Discover Financial Services - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - July 22, 2020

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DISCOVER FINANCIAL SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 99.2
 
 
EARNINGS SUMMARY
 
 
 
 
 
 
 
 
(unaudited, in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
 
Six Months Ended
 
 
 
 
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
 
Jun 30, 2020
 
Jun 30, 2019
 
2020 vs. 2019
 
EARNINGS SUMMARY
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Income

$2,672

 

$2,982

 

$3,039

 

$3,040

 

$2,977

 

($305
)
 
(10
%)
 

$5,654

 

$5,914

 

($260
)
(4
%)
 
Interest Expense
482

 
584

 
615

 
638

 
645

 
(163
)
 
(25
%)
 
1,066

 
1,277

 
(211
)
(17
%)
 
Net Interest Income
2,190

 
2,398

 
2,424

 
2,402

 
2,332

 
(142
)
 
(6
%)
 
4,588

 
4,637

 
(49
)
(1
%)
 
Discount/Interchange Revenue
622

 
694

 
800

 
775

 
759

 
(137
)
 
(18
%)
 
1,316

 
1,436

 
(120
)
(8
%)
 
Rewards Cost
385

 
478

 
519

 
520

 
460

 
(75
)
 
(16
%)
 
863

 
906

 
(43
)
(5
%)
 
Discount and Interchange Revenue, net
237

 
216

 
281

 
255

 
299

 
(62
)
 
(21
%)
 
453

 
530

 
(77
)
(15
%)
 
Protection Products Revenue
44

 
47

 
48

 
48

 
49

 
(5
)
 
(10
%)
 
91

 
98

 
(7
)
(7
%)
 
Loan Fee Income
85

 
119

 
123

 
120

 
102

 
(17
)
 
(17
%)
 
204

 
206

 
(2
)
(1
%)
 
Transaction Processing Revenue
49

 
44

 
51

 
52

 
48

 
1

 
2
%
 
93

 
94

 
(1
)
(1
%)
 
Other Income
57

 
64

 
17

 
23

 
22

 
35

 
159
%
 
121

 
50

 
71

142
%
 
Total Non-Interest Income
472

 
490

 
520

 
498

 
520

 
(48
)
 
(9
%)
 
962

 
978

 
(16
)
(2
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue Net of Interest Expense
2,662

 
2,888

 
2,944

 
2,900

 
2,852

 
(190
)
 
(7
%)
 
5,550

 
5,615

 
(65
)
(1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for Credit Losses
2,046

 
1,807

 
836

 
799

 
787

 
1,259

 
160
%
 
3,853

 
1,596

 
2,257

141
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Compensation and Benefits
452

 
467

 
447

 
439

 
427

 
25

 
6
%
 
919

 
852

 
67

8
%
 
Marketing and Business Development
129

 
231

 
234

 
230

 
224

 
(95
)
 
(42
%)
 
360

 
419

 
(59
)
(14
%)
 
Information Processing & Communications
117

 
114

 
113

 
96

 
101

 
16

 
16
%
 
231

 
200

 
31

16
%
 
Professional Fees
181

 
193

 
214

 
189

 
183

 
(2
)
 
(1
%)
 
374

 
350

 
24

7
%
 
Premises and Equipment
27

 
30

 
27

 
26

 
26

 
1

 
4
%
 
57

 
54

 
3

6
%
 
Other Expense
171

 
124

 
149

 
127

 
117

 
54

 
46
%
 
295

 
227

 
68

30
%
 
Total Operating Expense
1,077

 
1,159

 
1,184

 
1,107

 
1,078

 
(1
)
 
—
%
 
2,236

 
2,102

 
134

6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income/ (Loss) Before Income Taxes
(461
)
 
(78
)
 
924

 
994

 
987

 
(1,448
)
 
(147
%)
 
(539
)
 
1,917

 
(2,456
)
(128
%)
 
Tax Expense
(93
)
 
(17
)
 
216

 
224

 
234

 
(327
)
 
(140
%)
 
(110
)
 
438

 
(548
)
(125
%)
 
Net Income/ (Loss)

($368
)
 

($61
)
 

$708

 

$770

 

$753

 

($1,121
)
 
(149
%)
 

($429
)
 

$1,479

 

($1,908
)
(129
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income/ (Loss) Allocated to Common Stockholders

($369
)
 

($78
)
 

$704

 

$749

 

$747

 

($1,116
)
 
(149
%)
 

($446
)
 

$1,452

 

($1,898
)
(131
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
20.2
 %
 
22.0
 %
 
23.4
%
 
22.5
%
 
23.8
%
 
 
 
 
 
20.4
 %
 
22.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
9.81
 %
 
10.21
 %
 
10.29
%
 
10.43
%
 
10.47
%
 
(66
)
 
bps
 
10.01
 %
 
10.47
%
 
(46
)
bps
 
Operating Efficiency
40.5
 %
 
40.1
 %
 
40.2
%
 
38.2
%
 
37.8
%
 
270

 
bps
 
40.3
 %
 
37.4
%
 
290

bps
 
ROE
(15
)%
 
(2
)%
 
24
%
 
26
%
 
26
%
 
 
 
 
 
(9
)%
 
26
%
 
 
 
 
Capital Returned to Common Stockholders

$136

 

$468

 

$521

 

$540

 

$571

 

($435
)
 
(76
%)
 

$604

 

$1,172

 

($568
)
(48
%)
 
Payout Ratio
(37
)%
 
(604
)%
 
74
%
 
72
%
 
76
%
 


 


