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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to 
Commission File Number 001-33378
DISCOVER FINANCIAL SERVICES
(Exact name of registrant as specified in its charter) 
Delaware
(State or other jurisdiction of incorporation or organization)
36-2517428
(I.R.S. 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)
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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of October 21, 2022, there were 273,225,765 shares of the registrant's Common Stock, par value $0.01 per share, outstanding.



DISCOVER FINANCIAL SERVICES
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022
Except as otherwise indicated or unless the context otherwise requires, "Discover Financial Services," "Discover," "DFS," "we," "us," "our," and "the Company" refer to Discover Financial Services and its subsidiaries. See Glossary of Acronyms, located after Part I — Item 4, for terms and abbreviations used throughout the quarterly report.
We own or have rights to use the trademarks, trade names and service marks that we use in conjunction with the operation of our business, including, but not limited to Discover®, PULSE®, Cashback Bonus®, Discover Cashback Checking®, Discover it®, Freeze it®, College Covered® and Diners Club International®. All other trademarks, trade names and service marks included in this quarterly report on Form 10-Q are the property of their respective owners.


Part I.    FINANCIAL INFORMATION
Item 1.    Financial Statements
DISCOVER FINANCIAL SERVICES
Condensed Consolidated Statements of Financial Condition (unaudited)
(dollars in millions, except for share amounts)
September 30,
2022
December 31,
2021
Assets
Cash and cash equivalents$10,004 $8,750 
Restricted cash1,866 2,582 
Investment securities (includes available-for-sale securities of $6,681 and $6,700 reported at fair value with associated amortized cost of $6,876 and $6,549 at September 30, 2022 and December 31, 2021, respectively)
6,897 6,904 
Loan receivables
Loan receivables104,908 93,684 
Allowance for credit losses(7,061)(6,822)
Net loan receivables97,847 86,862 
Premises and equipment, net1,015 983 
Goodwill255 255 
Other assets4,002 3,906 
Total assets$121,886 $110,242 
Liabilities and Stockholders' Equity
Liabilities
Deposits
Interest-bearing deposit accounts$81,373 $70,818 
Non-interest bearing deposit accounts1,524 1,575 
Total deposits82,897 72,393 
Short-term borrowings 1,750 
Long-term borrowings20,177 18,477 
Accrued expenses and other liabilities4,526 4,214 
Total liabilities107,600 96,834 
Commitments, contingencies and guarantees (Notes 9, 12 and 13)
Stockholders' Equity
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 569,637,306 and 568,830,897 shares issued at September 30, 2022 and December 31, 2021, respectively
6 6 
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
1,056 1,056 
Additional paid-in capital4,444 4,369 
Retained earnings27,585 24,766 
Accumulated other comprehensive loss(353)(94)
Treasury stock, at cost; 296,412,179 and 280,502,577 shares at September 30, 2022 and December 31, 2021, respectively
(18,452)(16,695)
Total stockholders' equity14,286 13,408 
Total liabilities and stockholders' equity$121,886 $110,242 
The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the condensed consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.
September 30,
2022
December 31,
2021
Assets
Restricted cash$1,866 $2,582 
Loan receivables$24,885 $25,449 
Allowance for credit losses allocated to securitized loan receivables$(1,153)$(1,371)
Other assets$6 $4 
Liabilities
Short- and long-term borrowings$11,092 $9,539 
Accrued expenses and other liabilities$13 $6 
See Notes to the Condensed Consolidated Financial Statements.
1

DISCOVER FINANCIAL SERVICES
Condensed Consolidated Statements of Income (unaudited)
(dollars in millions, except for share amounts)
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2022202120222021
Interest income
Credit card loans$2,783 $2,193 $7,475 $6,452 
Other loans476 433 1,343 1,301 
Investment securities35 45 104 142 
Other interest income63 3 86 14 
Total interest income3,357 2,674 9,008 7,909 
Interest expense
Deposits345 156 658 519 
Short-term borrowings1  2  
Long-term borrowings168 113 416 356 
Total interest expense514 269 1,076 875 
Net interest income2,843 2,405 7,932 7,034 
Provision for credit losses773 185 1,476 (45)
Net interest income after provision for credit losses2,070 2,220 6,456 7,079 
Other income
Discount and interchange revenue, net346 299 1,056 879 
Protection products revenue42 43 128 129 
Loan fee income168 121 450 333 
Transaction processing revenue65 58 183 167 
Unrealized (losses) gains on equity investments(37)(167)(394)562 
Realized gains on equity investments33  186  
Other income19 18 64 47 
Total other income636 372 1,673 2,117 
Other expense
Employee compensation and benefits551 483 1,566 1,487 
Marketing and business development276 210 722 539 
Information processing and communications124 121 370 375 
Professional fees241 198 607 567 
Premises and equipment22 23 70 69 
Other expense174 155 406 456 
Total other expense1,388 1,190 3,741 3,493 
Income before income taxes1,318 1,402 4,388 5,703 
Income tax expense312 311 1,029 1,321 
Net income$1,006 $1,091 $3,359 $4,382 
Net income allocated to common stockholders$967 $1,055 $3,277 $4,289 
Basic earnings per common share$3.54 $3.54 $11.74 $14.17 
Diluted earnings per common share$3.54 $3.54 $11.73 $14.16 
See Notes to the Condensed Consolidated Financial Statements.
2

DISCOVER FINANCIAL SERVICES
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(dollars in millions)
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2022202120222021
Net income$1,006 $1,091 $3,359 $4,382 
Other comprehensive loss, net of tax
Unrealized losses on available-for-sale investment securities, net of tax(100)(29)(262)(115)
Unrealized (losses) gains on cash flow hedges, net of tax(2) 3 2 
Other comprehensive loss(102)(29)(259)(113)
Comprehensive income$904 $1,062 $3,100 $4,269 

See Notes to the Condensed Consolidated Financial Statements.
3

DISCOVER FINANCIAL SERVICES
Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited)
(dollars in millions, shares in thousands)
 Additional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive LossTreasury
Stock
Total
Stockholders'
Equity
Preferred StockCommon Stock
 SharesAmountSharesAmount
For the Three Months Ended September 30, 2021
Balance at June 30, 202111 $1,056 568,693 $6 $4,319 $22,936 $(39)$(15,107)$13,171 
Net income— — — — — 1,091 — — 1,091 
Other comprehensive loss — — — — — — (29)— (29)
Purchases of treasury stock— — — — — — — (815)(815)
Common stock issued under employee benefit plans— — 21  2 — — — 2 
Common stock issued and stock-based compensation expense— — 47  24 — — — 24 
Dividends — common stock ($0.50 per share)
— — — — — (151)— — (151)
Dividends — Series C preferred stock ($2,750 per share)
— — — — — (15)— — (15)
Dividends — Series D preferred stock ($3,062.50 per share)
— — — — — (15)— — (15)
Balance at September 30, 202111 $1,056 568,761 $6 $4,345 $23,846 $(68)$(15,922)$13,263 
For the Three Months Ended September 30, 2022
Balance at June 30, 202211 $1,056 569,564 $6 $4,417 $26,776 $(251)$(18,240)$13,764 
Net income— — — — — 1,006 — — 1,006 
Other comprehensive loss — — — — — — (102)— (102)
Purchases of treasury stock— — — — — — — (212)(212)
Common stock issued under employee benefit plans— — 31  2 — — — 2 
Common stock issued and stock-based compensation expense— — 42  25 —