EX-99.2 3 dfs2022630ex992.htm EX-99.2 Document

DISCOVER FINANCIAL SERVICES Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
 Quarter EndedSix Months Ended
 Jun 30,
2022		Mar 31,
2022		Dec 31,
2021		Sep 30,
2021		Jun 30,
2021		Jun 30, 2022 vs. Jun 30, 2021Jun 30,
2022		Jun 30,
2021		2022 vs. 2021
EARNINGS SUMMARY       
Interest Income$2,915 $2,736 $2,742 $2,674 $2,589 $326 13 %$5,651 $5,235 $416 8 %
Interest Expense305 257 259 269 290 15 5 %562 606 (44)(7 %)
Net Interest Income2,610 2,479 2,483 2,405 2,299 311 14 %5,089 4,629 460 10 %
Discount/Interchange Revenue1,133 955 1,042 988 937 196 21 %2,088 1,703 385 23 %
Rewards Cost743 635 697 689 598 145 24 %1,378 1,123 255 23 %
Discount and Interchange Revenue, net390 320 345 299 339 51 15 %710 580 130 22 %
Protection Products Revenue42 44 36 43 43 (1)(2 %)86 86 — — %
Loan Fee Income142 140 131 121 105 37 35 %282 212 70 33 %
Transaction Processing Revenue61 57 60 58 58 3 5 %118 109 9 8 %
Unrealized Gains/ (Losses) on Equity Investments(169)(188)(139)(167)729 (898)(123 %)(357)729 (1,086)(149 %)
Realized Gains/ (Losses) on Equity Investments127 26 1 — — 127 NM153 — 153 NM
Other Income21 24 19 18 6 15 NM45 29 16 55 %
Total Non-Interest Income614 423 453 372 1,280 (666)(52 %)1,037 1,745 (708)(41 %)
Revenue Net of Interest Expense3,224 2,902 2,936 2,777 3,579 (355)(10 %)6,126 6,374 (248)(4)%
Provision for Credit Losses549 154 263 185 135 414 NM703 (230)933 NM
Employee Compensation and Benefits515 500 499 483 498 17 3 %1,015 1,004 11 1 %
Marketing and Business Development254 192 271 210 175 79 45 %446 329 117 36 %
Information Processing & Communications121 125 125 121 145 (24)(17 %)246 254 (8)(3 %)
Professional Fees189 177 230 198 187 2 1 %366 369 (3)(1 %)
Premises and Equipment24 24 23 23 22 2 9 %48 46 2 4 %
Other Expense120 112 164 155 195 (75)(38 %)232 301 (69)(23 %)
Total Operating Expense1,223 1,130 1,312 1,190 1,222 1 — %2,353 2,303 50 2 %
Income/ (Loss) Before Income Taxes1,452 1,618 1,361 1,402 2,222 (770)(35 %)3,070 4,301 (1,231)(29 %)
Tax Expense341 376 294 311 524 (183)(35 %)717 1,010 (293)(29 %)
Net Income/ (Loss)$1,111 $1,242 $1,067 $1,091 $1,698 ($587)(35 %)$2,353 $3,291 ($938)(29 %)
Net Income/ (Loss) Allocated to Common Stockholders$1,105 $1,205 $1,062 $1,055 $1,688 ($583)(35 %)$2,309 $3,234 ($925)(29 %)
Effective Tax Rate23.5 %23.3 %21.6 %22.2 %23.6 %23.4 %23.5 %
Net Interest Margin10.94 %10.85 %10.81 %10.80 %10.68 %26 bps10.89 %10.72 %17 bps
Operating Efficiency37.9 %38.9 %44.7 %42.9 %34.1 %380 bps38.4 %36.1 %230 bps
ROE32 %37 %32 %33 %54 %35 %55 %
ROCE35 %39 %35 %35 %59 %37 %59 %
Capital Returned to Common Stockholders$742 $1,067 $895 $940 $649 $93 14 %$1,809 $881 $928 105 %
Payout Ratio67 %89 %84 %89 %38 %78 %27 %
Ending Common Shares Outstanding275 281 288 295 301 (26)(9 %)275 301 (26)(9 %)
Weighted Average Common Shares Outstanding279 285 291 298 304 (25)(8 %)282 305 (23)(8 %)
Weighted Average Common Shares Outstanding (fully diluted)279 285 292 298 304 (25)(8 %)282 305 (23)(8 %)
PER SHARE STATISTICS       
Basic EPS$3.96 $4.23 $3.64 $3.54 $5.56 ($1.60)(29 %)$8.19 $10.60 ($2.41)(23 %)
