EX-99.2 3 dfs2022930ex992.htm EX-99.2

DISCOVER FINANCIAL SERVICES																																																									Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
			Quarter Ended																																										Nine Months Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021												Sep 30, 2022						Sep 30, 2021						2022 vs. 2021
EARNINGS SUMMARY
Interest Income			$3,357						$2,915						$2,736						$2,742						$2,674						$683						26		%				$9,008						$7,909						$1,099			14		%
Interest Expense			514						305						257						259						269						245						91		%				1,076						875						201			23		%
Net Interest Income			2,843						2,610						2,479						2,483						2,405						438						18		%				7,932						7,034						898			13		%
Discount/Interchange Revenue			1,157						1,133						955						1,042						988						169						17		%				3,245						2,691						554			21		%
Rewards Cost			811						743						635						697						689						122						18		%				2,189						1,812						377			21		%
Discount and Interchange Revenue, net			346						390						320						345						299						47						16		%				1,056						879						177			20		%
Protection Products Revenue			42						42						44						36						43						(1)						(2		%)				128						129						(1)			(1		%)
Loan Fee Income			168						142						140						131						121						47						39		%				450						333						117			35		%
Transaction Processing Revenue			65						61						57						60						58						7						12		%				183						167						16			10		%
Unrealized Gains/ (Losses) on Equity Investments			(37)						(169)						(188)						(139)						(167)						130						78		%				(394)						562						(956)			(170		%)
Realized Gains/ (Losses) on Equity Investments			33						127						26						1						—						33						NM						186						—						186			NM
Other Income			19						21						24						19						18						1						6		%				64						47						17			36		%
Total Non-Interest Income			636						614						423						453						372						264						71		%				1,673						2,117						(444)			(21		%)
Revenue Net of Interest Expense			3,479						3,224						2,902						2,936						2,777						702						25		%				9,605						9,151						454			5		%
Provision for Credit Losses			773						549						154						263						185						588						NM						1,476						(45)						1,521			NM
Employee Compensation and Benefits			551						515						500						499						483						68						14		%				1,566						1,487						79			5		%
Marketing and Business Development			276						254						192						271						210						66						31		%				722						539						183			34		%
Information Processing & Communications			124						121						125						125						121						3						2		%				370						375						(5)			(1		%)
Professional Fees			241						189						177						230						198						43						22		%				607						567						40			7		%
Premises and Equipment			22						24						24						23						23						(1)						(4		%)				70						69						1			1		%
Other Expense			174						120						112						164						155						19						12		%				406						456						(50)			(11		%)
Total Operating Expense			1,388						1,223						1,130						1,312						1,190						198						17		%				3,741						3,493						248			7		%
Income/ (Loss) Before Income Taxes			1,318						1,452						1,618						1,361						1,402						(84)						(6		%)				4,388						5,703						(1,315)			(23		%)
Tax Expense			312						341						376						294						311						1						—		%				1,029						1,321						(292)			(22		%)
Net Income/ (Loss)			$1,006						$1,111						$1,242						$1,067						$1,091						($85)						(8		%)				$3,359						$4,382						($1,023)			(23		%)
Net Income/ (Loss) Allocated to Common Stockholders			$967						$1,105						$1,205						$1,062						$1,055						($88)						(8		%)				$3,277						$4,289						($1,012)			(24		%)
Effective Tax Rate			23.6		%				23.5		%				23.3		%				21.6		%				22.2		%																23.4		%				23.2		%
Net Interest Margin			11.05		%				10.94		%				10.85		%				10.81		%				10.80		%				25						bps						10.95		%				10.74		%				21			bps
Operating Efficiency			39.9		%				37.9		%				38.9		%				44.7		%				42.9		%				(300)						bps						39		%				38.2		%				80			bps
ROE			29		%				32		%				37		%				32		%				33		%																33		%				47		%
ROCE			30		%				35		%				39		%				35		%				35		%																34		%				50		%
Capital Returned to Common Stockholders			$350						$742						$1,067						$895						$940						($590)						(63		%)				$2,160						$1,821						$339			19		%
Payout Ratio			36		%				67		%				89		%				84		%				89		%																66		%				42		%
