
6
%
Premises and Equipment, net
734

 
722

 
708

 
706

 
693

 
41

 
6
%
Goodwill and Intangible Assets, net
421

 
421

 
422

 
422

 
423

 
(2
)
 
%
Other Assets
2,300

 
2,143

 
2,170

 
2,465

 
2,412

 
(112
)
 
(5
%)
Total Assets

$92,308

 

$90,541

 

$87,511

 

$88,093

 

$86,799

 

$5,509

 
6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities & Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

Direct to Consumer and Affinity Deposits

$36,002

 

$35,323

 

$34,101

 

$32,818

 

$30,866

 

$5,136

 
17
%
Brokered Deposits and Other Deposits
15,990

 
13,922

 
14,426

 
15,647

 
16,665

 
(675
)
 
(4
%)
Deposits
51,992

 
49,245

 
48,527

 
48,465

 
47,531

 
4,461

 
9
%
Borrowings
25,443

 
26,830

 
24,681

 
24,752

 
24,650

 
793

 
3
%
Accrued Expenses and Other Liabilities
3,550

 
3,119

 
2,906

 
3,560

 
3,343

 
207

 
6
%
Total Liabilities
80,985

 
79,194

 
76,114

 
76,777

 
75,524

 
5,461

 
7
%
Total Equity
11,323

 
11,347

 
11,397

 
11,316

 
11,275

 
48

 
%
Total Liabilities and Stockholders' Equity

$92,308

 

$90,541

 

$87,511

 

$88,093

 

$86,799

 

$5,509

 
6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIQUIDITY
 

 
 

 
 

 
 

 
 

 
 

 
 

Liquidity Portfolio

$12,635

 

$14,017

 

$13,455

 

$14,556

 

$12,077

 

$558

 
5
%
Undrawn Credit Facilities 1
30,194

 
29,048

 
30,777

 
30,077

 
30,682

 
(488
)
 
(2
%)
Total Liquidity

$42,829

 

$43,065

 

$44,232

 

$44,633

 

$42,759

 

$70

 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  Excludes investments pledged to the Federal Reserve, which is included within the liquidity portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 
 
 
 
 
 
 





DISCOVER FINANCIAL SERVICES
 
BALANCE SHEET STATISTICS
 
(unaudited, in millions)
 
 
Quarter Ended
 
 
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
 
BALANCE SHEET STATISTICS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Total Common Equity

$10,763

 

$10,787

 

$10,837

 

$10,756

 

$10,715

 

$48

 
%
 
Total Common Equity/Total Assets
11.7
%
 
11.9
%
 
12.4
%
 
12.2
%
 
12.3
%
 
 
 
 
 
Total Common Equity/Net Loans
14.3
%
 
15.1
%
 
15.5
%
 
15.7
%
 
15.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible Assets

$91,887

 

$90,120

 

$87,089

 

$87,671

 

$86,376

 

$5,511

 
6
%
 
Tangible Common Equity 1

$10,342

 

$10,366

 

$10,415

 

$10,334

 

$10,292

 

$50

 
%
 
Tangible Common Equity/Tangible Assets 1
11.3
%
 
11.5
%
 
12.0
%
 
11.8
%
 
11.9
%
 
 
 
 
 
Tangible Common Equity/Net Loans 1
13.8
%
 
14.5
%
 
14.9
%
 
15.1
%
 
14.6
%
 
 
 
 
 
Tangible Common Equity per share  1
$26.60

 

$26.15

 

$25.62

 

$24.95

 

$24.41

 

$2.19

 
9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS
Basel III Transition
 
 

 
 

 
Total Risk Based Capital Ratio
15.5
%
 
16.3
%
 
16.7
%
 
16.8
%
 
16.5
%
 
 

 
 

 
Tier 1 Risk Based Capital Ratio
13.9
%
 
14.6
%
 
15.0
%
 
15.0
%
 
14.7
%
 
 

