EX-99.2 3 dfs2021930ex992.htm EX-99.2 Document

DISCOVER FINANCIAL SERVICES Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
 Quarter EndedNine Months Ended
 Sep 30,
2021		Jun 30,
2021		Mar 31,
2021		Dec 31,
2020		Sep 30,
2020		Sep 30, 2021 vs. Sep 30, 2020Sep 30,
2021		Sep 30,
2020		2021 vs. 2020
EARNINGS SUMMARY       
Interest Income$2,674 $2,589 $2,646 $2,760 $2,681 ($7)— %$7,909 $8,335 ($426)(5 %)
Interest Expense269 290 316 383 416 (147)(35 %)875 1,482 (607)(41 %)
Net Interest Income2,405 2,299 2,330 2,377 2,265 140 6 %7,034 6,853 181 3 %
Discount/Interchange Revenue988 937 766 811 752 236 31 %2,691 2,068 623 30 %
Rewards Cost689 598 525 569 514 175 34 %1,812 1,377 435 32 %
Discount and Interchange Revenue, net299 339 241 242 238 61 26 %879 691 188 27 %
Protection Products Revenue43 43 43 45 44 (1)(2 %)129 135 (6)(4 %)
Loan Fee Income121 105 107 110 100 21 21 %333 304 29 10 %
Transaction Processing Revenue58 58 51 52 50 8 16 %167 143 24 17 %
Unrealized Gains/ (Losses) on Equity Investments(167)729 — — — (167)NM562 — 562 NM
Realized Gains/ (Losses) on Equity Investments— — — — — — NM— 79 (79)(100 %)
Other Income18 6 23 (2)17 1 6 %47 59 (12)(20 %)
Total Non-Interest Income372 1,280 465 447 449 (77)(17 %)2,117 1,411 706 50 %
Revenue Net of Interest Expense2,777 3,579 2,795 2,824 2,714 63 2 %9,151 8,264 887 11 %
Provision for Credit Losses185 135 (365)531 750 (565)(75 %)(45)4,603 (4,648)(101 %)
Employee Compensation and Benefits483 498 506 504 471 12 3 %1,487 1,390 97 7 %
Marketing and Business Development210 175 154 159 140 70 50 %539 500 39 8 %
Information Processing & Communications121 145 109 198 111 10 9 %375 342 33 10 %
Professional Fees198 187 182 192 151 47 31 %567 525 42 8 %
Premises and Equipment23 22 24 30 26 (3)(12 %)69 83 (14)(17 %)
Other Expense155 195 106 195 106 49 46 %456 401 55 14 %
Total Operating Expense1,190 1,222 1,081 1,278 1,005 185 18 %3,493 3,241 252 8 %
Income/ (Loss) Before Income Taxes1,402 2,222 2,079 1,015 959 443 46 %5,703 420 5,283 NM
Tax Expense311 524 486 216 188 123 65 %1,321 78 1,243 NM
Net Income/ (Loss)$1,091 $1,698 $1,593 $799 $771 $320 42 %$4,382 $342 $4,040 NM
Net Income/ (Loss) Allocated to Common Stockholders$1,055 $1,688 $1,546 $794 $751 $304 40 %$4,289 $309 $3,980 NM
Effective Tax Rate22.2 %23.6 %23.4 %21.3 %19.6 %23.2 %18.6 %
Net Interest Margin10.80 %10.68 %10.75 %10.63 %10.19 %61 bps10.74 %10.07 %67 bps
Operating Efficiency42.9 %34.1 %38.7 %45.2 %37.0 %590 bps38.2 %39.2 %(100)bps
ROE33 %54 %56 %30 %31 %47 %5 %
ROCE35 %59 %59 %33 %34 %50 %4 %
Capital Returned to Common Stockholders$940 $649 $232 $119 $117 $823 NM$1,821 $721 $1,100 153 %
Payout Ratio89 %38 %15 %15 %16 %42 %234 %
Ending Common Shares Outstanding295 301 306 307 306 (11)(4 %)295 306 (11)(4 %)
Weighted Average Common Shares Outstanding298 304 307 307 306 (8)(3 %)303 307 (4)(1 %)
Weighted Average Common Shares Outstanding (fully diluted)298 304 307 307 306 (8)(3 %)303 307 (4)(1 %)
PER SHARE STATISTICS       
Basic EPS$3.54 $5.56 $5.04 $2.59 $2.45 $1.09 44 %$14.17 $1.00 $13.17 NM
Diluted EPS$3.54 $5.55 $5.04 $2.59 $2.45 $1.09 44 %$14.16 $1.00 $13.16 NM
Common Dividends Declared Per Share$0.50 $0.44 $0.44 $0.44 $0.44 $0.06 14 %$1.38 $1.32 $0.06 5 %