Ending Common Shares Outstanding			273						275						281						288						295						(22)						(7		%)				273						295						(22)			(7		%)
Weighted Average Common Shares Outstanding			273						279						285						291						298						(25)						(8		%)				279						303						(24)			(8		%)
Weighted Average Common Shares Outstanding (fully diluted)			274						279						285						292						298						(24)						(8		%)				279						303						(24)			(8		%)
PER SHARE STATISTICS
Basic EPS			$3.54						$3.96						$4.23						$3.64						$3.54						$—						—		%				$11.74						$14.17						($2.43)			(17		%)
Diluted EPS			$3.54						$3.96						$4.22						$3.64						$3.54						$—						—		%				$11.73						$14.16						($2.43)			(17		%)
Common Dividends Declared Per Share			$0.60						$0.60						$0.50						$0.50						$0.50						$0.10						20		%				$1.70						$1.38						$0.32			23		%
Common Stock Price (period end)			$90.92						$94.58						$110.19						$115.56						$122.85						($31.93)						(26		%)				$90.92						$122.85						($31.93)			(26		%)
Book Value per share			$52.29						$50.00						$47.81						$46.50						$45.00						$7.29						16		%				$52.29						$45.00						$7.29			16		%
Note: See Glossary of Financial Terms for definitions of financial terms

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DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
			Quarter Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021
BALANCE SHEET SUMMARY
Assets
Cash and Investment Securities			$18,767						$17,007						$15,620						$18,236						$20,762						($1,995)						(10		%)
Total Loan Receivables			104,908						99,301						93,471						93,684						89,542						15,366						17		%
Allowance for Credit Losses			(7,061)						(6,757)						(6,647)						(6,822)						(6,861)						(200)						(3		%)
Net Loan Receivables			97,847						92,544						86,824						86,862						82,681						15,166						18		%
Premises and Equipment, net			1,015						984						984						983						987						28						3		%
Goodwill and Intangible Assets, net			255						255						255						255						256						(1)						—		%
Other Assets			4,002						3,810						3,729						3,906						3,858						144						4		%
Total Assets			$121,886						$114,600						$107,412						$110,242						$108,544						$13,342						12		%
Liabilities & Stockholders' Equity
Certificates of Deposits 1			$14,505						$13,543						$13,518						$14,391						$14,931						($426)						(3		%)
Savings, Money Market, and Other Deposits 1, 2			51,743						49,655						50,185						47,548						47,035						4,708						10		%
Total Direct to Consumer Deposits 1, 2			66,248						63,198						63,703						61,939						61,966						4,282						7		%
Brokered Deposits and Other Deposits			16,649						13,214						8,779						10,454						10,596						6,053						57		%
Deposits			82,897						76,412						72,482						72,393						72,562						10,335						14		%
Securitized Borrowings 3			11,092						9,099						7,715						9,539						9,064						2,028						22		%
Other Borrowings 3			9,085						10,886						9,417						10,688						9,452						(367)						(4		%)
Borrowings			20,177						19,985						17,132						20,227						18,516						1,661						9		%
Accrued Expenses and Other Liabilities			4,526						4,439						4,365						4,214						4,203						323						8		%
Total Liabilities			107,600						100,836						93,979						96,834						95,281						12,319						13		%
Total Equity			14,286						13,764						13,433						13,408						13,263						1,023						8		%
Total Liabilities and Stockholders' Equity			$121,886						$114,600						$107,412						$110,242						$108,544						$13,342						12		%
LIQUIDITY
Liquidity Portfolio			$16,042						$16,204						$14,910						$14,959						$19,946						($3,904)						(20		%)
Private Asset-backed Securitizations			3,500						3,500						3,750						3,500						4,000						(500)						(13		%)
Federal Home Loan Bank Borrowing Capacity			2,078						12						1,505						150						1,341						737						55		%
Federal Reserve Discount Window  4			39,888						36,463						34,393						34,254						32,719						7,169						22		%
Undrawn Credit Facilities 4			45,466						39,975						39,648						37,904						38,060						7,406						19		%
Total Liquidity			$61,508						$56,179						$54,558						$52,863						$58,006						$3,502						6		%
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

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DISCOVER FINANCIAL SERVICES
BALANCE SHEET STATISTICS
(unaudited, in millions)
			Quarter Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021
BALANCE SHEET STATISTICS