 
(135
)%
 
81
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Common Shares Outstanding
306

 
306

 
310

 
315

 
319

 
(13
)
 
(4
%)
 
306

 
319

 
(13
)
(4
%)
 
Weighted Average Common Shares Outstanding
306

 
308

 
312

 
317

 
322

 
(16
)
 
(5
%)
 
307

 
325

 
(18
)
(6
%)
 
Weighted Average Common Shares Outstanding (fully diluted)
306

 
308

 
313

 
317

 
323

 
(17
)
 
(5
%)
 
307

 
326

 
(19
)
(6
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PER SHARE STATISTICS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Basic EPS

($1.20
)
 

($0.25
)
 

$2.25

 

$2.36

 

$2.32

 

($3.52
)
 
(152
%)
 

($1.45
)
 

$4.46

 

($5.91
)
(133
%)
 
Diluted EPS

($1.20
)
 

($0.25
)
 

$2.25

 

$2.36

 

$2.32

 

($3.52
)
 
(152
%)
 

($1.45
)
 

$4.46

 

($5.91
)
(133
%)
 
Common Dividends Declared Per Share

$0.44

 

$0.44

 

$0.44

 

$0.44

 

$0.40

 

$0.04

 
10
%
 

$0.88

 

$0.80

 

$0.08

10
%
 
Common Stock Price (period end)

$50.09

 

$35.67

 

$84.82

 

$81.09

 

$77.59

 

($27.50
)
 
(35
%)
 

$50.09

 

$77.59

 

($27.50
)
(35
%)
 
Book Value per share

$31.47

 

$31.55

 

$38.24

 

$37.20

 

$35.97

 

($4.50
)
 
(13
%)
 

$31.47

 

$35.97

 

($4.50
)
(13
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 
 




DISCOVER FINANCIAL SERVICES
 
BALANCE SHEET SUMMARY
 
(unaudited, in millions)
 
 
Quarter Ended
 
 
 
 
 
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
 
BALANCE SHEET SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and Investment Securities

$28,201

 

$21,993

 

$17,559

 

$17,761

 

$19,934

 

$8,267

 
41
%
 
Total Loan Receivables
88,927

 
92,963

 
95,894

 
92,493

 
90,229

 
(1,302
)
 
(1
%)
 
Allowance for Credit Losses
(8,184
)
 
(6,913
)
 
(3,383
)
 
(3,299
)
 
(3,202
)
 
(4,982
)
 
(156
%)
 
Net Loan Receivables
80,743

 
86,050

 
92,511

 
89,194

 
87,027

 
(6,284
)
 
(7
%)
 
Premises and Equipment, net
1,115

 
1,070

 
1,057

 
1,028

 
1,008

 
107

 
11
%
 
Goodwill and Intangible Assets, net
351

 
410

 
410

 
414

 
415

 
(64
)
 
(15
%)
 
Other Assets
3,382

 
3,134

 
2,459

 
2,389

 
2,323

 
1,059

 
46
%
 
Total Assets

$113,792

 

$112,657

 

$113,996

 

$110,786

 

$110,707

 

$3,085

 
3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities & Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

 
           Certificates of Deposits 1
$20,848
 

$20,703

 

$19,168

 

$18,313

 

$16,679

 

$4,169

 
25
%
 
           Savings, Money Market, and Other Deposits 1
40,266

 
36,003

 
35,241

 
33,985

 
33,007

 
7,259

 
22
%
 
Direct to Consumer Deposits 1
61,114

 
56,706

 
54,409

 
52,298

 
49,686

 
11,428

 
23
%
 
Brokered Deposits and Other Deposits
16,250

 
16,712

 
18,337

 
18,723

 
20,048

 
(3,798
)
 
(19
%)
 
Deposits
77,364

 
73,418

 
72,746

 
71,021

 
69,734

 
7,630

 
11
%
 
   Securitized Borrowings
12,766

 
13,939

 
14,284

 
12,820

 
14,214

 
(1,448
)
 
(10
%)
 
   Other Borrowings
10,428

 
12,159

 
11,417

 
11,634

 
10,949

 
(521
)
 
(5
%)
 
Borrowings
23,194

 
26,098

 
25,701

 
24,454

 
25,163

 
(1,969
)
 
(8
%)
 
Accrued Expenses and Other Liabilities
3,591

 
3,476

 
3,690

 
3,594

 
4,317

 
(726
)
 
(17
%)
 
Total Liabilities
104,149

 
102,992

 
102,137

 
99,069

 
99,214

 
4,935

 
5
%
 
Total Equity
9,643

 
9,665

 
11,859

 
11,717

 
11,493

 
(1,850
)
 
(16
%)
 
Total Liabilities and Stockholders' Equity

$113,792

 

$112,657

 

$113,996

 

$110,786

 

$110,707

 

$3,085

 
3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIQUIDITY
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Liquidity Portfolio

$26,853

 

$19,430

 

$16,608

 

$16,732

 

$17,283

 

$9,570

 
55
%
 
Private Asset-backed Securitizations
6,000

 
6,000

 
5,500

 
6,000

 
6,000

 
—

 
—
%
 
Federal Reserve Discount Window 2
32,830

 
34,712

 
34,220

 
33,355

 
32,466

 
364

 
1
%
 
Undrawn Credit Facilities 2
38,830

 
40,712

 
39,720

 
39,355

 
38,466

 
364

 
1
%
 
Total Liquidity
$65,683
 
$60,142
 
$56,328
 
$56,087
 
$55,749
 
$9,934
 
18
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  Includes Affinity relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2  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
 