 
 

 
Tier 1 Leverage Ratio
12.3
%
 
12.6
%
 
12.8
%
 
12.8
%
 
12.9
%
 
 

 
 

 
Common Equity Tier 1 Capital Ratio
13.2
%
 
13.9
%
 
14.3
%
 
14.3
%
 
13.9
%
 
 
 
 
 
 
Basel III Fully Phased-in
 
 
 
 
 
Common Equity Tier 1 Capital Ratio 2
13.2
%
 
13.8
%
 
14.2
%
 
14.2
%
 
13.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RATIO OF EARNINGS TO FIXED CHARGES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratio of Earnings to Fixed Charges 3, 4
3.6

 
3.7

 
3.7

 
3.8

 
3.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1   Tangible Common Equity ("TCE") is a non-GAAP measure. The Company believes TCE is a more meaningful measure 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) is calculated using Basel III fully phased-in Common Equity Tier 1 Capital, a non-GAAP measure. The Company believes that the Common Equity Tier 1 Capital Ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of Common Equity Tier 1 Capital and risk weighted assets calculated under fully phased-in Basel III rules to common equity tier 1 capital and risk weighted assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-GAAP data schedule
 
3 Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 The Ratio of Earnings to Fixed Charges is a year-to-date statistic. The periods reported reflect the twelve months ended December 31, 2016, the nine months ended September 30, 2016, the six months ended June 30, 2016, the three months ended March 31, 2016 and the twelve months ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 






DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
 
Quarter Ended
 
 

 
 

 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
AVERAGE BALANCES
 

 
 

 
 

 
 

 
 

 
 

 
 

Assets
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and Investment Securities

$13,567

 

$13,761

 

$14,299

 

$13,452

 

$12,881

 

$686

 
5
%
Restricted Cash
473

 
621

 
263

 
801

 
529

 
(56
)
 
(11
%)
Credit Card Loans
59,121

 
57,561

 
56,124

 
56,124

 
56,050

 
3,071

 
5
%
Private Student Loans
8,954

 
8,795

 
8,816

 
8,967

 
8,732

 
222

 
3
%
Personal Loans
6,425

 
6,036

 
5,608

 
5,503

 
5,488

 
937

 
17
%
Other Loans
275

 
276

 
262

 
243

 
233

 
42

 
18
%
Total Loans
74,775

 
72,668

 
70,810

 
70,837

 
70,503

 
4,272

 
6
%
Total Interest Earning Assets
88,815

 
87,050

 
85,372

 
85,090

 
83,913

 
4,902

 
6
%
Allowance for Loan Losses
(2,021
)
 
(1,947
)
 
(1,918
)
 
(1,866
)
 
(1,794
)
 
(227
)
 
13
%
Other Assets
4,162

 
4,282

 
4,502

 
4,453

 
4,357

 
(195
)
 
(4
%)
Total Assets

$90,956

 

$89,385

 

$87,956

 

$87,677

 

$86,476

 

$4,480

 
5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

Direct to Consumer and Affinity Deposits

$35,396

 

$34,488

 

$33,215

 

$31,529

 

$30,126

 

$5,270

 
17
%
Brokered Deposits and Other Deposits
14,355

 
14,267

 
14,740

 
15,982

 
16,504

 
(2,149
)
 
(13
%)
Total Interest-bearing Deposits
49,751

 
48,755

 
47,955

 
47,511

 
46,630

 
3,121

 
7
%
Short-term Borrowings
1

 
2

 
2

 
2

 

 
1

 
NM

Securitized Borrowings
16,817

 
16,736

 
16,635

 
16,950

 
16,628

 
189

 
1
%
Other Long-term Borrowings
9,042

 
8,746

 
7,984

 
7,934

 
7,900

 
1,142

 
14
%
Total Interest-bearing Liabilities
75,611

 
74,239

 
72,576

 
72,397

 
71,158

 
4,453

 
6
%
Other Liabilities & Stockholders' Equity
15,345

 
15,146

 
15,380

 
15,280

 
15,318

 
27

 
%
Total Liabilities and Stockholders' Equity

$90,956

 

