0001393612FALSE00013936122024-10-162024-10-16

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
Form 8-K  
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 16, 2024
  
DISCOVER FINANCIAL SERVICES
(Exact name of registrant as specified in its charter)
 
Commission File Number: 001-33378
 
Delaware 36-2517428
(State or other jurisdiction
of incorporation) 		 (IRS Employer
Identification No.)
2500 Lake Cook Road, Riverwoods, Illinois 60015
(Address of principal executive offices, including zip code)
(224) 405-0900
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
  
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☒Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareDFSNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Item 2.02.     Results of Operations and Financial Condition.
 
On October 16, 2024, Discover Financial Services (the “Company”) released financial information with respect to the quarter ended September 30, 2024. Copies of the press release, financial data supplement and financial results presentation containing this information are attached hereto as exhibits and incorporated herein by reference.

The information contained in this Item 2.02 of this Current Report on Form 8-K, including the exhibits, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.








Item 9.01.     Financial Statements and Exhibits.
  
(d) Exhibits  
Exhibit No. Description
 Press Release of the Company dated October 16, 2024 containing financial information for the quarter ended September 30, 2024
Financial Data Supplement of the Company for the quarter and the Nine Months Ended September 30, 2024
Financial Results Presentation of the Company for the quarter ended September 30, 2024
104Cover Page Interactive Data File — the cover page from this Current Report on Form 8-K, formatted as Inline XBRL (included as Exhibit 101)





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
DISCOVER FINANCIAL SERVICES
Dated: October 16, 2024By:
/s/ Hope D. Mehlman
Name: Hope D. Mehlman
Title: Executive Vice President, Chief Legal Officer, General Counsel and Corporate Secretary


                                              Exhibit 99.1

discoverlogo20150630a20.jpg
DISCOVER FINANCIAL SERVICES REPORTS THIRD QUARTER 2024 NET INCOME OF $965 MILLION
OR $3.69 PER DILUTED SHARE

BOARD OF DIRECTORS DECLARES QUARTERLY DIVIDEND FOR COMMON STOCK

Third Quarter 2024 Results
2024(1)
2023YOY Change
Total loans, end of period (in billions)$127.0$122.74%
Total revenue net of interest expense (in millions)$4,453$4,04410%
Total net charge-off rate4.86%3.52%134 bps
Net income (in millions)$965$68341%
Diluted EPS$3.69$2.5942%
Note(s)
1. Private student loans were classified as held-for-sale effective June 30, 2024. The charge-offs related to private student loans are through
June 30, 2024, the date the loans were transferred to held-for-sale classification

Riverwoods, IL, October 16, 2024 - Discover Financial Services (NYSE: DFS) today reported net income of $965 million or $3.69 per diluted share for the third quarter of 2024, as compared to a net income of $683 million or $2.59 per diluted share for the third quarter of 2023.

“Discover's financial performance remained strong in the third quarter, benefiting from increased net interest margin, modest loan growth, and some credit improvement," said Michael Shepherd, Discover’s Interim CEO and President. "We are pleased to have completed the first of four student loan sale closings, which will simplify our business. Additionally, we continued to make good progress on our risk management and compliance capabilities.”

Segment Results

Digital Banking
Digital Banking pretax income of $1.2 billion for the quarter was $401 million higher than the prior year period reflecting increased revenue net of interest expense and a lower provision for credit losses partially offset by increased operating expenses.

Total loans ended the quarter at $127.0 billion, up 4% year-over-year, down 1% sequentially. Credit card loans ended the quarter at $100.5 billion, up 3% year-over-year. Personal loans increased $879 million, or 9%. Private student loans were down 19% driven by the first closing of the private student loan portfolio sale.

Net interest income for the quarter increased $333 million, or 10% year-over-year, driven by higher average receivables and net interest margin expansion. Net interest margin was 11.38%, up 43 basis points versus the prior year. Card yield was 16.23%, up 80 basis points from the prior year primarily driven by a lower promotional balance mix and lower payment rates, partially offset by higher interest charge-offs. Interest expense as a percent of total loans increased 30 basis points from the prior year period, primarily driven by higher funding costs.

Non-interest income increased $77 million, or 13% from the prior year period reflecting a $70 million gain from the loan sale.

The total net charge-off rate was 4.86%, up 134 basis points from the prior year period and up 3 basis points from the prior quarter reflecting continued seasoning of recent vintages and the student loan accounting classification change. The credit card net charge-off rate was 5.28%, up 125 basis points from the prior year period and down 27 basis points from the prior quarter. The 30+ day delinquency rate for credit card loans was 3.84%, up 43 basis points year-over-year and up 15 basis points from the prior quarter. The Personal loan net charge-off rate of 4.01% was up 138 basis points from the prior year and up 3 basis points from the prior quarter.


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Provision for credit losses of $1.5 billion decreased $229 million from the prior year quarter driven by a $570 million lower reserve build, partially offset by a $372 million increase in net charge-offs.

Total operating expenses were up $238 million year-over-year, or 17%. Employee compensation increased due to higher wage rates and employee retention awards. Information processing increased due to technology investments and accelerated private student loan software depreciation. Professional fees were up from higher recovery fees and merger and integration costs. Other expenses increased due to the recognition of private student loan net charge-off expenses in this line, following last quarter's reclassification to held-for-sale.

Payment Services
Payment Services pretax income of $84 million was largely flat year-over-year. Payment Services volume was $100.5 billion, up 9% from the prior year period. Discover Network volume was down 4% reflecting a slowdown in Discover card sales volume. PULSE dollar volume was up 14% driven by increased debit transaction volume. Diners Club volume was up 7% year-over-year reflecting strength across most regions and Network Partners volume decreased 24% from the prior year due to lower AribaPay volume.

Regulatory Matters
As part of its review of the joint proxy statement and prospectus, the Staff of the SEC has indicated that they disagree with certain aspects of Discover's accounting approach for the card misclassification matter. Management is working diligently to resolve their comments, which largely focus on the allocation of previously incurred card misclassification charges between revenue and expense. Resolution of the matter is not expected to impact cumulative historical earnings, capital, or the counterparty restitution plan liability.

Dividend Declaration
The Board of Directors declared a quarterly cash dividend of $0.70 per share of common stock payable on December 5, 2024, to holders of record at the close of business on November 21, 2024.

Conference Call and Webcast Information
The company will host a conference call to discuss its third quarter results on Thursday, October 17, 2024, at 7:00 a.m. Central Time. Interested parties can listen to the conference call via a live audio webcast at https://investorrelations.discover.com.

About Discover
Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover® card, America's cash rewards pioneer, and offers personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network® comprised of Discover Network, with millions of merchants and cash access locations; PULSE®, one of the nation's leading ATM/debit networks; and Diners Club International®, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.

Contacts
Investors:                Media:
Erin Stieber, 224-405-4555        Matthew Towson, 224-405-5649
investorrelations@discover.com        matthewtowson@discover.com


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A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company's Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC's website (http://www.sec.gov) and the company's website (https://investorrelations.discover.com).