 
 
 
 
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
 
BALANCE SHEET STATISTICS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
Total Common Equity

$8,587

 

$9,102

 

$11,296

 

$11,154

 

$10,930

 

($2,343
)
 
(21
%)
 
Total Common Equity/Total Assets
7.5
%
 
8.1
%
 
9.9
%
 
10.1
%
 
9.9
%
 
 
 
 
 
Total Common Equity/Net Loans
10.6
%
 
10.6
%
 
12.2
%
 
12.5
%
 
12.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible Assets

$113,441

 

$112,247

 

$113,586

 

$110,372

 

$110,292

 

$3,149

 
3
%
 
Tangible Common Equity 1

$8,236

 

$8,692

 

$10,886

 

$10,740

 

$10,515

 

($2,279
)
 
(22
%)
 
Tangible Common Equity/Tangible Assets 1
7.3
%
 
7.7
%
 
9.6
%
 
9.7
%
 
9.5
%
 
 
 
 
 
Tangible Common Equity/Net Loans 1
10.2
%
 
10.1
%
 
11.8
%
 
12.0
%
 
12.1
%
 
 
 
 
 
Tangible Common Equity per share  1

$26.88

 

$28.38

 

$35.10

 

$34.10

 

$32.91

 

($6.03
)
 
(18
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basel III
 
 
 
 
 
 
Quarter Ended
 
 
 
 
 
REGULATORY CAPITAL RATIOS  2
Jun 30, 2020 2
 
Mar 31, 2020 2
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
 

 
 

 
Total Risk Based Capital Ratio
14.7
%
 
13.7
%
 
13.5
%
 
13.7
%
 
13.7
%
 
 

 
 

 
Tier 1 Risk Based Capital Ratio
12.9
%
 
11.9
%
 
11.8
%
 
12.0
%
 
12.0
%
 
 

 
 

 
Tier 1 Leverage Ratio
10.0
%
 
9.9
%
 
10.3
%
 
10.3
%
 
10.2
%
 
 

 
 

 
Common Equity Tier 1 Capital Ratio
11.7
%
 
11.3
%
 
11.2
%
 
11.4
%
 
11.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Based on interim final rule as of March 27, 2020. Capital ratios reflect delay in the recognition of the impact of CECL reserves on regulatory capital for two years in accordance with the interim final rule
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





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

 
 

 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
AVERAGE BALANCES
 

 
 

 
 

 
 

 
 

 
 

 
 

Assets
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and Investment Securities

$25,681

 

$17,977

 

$17,579

 

$17,215

 

$18,906

 

$6,775

 
36
%
Restricted Cash
226

 
627

 
58

 
737

 
888

 
(662
)
 
(75
%)
Credit Card Loans
70,848

 
75,337

 
74,814

 
73,248

 
71,492

 
(644
)
 
(1
%)
Private Student Loans
9,826

 
9,992

 
9,660

 
9,459

 
9,464

 
362

 
4
%
Personal Loans
7,475

 
7,704

 
7,675

 
7,522

 
7,419

 
56

 
1
%
Other Loans
1,622

 
1,468

 
1,288

 
1,116

 
983

 
639

 
65
%
Total Loans
89,771

 
94,501

 
93,437

 
91,345

 
89,358

 
413

 
—
%
Total Interest Earning Assets
115,678

 
113,105

 
111,074

 
109,297

 
109,152

 
6,526

 
6
%
Allowance for Credit Losses
(6,927
)
 
(5,851
)
 
(3,294
)
 
(3,198
)
 
(3,133
)
 
(3,794
)
 
(121
%)
Other Assets
5,717

 
5,661

 
4,835

 
4,674

 
4,539

 
1,178

 
26
%
Total Assets

$114,468

 

$112,915

 

$112,615

 

$110,773

 

$110,558

 

$3,910

 
4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

                       Certificates of Deposits 1

$20,939

 

$19,688

 

$18,879

 

$17,435

 

$16,138

 

$4,801

 
30
%
                       Savings, Money Market, and Other Deposits 1
37,874

 
35,534

 
34,113

 
33,062

 
32,073

 
5,801

 
18
%
Direct to Consumer Deposits 1
58,813

 
55,222

 
52,992

 
50,497

 
48,211

 
10,602

 
22
%
Brokered Deposits and Other Deposits
16,429

 
16,756

 
17,865

 
19,132

 
20,213

 
(3,784
)
 
(19
%)
Total Interest-bearing Deposits
75,242

 
71,978

 
70,857

 
69,629

 
68,424

 
6,818

 
10
%
Short-term Borrowings
—

 
1

 
—

 
1

 
—

 
—

 
NM

Securitized Borrowings
12,960

 
14,087

 
13,562

 
13,719

 
15,179

 
(2,219
)
 
(15
%)
Other Long-term Borrowings
11,375

 
11,790

 
11,542

 
11,047

 
10,932

 
443

 
4
%
Total Interest-bearing Liabilities
99,577

 
97,856

 
95,961

 
94,396

 
94,535

 
5,042

 
5
%
Other Liabilities & Stockholders' Equity
14,891

 
15,059

 
16,654

 
16,377

 
16,023

 
(1,132
)
 
(7
%)
Total Liabilities and Stockholders' Equity

$114,468

 

$112,915

 

$112,615

 

$110,773

 

$110,558

 

$3,910

 
4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVERAGE YIELD
 

 
 

 
 

 
 

 
 

 
 

 
 