$89,385

 

$87,956

 

$87,677

 

$86,476

 

$4,480

 
5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVERAGE RATES
 

 
 

 
 

 
 

 
 

 
 

 
 

Assets
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and Investment Securities
0.72
%
 
0.70
%
 
0.71
%
 
0.72
%
 
0.61
%
 
11

 
bps
Restricted Cash
0.37
%
 
0.32
%
 
0.41
%
 
0.40
%
 
0.16
%
 
21

 
bps
Credit Card Loans
12.62
%
 
12.53
%
 
12.42
%
 
12.42
%
 
12.20
%
 
42

 
bps
Private Student Loans
7.06
%
 
7.13
%
 
7.13
%
 
7.02
%
 
6.88
%
 
18

 
bps
Personal Loans
12.09
%
 
12.23
%
 
12.25
%
 
12.20
%
 
11.79
%
 
30

 
bps
Other Loans
4.88
%
 
4.96
%
 
5.04
%
 
5.18
%
 
4.88
%
 

 
bps
Total Loans
11.88
%
 
11.82
%
 
11.72
%
 
11.69
%
 
11.49
%
 
39

 
bps
Total Interest Earning Assets
10.12
%
 
9.98
%
 
9.84
%
 
9.85
%
 
9.75
%
 
37

 
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

Direct to Consumer and Affinity Deposits
1.26
%
 
1.26
%
 
1.22
%
 
1.22
%
 
1.21
%
 
5

 
bps
Brokered Deposits and Other Deposits
1.93
%
 
1.90
%
 
1.78
%
 
1.68
%
 
1.60
%
 
33

 
bps
Total Interest-bearing Deposits
1.45
%
 
1.45
%
 
1.39
%
 
1.37
%
 
1.35
%
 
10

 
bps
Short-term Borrowings
0.60
%
 
0.62
%
 
0.64
%
 
0.64
%
 
%
 
60

 
bps
Securitized Borrowings
2.09
%
 
2.07
%
 
2.06
%
 
2.04
%
 
1.99
%
 
10

 
bps
Other Long-term Borrowings
4.26
%
 
4.27
%
 
4.40
%
 
4.38
%
 
4.33
%
 
(7
)
 
bps
Total Interest-bearing Liabilities
1.93
%
 
1.92
%
 
1.88
%
 
1.86
%
 
1.83
%
 
10

 
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
10.07
%
 
9.99
%
 
9.94
%
 
9.94
%
 
9.75
%
 
32

 
bps
Net Yield on Interest-earning Assets
8.47
%
 
8.34
%
 
8.25
%
 
8.27
%
 
8.19
%
 
28

 
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms





DISCOVER FINANCIAL SERVICES
 
 
 
 
 
 
 
LOAN STATISTICS
 
 
 
 
 
 
 
(unaudited, in millions)
 
 
 
 
 
 
 
 
Quarter Ended
 
 

 
 

 
Twelve Months Ended
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
 
Dec 31, 2016
 
Dec 31, 2015
 
2016 vs. 2015
TOTAL LOAN RECEIVABLES
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Ending Loans 1, 2

$77,254

 

$73,551

 

$71,924

 

$70,320

 

$72,385

 

$4,869

 
7
%
 

$77,254

 

$72,385

 

$4,869

7
%
Average Loans 1, 2

$74,775

 

$72,668

 

$70,810

 

$70,837

 

$70,503

 

$4,272

 
6
%
 

$72,280

 

$69,061

 