Diluted EPS$3.96 $4.22 $3.64 $3.54 $5.55 ($1.59)(29 %)$8.18 $10.59 ($2.41)(23 %)
Common Dividends Declared Per Share$0.60 $0.50 $0.50 $0.50 $0.44 $0.16 36 %$1.10 $0.88 $0.22 25 %
Common Stock Price (period end)$94.58 $110.19 $115.56 $122.85 $118.29 ($23.71)(20 %)$94.58 $118.29 ($23.71)(20 %)
Book Value per share $50.00 $47.81 $46.50 $45.00 $43.72 $6.28 14 %$50.00 $43.72 $6.28 14 %
  Note: See Glossary of Financial Terms for definitions of financial terms


DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
 Quarter Ended  
 Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021Jun 30, 2022 vs. Jun 30, 2021
BALANCE SHEET SUMMARY       
Assets       
Cash and Investment Securities$17,007 $15,620 $18,236 $20,762 $25,209 ($8,202)(33 %)
Total Loan Receivables99,301 93,471 93,684 89,542 87,674 11,627 13 %
Allowance for Credit Losses(6,757)(6,647)(6,822)(6,861)(7,026)269 4 %
Net Loan Receivables92,544 86,824 86,862 82,681 80,648 11,896 15 %
Premises and Equipment, net984 984 983 987 986 (2)0 %
Goodwill and Intangible Assets, net255 255 255 256 256 (1)— %
Other Assets3,810 3,729 3,906 3,858 3,886 (76)(2 %)
Total Assets$114,600 $107,412 $110,242 $108,544 $110,985 $3,615 3 %
Liabilities & Stockholders' Equity       
           Certificates of Deposits 1
$13,543$13,518 $14,391 $14,931 $15,732 ($2,189)(14 %)
           Savings, Money Market, and Other Deposits 1, 2
49,655 50,185 47,548 47,035 46,823 2,832 6 %
Total Direct to Consumer Deposits 1, 2
63,198 63,703 61,939 61,966 62,555 643 1 %
Brokered Deposits and Other Deposits13,214 8,779 10,454 10,596 11,921 1,293 11 %
Deposits76,412 72,482 72,393 72,562 74,476 1,936 3 %
   Securitized Borrowings 3
9,099 7,715 9,539 9,064 9,145 (46)(1 %)
   Other Borrowings 3
10,886 9,417 10,688 9,452 10,205 681 7 %
Borrowings19,985 17,132 20,227 18,516 19,350 635 3 %
Accrued Expenses and Other Liabilities4,439 4,365 4,214 4,203 3,988 451 11 %
Total Liabilities100,836 93,979 96,834 95,281 97,814 3,022 3 %
Total Equity13,764 13,433 13,408 13,263 13,171 593 5 %
Total Liabilities and Stockholders' Equity$114,600 $107,412 $110,242 $108,544 $110,985 $3,615 3 %
LIQUIDITY       
Liquidity Portfolio$16,204 $14,910 $14,959 $19,946 $23,201 ($6,997)(30 %)
Private Asset-backed Securitizations3,500 3,750 3,500 4,000 4,000 (500)(13 %)
Federal Home Loan Bank Borrowing Capacity12 1,505 150 1,341 1,209 (1,197)(99)%
Federal Reserve Discount Window  4
36,463 34,393 34,254 32,719 32,328 4,135 13 %
Undrawn Credit Facilities 4
39,975 39,648 37,904 38,060 37,537 2,438 6 %
Total Liquidity$56,179$54,558$52,863$58,006$60,738-$4,559(8 %)
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  
 Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021Jun 30, 2022 vs. Jun 30, 2021
BALANCE SHEET STATISTICS       
Total Common Equity$12,708 $12,377 $12,352 $12,207 $12,115 $593 5 %
Total Common Equity/Total Assets11.1 %11.5 %11.2 %11.2 %10.9 %
Total Common Equity/Net Loans13.7 %14.3 %14.2 %14.8 %15.0 %
Tangible Assets$114,345 $107,157 $109,987 $108,288 $110,729 $3,616 3 %
Tangible Common Equity 1