Assets
 

 
 

 
 

 
 

 
 

 
 

 
 

Cash and Investment Securities
0.94
%
 
1.80
%
 
2.05
%
 
2.26
%
 
2.46
%
 
(152
)
 
bps
Restricted Cash
0.25
%
 
1.06
%
 
1.39
%
 
2.11
%
 
2.32
%
 
(207
)
 
bps
Credit Card Loans
12.34
%
 
12.90
%
 
13.08
%
 
13.35
%
 
13.44
%
 
(110
)
 
bps
Private Student Loans
7.46
%
 
8.24
%
 
8.43
%
 
8.54
%
 
8.59
%
 
(113
)
 
bps
Personal Loans
12.40
%
 
13.27
%
 
13.23
%
 
13.17
%
 
13.02
%
 
(62
)
 
bps
Other Loans
6.49
%
 
6.73
%
 
6.27
%
 
6.72
%
 
6.83
%
 
(34
)
 
bps
Total Loans
11.70
%
 
12.34
%
 
12.52
%
 
12.76
%
 
12.82
%
 
(112
)
 
bps
Total Interest Earning Assets
9.29
%
 
10.60
%
 
10.86
%
 
11.03
%
 
10.94
%
 
(165
)
 
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVERAGE RATES
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity
 

 
 

 
 

 
 

 
 

 
 

 
 

                       Certificates of Deposits 1
2.22
%
 
2.36
%
 
2.45
%
 
2.45
%
 
2.37
%
 
(15
)
 
bps
                       Savings, Money Market, and Other Deposits 1
1.29
%
 
1.64
%
 
1.80
%
 
2.01
%
 
2.11
%
 
(82
)
 
bps
Direct to Consumer Deposits 1
1.62
%
 
1.90
%
 
2.03
%
 
2.16
%
 
2.20
%
 
(58
)
 
bps
Brokered Deposits and Other Deposits
2.52
%
 
2.71
%
 
2.72
%
 
2.73
%
 
2.71
%
 
(19
)
 
bps
Total Interest-bearing Deposits
1.81
%
 
2.09
%
 
2.20
%
 
2.32
%
 
2.35
%
 
(54
)
 
bps
Short-term Borrowings
0.25
%
 
1.71
%
 
1.72
%
 
2.18
%
 
2.59
%
 
(234
)
 
bps
Securitized Borrowings
1.24
%
 
2.28
%
 
2.62
%
 
2.95
%
 
3.01
%
 
(177
)
 
bps
Other Long-term Borrowings
3.63
%
 
4.45
%
 
4.53
%
 
4.64
%
 
4.75
%
 
(112
)
 
bps
Total Interest-bearing Liabilities
1.95
%
 
2.40
%
 
2.54
%
 
2.68
%
 
2.73
%
 
(78
)
 
bps
Net Interest Margin
9.81
%
 
10.21
%
 
10.29
%
 
10.43
%
 
10.47
%
 
(66
)
 
bps
Net Yield on Interest-earning Assets
7.61
%
 
8.53
%
 
8.66
%
 
8.72
%
 
8.57
%
 
(96
)
 
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  Includes Affinity relationships
Note: See Glossary of Financial Terms for definitions of financial terms




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

 
 

 
Six Months Ended
 
 
 
 
 
 
 
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
 
Jun 30, 2020
 
Jun 30, 2019
 
2020 vs. 2019
 
 
 
 
TOTAL LOAN RECEIVABLES
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Ending Loans 1

$88,927

 

$92,963

 

$95,894

 

$92,493

 

$90,229

 

($1,302
)
 
(1
%)
 

$88,927

 

$90,229

 

($1,302
)
(1
%)
 
 
 
 
Average Loans 1

$89,771

 

$94,501

 

$93,437

 

$91,345

 

$89,358

 

$413

 
—
%
 

$92,135

 

$89,356

 

$2,779

3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
11.70
%
 
12.34
%
 
12.52
%
 
12.76
%
 
12.82
%
 
(112
)
 
bps
 
12.03
%
 
12.81
%
 
(78
)
bps
 
 
 
 
Gross Principal Charge-off Rate 2
4.26
%
 
4.15
%
 
4.00
%
 
3.87
%
 
4.03
%
 
23

 
bps
 
4.20
%
 
4.03
%
 
17

bps
 
 
 
 
Net Principal Charge-off Rate 2
3.44
%
 
3.27
%
 
3.19
%
 
3.05
%
 
3.22
%
 
22

 
bps
 
3.35
%
 
3.23
%
 
12

bps
 
 
 
 
Delinquency Rate (30 or more days)
1.98
%
 
2.39
%
 
2.41
%
 
2.33
%
 
2.19
%
 
(21
)
 
bps
 
 
 
 
 
 
 
 
 
 
 
Delinquency Rate (30 or more days) excluding Purchased Loans 3
1.98
%
 
2.38
%
 
2.40
%
 
2.32
%
 
2.18
%
 
(20
)
 
bps
 
1.98
%
 
2.18
%
 
(20
)
bps
 
 
 
 
Delinquency Rate (90 or more days)
1.03
%
 
1.18
%
 
1.15
%
 
1.06
%
 
1.03
%
 
—

 
bps
 
 
 
 
 
 
 
 
 
 
 
Delinquency Rate (90 or more days) excluding Purchased Loans 3
1.04
%
 
1.19
%
 
1.15
%
 
1.06
%
 
1.04
%
 
—

 
bps
 
1.04
%
 
1.04
%
 
—

bps
 
 
 