$3,219

5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
11.88
%
 
11.82
%
 
11.72
%
 
11.69
%
 
11.49
%
 
39

 
bps
 
11.78
%
 
11.40
%
 
38

bps
Gross Principal Charge-off Rate
2.91
%
 
2.66
%
 
2.87
%
 
2.80
%
 
2.65
%
 
26

 
bps
 
2.81
%
 
2.69
%
 
12

bps
Gross Principal Charge-off Rate excluding PCI Loans 3
3.02
%
 
2.77
%
 
2.99
%
 
2.92
%
 
2.78
%
 
24

 
bps
 
2.93
%
 
2.82
%
 
11

bps
Net Principal Charge-off Rate
2.31
%
 
2.02
%
 
2.18
%
 
2.11
%
 
2.02
%
 
29

 
bps
 
2.16
%
 
2.01
%
 
15

bps
Net Principal Charge-off Rate excluding PCI Loans 3
2.39
%
 
2.10
%
 
2.27
%
 
2.21
%
 
2.11
%
 
28

 
bps
 
2.24
%
 
2.12
%
 
12

bps
Delinquency Rate (over 30 days) excluding PCI Loans 3
1.97
%
 
1.79
%
 
1.60
%
 
1.64
%
 
1.67
%
 
30

 
bps
 
1.97
%
 
1.67
%
 
30

bps
Delinquency Rate (over 90 days) excluding PCI Loans 3
0.87
%
 
0.77
%
 
0.71
%
 
0.79
%
 
0.76
%
 
11

 
bps
 
0.87
%
 
0.76
%
 
11

bps
Gross Principal Charge-off Dollars

$548

 

$488

 

$505

 

$493

 

$472

 

$76

 
16
%
 

$2,034

 

$1,855

 

$179

10
%
Net Principal Charge-off Dollars

$435

 

$370

 

$384

 

$372

 

$358

 

$77

 
22
%
 

$1,561

 

$1,389

 

$172

12
%
Net Interest and Fee Charge-off Dollars

$94

 

$80

 

$84

 

$86

 

$86

 

$8

 
9
%
 

$344

 

$349

 

($5
)
(1
%)
Loans Delinquent Over 30 Days 3

$1,469

 

$1,269

 

$1,104

 

$1,105

 

$1,153

 

$316

 
27
%
 

$1,469

 

$1,153

 

$316

27
%
Loans Delinquent Over 90 Days 3

$652

 

$545

 

$491

 

$531

 

$530

 

$122

 
23
%
 

$652

 

$530

 

$122

23
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Loan Loss (period end)

$2,167

 

$2,024

 

$1,949

 

$1,921

 

$1,869

 

$298

 
16
%
 

$2,167

 

$1,869

 

$298

16
%
Change in Loan Loss Reserves

$143

 

$75

 

$28

 

$52

 

$126

 

$17

 


 

$298

 

$123

 

$175



Reserve Rate
2.80
%
 
2.75
%
 
2.71
%
 
2.73
%
 
2.58
%
 
22

 
bps
 
2.80
%
 
2.58
%
 
22

bps
Reserve Rate Excluding PCI Loans 3
2.86
%
 
2.81
%
 
2.77
%
 
2.80
%
 
2.65
%
 
21

 
bps
 
2.86
%
 
2.65
%
 
21

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT CARD LOANS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Ending Loans

$61,522

 

$58,006

 

$57,219

 

$55,620

 

$57,896

 

$3,626

 
6
%
 

$61,522

 

$57,896

 

$3,626

6
%
Average Loans

$59,121

 

$57,561

 

$56,124

 

$56,124

 

$56,050

 

$3,071

 
5
%
 

$57,238

 

$54,846

 