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as "believe," "expect," "anticipate," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely," "forecast," and similar expressions. Such statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release and there is no undertaking to update or revise them as more information becomes available. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance and regulatory and legal actions, including, but not limited to, those related to accounting guidance, tax reform, financial regulatory reform, consumer financial services practices, anti-corruption and funding, capital and liquidity; risks related to the proposed merger with Capital One Financial Corporation (“Capital One”) including, among others, (i) failure to complete the merger with Capital One or unexpected delays related to the merger or the inability of the parties to obtain regulatory approvals or satisfy other closing conditions required to complete the merger, (ii) regulatory approvals resulting in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction, (iii) diversion of management’s attention from ongoing business operations and opportunities, (iv) cost and revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (v) the integration of each party’s management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (vi) deposit attrition, customer or employee loss and/or revenue loss as a result of the announcement of the proposed merger, (vii) expenses related to the proposed merger being greater than expected, and (viii) shareholder litigation that could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations; the actions and initiatives of current and potential competitors; our ability to manage our expenses; our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants and merchants; our ability to sustain our card and personal loan growth; our ability to timely complete the sale of the our private student loan portfolio, including due to the failure of a closing condition in the agreement to be satisfied, or any unexpected delay in closing the transaction or the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement; our ability to increase or sustain Discover card usage or attract new customers; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; our ability to manage our credit risk, market risk, liquidity risk, operational risk, compliance and legal risk and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in our investment portfolio; limits on our ability to pay dividends and repurchase our common stock; limits on our ability to receive payments from our subsidiaries; fraudulent activities or material security breaches of our or others' key systems; our ability to remain organizationally effective; our ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events, climate change, pandemics and unforeseen or catastrophic events; our ability to introduce new products and services; our ability to manage our relationships with third-party vendors, as well as those with which we have no direct relationship such as our employees' internet service providers; our ability to maintain current technology and integrate new and acquired systems and technology; our ability to collect amounts for disputed transactions from merchants and merchant acquirers; our ability to attract and retain employees; our ability to protect our reputation and our intellectual property; our ability to comply with regulatory requirements; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. We routinely evaluate and may pursue acquisitions of, investments in or divestitures from businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or our debt or equity securities.

Additional factors that could cause the company's results to differ materially from those described in the forward-looking statements can be found under “Risk Factors,” “Business - Competition,” “Business - Supervision and Regulation” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's Annual Report on Form 10-K for the year ended December 31, 2023, which is filed with the SEC and available at the SEC's internet site (http://


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www.sec.gov) and subsequent reports on Forms 8-K and 10-Q, including the company's Current Report on Form 8-K filed today with the SEC.

Important Information About the Transaction and Where to Find It

Capital One has filed a registration statement on Form S-4 with the SEC to register the shares of Capital One's common stock that will be issued to Discover Financial Services ("Discover") stockholders in connection with the proposed transaction. The registration statement includes a preliminary joint proxy statement of Capital One and Discover that also constitutes a preliminary prospectus of Capital One. The definitive joint proxy statement/prospectus will be sent to the stockholders of each of Discover and Capital One in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS WHEN THEY BECOME AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC by Discover or Capital One through the website maintained by the SEC at http://www.sec.gov or by contacting the investor relations department of Discover or Capital One at:

Discover Financial ServicesCapital One Financial Corporation
2500 Lake Cook Road1680 Capital One Drive
Riverwoods, IL 60015McLean, VA 22102
Attention: Investor RelationsAttention: Investor Relations
investorrelations@discover.com
(224) 405-4555		investorrelations@capitalone.com
(703) 720-1000

Before making any voting or investment decision, investors and security holders of Discover and Capital One are urged to read carefully the entire registration statement and joint proxy statement/prospectus, including any amendments thereto, because they contain important information about the proposed transaction. Free copies of these documents may be obtained as described above.


Participants in Solicitation

Discover, Capital One and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of each of Discover and Capital One in connection with the transaction. Information regarding the directors and executive officers of Discover and Capital One and other persons who may be deemed participants in the solicitation of the stockholders of Discover or of Capital One in connection with the transaction will be included in the joint proxy statement/prospectus related to the proposed transaction, which will be filed by Capital One with the SEC. Information about the directors and executive officers of Discover and their ownership of Discover common stock can also be found in Discover’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 15, 2024, as supplemented by Discover’s proxy statement supplement, as filed with the SEC on April 2, 2024, and other documents subsequently filed by Discover with the SEC. Information about the directors and executive officers of Capital One and their ownership of Capital One common stock can also be found in Capital One’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 20, 2024, and other documents subsequently filed by Capital One with the SEC. Additional information regarding the interests of such participants will be included in the joint proxy statement/prospectus and other relevant documents regarding the proposed transaction filed with the SEC when they become available.


DISCOVER FINANCIAL SERVICES Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
 Quarter EndedNine Months Ended
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023		Sep 30, 2024Sep 30, 20232024 vs. 2023
EARNINGS SUMMARY       
Interest Income$5,112 $4,971 $4,948 $4,868 $4,610 $502 11 %$15,031 $12,977 $2,054 16 %
Interest Expense1,457 1,447 1,461 1,400 1,288 169 13 %4,365 3,346 1,019 30 %
Net Interest Income3,655 3,524 3,487 3,468 3,322 333 10 %10,666 9,631 1,035 11 %
Discount/Interchange Revenue1,142 1,153 1,074 1,158 1,164 (22)(2 %)3,369 3,368 1 — %
Rewards Cost779 716 703 788 787 (8)(1 %)2,198 2,291 (93)(4 %)
Discount and Interchange Revenue, net363 437 371 370 377 (14)(4 %)1,171 1,077 94 9 %
Protection Products Revenue42 42 42 43 42 — — %126 129 (3)(2 %)
Loan Fee Income214 205 200 217 194 20 10 %619 546 73 13 %
Transaction Processing Revenue84 91 87 82 82 2 2 %262 221 41 19 %
Other Income95 239 23 16 27 68 NM357 60 297 NM
Total Non-Interest Income798 1,014 723 728 722 76 11 %2,535 2,033 502 25 %
Revenue Net of Interest Expense4,453 4,538 4,210 4,196 4,044 409 10 %13,201 11,664 1,537 13 %
Provision for Credit Losses1,473 739 1,497 1,909 1,702 (229)(13 %)3,709 4,109 (400)(10 %)
Employee Compensation and Benefits703 658 671 646 575 128 22 %2,032 1,788 244 14 %
Marketing and Business Development263 258 250 372 283 (20)(7 %)771 792 (21)(3 %)
Information Processing & Communications197 167 163 170 149 48 32 %527 438 89 20 %
Professional Fees323 296 292 312 281 42 15 %911 729 182 25 %
Premises and Equipment25 23 20 25 22 3 14 %68 64 4 6 %
Other Expense181 327 913 250 144 37 26 %1,421 430 991 NM
Total Operating Expense1,692 1,729 2,309 1,775 1,454 238 16 %5,730 4,241 1,489 35 %
Income/ (Loss) Before Income Taxes1,288 2,070 404 512 888 400 45 %3,762 3,314 448 14 %
Tax Expense323 540 96 124 205 118 58 %959 762 197 26 %
Net Income/ (Loss)$965 $1,530 $308 $388 $683 $282 41 %$2,803 $2,552 $251 10 %
Net Income/ (Loss) Allocated to Common Stockholders$928 $1,521 $274 $386 $647 $281 43 %$2,723 $2,473 $250 10 %
Effective Tax Rate25.1 %26.1 %23.7 %24.0 %23.1 %25.5 %23.0 %
Net Interest Margin11.38 %11.17 %11.03 %10.98 %10.95 %43 bps11.19 %11.11 %8 bps
Operating Efficiency38.0 %38.1 %54.9 %42.3 %36.0 %200 bps43.4 %36.4 %700 bps
ROE23 %40 %8 %11 %19 %24 %24 %
ROCE23 %43 %8 %11 %20 %25 %25 %
Capital Returned to Common Stockholders$155 $178 $180 $144 $169 ($14)(8 %)$513 $2,397 ($1,884)(79 %)
Payout Ratio17 %12 %66 %37 %26 %19 %97 %
Ending Common Shares Outstanding251 251 251 250 250 1 — %251 250 1 — %
Weighted Average Common Shares Outstanding251 251 250 250 250 1 — %251 255 (4)(2 %)
Weighted Average Common Shares Outstanding (fully diluted)251 251 250 250 250 1 — %251 255 (4)(2 %)
PER SHARE STATISTICS       
Basic EPS$3.69 $6.06 $1.10 $1.54 $2.59 $1.10 42 %$10.86 $9.70 $1.16 12 %
Diluted EPS$3.69 $6.06 $1.10 $1.54 $2.59 $1.10 42 %$10.85 $9.69 $1.16 12 %
Common Dividends Declared Per Share$0.70 $0.70 $0.70 $0.70 $0.70 $— — %$2.10 $2.00 $0.10 5 %
Common Stock Price (period end)$140.29 $130.81 $131.09 $112.40 $86.63 $53.66 62 %$140.29 $86.63 $53.66 62 %
Book Value per share $68.71 $63.99 $58.74 $59.29 $56.93 $11.78 21 %$68.71 $56.93 $11.78 21 %
  Note: See Glossary of Financial Terms for definitions of financial terms


DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
 Quarter Ended  
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023
BALANCE SHEET SUMMARY       
Assets       
Cash and Investment Securities$26,423 $24,405 $27,965 $25,383 $22,569 $3,854 17 %
Loans Held-for-Sale8,484 10,145 — — — 8,484 NM
Loan Portfolio118,509 117,504 126,555 128,409 122,676 (4,167)(3 %)
Total Loan Receivables126,993 127,649 126,555 128,409 122,676 4,317 4 %
Allowance for Credit Losses(8,512)(8,481)(9,258)(9,283)(8,665)153 2 %
Net Loan Receivables118,481 119,168 117,297 119,126 114,011 4,470 4 %
Premises and Equipment, net1,085 1,087 1,107 1,091 1,084 1 0 %
Goodwill and Intangible Assets, net255 255 255 255 255 — — %
Other Assets5,349 5,952 6,065 5,667 5,513 (164)(3 %)
Total Assets$151,593 $150,867 $152,689 $151,522 $143,432 $8,161 6 %
Liabilities & Stockholders' Equity       
           Certificates of Deposits 1
30,29625,881 25,921 24,151 21,755 8,541 39 %
           Savings, Money Market, and Other Deposits 1, 2
60,013 61,414 61,412 59,882 59,501 512 1 %
Total Direct to Consumer Deposits 1, 2
90,309 87,295 87,333 84,033 81,256 9,053 11 %
Brokered Deposits and Other Deposits19,543 21,055 23,097 24,898 22,763 (3,220)(14 %)
Deposits109,852 108,350 110,430 108,931 104,019 5,833 6 %
   Securitized Borrowings 3
9,307 9,608 10,933 11,743 10,889 (1,582)(15 %)
   Other Borrowings 3
8,870 9,533 9,542 9,588 8,578 292 3 %
Borrowings18,177 19,141 20,475 21,331 19,467 (1,290)(7 %)
Accrued Expenses and Other Liabilities6,304 7,309 7,064 6,432 5,710 594 10 %
Total Liabilities134,333 134,800 137,969 136,694 129,196 5,137 4 %
Total Equity17,260 16,067 14,720 14,828 14,236 3,024 21 %
Total Liabilities and Stockholders' Equity$151,593 $150,867 $152,689 $151,522 $143,432 $8,161 6 %
LIQUIDITY       
Liquidity Portfolio$24,804 $22,371 $25,739 $23,254 $21,186 $3,618 17 %
Private Asset-backed Securitization Capacity2,750 3,500 3,500 2,750 3,500 (750)(21 %)
Federal Home Loan Bank Borrowing Capacity3,853 3,383 3,087 2,551 2,202 1,651 75 %
Federal Reserve Discount Window 4
46,118 39,569 41,710 41,199 48,658 (2,540)(5 %)
Undrawn Credit Facilities 4
52,721 46,452 48,297 46,500 54,360 (1,639)(3 %)
Total Liquidity$77,525$68,823$74,036$69,754$75,546$1,9793 %
1 Includes Affinity relationships
2 Savings, Money Market, and Other Deposits and reflects both interest-bearing and non-interest bearing direct to consumer deposits
3 Includes short-term and long-term borrowings
4 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  
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023
BALANCE SHEET STATISTICS       
Total Common Equity$16,204 $15,011 $13,664 $13,772 $13,180 $3,024 23 %
Total Common Equity/Total Assets10.7 %9.9 %8.9 %9.1 %9.2 %
Total Common Equity/Net Loans13.7 %12.6 %11.6 %11.6 %11.6 %
Tangible Assets$151,338 $150,612 $152,434 $151,267 $143,177 $8,161 6 %
Tangible Common Equity  1
$15,949 $14,756 $13,409 $13,517 $12,925 $3,024 23 %
Tangible Common Equity/Tangible Assets  1
10.5 %9.8 %8.8 %8.9 %9.0 %
Tangible Common Equity/Net Loans  1
13.5 %12.4 %11.4 %11.3 %11.3 %
Tangible Common Equity per share  1
$63.49 $58.76 $53.51 $54.04 $51.69 $11.80 23 %
Basel III
Quarter Ended
REGULATORY CAPITAL RATIOS 2
Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023  
Total Risk Based Capital Ratio15.0 %14.3 %13.3 %13.7 %14.1 %  
Tier 1 Risk Based Capital Ratio13.5 %12.7 %11.7 %12.1 %12.5 %  
Tier 1 Leverage Ratio 11.5 %11.1 %10.1 %10.7 %11.0 %  
Common Equity Tier 1 Capital Ratio 12.7 %11.9 %10.9 %11.3 %11.6 %
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 the final rule published September 30, 2020. Capital ratios reflect the impact of CECL reserves on regulatory capital with transition impacts
  Note: See Glossary of Financial Terms for definitions of financial terms



DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
 Quarter Ended  
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023
AVERAGE BALANCES       
Assets       
Cash and Investment Securities$24,023 $24,193 $25,662 $22,448 $21,210 $2,813 13 %
Restricted Cash641 590 558 104 238 403 169 %
Credit Card Loans100,290 99,584 100,310 99,610 95,796 4,494 5 %
Private Student Loans 1
9,631 10,304 10,577 10,369 10,274 (643)(6 %)
Personal Loans10,428 10,266 10,004 9,754 9,368 1,060 11 %
Other Loans7,358 6,829 6,235 5,654 4,942 2,416 49 %
Total Loans127,707 126,983 127,126 125,387 120,380 7,327 6 %
Total Interest Earning Assets152,371 151,766 153,346 147,939 141,828 10,543 7 %
Allowance for Credit Losses(8,480)(9,245)(9,279)(8,668)(8,063)(417)(5 %)
Other Assets7,756 7,953 7,709 7,462 7,116 640 9 %
Total Assets$151,647 $150,474 $151,776 $146,733 $140,881 $10,766 8 %
Liabilities and Stockholders' Equity       
Non-Interest-bearing Direct to Consumer Deposits 2
$1,063 $1,071 $1,037 $987 $961 $102 11 %
                       Certificates of Deposits 2
27,839 25,906 25,625 22,496 21,473 6,366 30 %
                       Savings, Money Market, and Other Deposits 2
59,258 59,973 59,212 58,766 56,797 2,461 4 %
Interest-bearing Direct to Consumer Deposits 2
87,097 85,879 84,837 81,262 78,270 8,827 11 %
Brokered Deposits and Other Deposits20,189 21,631 23,792 23,271 21,336 (1,147)(5 %)
Total Interest-bearing Deposits107,286 107,510 108,629 104,533 99,606 7,680 8 %
Securitized Borrowings 3
9,971 10,432 11,340 11,045 11,161 (1,190)(11 %)
Other Borrowings 3
9,416 9,521 9,572 9,228 8,873 543 6 %
Total Interest-bearing Liabilities126,673 127,463 129,541 124,806 119,640 7,033 6 %
Other Liabilities & Stockholders' Equity23,911 21,940 21,198 20,940 20,280 3,631 18 %
Total Liabilities and Stockholders' Equity$151,647 $150,474 $151,776 $146,733 $140,881 $10,766 8 %
AVERAGE YIELD       
Assets       
Cash and Investment Securities4.46 %4.51 %4.51 %4.36 %4.19 %27 bps
Restricted Cash5.73 %8.33 %7.03 %16.71 %10.65 %(492)bps
Credit Card Loans16.23 %15.99 %15.79 %15.63 %15.43 %80 bps
Private Student Loans 1
10.08 %9.97 %10.04 %10.16 %10.11 %(3)bps
Personal Loans13.72 %13.60 %13.40 %13.20 %12.94 %78 bps
Other Loans7.45 %7.45 %7.39 %7.14 %6.95 %50 bps
Total Loans15.06 %14.85 %14.71 %14.61 %14.44 %62 bps
Total Interest Earning Assets13.35 %13.18 %12.98 %13.05 %12.90 %45 bps
AVERAGE RATES
Liabilities and Stockholders' Equity       
                       Certificates of Deposits 2
4.67 %4.62 %4.53 %4.24 %3.84 %83 bps
                       Savings, Money Market, and Other Deposits 2
4.27 %4.29 %4.35 %4.39 %4.30 %(3)bps
Interest-bearing Direct to Consumer Deposits 2
4.40 %4.39 %4.41 %4.35 %4.18 %22 bps
Brokered Deposits and Other Deposits4.95 %4.85 %4.75 %4.64 %4.43 %52 bps
Total Interest-bearing Deposits4.50 %4.48 %4.48 %4.41 %4.23 %27 bps
Securitized Borrowings 3
4.81 %4.89 %4.71 %4.68 %4.60 %21 bps
Other Borrowings 3
5.23 %5.12 %4.94 %4.55 %4.32 %91 bps
Total Interest-bearing Liabilities4.58 %4.56 %4.54 %4.45 %4.27 %31 bps
Net Interest Margin11.38 %11.17 %11.03 %10.98 %10.95 %43 bps
Net Yield on Interest-earning Assets9.54 %9.34 %9.15 %9.30 %9.29 %25 bps
1 Private student loans were classified as held-for-sale effective June 30, 2024
2 Includes Affinity relationships
3 Includes short-term and long-term borrowings
Note: See Glossary of Financial Terms for definitions of financial terms


DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
 Quarter Ended  Nine Months Ended
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023		Sep 30, 2024Sep 30, 20232024 vs. 2023
TOTAL LOAN RECEIVABLES       
Ending Loans  1
$126,993 $127,649 $126,555 $128,409 $122,676 $4,317 4 %$126,993 $122,676 $4,317 4 %
Average Loans  1
$127,707 $126,983 $127,126 $125,387 $120,380 $7,327 6 %$127,273 $115,926 $11,347 10 %
Interest Yield 1
15.06 %14.85 %14.71 %14.61 %14.44 %62 bps14.87 %14.23 %64 bps
Gross Principal Charge-off Rate 2
5.91 %5.77 %5.74 %4.82 %4.24 %167 bps5.80 %3.93 %187 bps
Net Principal Charge-off Rate 2
4.86 %4.83 %4.92 %4.11 %3.52 %134 bps4.87 %3.16 %171 bps
Delinquency Rate (30 or more days) 2
3.46 %3.33 %3.38 %3.45 %3.06 %40 bps3.46 %3.06 %40 bps
Delinquency Rate (90 or more days) 2
1.65 %1.62 %1.64 %1.59 %1.34 %31 bps1.65 %1.34 %31 bps
Gross Principal Charge-off Dollars 2
$1,756 $1,820 $1,812 $1,521 $1,287 $469 36 %$5,388 $3,406 $1,982 58 %
Net Principal Charge-off Dollars 2
$1,442 $1,522 $1,556 $1,298 $1,070 $372 35 %$4,520 $2,744 $1,776 65 %
Net Interest and Fee Charge-off Dollars 2
$335 $344 $348 $279 $223 $112 50 %$1,027 $594 $433 73 %
Loans Delinquent 30 or more days 2
$4,105 $3,917 $4,282 $4,427 $3,756 $349 9 %$4,105 $3,756 $349 9 %
Loans Delinquent 90 or more days 2
$1,960 $1,903 $2,079 $2,045 $1,637 $323 20 %$1,960 $1,637 $323 20 %
Allowance for Credit Losses (period end)$8,512 $8,481 $9,258 $9,283 $8,665 ($153)(2 %)$8,512 $8,665 ($153)(2 %)
Reserve Change Build/ (Release) 3, 4
$31 ($777)($25)$618 $601 ($570)($771)$1,359 ($2,130)
Reserve Rate 2
7.18 %7.22 %7.32 %7.23 %7.06 %12 bps7.18 %7.06 %12 bps
CREDIT CARD LOANS       
Ending Loans$100,489 $100,066 $99,475 $102,259 $97,389 $3,100 3 %$100,489 $97,389 $3,100 3 %
Average Loans$100,290 $99,584 $100,310 $99,610 $95,796 $4,494 5 %$100,062 $92,383 $7,679 8 %
Interest Yield16.23 %15.99 %15.79 %15.63 %15.43 %80 bps16.01 %15.21 %80 bps
Gross Principal Charge-off Rate6.46 %6.66 %6.61 %5.50 %4.85 %161 bps6.58 %4.49 %209 bps
Net Principal Charge-off Rate5.28 %5.55 %5.66 %4.68 %4.03 %125 bps5.50 %3.62 %188 bps
Delinquency Rate (30 or more days) 3.84 %3.69 %3.83 %3.87 %3.41 %43 bps3.84 %3.41 %43 bps
Delinquency Rate (90 or more days) 1.87 %1.83 %1.95 %1.87 %1.57 %30 bps1.87 %1.57 %30 bps
Gross Principal Charge-off Dollars$1,629 $1,648 $1,649 $1,380 $1,171 $458 39 %$4,926 $3,101 $1,825 59 %
Net Principal Charge-off Dollars$1,332 $1,373 $1,411 $1,175 $973 $359 37 %$4,116 $2,499 $1,617 65 %
Loans Delinquent 30 or more days$3,857 $3,697 $3,810 $3,955 $3,324 $533 16 %$3,857 $3,324 $533 16 %
Loans Delinquent 90 or more days$1,883 $1,834 $1,941 $1,917 $1,527 $356 23 %$1,883 $1,527 $356 23 %
Allowance for Credit Losses (period end)$7,586 $7,591 $7,541 $7,619 $7,070 $516 7 %$7,586 $7,070 $516 7 %
Reserve Change Build/ (Release) 4
($5)$50 ($78)$549 $545 ($550)($33)$1,253 ($1,286)
Reserve Rate7.55 %7.59 %7.58 %7.45 %7.26 %29 bps7.55 %7.26 %29 bps
Total Discover Card Volume$56,593 $56,441 $53,239 $60,917 $58,965 ($2,372)(4 %)$166,273 $171,868 ($5,595)(3 %)
Discover Card Sales Volume$53,380 $53,482 $50,137 $57,145 $54,952 ($1,572)(3 %)$156,999 $160,769 ($3,770)(2 %)
Rewards Rate1.44 %1.32 %1.39 %1.37 %1.42 %2 bps1.38 %1.42 %(4)bps
1 Total Loans includes private student loans, home equity and other loans
2 Excludes loans classified as held-for-sale as of June 30, 2024
3 Includes the adjustment to eliminate the allowance for credit losses upon classifying the private student loan portfolio as held-for-sale as of June 30, 2024
4 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  Nine Months Ended
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023		Sep 30, 2024Sep 30, 20232024 vs. 2023
PRIVATE STUDENT LOANS 1
       