$12,453 $12,122 $12,097 $11,951 $11,859 $594 5 %
Tangible Common Equity/Tangible Assets 1
10.9 %11.3 %11.0 %11.0 %10.7 %
Tangible Common Equity/Net Loans 1
13.5 %14.0 %13.9 %14.5 %14.7 %
Tangible Common Equity per share  1
$45.24 $43.14 $41.96 $40.55 $39.37 $5.87 15 %
Basel III
Quarter Ended
REGULATORY CAPITAL RATIOS 2
Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021  
Total Risk Based Capital Ratio17.0 %17.6 %17.6 %18.5 %18.8 %  
Tier 1 Risk Based Capital Ratio15.2 %15.8 %15.8 %16.7 %16.9 %  
Tier 1 Leverage Ratio 13.9 %13.7 %13.9 %13.8 %13.3 %  
Common Equity Tier 1 Capital Ratio 14.2 %14.7 %14.8 %15.5 %15.7 %
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  
 Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021Jun 30, 2022 vs. Jun 30, 2021
AVERAGE BALANCES       
Assets       
Cash and Investment Securities$14,409 $15,028 $17,309 $20,623 $26,784 ($12,375)(46 %)
Restricted Cash40 774 1,164 571 897 (857)(96 %)
Credit Card Loans75,917 73,042 71,865 69,416 67,420 8,497 13 %
Private Student Loans10,164 10,381 10,094 9,932 9,993 171 2 %
Personal Loans6,981 6,909 6,923 6,900 6,884 97 1 %
Other Loans2,674 2,359 2,213 2,108 1,999 675 34 %
Total Loans95,736 92,691 91,095 88,356 86,296 9,440 11 %
Total Interest Earning Assets110,185 108,493 109,568 109,550 113,977 (3,792)(3 %)
Allowance for Credit Losses(6,644)(6,818)(6,847)(7,020)(7,342)698 10 %
Other Assets5,874 6,248 6,379 6,430 5,971 (97)(2 %)
Total Assets$109,415 $107,923 $109,100 $108,960 $112,606 ($3,191)(3 %)
Liabilities and Stockholders' Equity       
Non-Interest-bearing Direct to Consumer Deposits 1
$1,136 $1,090 $1,016 $959 $977 $159 16 %
                       Certificates of Deposits 1
$13,391 $14,035 $14,606 $15,373 $16,109 ($2,718)(17 %)
                       Savings, Money Market, and Other Deposits 1
48,504 47,426 46,213 45,907 46,020 2,484 5 %
Interest-bearing Direct to Consumer Deposits 1
61,895 61,461 60,819 61,280 62,129 (234)— %
Brokered Deposits and Other Deposits10,031 9,157 9,834 10,691 11,915 (1,884)(16 %)
Total Interest-bearing Deposits71,926 70,618 70,653 71,971 74,044 (2,118)(3 %)
Securitized Borrowings 2
8,262 7,739 9,119 8,292 10,305 (2,043)(20 %)
Other Borrowings 2
9,325 10,099 9,721 9,556 10,211 (886)(9 %)
Total Interest-bearing Liabilities89,513 88,456 89,493 89,819 94,560 (5,047)(5 %)
Other Liabilities & Stockholders' Equity18,766 18,377 18,591 18,182 17,069 1,697 10 %
Total Liabilities and Stockholders' Equity$109,415 $107,923 $109,100 $108,960 $112,606 ($3,191)(3 %)
AVERAGE YIELD       
Assets       
Cash and Investment Securities1.46 %1.09 %1.01 %0.95 %0.78 %68 bps
Restricted Cash0.41 %0.02 %0.03 %0.03 %0.02 %39 bps
Credit Card Loans12.81 %12.59 %12.50 %12.53 %12.52 %29 bps
Private Student Loans7.74 %7.41 %7.37 %7.36 %7.41 %33 bps
Personal Loans11.84 %12.09 %12.36 %12.61 %12.76 %(92)bps
Other Loans5.47 %5.60 %5.39 %5.41 %5.59 %(12)bps
Total Loans12.00 %11.80 %11.75 %11.79 %11.79 %21 bps
Total Interest Earning Assets10.61 %10.23 %9.93 %9.68 %9.11 %150 bps
AVERAGE RATES
Liabilities and Stockholders' Equity       
                       Certificates of Deposits 1