 
Gross Principal Charge-off Dollars

$950

 

$975

 

$941

 

$891

 

$898

 

$52

 
6
%
 

$1,925

 

$1,785

 

$140

8
%
 
 
 
 
Net Principal Charge-off Dollars

$767

 

$769

 

$751

 

$702

 

$718

 

$49

 
7
%
 

$1,536

 

$1,433

 

$103

7
%
 
 
 
 
Net Interest and Fee Charge-off Dollars

$169

 

$178

 

$166

 

$156

 

$158

 

$11

 
7
%
 

$347

 

$316

 

$31

10
%
 
 
 
 
Loans Delinquent 30 or more days

$1,763

 

$2,218

 

$2,312

 

$2,153

 

$1,976

 

($213
)
 
(11
%)
 
 
 
 
 
 
 
 
 
 
 
Loans Delinquent 30 or more days excluding Purchased Loans 3

$1,739

 

$2,189

 

$2,276

 

$2,114

 

$1,939

 

($200
)
 
(10
%)
 

$1,739

 

$1,939

 

($200
)
(10
%)
 
 
 
 
Loans Delinquent 90 or more days

$916

 

$1,095

 

$1,098

 

$978

 

$931

 

($15
)
 
(2
%)
 
 
 
 
 
 
 
 
 
 
 
Loans Delinquent 90 or more days excluding Purchased Loans 3

$911

 

$1,088

 

$1,089

 

$968

 

$922

 

($11
)
 
(1
%)
 

$911

 

$922

 

($11
)
(1
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Credit Losses (period end) 4

$8,184

 

$6,913

 

$3,383

 

$3,299

 

$3,202

 

$4,982

 
156
%
 

$8,184

 

$3,202

 

$4,982

156
%
 
 
 
 
Reserve Change Build/ (Release)  5, 6, 7

$1,271

 

$1,069

 

$85

 

$97

 

$69

 

$1,202

 


 

$2,340

 

$163

 

$2,177



 
 
 
 
Reserve Rate
9.20
%
 
7.44
%
 
3.53
%
 
3.57
%
 
3.55
%
 
565

 
bps
 
9.20
%
 
3.55
%
 
565

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT CARD LOANS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Ending Loans

$70,201

 

$73,811

 

$77,181

 

$73,968

 

$72,393

 

($2,192
)
 
(3
%)
 

$70,201

 

$72,393

 

($2,192
)
(3
%)
 
 
 
 
Average Loans

$70,848

 

$75,337

 

$74,814

 

$73,248

 

$71,492

 

($644
)
 
(1
%)
 

$73,092

 

$71,428

 

$1,664

2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
12.34
%
 
12.90
%
 
13.08
%
 
13.35
%
 
13.44
%
 
(110
)
 
bps
 
12.63
%
 
13.43
%
 
(80
)
bps
 
 
 
 
Gross Principal Charge-off Rate
4.84
%
 
4.64
%
 
4.34
%
 
4.25
%
 
4.43
%
 
41

 
bps
 
4.74
%
 
4.41
%
 
33

bps
 
 
 
 
Net Principal Charge-off Rate
3.90
%
 
3.65
%
 
3.41
%
 
3.32
%
 
3.49
%
 
41

 
bps
 
3.77
%
 
3.50
%
 
27

bps
 
 
 
 
Delinquency Rate (30 or more days)
2.17
%
 
2.62
%
 
2.62
%
 
2.50
%
 
2.34
%
 
(17
)
 
bps
 
2.17
%
 
2.34
%
 
(17
)
bps
 
 
 
 
Delinquency Rate (90 or more days)
1.21
%
 
1.38
%
 
1.32
%
 
1.21
%
 
1.18
%
 
3

 
bps
 
1.21
%
 
1.18
%
 
3

bps
 
 
 
 
Gross Principal Charge-off Dollars

$852

 

$869

 

$818

 

$784

 

$789

 

$63

 
8
%
 

$1,721

 

$1,563

 

$158

10
%
 
 
 
 
Net Principal Charge-off Dollars

$688

 

$683

 

$644

 

$611

 

$623

 

$65

 
10
%
 

$1,371

 

$1,239

 

$132

11
%
 
 
 
 
Loans Delinquent 30 or more days

$1,523

 

$1,935

 

$2,019

 

$1,847

 

$1,692

 

($169
)
 
(10
%)
 

$1,523

 

$1,692

 

($169
)
(10
%)
 
 
 
 
Loans Delinquent 90 or more days

$846

 

$1,016

 

$1,020

 

$897

 

$857

 

($11
)
 
(1
%)
 

$846

 

$857

 

($11
)
(1
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Credit Losses (period end) 4

$6,491

 

$5,306

 

$2,883

 

$2,799

 

$2,691

 

$3,800

 
141
%
 

$6,491

 

$2,691

 

$3,800

141
%
 
 
 
 
Reserve Change Build/ (Release)  5, 6

$1,185

 

$756

 

$84

 

$106

 

$69

 

$1,116

 


 

$1,941

 

$163

 

$1,778



 
 
 
 
Reserve Rate
9.25
%
 
7.19
%
 
3.74
%
 
3.78
%
 
3.72
%
 
553

 
bps
 
9.25
%
 
3.72
%
 
553

bps
 
 
 
 
Total Discover Card Volume

$33,105

 

$37,474

 

$42,794

 

$41,168

 

$39,935

 

($6,830
)
 
(17
%)
 

$70,579

 

$76,321

 

($5,742
)
(8
%)
 
 
 