Organic Student Loans$8,101 $9,740 $10,050 $9,894 $9,963 ($1,862)(19 %)$8,101 $9,963 ($1,862)(19 %)
Purchased Student Loans383 405 430 458 485 (102)(21 %)383 485 (102)(21 %)
Total Private Student Loans$8,484 $10,145 $10,480 $10,352 $10,448 ($1,964)(19 %)$8,484 $10,448 ($1,964)(19 %)
Interest Yield10.08 %9.97 %10.04 %10.16 %10.11 %(3)bps10.03 %9.88 %15 bps
Net Principal Charge-off Rate 2
N/A1.85 %1.58 %1.52 %1.32 %1.72 %1.21 %51 bps
Delinquency Rate (30 or more days) 2
N/AN/A2.59 %2.62 %2.62 %N/A2.62 %
Reserve Rate 3
N/AN/A8.29 %8.29 %8.29 %N/A8.29 %
PERSONAL LOANS       
Ending Loans$10,438 $10,321 $10,107 $9,852 $9,559 $879 9 %$10,438 $9,559 $879 9 %
Interest Yield13.72 %13.60 %13.40 %13.20 %12.94 %78 bps13.58 %12.69 %89 bps
Net Principal Charge-off Rate4.01 %3.98 %4.02 %3.39 %2.63 %138 bps4.00 %2.30 %170 bps
Delinquency Rate (30 or more days)1.66 %1.54 %1.46 %1.45 %1.24 %42 bps1.66 %1.24 %42 bps
Reserve Rate7.65 %7.68 %7.48 %7.33 %6.83 %82 bps7.65 %6.83 %82 bps
1 Private student loans were classified as held-for-sale effective June 30, 2024
2 Excludes loans classified as held-for-sale as of June 30, 2024
3 The allowance for credit losses was reversed upon classifying the private student loan portfolio as held-for-sale

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



DISCOVER FINANCIAL SERVICES
SEGMENT RESULTS AND VOLUME STATISTICS
(unaudited, in millions)
 Quarter Ended  Nine Months Ended
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023Sep 30, 2024 vs.
Sep 30, 2023		Sep 30, 2024Sep 30, 20232024 vs. 2023
DIGITAL BANKING       
Interest Income$5,112 $4,971 $4,948 $4,868 $4,610 $502 11 %$15,031 $12,977 $2,054 16 %
Interest Expense1,457 1,447 1,461 1,400 1,288 169 13 %4,365 3,346 1,019 30 %
Net Interest Income3,655 3,524 3,487 3,468 3,322 333 10 %10,666 9,631 1,035 11 %
Non-Interest Income669 691 591 611 592 77 13 %1,951 1,700 251 15 %
Revenue Net of Interest Expense4,324 4,215 4,078 4,079 3,914 410 10 %12,617 11,331 1,286 11 %
Provision for Credit Losses1,473 739 1,497 1,909 1,702 (229)(13 %)3,709 4,109 (400)(10 %)
Total Operating Expense1,647 1,683 2,259 1,712 1,409 238 17 %5,589 4,110 1,479 36 %
Income/ (Loss) Before Income Taxes$1,204 $1,793 $322 $458 $803 $401 50 %$3,319 $3,112 $207 7 %
Net Interest Margin11.38 %11.17 %11.03 %10.98 %10.95 %43 bps11.19 %11.11 %8 bps
Pretax Return on Loan Receivables3.75 %5.68 %1.02 %1.45 %2.65 %110 bps3.48 %3.59 %(11)bps
Allowance for Credit Losses (period end)$8,512 $8,481 $9,258 $9,283 $8,665 ($153)(2 %)$8,512 $8,665 ($153)(2 %)
Reserve Change Build/ (Release) $31 ($777)($25)$618 $601 ($570)($771)$1,359 ($2,130)
PAYMENT SERVICES       
Interest Income$— $— $— $— $— $— NM$— $— $— NM
Interest Expense— — — — — — NM— — — NM
Net Interest Income— — — — — — NM— — — NM
Non-Interest Income (Loss)129 323 132 117 130 (1)(1 %)584 333 251 75 %
Revenue Net of Interest Expense129 323 132 117 130 (1)(1 %)584 333 251 75 %
Provision for Credit Losses— — — — — — NM— — — NM
Total Operating Expense45 46 50 63 45 — — %141 131 10 8 %
Income/ (Loss) Before Income Taxes$84 $277 $82 $54 $85 ($1)NM$443 $202 $241 119 %
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network954 936 883 974 964 (10)(1)%2,773 2,754 19 1 %
PULSE Network2,421 2,413 2,312 2,308 2,011 410 20 %7,146 5,397 1,749 32 %
Total3,375 3,349 3,195 3,282 2,975 400 13 %9,919 8,151 1,768 22 %
NETWORK VOLUME
PULSE Network$82,573 $81,749 $79,073 $79,194 $72,146 $10,427 14 %$243,395 $206,422 $36,973 18 %
Network Partners7,512 8,111 11,070 8,736 9,899 (2,387)(24 %)26,693 30,935 (4,242)(14 %)
Diners Club International 1
10,388 9,421 10,181 10,468 9,723 665 7 %29,990 28,831 1,159 4 %
Total Payment Services100,473 99,281 100,324 98,398 91,768 8,705 9 %300,078 266,188 33,890 13 %
Discover Network - Proprietary55,184 55,351 51,764 58,419 57,228 (2,044)(4)%162,299 166,153 (3,854)(2)%
Total$155,657 $154,632 $152,088 $156,817 $148,996 $6,661 4 %$462,377 $432,341 $30,036 7 %
1 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 operating 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 Common Equity represents net income available for common stockholders (annualized) divided by average total common equity for the reporting period
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
 Sep 30, 2024Jun 30, 2024Mar 31, 2024Dec 31, 2023Sep 30, 2023
GAAP Total Common Equity$16,204 $15,011 $13,664 $13,772 $13,180 
Less: Goodwill(255)(255)(255)(255)(255)
Less: Intangibles— — — — — 
Tangible Common Equity 1
$15,949 $14,756 $13,409 $13,517 $12,925 
GAAP Book Value Per Share$68.71 $63.99 $58.74 $59.29 $56.93 
Less: Goodwill(1.02)(1.02)(1.02)(1.03)(1.02)
Less: Intangibles— — — — — 
   Less: Preferred Stock(4.20)(4.21)(4.21)(4.22)(4.22)
Tangible Common Equity Per Share $63.49 $58.76 $53.51 $54.04 $51.69 
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