Total Common Equity			$13,230						$12,708						$12,377						$12,352						$12,207						$1,023						8		%
Total Common Equity/Total Assets			10.9		%				11.1		%				11.5		%				11.2		%				11.2		%
Total Common Equity/Net Loans			13.5		%				13.7		%				14.3		%				14.2		%				14.8		%
Tangible Assets			$121,631						$114,345						$107,157						$109,987						$108,288						$13,343						12		%
Tangible Common Equity 1			$12,975						$12,453						$12,122						$12,097						$11,951						$1,024						9		%
Tangible Common Equity/Tangible Assets 1			10.7		%				10.9		%				11.3		%				11.0		%				11.0		%
Tangible Common Equity/Net Loans 1			13.3		%				13.5		%				14.0		%				13.9		%				14.5		%
Tangible Common Equity per share  1			$47.49						$45.24						$43.14						$41.96						$40.55						$6.94						17		%
			Basel III
			Quarter Ended
REGULATORY CAPITAL RATIOS 2			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021
Total Risk Based Capital Ratio			16.7		%				17.0		%				17.6		%				17.6		%				18.5		%
Tier 1 Risk Based Capital Ratio			14.9		%				15.2		%				15.8		%				15.8		%				16.7		%
Tier 1 Leverage Ratio			13.4		%				13.9		%				13.7		%				13.9		%				13.8		%
Common Equity Tier 1 Capital Ratio			13.9		%				14.2		%				14.7		%				14.8		%				15.5		%
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

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DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
			Quarter Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021
AVERAGE BALANCES
Assets
Cash and Investment Securities			$16,057						$14,409						$15,028						$17,309						$20,623						($4,566)						(22		%)
Restricted Cash			853						40						774						1,164						571						282						49		%
Credit Card Loans			81,445						75,917						73,042						71,865						69,416						12,029						17		%
Private Student Loans			10,132						10,164						10,381						10,094						9,932						200						2		%
Personal Loans			7,408						6,981						6,909						6,923						6,900						508						7		%
Other Loans			3,050						2,674						2,359						2,213						2,108						942						45		%
Total Loans			102,035						95,736						92,691						91,095						88,356						13,679						15		%
Total Interest Earning Assets			118,945						110,185						108,493						109,568						109,550						9,395						9		%
Allowance for Credit Losses			(6,758)						(6,644)						(6,818)						(6,847)						(7,020)						262						4		%
Other Assets			5,923						5,874						6,248						6,379						6,430						(507)						(8		%)
Total Assets			$118,110						$109,415						$107,923						$109,100						$108,960						$9,150						8		%
Liabilities and Stockholders' Equity
Non-Interest-bearing Direct to Consumer Deposits 1			$1,122						$1,136						$1,090						$1,016						$959						$163						17		%
Certificates of Deposits 1			$14,029						$13,391						$14,035						$14,606						$15,373						($1,344)						(9		%)
Savings, Money Market, and Other Deposits 1			49,332						48,504						47,426						46,213						45,907						3,425						7		%
Interest-bearing Direct to Consumer Deposits 1			63,361						61,895						61,461						60,819						61,280						2,081						3		%
Brokered Deposits and Other Deposits			14,722						10,031						9,157						9,834						10,691						4,031						38		%
Total Interest-bearing Deposits			78,083						71,926						70,618						70,653						71,971						6,112						8		%
Securitized Borrowings 2			10,246						8,262						7,739						9,119						8,292						1,954						24		%
Other Borrowings 2			9,185						9,325						10,099						9,721						9,556						(371)						(4		%)
Total Interest-bearing Liabilities			97,514						89,513						88,456						89,493						89,819						7,695						9		%
Other Liabilities & Stockholders' Equity			19,474						18,766						18,377						18,591						18,182						1,292						7		%
Total Liabilities and Stockholders' Equity			$118,110						$109,415						$107,923						$109,100						$108,960						$9,150						8		%
AVERAGE YIELD
Assets
Cash and Investment Securities			2.31		%				1.46		%				1.09		%				1.01		%				0.95		%				136						bps
Restricted Cash			2.25		%				0.41		%				0.02		%				0.03		%				0.03		%				222						bps
Credit Card Loans			13.56		%				12.81		%				12.59		%				12.50		%				12.53		%				103						bps
Private Student Loans			8.26		%				7.74		%				7.41		%				7.37		%				7.36		%				90						bps
Personal Loans			11.83		%				11.84		%				12.09		%				12.36		%				12.61		%				(78)						bps
Other Loans			5.70		%				5.47		%				5.60		%				5.39		%				5.41		%				29						bps