 
Discover Card Sales Volume

$30,721

 

$33,988

 

$39,188

 

$37,432

 

$36,664

 

($5,943
)
 
(16
%)
 

$64,709

 

$69,563

 

($4,854
)
(7
%)
 
 
 
 
Rewards Rate
1.24
%
 
1.40
%
 
1.32
%
 
1.38
%
 
1.25
%
 
(1
)
 
bps
 
1.33
%
 
1.30
%
 
3

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  Total Loans includes Home Equity and other loans
 
 
 
 
2  Prior to adoption of ASU No. 2016-13 on January 1, 2020, net charge-offs on Purchased Credit Impaired ("PCI") loans generally did not result in a charge to earnings
 
 
 
 
3  Prior to adoption of ASU No. 2016-13 on January 1, 2020, Purchased loans (formerly referred to as PCI) were accounted for on a pooled basis. Since a pool was 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, was not meaningful. Because the Company was recognizing interest income on a pool of loans, it was all considered to be performing
 
 
 
 
4  Prior to adoption of ASU No. 2016-13 on January 1, 2020, credit losses were estimated using the incurred loss approach. Under the new current expected credit loss (“CECL”) approach, reserves are now recorded for expected losses, not simply those deemed to be already incurred, and the loss estimate period is extended to include the entire life of the loan
 
 
 
 
5  Prior to adoption of ASU No. 2016-13 on January 1, 2020, the allowance for credit loss included the net change in reserves on PCI pools having no remaining non-accretable difference which did not impact the reserve change build/(release) in provision for credit losses
 
 
 
 
 
6  Excludes January 1, 2020 CECL day one impact
 
 
 
 
 
 
 
 
 
 
 
7  Excludes any build/release of the liability for expected credit losses on unfunded commitments as the offset is recorded in accrued expenses and other liabilities in the Company's condensed consolidated statements of financial condition
 
 
 
 
 
 
 
 
 
 
  Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




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

 
 

 
Six Months Ended
 
 
 
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
 
Jun 30, 2020
 
Jun 30, 2019
 
2020 vs. 2019
PRIVATE STUDENT LOANS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Organic Student Loans

$8,635

 

$8,790

 

$8,402

 

$8,395

 

$7,943

 

$692

 
9
%
 

$8,635

 

$7,943

 

$692

9
%
Purchased Student Loans
1,095

 
1,167

 
1,251

 
1,341

 
1,432

 
(337
)
 
(24
%)
 
1,095

 
1,432

 
(337
)
(24
%)
Total Private Student Loans

$9,730

 

$9,957

 

$9,653

 

$9,736

 

$9,375

 

$355

 
4
%
 

$9,730

 

$9,375

 

$355

4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
7.46
%
 
8.24
%
 
8.43
%
 
8.54
%
 
8.59
%
 
(113
)
 
bps
 
7.85
%
 
8.61
%
 
(76
)
bps
Net Principal Charge-off Rate  1
0.62
%
 
0.68
%
 
1.02
%
 
0.59
%
 
0.61
%
 
1

 
bps
 
0.65
%
 
0.64
%
 
1

bps
Delinquency Rate (30 or more days)
1.57
%
 
1.75
%
 
1.88
%
 
1.93
%
 
1.82
%
 
(25
)
 
bps
 
0.85
%
 
1.14
%
 
(29
)
bps
Delinquency Rate (30 or more days) excluding Purchased Loans  2
1.49
%
 
1.64
%
 
1.72
%
 
1.78
%
 
1.67
%
 
(18
)
 
bps
 
1.49
%
 
1.67
%
 
(18
)
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve Rate
8.21
%
 
7.68
%
 
1.53
%
 
1.51
%
 
1.79
%
 
642

 
bps
 
8.21
%
 
1.79
%
 
642

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PERSONAL LOANS
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
Ending Loans

$7,316

 

$7,651

 

$7,687

 

$7,596

 

$7,414

 

($98
)
 
(1
%)
 

$7,316

 

$7,414

 

($98
)
(1
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Yield
12.40
%
 
13.27
%
 
13.23
%
 
13.17
%
 
13.02
%
 
(62
)
 
bps
 
12.84
%
 
12.94
%
 
(10
)
bps
Net Principal Charge-off Rate
3.43
%
 
3.59
%
 
4.26
%
 
3.99
%
 
4.33
%
 
(90
)
 
bps
 
3.51
%
 
4.43
%
 
(92
)
bps
Delinquency Rate (30 or more days)
1.07
%
 
1.31
%
 
1.37
%
 
1.49
%
 
1.49
%
 
(42
)
 
bps
 
1.07
%
 
1.49
%
 
(42
)
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve Rate
11.71
%
 
10.55
%
 
4.53
%
 
4.59
%
 
4.56
%
 
715

 
bps
 
11.71
%
 
4.56
%
 
715

bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  Prior to adoption of ASU No. 2016-13 on January 1, 2020, net charge-offs on Purchased Credit Impaired ("PCI") loans generally did not result in a charge to earnings
 
 
 
 
 
 
 
 
2  Prior to adoption of ASU No. 2016-13 on January 1, 2020, Purchased loans (formerly referred to as PCI) were accounted for on a pooled basis. Since a pool was 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, was not meaningful. Because the Company was recognizing interest income on a pool of loans, it was all considered to be performing
 
 
 
 
 
 
 
 
Note: See Glossary of Financial Terms for definitions of financial terms
 
 
 
 
 
 
 





DISCOVER FINANCIAL SERVICES
 
 
 