Common Stock Price (period end)$122.85 $118.29 $94.99 $90.53 $57.78 $65.07 113 %$122.85 $57.78 $65.07 113 %
Book Value per share $45.00 $43.72 $39.72 $35.50 $33.45 $11.55 35 %$45.00 $33.45 $11.55 35 %
  Note: See Glossary of Financial Terms for definitions of financial terms


DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
 Quarter Ended  
 Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020Sep 30, 2021 vs. Sep 30, 2020
BALANCE SHEET SUMMARY       
Assets       
Cash and Investment Securities 1
$20,762 $25,209 $30,106 $25,703 $38,991 ($18,229)(47 %)
Total Loan Receivables89,542 87,674 86,347 90,449 88,660 882 1 %
Allowance for Credit Losses(6,861)(7,026)(7,347)(8,226)(8,226)1,365 17 %
Net Loan Receivables82,681 80,648 79,000 82,223 80,434 2,247 3 %
Premises and Equipment, net987 986 1,021 1,027 1,121 (134)(12 %)
Goodwill and Intangible Assets, net256 256 350 350 350 (94)(27 %)
Other Assets3,858 3,886 3,394 3,586 3,453 405 12 %
Total Assets$108,544 $110,985 $113,871 $112,889 $124,349 ($15,805)(13 %)
Liabilities & Stockholders' Equity       
           Certificates of Deposits 2
$14,931$15,732 $16,681 $18,526 $19,661 ($4,730)(24 %)
           Savings, Money Market, and Other Deposits 2, 3
47,035 46,823 47,420 44,971 43,282 3,753 9 %
Total Direct to Consumer Deposits 2, 3
61,966 62,555 64,101 63,497 62,943 (977)(2 %)
Brokered Deposits and Other Deposits10,596 11,921 12,644 13,407 15,072 (4,476)(30 %)
Deposits72,562 74,476 76,745 76,904 78,015 (5,453)(7 %)
   Short-term Borrowings 4
— — — — 10,700 (10,700)(100)%
   Securitized Borrowings9,064 9,145 10,804 10,840 11,425 (2,361)(21 %)
   Other Borrowings9,452 10,205 10,207 10,401 10,416 (964)(9 %)
Borrowings18,516 19,350 21,011 21,241 32,541 (14,025)(43 %)
Accrued Expenses and Other Liabilities4,203 3,988 3,961 3,860 3,541 662 19 %
Total Liabilities95,281 97,814 101,717 102,005 114,097 (18,816)(16 %)
Total Equity13,263 13,171 12,154 10,884 10,252 3,011 29 %
Total Liabilities and Stockholders' Equity$108,544 $110,985 $113,871 $112,889 $124,349 ($15,805)(13 %)
LIQUIDITY       
Liquidity Portfolio 5
$19,946 $23,201 $28,196 $24,411 $25,759 ($5,813)(23 %)
Private Asset-backed Securitizations4,000 4,000 6,000 6,000 6,000 (2,000)(33 %)
Federal Home Loan Bank Borrowing Capacity1,341 1,209 1,127 — — 1,341 NM
Federal Reserve Discount Window  6
32,719 32,328 32,457 32,930 32,635 84 — %
Undrawn Credit Facilities 6
38,060 37,537 39,584 38,930 38,635 (575)(1 %)
Total Liquidity$58,006$60,738$67,780$63,341$64,394-$6,388(10 %)
1 Numbers for the quarter ending September 30, 2020 includes $10.7 billion of agency pass-through residential mortgage-backed securities (RMBS) received in connection with a securities lending transaction entered into in September 2020
2 Includes Affinity relationships
3 Savings, Money Market, and Other Deposits includes checking and reflects both interest-bearing and non-interest bearing direct to consumer deposits
4 Represents the obligation to return the agency pass-through RMBS received from the counterparty of the securities lending transaction. The Company returned the RMBS when the securities lending transaction expired in November 2020