©2024 DISCOVER FINANCIAL SERVICES Exhibit 99.3 3Q24 Financial Results October 16, 2024

 
The following slides are part of a presentation by Discover Financial Services (the "Company") in connection with reporting quarterly financial results and are intended to be viewed as part of that presentation. No representation is made that the information in these slides is complete. For additional financial, statistical, and business related information, as well as information regarding business and segment trends, see the earnings release and financial supplement included as exhibits to the Company’s Current Report on Form 8-K filed today and available on the Company’s website (www.discover.com) and the SEC’s website (www.sec.gov). Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as "believe," "expect," "anticipate," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely," "forecast," and similar expressions. Such statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release and there is no undertaking to update or revise them as more information becomes available. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance and regulatory and legal actions, including, but not limited to, those related to accounting guidance, tax reform, financial regulatory reform, consumer financial services practices, anti-corruption and funding, capital and liquidity; risks related to the proposed merger with Capital One Financial Corporation (“Capital One”) including, among others, (i) failure to complete the merger with Capital One or unexpected delays related to the merger or the inability of the parties to obtain regulatory approvals or satisfy other closing conditions required to complete the merger, (ii) regulatory approvals resulting in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction, (iii) diversion of management’s attention from ongoing business operations and opportunities, (iv) cost and revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (v) the integration of each party’s management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (vi) deposit attrition, customer or employee loss and/or revenue loss as a result of the announcement of the proposed merger, (vii) expenses related to the proposed merger being greater than expected, and (viii) shareholder litigation that could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations; the actions and initiatives of current and potential competitors; our ability to manage our expenses; our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants and merchants; our ability to sustain our card and personal loan growth; our ability to timely complete the sale of the our private student loan portfolio, including due to the failure of a closing condition in the agreement to be satisfied, or any unexpected delay in closing the transaction or the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement; our ability to increase or sustain Discover card usage or attract new customers; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; our ability to manage our credit risk, market risk, liquidity risk, operational risk, compliance and legal risk and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in our investment portfolio; limits on our ability to pay dividends and repurchase our common stock; limits on our ability to receive payments from our subsidiaries; fraudulent activities or material security breaches of our or others' key systems; our ability to remain organizationally effective; our ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events, climate change, pandemics and unforeseen or catastrophic events; our ability to introduce new products and services; our ability to manage our relationships with third-party vendors, as well as those with which we have no direct relationship such as our employees' internet service providers; our ability to maintain current technology and integrate new and acquired systems and technology; our ability to collect amounts for disputed transactions from merchants and merchant acquirers; our ability to attract and retain employees; our ability to protect our reputation and our intellectual property; our ability to comply with regulatory requirements; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. We routinely evaluate and may pursue acquisitions of, investments in or divestitures from businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or our debt or equity securities. Additional factors that could cause the company's results to differ materially from those described in the forward-looking statements can be found under “Risk Factors,” “Business - Competition,” “Business - Supervision and Regulation” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's Annual Report on Form 10-K for the year ended December 31, 2023, which is filed with the SEC and available at the SEC's internet site (http://www.sec.gov) and subsequent reports on Forms 8-K and 10-Q, including the company's Current Report on Form 8-K filed today with the SEC. Notice 2

 
Important Information About the Transaction and Where to Find It Capital One has filed a registration statement on Form S-4 with the SEC to register the shares of Capital One's common stock that will be issued to Discover Financial Services ("Discover") stockholders in connection with the proposed transaction. The registration statement includes a preliminary joint proxy statement of Capital One and Discover that also constitutes a preliminary prospectus of Capital One. The definitive joint proxy statement/prospectus will be sent to the stockholders of each of Discover and Capital One in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS WHEN THEY BECOME AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC by Discover or Capital One through the website maintained by the SEC at http://www.sec.gov or by contacting the investor relations department of Discover or Capital One at: Discover Financial Services Capital One Financial Corporation 2500 Lake Cook Road 1680 Capital One Drive Riverwoods, IL 60015 McLean, VA 22102 Attention: Investor Relations Attention: Investor Relations investorrelations@discover.com investorrelations@capitalone.com (224) 405-4555 (703) 720-1000 Before making any voting or investment decision, investors and security holders of Discover and Capital One are urged to read carefully the entire registration statement and joint proxy statement/prospectus, including any amendments thereto, because will contain important information about the proposed transaction. Free copies of these documents may be obtained as described above. Participants in Solicitation Discover, Capital One and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of each of Discover and Capital One in connection with the transaction. Information regarding the directors and executive officers of Discover and Capital One and other persons who may be deemed participants in the solicitation of the stockholders of Discover or of Capital One in connection with the transaction will be included in the joint proxy statement/prospectus related to the proposed transaction, which will be filed by Capital One with the SEC. Information about the directors and executive officers of Discover and their ownership of Discover common stock can also be found in Discover’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 15, 2024, as supplemented by Discover’s proxy statement supplement, as filed with the SEC on April 2, 2024, and other documents subsequently filed by Discover with the SEC. Information about the directors and executive officers of Capital One and their ownership of Capital One common stock can also be found in Capital One’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 20, 2024, and other documents subsequently filed by Capital One with the SEC. Additional information regarding the interests of such participants will be included in the joint proxy statement/prospectus and other relevant documents regarding the proposed transaction filed with the SEC when they become available. Notice 3

 
3Q24 Highlights 4 • Strong financial performance ◦ 3Q24 net income of $965MM; diluted EPS of $3.69; and return on equity of 23% ◦ Net interest income growth from higher loans and margin expansion ◦ Credit performing in-line with expectations • Simplifying our business by exiting student loans; completed the first of four planned loan sale closings • Focused on compliance, customers, community and our employees ◦ Progressed risk management and compliance capabilities ◦ Recognized for outstanding customer satisfaction ◦ Invested in the Columbus Ohio region by opening a new customer care and community center ◦ Recognized as a great place to work • Merger with Capital One progressing ◦ Merger applications are under review by the regulators ◦ Integration planning activities are advancing as anticipated Note(s) Merger with Capital One remains subject to numerous conditions including shareholder and regulatory approvals