Total Loans			12.67		%				12.00		%				11.80		%				11.75		%				11.79		%				88						bps
Total Interest Earning Assets			11.20		%				10.61		%				10.23		%				9.93		%				9.68		%				152						bps
AVERAGE RATES
Liabilities and Stockholders' Equity
Certificates of Deposits 1			1.31		%				1.04		%				1.02		%				1.07		%				1.19		%				12						bps
Savings, Money Market, and Other Deposits 1			1.60		%				0.68		%				0.50		%				0.42		%				0.42		%				118						bps
Interest-bearing Direct to Consumer Deposits 1			1.53		%				0.75		%				0.62		%				0.58		%				0.61		%				92						bps
Brokered Deposits and Other Deposits			2.71		%				2.28		%				2.03		%				2.16		%				2.28		%				43						bps
Total Interest-bearing Deposits			1.76		%				0.97		%				0.80		%				0.80		%				0.86		%				90						bps
Securitized Borrowings 2			2.79		%				1.87		%				1.29		%				1.09		%				1.10		%				169						bps
Other Borrowings 2			4.17		%				3.97		%				3.75		%				3.75		%				3.78		%				39						bps
Total Interest-bearing Liabilities			2.09		%				1.36		%				1.18		%				1.15		%				1.19		%				90						bps
Net Interest Margin			11.05		%				10.94		%				10.85		%				10.81		%				10.80		%				25						bps
Net Yield on Interest-earning Assets			9.48		%				9.50		%				9.27		%				8.99		%				8.71		%				77						bps
1 Includes Affinity relationships
2 Includes short-term and long-term borrowings
Note: See Glossary of Financial Terms for definitions of financial terms

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DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
			Quarter Ended																																										Nine Months Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021												Sep 30, 2022						Sep 30, 2021						2022 vs. 2021
TOTAL LOAN RECEIVABLES
Ending Loans 1			$104,908						$99,301						$93,471						$93,684						$89,542						$15,366						17		%				$104,908						$89,542						$15,366			17		%
Average Loans 1			$102,035						$95,736						$92,691						$91,095						$88,356						$13,679						15		%				$96,855						$87,521						$9,334			11		%
Interest Yield			12.67		%				12.00		%				11.80		%				11.75		%				11.79		%				88						bps						12.17		%				11.84		%				33			bps
Gross Principal Charge-off Rate			2.56		%				2.76		%				2.64		%				2.36		%				2.50		%				6						bps						2.65		%				3.04		%				(39)			bps
Net Principal Charge-off Rate			1.71		%				1.80		%				1.61		%				1.37		%				1.46		%				25						bps						1.71		%				2.01		%				(30)			bps
Delinquency Rate (30 or more days)			1.94		%				1.63		%				1.64		%				1.55		%				1.40		%				54						bps
Delinquency Rate (90 or more days)			0.80		%				0.70		%				0.72		%				0.66		%				0.58		%				22						bps
Gross Principal Charge-off Dollars			$659						$659						$603						$543						$556						$103						19		%				$1,921						$1,991						($70)			(4		%)
Net Principal Charge-off Dollars			$439						$429						$368						$313						$325						$114						35		%				$1,236						$1,318						($82)			(6		%)
Net Interest and Fee Charge-off Dollars			$98						$92						$87						$70						$72						$26						36		%				$277						$291						($14)			(5		%)
Loans Delinquent 30 or more days			$2,034						$1,621						$1,537						$1,451						$1,258						$776						62		%
Loans Delinquent 90 or more days			$837						$694						$678						$618						$522						$315						60		%
Allowance for Credit Losses (period end)			$7,061						$6,757						$6,647						$6,822						$6,861						$200						3		%				$7,061						$6,861						$200			3		%
Reserve Change Build/ (Release) 2			$304						$110						($175)						($39)						($165)						$469												$239						($1,365)						$1,604
Reserve Rate			6.73		%				6.80		%				7.11		%				7.28		%				7.66		%				(93)						bps						6.73		%				7.66		%				(93)			bps
CREDIT CARD LOANS
Ending Loans			$83,630						$79,237						$73,783						$74,369						$70,320						$13,310						19		%				$83,630						$70,320						$13,310			19		%
Average Loans			$81,445						$75,917						$73,042						$71,865						$69,416						$12,029						17		%				$76,832						$68,522						$8,310			12		%
Interest Yield			13.56		%				12.81		%				12.59		%				12.50		%				12.53		%				103						bps						13.01		%				12.59		%				42			bps
Gross Principal Charge-off Rate			2.88		%				3.10		%				3.00		%				2.63		%				2.83		%				5						bps						2.99		%				3.47		%				(48)			bps
Net Principal Charge-off Rate			1.92		%				2.01		%				1.84		%				1.50		%				1.65		%				27						bps						1.93		%				2.29		%				(36)			bps
Delinquency Rate (30 or more days)			2.11		%				1.76		%				1.77		%				1.66		%				1.48		%				63						bps						2.11		%				1.48		%				63			bps