5 Excludes U.S. Treasury securities that have been pledged as collateral in the securities lending transaction
6 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, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020Sep 30, 2021 vs. Sep 30, 2020
BALANCE SHEET STATISTICS       
Total Common Equity$12,207 $12,115 $11,098 $9,828 $9,196 $3,011 33 %
Total Common Equity/Total Assets11.2 %10.9 %9.7 %8.7 %7.4 %
Total Common Equity/Net Loans14.8 %15.0 %14.0 %12.0 %11.4 %
Tangible Assets$108,288 $110,729 $113,521 $112,539 $123,999 ($15,711)(13 %)
Tangible Common Equity 1
$11,951 $11,859 $10,748 $9,478 $8,846 $3,105 35 %
Tangible Common Equity/Tangible Assets 1
11.0 %10.7 %9.5 %8.4 %7.1 %
Tangible Common Equity/Net Loans 1
14.5 %14.7 %13.6 %11.5 %11.0 %
Tangible Common Equity per share  1
$40.55 $39.37 $35.12 $30.91 $28.86 $11.69 41 %
Basel III
Quarter Ended
REGULATORY CAPITAL RATIOS 2
Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020  
Total Risk Based Capital Ratio18.5 %18.8 %18.0 %16.1 %15.2 %  
Tier 1 Risk Based Capital Ratio16.7 %16.9 %16.1 %14.3 %13.3 %  
Tier 1 Leverage Ratio 13.8 %13.3 %12.2 %10.9 %10.6 %  
Common Equity Tier 1 Capital Ratio 15.5 %15.7 %14.9 %13.1 %12.2 %
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 delay in the recognition of the impact of CECL reserves on regulatory capital for two years in accordance with the final rule
  Note: See Glossary of Financial Terms for definitions of financial terms



DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
 Quarter Ended  
 Sep 30, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020Sep 30, 2021 vs. Sep 30, 2020
AVERAGE BALANCES       
Assets       
Cash and Investment Securities$20,623 $26,784 $27,927 $30,245 $27,841 ($7,218)(26 %)
Restricted Cash571 897 136 121 775 (204)(26 %)
Credit Card Loans69,416 67,420 68,723 69,997 69,643 (227)— %
Private Student Loans9,932 9,993 10,211 9,952 9,790 142 1 %
Personal Loans6,900 6,884 7,075 7,197 7,255 (355)(5 %)
Other Loans2,108 1,999 1,896 1,814 1,734 374 22 %
Total Loans88,356 86,296 87,905 88,960 88,422 (66)— %
Total Interest Earning Assets109,550 113,977 115,968 119,326 117,038 (7,488)(6 %)
Allowance for Credit Losses(7,020)(7,342)(8,214)(8,222)(8,183)1,163 (14 %)
Other Assets6,430 5,971 6,165 6,050 5,981 449 8 %
Total Assets$108,960 $112,606 $113,919 $117,154 $114,836 ($5,876)(5 %)
Liabilities and Stockholders' Equity       
                       Certificates of Deposits 1
$15,373 $16,109 $17,682 $19,032 $20,295 ($4,922)(24 %)
                       Savings, Money Market, and Other Deposits 1, 2
45,907 46,020 45,020 43,489 41,256 4,651 11 %
Interest-bearing Direct to Consumer Deposits 1, 2
61,280 62,129 62,702 62,521 61,551 (271)— %
Brokered Deposits and Other Deposits10,691 11,915 12,621 13,711 15,271 (4,580)(30 %)
Total Interest-bearing Deposits71,971 74,044 75,323 76,232 76,822 (4,851)(6 %)
Short-term Borrowings6 — 1 3,722 350 (344)NM
Securitized Borrowings8,292 10,305 10,826 10,945 12,115 (3,823)(32 %)
Other Long-term Borrowings9,550 10,211 10,360 10,409 10,426 (876)(8 %)
Total Interest-bearing Liabilities89,819 94,560 96,510 101,308 99,713 (9,894)(10 %)