1.04 %1.02 %1.07 %1.19 %1.32 %(28)bps
                       Savings, Money Market, and Other Deposits 1
0.68 %0.50 %0.42 %0.42 %0.42 %26 bps
Interest-bearing Direct to Consumer Deposits 1
0.75 %0.62 %0.58 %0.61 %0.65 %10 bps
Brokered Deposits and Other Deposits2.28 %2.03 %2.16 %2.28 %2.35 %(7)bps
Total Interest-bearing Deposits0.97 %0.80 %0.80 %0.86 %0.92 %5 bps
Securitized Borrowings 2
1.87 %1.29 %1.09 %1.10 %1.01 %86 bps
Other Borrowings 2
3.97 %3.75 %3.75 %3.78 %3.66 %31 bps
Total Interest-bearing Liabilities1.36 %1.18 %1.15 %1.19 %1.23 %13 bps
Net Interest Margin10.94 %10.85 %10.81 %10.80 %10.68 %26 bps
Net Yield on Interest-earning Assets9.50 %9.27 %8.99 %8.71 %8.09 %141 bps
1 Includes Affinity relationships
2 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  Six Months Ended
 Jun 30,
2022		Mar 31,
2022		Dec 31,
2021		Sep 30,
2021		Jun 30,
2021		Jun 30, 2022 vs. Jun 30, 2021Jun 30,
2022		Jun 30,
2021		2022 vs. 2021
TOTAL LOAN RECEIVABLES       
Ending Loans 1
$99,301 $93,471 $93,684 $89,542 $87,674 $11,627 13 %$99,301 $87,674 $11,627 13 %
Average Loans 1
$95,736 $92,691 $91,095 $88,356 $86,296 $9,440 11 %$94,221 $87,096 $7,125 8 %
Interest Yield12.00 %11.80 %11.75 %11.79 %11.79 %21 bps11.90 %11.87 %3 bps
Gross Principal Charge-off Rate 2.76 %2.64 %2.36 %2.50 %3.20 %(44)bps2.70 %3.32 %(62)bps
Net Principal Charge-off Rate 1.80 %1.61 %1.37 %1.46 %2.12 %(32)bps1.71 %2.30 %(59)bps
Delinquency Rate (30 or more days)1.63 %1.64 %1.55 %1.40 %1.34 %29 bps
Delinquency Rate (90 or more days)0.70 %0.72 %0.66 %0.58 %0.63 %7 bps
Gross Principal Charge-off Dollars $659 $603 $543 $556 $688 ($29)(4 %)$1,262 $1,435 ($173)(12 %)
Net Principal Charge-off Dollars$429 $368 $313 $325 $456 ($27)(6 %)$797 $993 ($196)(20 %)
Net Interest and Fee Charge-off Dollars$92 $87 $70 $72 $101 ($9)(9 %)$179 $219 ($40)(18 %)
Loans Delinquent 30 or more days$1,621 $1,537 $1,451 $1,258 $1,172 $449 38 %
Loans Delinquent 90 or more days$694 $678 $618 $522 $550 $144 26 %
Allowance for Credit Losses (period end)$6,757 $6,647 $6,822 $6,861 $7,026 ($269)(4 %)$6,757 $7,026 ($269)(4 %)
Reserve Change Build/ (Release) 2
$110 ($175)($39)($165)($321)$431 ($65)($1,200)$1,135 
Reserve Rate6.80 %7.11 %7.28 %7.66 %8.01 %(121)bps6.80 %8.01 %(121)bps
CREDIT CARD LOANS       
Ending Loans$79,237 $73,783 $74,369 $70,320 $68,886 $10,351 15 %$79,237 $68,886 $10,351 15 %
Average Loans$75,917 $73,042 $71,865 $69,416 $67,420 $8,497 13 %$74,487 $68,068 $6,419 9 %
Interest Yield12.81 %12.59 %12.50 %12.53 %12.52 %29 bps12.70 %12.62 %8 bps
Gross Principal Charge-off Rate3.10 %3.00 %2.63 %2.83 %3.69 %(59)bps3.05 %3.80 %(75)bps
Net Principal Charge-off Rate2.01 %1.84 %1.50 %1.65 %2.45 %(44)bps1.93 %2.63 %(70)bps
Delinquency Rate (30 or more days) 1.76 %1.77 %1.66 %1.48 %1.43 %33 bps1.76 %1.43 %33 bps
Delinquency Rate (90 or more days) 0.80 %0.83 %0.76 %0.66 %0.73 %7 bps0.80 %0.73 %7 bps
Gross Principal Charge-off Dollars$587 $541 $477 $495 $620 ($33)(5 %)$1,128 $1,283 ($155)(12 %)
Net Principal Charge-off Dollars$381 $331 $272 $289 $412 ($31)(8 %)$712 $886 ($174)(20 %)