$2,392

4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
12.62
%
 
12.53
%
 
12.42
%
 
12.42
%
 
12.20
%
 
42

 
bps
 
12.50
%
 
12.08
%
 
42

bps
Gross Principal Charge-off Rate
3.19
%
 
2.93
%
 
3.21
%
 
3.15
%
 
2.94
%
 
25

 
bps
 
3.12
%
 
3.03
%
 
9

bps
Net Principal Charge-off Rate
2.47
%
 
2.17
%
 
2.39
%
 
2.34
%
 
2.18
%
 
29

 
bps
 
2.34
%
 
2.22
%
 
12

bps
Delinquency Rate (over 30 days)
2.04
%
 
1.87
%
 
1.63
%
 
1.68
%
 
1.72
%
 
32

 
bps
 
2.04
%
 
1.72
%
 
32

bps
Delinquency Rate (over 90 days)
0.97
%
 
0.86
%
 
0.78
%
 
0.86
%
 
0.85
%
 
12

 
bps
 
0.97
%
 
0.85
%
 
12

bps
Gross Principal Charge-off Dollars

$474

 

$425

 

$448

 

$439

 

$415

 

$59

 
14
%
 

$1,786

 

$1,660

 

$126

8
%
Net Principal Charge-off Dollars

$369

 

$314

 

$334

 

$326

 

$309

 

$60

 
19
%
 

$1,343

 

$1,220

 

$123

10
%
Loans Delinquent Over 30 Days

$1,252

 

$1,086

 

$933

 

$934

 

$995

 

$257

 
26
%
 

$1,252

 

$995

 

$257

26
%
Loans Delinquent Over 90 Days

$597

 

$500

 

$444

 

$480

 

$490

 

$107

 
22
%
 

$597

 

$490

 

$107

22
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Loan Loss (period end)

$1,790

 

$1,661

 

$1,603

 

$1,590

 

$1,554

 

$236

 
15
%
 

$1,790

 

$1,554

 

$236

15
%
Change in Loan Loss Reserves

$129

 

$58

 

$13

 

$36

 

$95

 

$34

 


 

$236

 

$80

 

$156



Reserve Rate
2.91
%
 
2.86
%
 
2.80
%
 
2.86
%
 
2.68
%
 
23

 
bps
 
2.91
%
 
2.68
%
 
23

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Discover Card Volume

$35,440

 

$33,471

 

$33,409

 

$30,004

 

$33,830

 

$1,610

 
5
%
 

$132,324

 

$127,825

 

$4,499

4
%
Discover Card Sales Volume

$32,486

 

$30,683

 

$30,702

 

$27,552

 

$31,672

 

$814

 
3
%
 

$121,423

 

$118,442

 

$2,981

3
%
Rewards Rate
1.26
%
 
1.20
%
 
1.21
%
 
1.06
%
 
1.18
%
 
8

 
bps
 
1.19
%
 
1.08
%
 
11

bps
Total Loans includes Home Equity and other loans
 
 
 
 
 
 
 
 
2 Purchased Credit Impaired ("PCI") loans are loans that were acquired in 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
 
 
 
 
 
 
 
 
3 Excludes PCI loans (described above) 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
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 





DISCOVER FINANCIAL SERVICES
 
 
 
 
 
 
 
LOAN STATISTICS
 
 
 
 
 
 
 
(unaudited, in millions)
 
 
 
 
 
 
 
 
Quarter Ended
 
 

 
 

 
Twelve Months Ended
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
 
Dec 31, 2016
 
Dec 31, 2015
 
2016 vs. 2015
PRIVATE STUDENT LOANS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Ending Loans

$8,977

 

$8,995

 

$8,725

 

$8,914

 

$8,763

 

$214

 
2
%
 

$8,977

 

$8,763

 

$214

2
%
Ending PCI Loans 1

$2,584

 

$2,708

 

$2,834

 

$2,965

 

$3,116

 

($532
)
 
(17
%)
 

$2,584

 

$3,116

 