 
 
 
 
 
 
 
 
 
SEGMENT RESULTS AND VOLUME STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
 
Six Months Ended
 
 
 
 
 
 
 
 
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
 
Jun 30, 2020 vs. Jun 30, 2019
 
Jun 30, 2020
 
Jun 30, 2019
 
2020 vs. 2019
 
 
 
 
 
DIRECT BANKING
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Income

$2,672

 

$2,982

 

$3,039

 

$3,040

 

$2,976

 

($304
)
 
(10
%)
 

$5,654

 

$5,913

 

($259
)
(4
%)
 
 
 
 
 
Interest Expense
482

 
584

 
615

 
638

 
645

 
(163
)
 
(25
%)
 
1,066

 
1,277

 
(211
)
(17
%)
 
 
 
 
 
Net Interest Income
2,190

 
2,398

 
2,424

 
2,402

 
2,331

 
(141
)
 
(6
%)
 
4,588

 
4,636

 
(48
)
(1
%)
 
 
 
 
 
Non-Interest Income
354

 
366

 
431

 
409

 
436

 
(82
)
 
(19
%)
 
720

 
808

 
(88
)
(11
%)
 
 
 
 
 
Revenue Net of Interest Expense
2,544

 
2,764

 
2,855

 
2,811

 
2,767

 
(223
)
 
(8
%)
 
5,308

 
5,444

 
(136
)
(2
%)
 
 
 
 
 
Provision for Credit Losses
2,046

 
1,807

 
838

 
799

 
787

 
1,259

 
160
%
 
3,853

 
1,596

 
2,257

141
%
 
 
 
 
 
Total Operating Expense
982

 
1,118

 
1,134

 
1,069

 
1,039

 
(57
)
 
(5
%)
 
2,100

 
2,028

 
72

4
%
 
 
 
 
 
Income/ (Loss) Before Income Taxes

($484
)
 

($161
)
 

$883

 

$943

 

$941

 

($1,425
)
 
(151
%)
 

($645
)
 

$1,820

 

($2,465
)
(135
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
9.81
 %
 
10.21
 %
 
10.29
%
 
10.43
%
 
10.47
%
 
(66
)
 
bps
 
10.01
 %
 
10.47
%
 
(46
)
bps
 
 
 
 
 
Pretax Return on Loan Receivables
(2.17
)%
 
(0.69
)%
 
3.75
%
 
4.09
%
 
4.23
%
 
(640
)
 
bps
 
(1.41
)%
 
4.11
%
 
(552
)
bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Credit Losses (period end)  1

$8,184

 

$6,913

 

$3,383

 

$3,298

 

$3,200

 

$4,984

 
156
%
 

$8,184

 

$3,200

 

$4,984

156
%
 
 
 
 
 
Reserve Change Build/ (Release) 2, 3

$1,271

 

$1,069

 

$87

 

$98

 

$69

 

$1,202

 
 
 

$2,340

 

$163

 

$2,177

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PAYMENT SERVICES
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Interest Income

$—

 

$—

 

$—

 

$—

 

$1

 

($1
)
 
(100%)

 

$—

 

$1

 

($1
)
(100
%)
 
 
 
 
 
Interest Expense
—

 
—

 
—

 
—

 
—

 
—

 
NM

 
—

 
—

 
—

NM

 
 
 
 
 
Net Interest Income
—

 
—

 
—

 
—

 
1

 
(1
)
 
(100%)

 
—

 
1

 
(1
)
(100
%)
 
 
 
 
 
Non-Interest Income
118

 
124

 
89

 
89

 
84

 
34

 
40
%
 
242

 
170

 
72

42
%
 
 
 
 
 
Revenue Net of Interest Expense
118

 
124

 
89

 
89

 
85

 
33

 
39
%
 
242

 
171

 
71

42
%
 
 
 
 
 
Provision for Credit Losses
—

 
—

 
(2
)
 
—

 
—

 
—

 
NM

 
—

 
—

 
—

NM

 
 
 
 
 
Total Operating Expense
95

 
41

 
50

 
38

 
39

 
56

 
144
%
 
136

 
74

 
62

84
%
 
 
 
 
 
Income/ (Loss) Before Income Taxes

$23

 

$83

 

$41

 

$51

 

$46

 

($23
)
 
(50
%)
 

$106

 

$97

 

$9

9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TRANSACTIONS PROCESSED ON NETWORKS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discover Network
565

 
645

 
731

 
710

 
671

 
(106
)
 
(16
)%
 
1,210

 
1,276

 
(66
)
(5
)%
 
 
 
 
 
PULSE Network
1,209

 
1,189

 
1,253

 
1,220

 
1,183

 
26

 
2
 %
 
2,398

 
2,315

 
83

4
 %
 
 
 
 
 
Total

$1,774

 

$1,834

 

$1,984

 

$1,930

 

$1,854

 

($80
)
 
(4
)%
 
3,608

 
3,591

 
17

—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NETWORK VOLUME
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PULSE Network

$52,859

 

$49,174

 

$50,037

 

$47,535

 

$47,389

 

$5,470

 
12
 %
 

$102,033

 

$94,495

 

$7,538

8
 %
 
 
 
 
 
Network Partners
7,280

 
6,980

 
7,099

 
6,656

 
5,950

 
1,330

 
22
%
 
14,260

 
11,613

 
2,647

23
%
 
 
 
 
 
Diners Club International 4
4,339

 
7,737

 
8,831

 
8,386

 
8,472

 
(4,133
)
 