Delinquency Rate (90 or more days)			0.92		%				0.80		%				0.83		%				0.76		%				0.66		%				26						bps						0.92		%				0.66		%				26			bps
Gross Principal Charge-off Dollars			$592						$587						$541						$477						$495						$97						20		%				$1,720						$1,778						($58)			(3		%)
Net Principal Charge-off Dollars			$395						$381						$331						$272						$289						$106						37		%				$1,107						$1,175						($68)			(6		%)
Loans Delinquent 30 or more days			$1,761						$1,392						$1,305						$1,232						$1,040						$721						69		%				$1,761						$1,040						$721			69		%
Loans Delinquent 90 or more days			$770						$633						$613						$562						$467						$303						65		%				$770						$467						$303			65		%
Allowance for Credit Losses (period end)			$5,561						$5,307						$5,120						$5,273						$5,298						$263						5		%				$5,561						$5,298						$263			5		%
Reserve Change Build/ (Release) 2			$254						$187						($153)						($25)						($111)						$365												$288						($1,193)						$1,481
Reserve Rate			6.65		%				6.70		%				6.94		%				7.09		%				7.54		%				(89)						bps						6.65		%				7.54		%				(89)			bps
Total Discover Card Volume			$58,561						$57,384						$49,379						$53,983						$50,389						$8,172						16		%				$165,324						$138,772						$26,552			19		%
Discover Card Sales Volume			$54,793						$53,860						$46,329						$51,308						$47,613						$7,180						15		%				$154,982						$130,817						$24,165			18		%
Rewards Rate			1.47		%				1.37		%				1.36		%				1.35		%				1.44		%				3						bps						1.40		%				1.38		%				2			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

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DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
			Quarter Ended																																										Nine Months Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021												Sep 30, 2022						Sep 30, 2021						2022 vs. 2021
PRIVATE STUDENT LOANS
Organic Student Loans			$9,722						$9,412						$9,614						$9,367						$9,391						$331						4		%				$9,722						$9,391						$331			4		%
Purchased Student Loans			627						662						700						746						793						(166)						(21		%)				627						793						(166)			(21		%)
Total Private Student Loans			$10,349						$10,074						$10,314						$10,113						$10,184						$165						2		%				$10,349						$10,184						$165			2		%
Interest Yield			8.26		%				7.74		%				7.41		%				7.37		%				7.36		%				90						bps						7.81		%				7.38		%				43			bps
Net Principal Charge-off Rate			0.91		%				1.08		%				0.69		%				0.80		%				0.68		%				23						bps						0.89		%				0.58		%				31			bps
Delinquency Rate (30 or more days)			1.94		%				1.66		%				1.62		%				1.55		%				1.55		%				39						bps						1.94		%				1.55		%				39			bps
Reserve Rate			8.01		%				8.26		%				8.43		%				8.33		%				8.41		%				(40)						bps						8.01		%				8.41		%				(40)			bps
PERSONAL LOANS
Ending Loans			$7,674						$7,145						$6,904						$6,936						$6,890						$784						11		%				$7,674						$6,890						$784			11		%
Interest Yield			11.83		%				11.84		%				12.09		%				12.36		%				12.61		%				(78)						bps						11.92		%				12.73		%				(81)			bps
Net Principal Charge-off Rate			1.14		%				1.21		%				1.12		%				1.21		%				1.11		%				3						bps						1.16		%				1.91		%				(75)			bps
Delinquency Rate (30 or more days)			0.69		%				0.63		%				0.69		%				0.69		%				0.71		%				(2)						bps						0.69		%				0.71		%				(2)			bps
Reserve Rate			8.08		%				8.01		%				8.88		%				9.54		%				9.61		%				(153)						bps						8.08		%				9.61		%				(153)			bps
Note: See Glossary of Financial Terms for definitions of financial terms

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DISCOVER FINANCIAL SERVICES
SEGMENT RESULTS AND VOLUME STATISTICS
(unaudited, in millions)
			Quarter Ended																																										Nine Months Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021						Sep 30, 2022 vs. Sep 30, 2021												Sep 30, 2022						Sep 30, 2021						2022 vs. 2021
DIGITAL BANKING
Interest Income			$3,357						$2,915						$2,736						$2,742						$2,674						$683						26		%				$9,008						$7,909						$1,099			14		%
Interest Expense			514						305						257						259						269						245						91		%				1,076						875						201			23		%
Net Interest Income			2,843						2,610						2,479						2,483						2,405						438						18		%				7,932						7,034						898			13		%
Non-Interest Income			541						557						486						497						447						94						21		%				1,584						1,284						300			23		%