Other Liabilities & Stockholders' Equity19,141 18,046 17,409 15,846 15,123 4,018 27 %
Total Liabilities and Stockholders' Equity$108,960 $112,606 $113,919 $117,154 $114,836 ($5,876)(5 %)
AVERAGE YIELD       
Assets       
Cash and Investment Securities0.95 %0.78 %0.79 %1.14 %0.90 %5 bps
Restricted Cash0.03 %0.02 %0.03 %0.05 %0.09 %(6)bps
Credit Card Loans12.53 %12.52 %12.71 %12.65 %12.40 %13 bps
Private Student Loans7.36 %7.41 %7.37 %7.40 %7.40 %(4)bps
Personal Loans12.61 %12.76 %12.83 %13.01 %13.03 %(42)bps
Other Loans5.41 %5.59 %5.94 %6.02 %6.25 %(84)bps
Total Loans11.79 %11.79 %11.96 %11.96 %11.78 %1 bps
Total Interest Earning Assets9.68 %9.11 %9.25 %9.20 %9.11 %57 bps
AVERAGE RATES
Liabilities and Stockholders' Equity       
                       Certificates of Deposits 1
1.19 %1.32 %1.57 %1.80 %2.02 %(83)bps
                       Savings, Money Market, and Other Deposits 1, 2
0.42 %0.42 %0.45 %0.57 %0.86 %(44)bps
Interest-bearing Direct to Consumer Deposits 1, 2
0.61 %0.65 %0.77 %0.94 %1.25 %(64)bps
Brokered Deposits and Other Deposits2.28 %2.35 %2.37 %2.38 %2.47 %(19)bps
Total Interest-bearing Deposits0.86 %0.92 %1.04 %1.20 %1.49 %(63)bps
Short-term Borrowings0.24 %0.11 %0.15 %3.10 %3.10 %(286)bps
Securitized Borrowings1.10 %1.01 %1.07 %1.06 %1.04 %6 bps
Other Long-term Borrowings3.78 %3.66 %3.72 %3.60 %3.60 %18 bps
Total Interest-bearing Liabilities1.19 %1.23 %1.33 %1.50 %1.66 %(47)bps
Net Interest Margin10.80 %10.68 %10.75 %10.63 %10.19 %61 bps
Net Yield on Interest-earning Assets8.71 %8.09 %8.15 %7.93 %7.70 %101 bps
1 Includes Affinity relationships
2 Excludes checking which is a non-interest bearing deposit product. All non-interest bearing deposits, including checking, are reflected in Other Liabilities & Stockholders’ Equity on the average balance sheet
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,
2021		Jun 30,
2021		Mar 31,
2021		Dec 31,
2020		Sep 30,
2020		Sep 30, 2021 vs. Sep 30, 2020Sep 30,
2021		Sep 30,
2020		2021 vs. 2020
TOTAL LOAN RECEIVABLES       
Ending Loans 1
$89,542 $87,674 $86,347 $90,449 $88,660 $882 1 %$89,542 $88,660 $882 1 %
Average Loans 1
$88,356 $86,296 $87,905 $88,960 $88,422 ($66)— %$87,521 $90,889 ($3,368)(4 %)
Interest Yield11.79 %11.79 %11.96 %11.96 %11.78 %1 bps11.84 %11.95 %(11)bps
Gross Principal Charge-off Rate 2.50 %3.20 %3.45 %3.17 %3.78 %(128)bps3.04 %4.07 %(103)bps
Net Principal Charge-off Rate 1.46 %2.12 %2.48 %2.38 %3.00 %(154)bps2.01 %3.24 %(123)bps
Delinquency Rate (30 or more days)1.40 %1.34 %1.67 %1.89 %1.77 %(37)bps
Delinquency Rate (90 or more days)0.58 %0.63 %0.85 %0.88 %0.80 %(22)bps
Gross Principal Charge-off Dollars $556 $688 $747 $709 $842 ($286)(34 %)$1,991 $2,767 ($776)(28 %)
Net Principal Charge-off Dollars$325 $456 $537 $531 $668 ($343)(51 %)$1,318 $2,204 ($886)(40 %)
Net Interest and Fee Charge-off Dollars$72 $101 $118 $113 $141 ($69)(49 %)$291 $488 ($197)(40 %)
Loans Delinquent 30 or more days$1,258 $1,172 $1,438 $1,705 $1,567 ($309)(20 %)
Loans Delinquent 90 or more days$522 $550 $732 $795 $708 ($186)(26 %)
Allowance for Credit Losses (period end)$6,861 $7,026 $7,347 $8,226 $8,226 ($1,365)(17 %)$6,861 $8,226 ($1,365)(17 %)