 
• Revenue net of interest expense was $4.5Bn, up 10%, due to higher net interest income, and higher non-interest income reflecting a gain from the private student loan sale • Provision for credit losses decreased by $229MM reflecting a $570MM lower reserve build, partially offset by a $372MM increase in net charge-offs • Expenses increased $238MM, or 16%, from higher employee compensation, higher information processing, and higher professional fees 3Q24 Summary Financial Results Key Points 5 $683 $333 $76 $229 $(238) $(118) $965 3Q23 Net Income Net Interest Income Non- Interest Income Provision for Credit Losses Operating Expense Income Tax/ Capital Action 3Q24 Net Income Year-Over-Year Net Income & EPS ($MM, except EPS)(1) 3Q24 $ 3,655 $ 798 $ 1,473 $ 1,692 $ 323 3Q23 $ 3,322 $ 722 $ 1,702 $ 1,454 $ 205 B/(W) $ 333 $ 76 $ 229 $ (238) $ (118) EPS $ 2.59 $ 1.02 $ 0.23 $ 0.70 $ (0.73) $ (0.12) $ 3.69 Note(s) 1. Private student loans were classified as held-for-sale effective June 30, 2024. The charge-offs related to private student loans are through June 30, 2024, the date the loans were transferred to held-for-sale classification

 
• NIM on loans was 11.38%, up 21bps QOQ primarily driven by favorable loan yields • Total loan yield was up 21bps QOQ due to a lower card promotional balance mix • The net funding rate was down 1bp QOQ driven by lower average funding costs • Average consumer deposits were up 1% QOQ and up 11% YOY 3Q24 Net Interest Income Drivers 6 Key Points Note(s) 1. Includes checking and reflects both interest-bearing and non-interest bearing consumer deposits 2. Net Funding Rate reflects interest expense, net of interest income from other interest-earning assets, as a percentage of average receivables 10.95% 10.98% 11.03% 11.17% 11.38% 3Q23 4Q23 1Q24 2Q24 3Q24 NIM on Loans Total Loan Growth ($Bn) Funding Mix (%), Average Balance $97.4 $102.3 $99.5 $100.1 $100.5 $10.4 $10.4 $10.5 $10.1 $8.5 $9.6 $9.9 $10.1 $10.3 $10.4$5.3 $5.9 $6.5 $7.1 $7.6 Card +3% YOY Student (19)% YOY Personal +9% YOY Other + 44% YOY 3Q23 4Q23 1Q24 2Q24 3Q24 66% 65% 66% 68% 69% 18% 18% 18% 17% 16% 9% 9% 9% 8% 8% 7% 8% 7% 7% 7% DTC and Affinity Deposits Brokered & Other Deposits Securitized Borrowing Unsecured Borrowing 3Q23 4Q23 1Q24 2Q24 3Q24 Total Loan Yield 14.44% 14.61% 14.71% 14.85% 15.06% Net Funding Rate (2) 3.49% 3.63% 3.68% 3.68% 3.67% (1)

 
Note(s) 1. Rewards rate represents credit card rewards cost divided by Discover Card sales volume • Net interest income increased due to higher loan receivables and margin expansion • Net discount / interchange revenue was down 4% from lower spend • Loan fee income was up from higher instances • Other income increased reflecting a $70MM gain from the loan sale • The rewards rate was up 2bps YOY driven by a change in the 5% category 3Q24 Grocery, Walmart 3Q23 Gas, e-Wallet 3Q24 Revenue 7 Key Points Inc / (Dec) ($MM) 3Q24 3Q23 $ % Net Interest Income 3,655 3,322 333 10% Net Discount/Interchange Revenue 363 377 (14) (4%) Protection Products Revenue 42 42 — —% Loan Fee Income 214 194 20 10% Transaction Processing Revenue 84 82 2 2% Other Income 95 27 68 NM Total Non-Interest Income 798 722 76 11% Revenue Net of Interest Expense $4,453 $4,044 $409 10% Change 3Q24 3Q23 QOQ YOY Discover Card Sales Volume ($MM) $53,380 $54,952 — % (3%) Rewards Rate(1) 1.44 % 1.42 % 12 bps 2 bps $4,044 $333 $(14) $20 $2 $68 $4,453 3Q23 Rev Net of Int Exp Net Interest Income Net Discount/ Interchange Loan Fee Income Transaction Processing Other Income 3Q24 Rev Net of Int Exp Year-Over-Year Revenue ($MM) (1)

 
Note(s) 1. Private student loans were classified as held-for-sale effective June 30, 2024. After June 30, 2024, the date the loans were transferred to held-for-sale classification, private student loan net charge-offs are recognized as Other Expense 2. Defined as reported total operating expense divided by revenue net of interest expense • Employee compensation increased due to higher wage rates and employee retention awards • Information processing increased driven by technology investments and accelerated student loan software depreciation • Professional fees were up from higher recovery fees and merger & integration planning costs • Other expense was up due to private student loan net charge- off expense 3Q24 Operating Expense Inc / (Dec) ($MM) 3Q24 3Q23 $ % Employee Compensation and Benefits $703 $575 128 22% Marketing and Business Development 263 283 (20) (7%) Information Processing & Communications 197 149 48 32% Professional Fees 323 281 42 15% Premises and Equipment 25 22 3 14% Other Expense 181 144 37 26% Total Operating Expense $1,692 $1,454 $238 16% Operating Efficiency(2) 38.0 % 36.0 % 200 bps 8 Key Points Year-Over-Year Expense ($MM) (1) $1,454 $128 $(20) $48 $42 $40 $1,692 3Q23 Expense Employee Comp Marketing Info Processing Professional Fees All Other 3Q24 Expense

 
• Credit card net charge-offs improved; 30-day delinquencies in-line with seasonal trends • Personal loan net charge-off and delinquency rates increased modestly reflecting seasoning of recent growth in loan balances • Total Loan net-charge-offs in line with expectations 3Q24 Key Credit Metrics 9 Key PointsChange 3Q23 2Q24 3Q24 QOQ YOY Credit Card Loans Ending Loan Balance ($MM) $97,389 $100,066 $100,489 —% 3% Net Principal Charge-off Rate 4.03% 5.55% 5.28% (27) bps 125 bps 30-Day Delinquency Rate 3.41% 3.69% 3.84% 15 bps 43 bps Personal Loans Ending Loan Balance ($MM) $9,559 $10,321 $10,438 1% 9% Net Principal Charge-off Rate 2.63% 3.98% 4.01% 3 bps 138 bps 30-Day Delinquency Rate 1.24% 1.54% 1.66% 12 bps 42 bps Total Loans Ending Loan Balance ($MM)(1) $122,676 $127,649 $126,993 (1)% 4% Net Principal Charge-off Rate(2) 3.52% 4.83% 4.86% 3 bps 134 bps 30-Day Delinquency Rate(2) 3.06% 3.33% 3.46% 13 bps 40 bps Note(s) 1. Total Loans includes private student loans, home equity and other loans 2. Excludes loans classified as held-for-sale as of June 30, 2024