Revenue Net of Interest Expense			3,384						3,167						2,965						2,980						2,852						532						19		%				9,516						8,318						1,198			14		%
Provision for Credit Losses			773						549						154						263						185						588						NM						1,476						(45)						1,521			NM
Total Operating Expense			1,346						1,186						1,092						1,259						1,151						195						17		%				3,624						3,290						334			10		%
Income/ (Loss) Before Income Taxes			$1,265						$1,432						$1,719						$1,458						$1,516						($251)						(17		%)				$4,416						$5,073						($657)			(13		%)
Net Interest Margin			11.05		%				10.94		%				10.85		%				10.81		%				10.80		%				25						bps						10.95		%				10.74		%				21			bps
Pretax Return on Loan Receivables			4.91		%				5.99		%				7.52		%				6.35		%				6.81		%				(190)						bps						6.09		%				7.75		%				(166)			bps
Allowance for Credit Losses (period end)			$7,061						$6,757						$6,647						$6,822						$6,861						$200						3		%				$7,061						$6,861						$200			3		%
Reserve Change Build/ (Release)			$304						$110						($175)						($39)						($165)						$469												$239						($1,365)						$1,604
PAYMENT SERVICES
Interest Income			$—						$—						$—						$—						$—						$—						NM						$—						$—						$—			NM
Interest Expense			—						—						—						—						—						—						NM						—						—						—			NM
Net Interest Income			—						—						—						—						—						—						NM						—						—						—			NM
Non-Interest Income/ (Loss)			95						57						(63)						(44)						(75)						170						NM						89						833						(744)			(89		%)
Revenue Net of Interest Expense			95						57						(63)						(44)						(75)						170						NM						89						833						(744)			(89		%)
Provision for Credit Losses			—						—						—						—						—						—						NM						—						—						—			NM
Total Operating Expense			42						37						38						53						39						3						8		%				117						203						(86)			(42		%)
Income/ (Loss) Before Income Taxes			$53						$20						($101)						($97)						($114)						$167						NM						($28)						$630						($658)			(104		%)
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network			924						916						831						914						868						56						6		%				2,671						2,345						326			14		%
PULSE Network			1,611						1,524						1,399						1,508						1,415						196						14		%				4,534						4,124						410			10		%
Total			2,535						2,440						2,230						2,422						2,283						252						11		%				7,205						6,469						736			11		%
NETWORK VOLUME
PULSE Network			$63,437						$62,992						$59,836						$64,787						$59,872						$3,565						6		%				$186,265						$183,126						$3,139			2		%
Network Partners			11,894						11,532						10,683						11,233						10,377						1,517						15		%				34,109						29,474						4,635			16		%
Diners Club International 1			8,793						8,381						7,176						7,367						6,547						2,246						34		%				24,350						18,570						5,780			31		%
Total Payment Services			84,124						82,905						77,695						83,387						76,796						7,328						10		%				244,724						231,170						13,554			6		%
Discover Network - Proprietary			56,633						55,838						48,129						53,197						49,360						7,273						15		%				160,600						135,763						24,837			18		%
Total			$140,757						$138,743						$125,824						$136,584						$126,156						$14,601						12		%				$405,324						$366,933						$38,391			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

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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

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DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO NON-GAAP DATA
(unaudited, in millions)
			Quarter Ended
			Sep 30, 2022						Jun 30, 2022						Mar 31, 2022						Dec 31, 2021						Sep 30, 2021
GAAP Total Common Equity			$13,230						$12,708						$12,377						$12,352						$12,207
Less: Goodwill			(255)						(255)						(255)						(255)						(255)
Less: Intangibles			—						—						—						—						(1)
Tangible Common Equity 1			$12,975						$12,453						$12,122						$12,097						$11,951
GAAP Book Value Per Share			$52.29						$50.00						$47.81						$46.50						$45.00
Less: Goodwill			(0.94)						(0.92)						(0.91)						(0.88)						(0.87)
Less: Intangibles			—						—						—						—						—
Less: Preferred Stock			(3.86)						(3.84)						(3.76)						(3.66)						(3.58)
Tangible Common Equity Per Share			$47.49						$45.24						$43.14						$41.96						$40.55
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