Loans Delinquent 30 or more days$1,392 $1,305 $1,232 $1,040 $983 $409 42 %$1,392 $983 $409 42 %
Loans Delinquent 90 or more days$633 $613 $562 $467 $504 $129 26 %$633 $504 $129 26 %
Allowance for Credit Losses (period end)$5,307 $5,120 $5,273 $5,298 $5,409 ($102)(2 %)$5,307 $5,409 ($102)(2 %)
Reserve Change Build/ (Release) 2
$187 ($153)($25)($111)($231)$418 $34 ($1,082)$1,116 
Reserve Rate6.70 %6.94 %7.09 %7.54 %7.85 %(115)bps6.70 %7.85 %(115)bps
Total Discover Card Volume$57,384 $49,379 $53,983 $50,389 $48,049 $9,335 19 %$106,763 $88,383 $18,380 21 %
Discover Card Sales Volume$53,860 $46,329 $51,308 $47,613 $45,460 $8,400 18 %$100,189 $83,204 $16,985 20 %
Rewards Rate1.37 %1.36 %1.35 %1.44 %1.31 %6 bps1.37 %1.34 %3 bps
1 Total Loans includes Home Equity and other loans
2 Excludes any build/release of the liability for expected credit losses on unfunded commitments as the offset is recorded in accrued expenses and other liabilities in the Company's condensed consolidated statements of financial condition
  Note: See Glossary of Financial Terms for definitions of financial terms


DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
 Quarter Ended  Six Months Ended
 Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021Jun 30, 2022 vs. Jun 30, 2021Jun 30, 2022Jun 30, 20212022 vs. 2021
PRIVATE STUDENT LOANS       
Organic Student Loans$9,412 $9,614 $9,367 $9,391 $9,021 $391 4 %$9,412 $9,021 $391 4 %
Purchased Student Loans662 700 746 793 843 (181)(21 %)662 843 (181)(21 %)
Total Private Student Loans$10,074 $10,314 $10,113 $10,184 $9,864 $210 2 %$10,074 $9,864 $210 2 %
Interest Yield7.74 %7.41 %7.37 %7.36 %7.41 %33 bps7.58 %7.39 %19 bps
Net Principal Charge-off Rate1.08 %0.69 %0.80 %0.68 %0.53 %55 bps0.88 %0.53 %35 bps
Delinquency Rate (30 or more days)1.66 %1.62 %1.55 %1.55 %1.34 %32 bps1.66 %1.34 %32 bps
Reserve Rate8.26 %8.43 %8.33 %8.41 %8.39 %(13)bps8.26 %8.39 %(13)bps
PERSONAL LOANS       
Ending Loans$7,145 $6,904 $6,936 $6,890 $6,865 $280 4 %$7,145 $6,865 $280 4 %
Interest Yield11.84 %12.09 %12.36 %12.61 %12.76 %(92)bps11.96 %12.79 %(83)bps
Net Principal Charge-off Rate1.21 %1.12 %1.21 %1.11 %1.80 %(59)bps1.17 %2.30 %(113)bps
Delinquency Rate (30 or more days)0.63 %0.69 %0.69 %0.71 %0.69 %(6)bps0.63 %0.69 %(6)bps
Reserve Rate8.01 %8.88 %9.54 %9.61 %10.85 %(284)bps8.01 %10.85 %(284)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  Six Months Ended
 Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021Jun 30, 2022 vs. Jun 30, 2021Jun 30, 2022Jun 30, 20212022 vs. 2021
DIGITAL BANKING       
Interest Income$2,915 $2,736 $2,742 $2,674 $2,589 $326 13 %$5,651 $5,235 $416 8 %
Interest Expense305 257 259 269 290 15 5 %562 606 (44)(7 %)
Net Interest Income2,610 2,479 2,483 2,405 2,299 311 14 %5,089 4,629 460 10 %
Non-Interest Income557 486 497 447 458 99 22 %1,043 837 206 25 %
Revenue Net of Interest Expense3,167 2,965 2,980 2,852 2,757 410 15 %6,132 5,466 666 12 %
Provision for Credit Losses549 154 263 185 135 414 NM703 (230)933 NM
Total Operating Expense1,186 1,092 1,259 1,151 1,092 94 9 %2,278 2,139 139 6 %