 
10 ($MM) Credit Card Personal Loans Other Total Allowance Balance at June 30, 2024 $7,591 $793 $97 $8,481 Reserve rate 7.59% 7.68% N/A 7.22% Provision for credit losses 1,327 111 35 1,473 Net Charge-offs 1,332 106 4 1,442 Balance at September 30, 2024 $7,586 $798 $128 $8,512 Reserve rate 7.55% 7.65% N/A 7.18% 7.06% 7.23% 7.32% 7.22% 7.18% 3Q23 4Q23 1Q24 2Q24 3Q24 Allowance for Credit Losses Note(s) 1. Private student loans were classified as held-for-sale effective June 30, 2024 2. Includes the adjustment to eliminate the allowance for credit losses upon classifying the private student loan portfolio as held-for-sale as of June 30,2024 Total Loan Reserve Rate (1)(2)

 
$1.8 $0.3 $2.3 $2.4 $1.9 $— $0.44 $0.44 $0.50 $0.60 $0.70 $0.70 2019 2020 2021 2022 2023 YTD 2024 11 Capital Return(3)Capital Position Common Equity Tier 1 (CET1) Capital Ratio (%) Note(s) 1. Capital for years ended 2022 and prior have been restated for comparative purposes and considers the impacts of the immaterial corrections to the financial statements; years 2019-2021 reflect a best estimate 2. Based on the final rule published September 30, 2020. Capital ratios reflect the impact of CECL reserves on regulatory capital with transition impacts 3. Quarterly dividend per share figures for 2019 through 2023 represent year-end levels 11.0% 12.9% 14.5% 13.1% 11.3% 12.7% 2019 2020 2021 2022 2023 3Q24 • The Common Equity Tier 1 ratio of 12.7% increased due to core earnings and the student loan sale • Declared quarterly cash dividend of $0.70 per share of common stock • Share repurchases have been suspended through merger closing and common dividends will not exceed $0.70 per share Key Points Capital Position & Capital Return Trends Share Repurchases ($Bn) Quarterly Dividend per Share (1) (2) Suspended through closing

 
12 2024 Perspective Previous(1)(2) (Includes Private Student Loan Sale) Current(1)(2) (Includes Private Student Loan Sale) Loan Growth • Down low single digits • Down low to mid single digits Net Interest Margin • Expect NIM of 11.1%-11.4% • Expect NIM of 11.2-11.4% Operating Expense • Anticipate total operating expense to be up mid-single digits excluding card misclassification and merger related costs • No change Net Charge-offs • Expect full year average net charge-off rate of 4.9-5.2% • Expect full year average net charge-off rate of 4.9-5.0% Capital Management • Share repurchases suspended through merger closing; dividend not to exceed $0.70 per share • No change Note(s) 1. Private student loans were classified as held-for-sale effective June 30, 2024. The charge-offs related to private student loans are through June 30, 2024, the date the loans were transferred to held-for-sale classification 2. The private student loan sale is subject to various closing conditions

 
Appendix

 
3Q24 Asset Yield & Liabilities Rate 3Q24 2Q24 3Q23 Interest-Earning Assets ($Bn) Avg Bal Yield Avg Bal Yield Avg Bal Yield Total Loans $127.7 15.06 % $127.0 14.85 % $120.4 14.44 % Other Interest-Earning Assets 24.7 4.49 % 24.8 4.60 % 21.4 4.26 % Total Interest-Earning Assets $152.4 13.35 % $151.8 13.18 % $141.8 12.90 % 3Q24 2Q24 3Q23 Interest-Bearing Liabilities ($Bn) Avg Bal Rate Avg Bal Rate Avg Bal Rate Direct to Consumer Deposits(1) (2) $87.1 4.40 % $85.9 4.39 % $78.3 4.18 % Brokered Deposits and Other 20.2 4.95 % 21.6 4.85 % 21.3 4.43 % Interest Bearing-Deposits 107.3 4.50 % 107.5 4.48 % 99.6 4.23 % Borrowings 19.4 5.02 % 20.0 5.00 % 20.0 4.49 % Total Interest-Bearing Liabilities $126.7 4.58 % $127.5 4.56 % $119.6 4.27 % 14 Note(s) 1. Includes Affinity relationships 2. Excludes checking which is a non-interest bearing deposit product

 
Total Company Loans(1) Credit Card Loans Private Student Loans(1)Personal Loans 1.80 1.71 2.13 2.72 3.22 3.52 4.11 4.92 4.83 4.86 1.63 1.94 2.30 2.48 2.57 3.06 3.45 3.38 3.33 3.46 NCO rate (%) 30+ day DQ rate (%) 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 2.01 1.92 2.37 3.10 3.68 4.03 4.68 5.66 5.55 5.28 1.76 2.11 2.53 2.76 2.86 3.41 3.87 3.83 3.69 3.84 NCO rate (%) 30+ day DQ rate (%) 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 1.21 1.14 1.49 1.94 2.28 2.63 3.39 4.02 3.98 4.01 0.63 0.69 0.80 0.91 1.00 1.24 1.45 1.46 1.54 1.66 NCO rate (%) 30+ day DQ rate (%) 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 1.08 0.91 1.33 1.04 1.25 1.32 1.52 1.58 1.85 1.66 1.94 2.05 2.02 2.13 2.62 2.62 2.59 NCO rate (%) 30+ day DQ rate (%) 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 Credit Performance Trends 15 Note(s) 1. Excludes loans classified as held-for-sale as of June 30, 2024 Transferred to HFS

 
YOY YOY YOY YOY 3Q24 Payments Volume ($Bn) Discover Network • Discover Network volume was down 4% reflecting a slowdown in Discover card sales • PULSE volume was up 14% driven by an increase in debit transaction volume • Diners Club volume was up 7% YOY reflecting strength across most regions • Network Partners was down 24% YOY from lower AribaPay volume Key Points $57.2 $58.4 $51.8 $55.4 $55.2 3Q23 4Q23 1Q24 2Q24 3Q24 $72.1 $79.2 $79.1 $81.7 $82.6 3Q23 4Q23 1Q24 2Q24 3Q24 $9.7 $10.5 $10.2 $9.4 $10.4 3Q23 4Q23 1Q24 2Q24 3Q24 $9.9 $8.7 $11.1 $8.1 $7.5 3Q23 4Q23 1Q24 2Q24 3Q24 Diners Club(1) PULSE Network Partners (4)% 14% 7% (24%) Note(s) 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 Total Network Volume up 4% YOY 16

 

 
v3.24.3
Document and Entity Information Document
Oct. 16, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Oct. 16, 2024
Entity Registrant Name DISCOVER FINANCIAL SERVICES
Entity File Number 001-33378
Entity Incorporation, State or Country Code DE
Entity Tax Identification Number 36-2517428
Entity Address, Address Line One 2500 Lake Cook Road
Entity Address, City or Town Riverwoods
Entity Address, State or Province IL
Entity Address, Postal Zip Code 60015
City Area Code 224
Local Phone Number 405-0900
Written Communications true
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol DFS
Security Exchange Name NYSE
Entity Emerging Growth Company false
Entity Central Index Key 0001393612
Amendment Flag false
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