($532
)
(17
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
7.06
%
 
7.13
%
 
7.13
%
 
7.02
%
 
6.88
%
 
18

 
bps
 
7.09
%
 
6.90
%
 
19

bps
Net Principal Charge-off Rate
1.00
%
 
0.70
%
 
0.74
%
 
0.56
%
 
0.82
%
 
18

 
bps
 
0.75
%
 
0.65
%
 
10

bps
Net Principal Charge-off Rate excluding PCI Loans 2
1.42
%
 
1.02
%
 
1.10
%
 
0.85
%
 
1.30
%
 
12

 
bps
 
1.10
%
 
1.07
%
 
3

bps
Delinquency Rate (over 30 days) excluding PCI Loans 2
2.22
%
 
1.87
%
 
1.88
%
 
1.92
%
 
1.91
%
 
31

 
bps
 
2.22
%
 
1.91
%
 
31

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve Rate
1.74
%
 
1.74
%
 
1.73
%
 
1.65
%
 
1.63
%
 
11

 
bps
 
1.74
%
 
1.63
%
 
11

bps
Reserve Rate excluding PCI Loans 2
1.91
%
 
1.92
%
 
1.95
%
 
1.86
%
 
1.88
%
 
3

 
bps
 
1.91
%
 
1.88
%
 
3

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PERSONAL LOANS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Ending Loans

$6,481

 

$6,273

 

$5,708

 

$5,534

 

$5,490

 

$991

 
18
%
 

$6,481

 

$5,490

 

$991

18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
12.09
%
 
12.23
%
 
12.25
%
 
12.20
%
 
11.79
%
 
30

 
bps
 
12.19
%
 
12.04
%
 
15

bps
Net Principal Charge-off Rate
2.70
%
 
2.63
%
 
2.38
%
 
2.45
%
 
2.28
%
 
42

 
bps
 
2.55
%
 
2.15
%
 
40

bps
Delinquency Rate (over 30 days)
1.12
%
 
0.98
%
 
1.02
%
 
0.97
%
 
0.89
%
 
23

 
bps
 
1.12
%
 
0.89
%
 
23

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve Rate
3.09
%
 
2.98
%
 
3.07
%
 
2.99
%
 
2.82
%
 
27

 
bps
 
3.09
%
 
2.82
%
 
27

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Purchased Credit Impaired ("PCI") loans are loans that were acquired in 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
 
 
 
 
 
 
 
 
2 Excludes PCI loans (described above) 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
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 






DISCOVER FINANCIAL SERVICES
 
 
 
 
 
 
 
SEGMENT RESULTS
 
 
 
 
 
 
 
(unaudited, in millions)
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
 
Twelve Months Ended
 
 
 
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
 
Dec 31, 2016 vs. Dec 31, 2015
 
Dec 31, 2016
 
Dec 31, 2015
 
2016 vs. 2015
DIRECT BANKING
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Income

$2,258

 

$2,184

 

$2,090

 

$2,084

 

$2,061

 

$197

 
10
%
 

$8,616

 

$7,945

 

$671

8
%
Interest Expense
366

 
359

 
339

 
334

 
329

 
37

 
11
%
 
1,398

 
1,263

 
135

11
%
Net Interest Income
1,892

 
1,825

 
1,751

 
1,750

 
1,732

 
160

 
9
%
 
7,218

 
6,682

 
536

8
%
Other Income
401

 
408

 
396

 
406

 
408

 
(7
)
 
(2
%)
 
1,611

 
1,779

 
(168
)
(9
%)
Revenue Net of Interest Expense
2,293

 
2,233

 
2,147

 
2,156

 
2,140

 
153

 
7
%
 
8,829

 
8,461

 
368

4
%
Provision for Loan Losses
579

 
445

 
411

 
423

 
486

 
93

 
19
%
 
1,858

 
1,512

 
346

23
%
Total Other Expense
846

 
857

 
868

 
851

 
887

 
(41
)
 
(5
%)
 
3,422

 
3,437

 
(15
)
%
Income Before Income Taxes

$868

 

$931

 

$868

 

$882

 

$767

 

$101

 
13
%
 

$3,549

 

$3,512

 