Income/ (Loss) Before Income Taxes$1,432 $1,719 $1,458 $1,516 $1,530 ($98)(6 %)$3,151 $3,557 ($406)(11 %)
Net Interest Margin10.94 %10.85 %10.81 %10.80 %10.68 %26 bps10.89 %10.72 %17 bps
Pretax Return on Loan Receivables5.99 %7.52 %6.35 %6.81 %7.11 %(112)bps6.74 %8.24 %(150)bps
Allowance for Credit Losses (period end)$6,757 $6,647 $6,822 $6,861 $7,026 ($269)(4 %)$6,757 $7,026 ($269)(4 %)
Reserve Change Build/ (Release) $110 ($175)($39)($165)($321)$431 ($65)($1,200)$1,135 
PAYMENT SERVICES       
Interest Income$— $— $— $— $— $— NM$— $— $— NM
Interest Expense— — — — — — NM— — — NM
Net Interest Income— — — — — — NM— — — NM
Non-Interest Income/ (Loss)57 (63)(44)(75)822 (765)(93 %)(6)908 (914)(101 %)
Revenue Net of Interest Expense57 (63)(44)(75)822 (765)(93 %)(6)908 (914)(101 %)
Provision for Credit Losses— — — — — — NM— — — NM
Total Operating Expense37 38 53 39 130 (93)(72 %)75 164 (89)(54 %)
Income/ (Loss) Before Income Taxes$20 ($101)($97)($114)$692 ($672)(97 %)($81)$744 ($825)(111 %)
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network916 831 914 868 799 117 15 %1,747 1,477 270 18 %
PULSE Network1,524 1,399 1,508 1,415 1,399 125 9 %2,923 2,709 214 8 %
Total2,440 2,230 2,422 2,283 2,198 242 11 %4,670 4,186 484 12 %
NETWORK VOLUME
PULSE Network$62,992 $59,836 $64,787 $59,872 $62,855 $137 — %$122,828 $123,254 ($426)— %
Network Partners11,532 10,683 11,233 10,377 9,468 2,064 22 %22,215 19,097 3,118 16 %
Diners Club International 1
8,381 7,176 7,367 6,547 6,126 2,255 37 %15,557 12,023 3,534 29 %
Total Payment Services82,905 77,695 83,387 76,796 78,449 4,456 6 %160,600 154,374 6,226 4 %
Discover Network - Proprietary55,838 48,129 53,197 49,360 47,201 8,637 18 %103,967 86,403 17,564 20 %
Total$138,743 $125,824 $136,584 $126,156 $125,650 $13,093 10 %$264,567 $240,777 $23,790 10 %
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 Equity represents net income (annualized) divided by average total equity for the reporting period
Rewards Rate represents Credit Card rewards cost divided by Discover Card sales volume
Volume Terms
Discover Card Sales Volume represents Discover card activity related to sales net of returns
Discover Card Volume represents Discover card activity related to sales net of returns, balance transfers, cash advances and other activity
Discover Network Proprietary Volume represents gross Discover Card sales volume on the Discover Network


DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO NON-GAAP DATA
(unaudited, in millions)
 Quarter Ended
 Jun 30, 2022Mar 31, 2022Dec 31, 2021Sep 30, 2021Jun 30, 2021
GAAP Total Common Equity$12,708 $12,377 $12,352 $12,207 $12,115 
Less: Goodwill(255)(255)(255)(255)(255)
Less: Intangibles— — — (1)(1)
Tangible Common Equity 1
$12,453 $12,122 $12,097 $11,951 $11,859 
GAAP Book Value Per Share$50.00 $47.81 $46.50 $45.00 $43.72 
Less: Goodwill(0.92)(0.91)(0.88)(0.87)(0.84)
Less: Intangibles— — — — 0.00 
   Less: Preferred Stock(3.84)(3.76)(3.66)(3.58)(3.51)
Tangible Common Equity Per Share $45.24 $43.14 $41.96 $40.55 $39.37 
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