(49
)%
 
12,076

 
16,750

 
(4,674
)
(28
%)
 
 
 
 
 
Total Payment Services
64,478

 
63,891

 
65,967

 
62,577

 
61,811

 
2,667

 
4
 %
 
128,369

 
122,858

 
5,511

4
 %
 
 
 
 
 
Discover Network - Proprietary
32,349

 
35,180

 
40,579

 
38,722

 
37,891

 
(5,542
)
 
(15
)%
 
67,529

 
71,942

 
(4,413
)
(6
)%
 
 
 
 
 
Total

$96,827

 

$99,071

 

$106,546

 

$101,299

 

$99,702

 

($2,875
)
 
(3
)%
 

$195,898

 

$194,800

 

$1,098

1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  Prior to adoption of ASU No. 2016-13 on January 1, 2020, credit losses were estimated using the incurred loss approach. Under the new current expected credit loss (“CECL”) approach, reserves are now recorded for expected losses, not simply those deemed to be already incurred, and the loss estimate period is extended to include the entire life of the loan
 
 
 
 
 
2  Prior to adoption of ASU No. 2016-13 on January 1, 2020, the allowance for credit loss included the net change in reserves on PCI pools having no remaining non-accretable difference which did not impact the reserve change build/(release) in provision for credit losses
 
 
 
 
 
3  Excludes January 1, 2020 CECL day one impact
 
 
 
 
 
4  Volume is derived from data provided by licencees 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 - GLOSSARY OF FINANCIAL TERMS
 
 
 
 
Balance Sheet & Regulatory Capital Terms
Liquidity Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments
 
 
 
 
Regulatory Capital Ratios are preliminary
•
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
•
Common Equity Tier 1 Capital Ratio represents common equity tier 1 capital divided by risk weighted assets
 
 
 
 
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 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
 
 
 
 
Tangible Common Equity/Net Loans, a non-GAAP measure, represents TCE divided by total loans less the allowance for credit losses (period end)
 
 
 
 
Tangible Common Equity per Share, a non-GAAP measure, represents TCE divided by ending common shares outstanding
 
 
 
 
Tangible Common Equity/Tangible Assets, a non-GAAP measure, represents TCE divided by total assets less goodwill and intangibles
 
 
 
 
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)
 
 
 
 
Credit Related Terms
Delinquency Rate (30 or more days) represents loans delinquent thirty days or more divided by ending loans (total or respective product loans, as appropriate)
 
 
 
 
Delinquency Rate (90 or more days) represents loans delinquent ninety days or more divided by ending loans (total or respective product loans, as appropriate)
 
 
 
 
Gross Principal Charge-off Rate represents gross principal charge-off dollars (annualized) divided by average loans for the reporting period (total or respective product loans, as appropriate)
 
 
 
 
Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period (total or respective product loans, as appropriate)
 
 
 
 
Reserve Rate represents the allowance for credit losses divided by total loans (total or respective product loans, as appropriate)
 
 
 
 
Earnings and Shareholder Return Terms
Book Value per share represents total equity divided by ending common shares outstanding
 
 
 
 
Capital Returned to Common Stockholders represents common stock dividends declared and treasury share repurchases, excluding common stock issued under employee benefit plans and stock based compensation
 
 
 
 
Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding
 
 
 
 
Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period (total or respective product loans, as appropriate)
 
 
 
 
Net Income Allocated to Common Stockholders represents net income less preferred stock dividends and income allocated to participating securities
 
 
 
 
Net Interest Margin represents net interest income (annualized) divided by average total loans for the period
 
 
 
 
Net Yield on Interest Earning Assets represents net interest income (annualized) divided by average total interest earning assets for the 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
 
 
 
 
Payout Ratio represents capital returned to common stockholders divided by net income allocated to common stockholders
 
 
 
 
Return on Equity represents net income (annualized) divided by average total equity for the reporting period
 
 
 
 
Rewards Rate represents Credit Card rewards cost divided by Discover Card sales volume
 
 
 
 
Volume Terms
Discover Card Sales Volume represents Discover card activity related to sales net of returns
 
 
 
 
Discover Card Volume represents Discover card activity related to sales net of returns, balance transfers, cash advances and other activity
 
 
 
 
Discover Network Proprietary Volume represents gross Discover Card sales volume on the Discover Network




DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO NON-GAAP DATA
(unaudited, in millions)
 
Quarter Ended
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
Jun 30, 2019
GAAP Total Common Equity

$8,587

 

$9,102

 

$11,296

 

$11,154

 

$10,930

Less: Goodwill
(255
)
 
(255
)
 
(255
)
 
(255
)
 
(255
)
Less: Intangibles
(96
)
 
(155
)
 
(155
)
 
(159
)
 
(160
)
Tangible Common Equity 1

$8,236

 

$8,692

 

$10,886

 

$10,740

 

$10,515

 
 
 
 
 
 
 
 
 
 
GAAP Book Value Per Share

$31.47

 

$31.55

 

$38.24

 

$37.20

 

$35.97

Less: Goodwill
(0.83
)
 
(0.82
)
 
(0.83
)
 
(0.80
)
 
(0.80
)
Less: Intangibles
(0.31
)
 
(0.51
)
 
(0.50
)
 
(0.51
)
 
(0.50
)
   Less: Preferred Stock
(3.45
)
 
(1.84
)
 
(1.81
)
 
(1.79
)
 
(1.76
)
Tangible Common Equity Per Share

$26.88

 

$28.38

 

$35.10

 

$34.10

 

$32.91

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


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