$37

1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
10.07
%
 
10.00
%
 
9.95
%
 
9.94
%
 
9.75
%
 
32

 
bps
 
9.99
%
 
9.68
%
 
31

bps
Pretax Return on Loan Receivables
4.62
%
 
5.10
%
 
4.93
%
 
5.01
%
 
4.32
%
 
30

 
bps
 
4.91
%
 
5.09
%
 
(18
)
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PAYMENT SERVICES
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Interest Income

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 
NM

 

$—

 

$—

 

$—

NM

Interest Expense

 

 

 

 

 

 
NM

 

 

 

NM

Net Interest Income

 

 

 

 

 

 
NM

 

 

 

NM

Other Income
65

 
68

 
69

 
68

 
65

 

 
%
 
270

 
278

 
(8
)
(3
%)
Revenue Net of Interest Expense
65

 
68

 
69

 
68

 
65

 

 
%
 
270

 
278

 
(8
)
(3
%)
Provision for Loan Losses
(1
)
 

 
1

 
1

 
(2
)
 
1

 
(50%)

 
1

 

 
1

NM

Total Other Expense
51

 
38

 
38

 
35

 
46

 
5

 
11
%
 
162

 
178

 
(16
)
(9
%)
Income Before Income Taxes

$15

 

$30

 

$30

 

$32

 

$21

 

($6
)
 
(29
%)
 

$107

 

$100

 

$7

7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 






DISCOVER FINANCIAL SERVICES
GLOSSARY OF FINANCIAL TERMS
 
Book Value per share represents total equity divided by ending common shares outstanding
 
Common Equity Tier 1 Capital Ratio (Basel III transition) represents common equity tier 1 capital divided by risk weighted assets calculated under Basel III rules subject to transition provisions
 
Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) represents fully phased-in common equity tier 1 capital divided by risk weighted assets under fully phased-in Basel III rules. The Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) is calculated using Basel III fully phased-in common equity tier 1 capital, a non-GAAP measure. The Company believes that the common equity tier 1 capital ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of common equity tier 1 capital and risk weighted assets calculated under fully phased-in Basel III rules to common equity tier 1 capital and risk weighted assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-GAAP data schedule
 
Delinquency Rate (Over 30 Days) represents loans delinquent over thirty days divided by ending loans (total or respective loans, as appropriate)
 
Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided
 
Discover card sales volume represents Discover card activity related to net sales
 
Discover card volume represents Discover card activity related to net sales, balance transfers, cash advances and other activity
 
Discover Network proprietary volume represents gross proprietary sales volume on the Discover Network
 
Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided by ending loans (total or respective loans, as appropriate)
 
Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding
 
Effective Tax Rate represents tax expense divided by income before income taxes
 
Gross Principal Charge-off Rate represents gross principal charge-off dollars (annualized) divided by average loans for the reporting period
 
Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period
 
Liquidity Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments
 
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
 
Net Interest Margin represents net interest income (annualized) divided by average total loans for the period.
 
Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period
 
Operating Efficiency represents total other expense divided by revenue net of interest expense
 
Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by total average loans for the period
 
Proprietary Network Volume represents gross proprietary sales volume on the Discover Network
 
Ratio of Earnings to Fixed Charges is a year-to-date statistic and represents income before income tax expense and fixed charges divided by fixed charges for the reporting period. Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense for the reporting period
 
Regulatory Capital Ratios are regulatory measures used to evaluate capital adequacy. Under Basel III, to be considered "well-capitalized," total risk-based, tier 1 risk-based, tier 1 leverage, and common equity tier 1 ratios of 10%, 8%, 5%, and 6.5% respectively must be maintained. As of January 1, 2015 regulatory capital ratios are calculated under Basel III rules subject to transition provisions. 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. The Tier 1 Common Capital Ratio has been replaced by the Common Equity Tier 1 Ratio under Basel III
 