Reserve Change Build/ (Release) 2, 3
($165)($321)($879)$— $42 ($207)($1,365)$2,382 ($3,747)
Reserve Rate7.66 %8.01 %8.51 %9.09 %9.28 %(162)bps7.66 %9.28 %(162)bps
CREDIT CARD LOANS       
Ending Loans$70,320 $68,886 $67,304 $71,472 $69,656 $664 1 %$70,320 $69,656 $664 1 %
Average Loans$69,416 $67,420 $68,723 $69,997 $69,643 ($227)— %$68,522 $71,934 ($3,412)(5 %)
Interest Yield12.53 %12.52 %12.71 %12.65 %12.40 %13 bps12.59 %12.55 %4 bps
Gross Principal Charge-off Rate2.83 %3.69 %3.91 %3.53 %4.33 %(150)bps3.47 %4.60 %(113)bps
Net Principal Charge-off Rate1.65 %2.45 %2.80 %2.63 %3.45 %(180)bps2.29 %3.67 %(138)bps
Delinquency Rate (30 or more days) 1.48 %1.43 %1.85 %2.07 %1.91 %(43)bps1.48 %1.91 %(43)bps
Delinquency Rate (90 or more days) 0.66 %0.73 %1.01 %1.03 %0.93 %(27)bps0.66 %0.93 %(27)bps
Gross Principal Charge-off Dollars$495 $620 $663 $621 $759 ($264)(35 %)$1,778 $2,480 ($702)(28 %)
Net Principal Charge-off Dollars$289 $412 $474 $463 $604 ($315)(52 %)$1,175 $1,975 ($800)(41 %)
Loans Delinquent 30 or more days$1,040 $983 $1,245 $1,478 $1,328 ($288)(22 %)$1,040 $1,328 ($288)(22 %)
Loans Delinquent 90 or more days$467 $504 $680 $739 $650 ($183)(28 %)$467 $650 ($183)(28 %)
Allowance for Credit Losses (period end)$5,298 $5,409 $5,640 $6,491 $6,491 ($1,193)(18 %)$5,298 $6,491 ($1,193)(18 %)
Reserve Change Build/ (Release) 2
($111)($231)($851)$— $— ($111)($1,193)$1,941 ($3,134)
Reserve Rate7.54 %7.85 %8.38 %9.08 %9.32 %(178)bps7.54 %9.32 %(178)bps
Total Discover Card Volume$50,389 $48,049 $40,334 $43,581 $39,783 $10,606 27 %$138,772 $110,362 $28,410 26 %
Discover Card Sales Volume$47,613 $45,460 $37,744 $40,957 $37,134 $10,479 28 %$130,817 $101,843 $28,974 28 %
Rewards Rate1.44 %1.31 %1.38 %1.38 %1.38 %6 bps1.38 %1.34 %4 bps
1 Total Loans includes Home Equity and other loans
2 Excludes January 1, 2020 CECL day one impact
3 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, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020Sep 30, 2021 vs. Sep 30, 2020Sep 30, 2021Sep 30, 20202021 vs. 2020
PRIVATE STUDENT LOANS       
Organic Student Loans$9,391 $9,021 $9,254 $8,989 $8,989 $402 4 %$9,391 $8,989 $402 4 %
Purchased Student Loans793 843 899 965 1,027 (234)(23 %)793 1,027 (234)(23 %)
Total Private Student Loans$10,184 $9,864 $10,153 $9,954 $10,016 $168 2 %$10,184 $10,016 $168 2 %
Interest Yield7.36 %7.41 %7.37 %7.40 %7.40 %(4)bps7.38 %7.70 %(32)bps
Net Principal Charge-off Rate 1
0.68 %0.53 %0.53 %0.71 %0.58 %10 bps0.58 %0.63 %(5)bps
Delinquency Rate (30 or more days)1.55 %1.34 %1.20 %1.39 %1.49 %6 bps1.55 %1.49 %6 bps
Reserve Rate8.41 %8.39 %8.49 %8.43 %8.38 %3 bps8.41 %8.38 %3 bps
PERSONAL LOANS       
Ending Loans$6,890 $6,865 $6,961 $7,177 $7,211 ($321)(4 %)$6,890 $7,211 ($321)(4 %)
Interest Yield12.61 %12.76 %12.83 %13.01 %13.03 %(42)bps12.73 %12.90 %(17)bps
Net Principal Charge-off Rate1.11 %1.80 %2.80 %2.79 %2.69 %(158)bps1.91 %3.24 %(133)bps
Delinquency Rate (30 or more days)0.71 %0.69 %0.84 %1.08 %1.10 %(39)bps0.71 %1.10 %(39)bps
Reserve Rate9.61 %10.85 %11.55 %11.94 %11.89 %(228)bps9.61 %11.89 %(228)bps
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, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020Sep 30, 2021 vs. Sep 30, 2020Sep 30, 2021Sep 30, 20202021 vs. 2020
DIGITAL BANKING       
Interest Income$2,674 $2,589 $2,646 $2,760 $2,681 ($7)— %$7,909 $8,335 ($426)(5 %)
Interest Expense269 290 316 383 416 (147)(35 %)875 1,482 (607)(41 %)
Net Interest Income2,405 2,299 2,330 2,377 2,265 140 6 %7,034 6,853 181 3 %
Non-Interest Income447 458 379 368 371 76 20 %1,284 1,091 193 18 %
Revenue Net of Interest Expense2,852 2,757 2,709 2,745 2,636 216 8 %8,318 7,944 374 5 %
Provision for Credit Losses185 135 (365)531 750 (565)(75 %)(45)4,603 (4,648)(101 %)
Total Operating Expense1,151 1,092 1,047 1,223 969 182 19 %3,290 3,069 221 7 %
Income/ (Loss) Before Income Taxes$1,516 $1,530 $2,027 $991 $917 $599 65 %$5,073 $272 $4,801 NM
Net Interest Margin10.80 %10.68 %10.75 %10.63 %10.19 %61 bps10.74 %10.07 %67 bps
Pretax Return on Loan Receivables6.81 %7.11 %9.36 %4.44 %4.13 %268 bps7.75 %0.4 %735 bps
Allowance for Credit Losses (period end)$6,861 $7,026 $7,347 $8,226 $8,226 ($1,365)(17 %)$6,861 $8,226 ($1,365)(17 %)
Reserve Change Build/ (Release) 1
($165)($321)($879)$0 $42 ($207)($1,365)$2,382 ($3,747)
PAYMENT SERVICES       
Interest Income$— $— $— $— $— $— NM$— $— $— NM
Interest Expense— — — — — — NM— — — NM
Net Interest Income— — — — — — NM— — — NM
Non-Interest Income/ (Loss)(75)822 86 79 78 (153)(196 %)833 320 513 160 %
Revenue Net of Interest Expense(75)822 86 79 78 (153)(196 %)833 320 513 160 %
Provision for Credit Losses— — — — — — NM— — — NM
Total Operating Expense39 130 34 55 36 3 8 %203 172 31 18 %
Income/ (Loss) Before Income Taxes($114)$692 $52 $24 $42 ($156)NM$630 $148 $482 NM
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network868 799 678 735 679 189 28 %2,345 1,889 456 24 %
PULSE Network1,415 1,399 1,310 1,286 1,270 145 11 %4,124 3,668 456 12 %
Total2,283 2,198 1,988 2,021 1,949 334 17 %6,469 5,557 912 16 %
NETWORK VOLUME
PULSE Network$59,872 $62,855 $60,399 $55,055 $54,993 $4,879 9 %$183,126 $157,026 $26,100 17 %
Network Partners10,377 9,468 9,629 8,740 8,917 1,460 16 %29,474 23,177 6,297 27 %
Diners Club International 2
6,547 6,126 5,897 6,321 5,839 708 12 %18,570 17,915 655 4 %
Total Payment Services76,796 78,449 75,925 70,116 69,749 7,047 10 %231,170 198,118 33,052 17 %
Discover Network - Proprietary49,360 47,201 39,202 42,526 38,699 10,661 28 %135,763 106,228 29,535 28 %
Total$126,156 $125,650 $115,127 $112,642 $108,448 $17,708 16 %$366,933 $304,346 $62,587 21 %
1 Excludes January 1, 2020 CECL day one impact
2 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 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, 2021Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020
GAAP Total Common Equity$12,207 $12,115 $11,098 $9,828 $9,196 
Less: Goodwill(255)(255)(255)(255)(255)
Less: Intangibles(1)(1)(95)(95)(95)
Tangible Common Equity 1
$11,951 $11,859 $10,748 $9,478 $8,846 
GAAP Book Value Per Share$45.00 $43.72 $39.72 $35.50 $33.45 
Less: Goodwill(0.87)(0.84)(0.84)(0.84)(0.84)
Less: Intangibles0.00 0.00 (0.31)(0.31)(0.31)
   Less: Preferred Stock(3.58)(3.51)(3.45)(3.44)(3.44)
Tangible Common Equity Per Share $40.55 $39.37 $35.12 $30.91 $28.86 
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