Reserve Rate represents the allowance for loan losses divided by total loans
 
Return on Equity represents net income (annualized) divided by average total equity for the reporting period
 
Rewards Rate represents rewards cost divided by Discover Card sales volume
 
Tangible Assets represents total assets less goodwill and intangibles
 
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 measure 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
 
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)
 
Tangible Common Equity per Share, a non-GAAP measure, represents total common equity less goodwill and intangibles divided by ending common shares outstanding
 
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
 
Total Volume represents the transaction dollar volume from the PULSE network, Network Partners, Diners Club and proprietary Discover Network
 
Undrawn Credit Facilities represents asset-backed conduit funding facilities and Federal Reserve discount window (excluding investments pledged to the Federal Reserve, which are included within the liquidity investment portfolio)





DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO NON-GAAP DATA
(unaudited, in millions)
 
Quarter Ended
 
Dec 31, 2016
 
Sep 30, 2016
 
Jun 30, 2016
 
Mar 31, 2016
 
Dec 31, 2015
GAAP Total Common Equity

$10,763

 

$10,787

 

$10,837

 

$10,756

 

$10,715

Less: Goodwill
(255
)
 
(255
)
 
(255
)
 
(255
)
 
(255
)
Less: Intangibles
(166
)
 
(166
)
 
(167
)
 
(167
)
 
(168
)
Tangible Common Equity 1

$10,342

 

$10,366

 

$10,415

 

$10,334

 

$10,292

 
 
 
 
 
 
 
 
 
 
Common Equity Tier 1 Capital (Basel III Transition)
$10,592

 

$10,618

 

$10,677

 

$10,593

 

$10,566

Adjustments Related To Capital Components During Transition 2
(52
)
 
(52
)
 
(53
)
 
(54
)
 
(82
)
Common Equity Tier 1 Capital (Basel III Fully Phased-in)
$10,540

 

$10,566

 

$10,624

 

$10,539

 

$10,484

 
 
 
 
 
 
 
 
 
 
Risk Weighted Assets (Basel III Transition)
$80,093

 

$76,560

 

$74,892

 

$74,205

 

$75,787

Risk Weighted Assets (Basel III Fully Phased-in) 3
$80,027

 

$76,493

 

$74,824

 

$74,137

 

$75,685

 
 
 
 
 
 
 
 
 
 
Common Equity Tier 1 Capital Ratio (Basel III Transition)
13.2
%
 
13.9
%
 
14.3
%
 
14.3
%
 
13.9
%
Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) 4
13.2
%
 
13.8
%
 
14.2
%
 
14.2
%
 
13.9
%
 
 
 
 
 
 
 
 
 
 
GAAP Book Value Per Share

$29.13

 

$28.62

 

$28.03

 

$27.32

 

$26.74

Less: Goodwill
(0.67
)
 
(0.64
)
 
(0.62
)
 
(0.62
)
 
(0.60
)
Less: Intangibles
(0.42
)
 
(0.42
)
 
(0.41
)
 
(0.40
)
 
(0.40
)
   Less: Preferred Stock
(1.44
)
 
(1.41
)
 
(1.38
)
 
(1.35
)
 
(1.33
)
Tangible Common Equity Per Share

$26.60

 

$26.15

 

$25.62

 

$24.95

 

$24.41

 
 
 
 
 
 
 
 
 
 
1 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 users of this information are advised 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 measure to investors of the true net asset value of the Company
 
2  Adjustments related to capital components for fully phased-in Basel III include the phase-in of the intangible asset exclusion
 
 
 
 
 
 
 
 
 
 
3  Key differences under fully phased-in Basel III rules in the calculation of risk weighted assets include higher risk weighting for past due loans and unfunded commitments
 
 
 
 
 
 
 
 
 
 
4  Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Common Equity Tier 1 Capital (Basel III Fully Phased-in), a non-GAAP measure, divided by Risk Weighted Assets (Basel III Fully Phased-in)
 
 
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms