Discover 2014 Annual Report Download

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CONNECTING CUSTOMERS WITH THE FUTURE
2014 ANNUAL REPORT

Table of contents

  • Page 1
    CONNECTING CUSTOMERS WITH THE FUTURE 2014 ANNUAL REPORT

  • Page 2
    ... for rewards, service and value. Across all direct banking products, Discover seeks to help customers meet their financial needs and achieve brighter financial futures. Executive Committee Payment Services PULSE is one of the nation's leading ATM/debit networks, while Diners Club International is...

  • Page 3
    ...2014 • Conventional and FHA loans • Home equity loans Personal Loans • $5 billion in loans • Debt consolidation and major purchases Discover Network • $129 billion volume • 10+ network alliances Pulse Debit Network • $166 billion volume • 3,700 + issuers Diners Club International...

  • Page 4
    ...five years, Discover has expanded significantly in direct banking. We now offer credit cards, personal loans, private student loans, home loans, deposit products and checking accounts that help our customers achieve their financial goals. We have grown to be the world's thirdmost-accepted network...

  • Page 5
    ... to provide cardmembers with "rewards, service and value." We also achieved meaningful growth in personal loans and private student loans, while continuing to invest for the future across our direct banking and payments operations. Net Income $0.8 Bn $2.3 Bn Stock Price at Fiscal Year-End $18...

  • Page 6
    ... in credit risk management across other consumer lending products. In 2014, we grew personal loans by 19% and private student loans by 4% (22% growth rate excluding purchased student loans). We also made Discover Personal Loans more widely available to the general public, and Discover Student Loans...

  • Page 7
    ... 2012 2013 2014 Diners Club International PULSE Discover Network Personal/Other* Student Credit card *Includes other consumer loans and loans held for sale Certificate of Deposits Money Market/Savings/Checking Net Principal Charge-Off Rate 7.53% Efficiency Ratio Net Income [Millions] 39...

  • Page 8
    ...Discover Cashback Checking exceeded 100,000 cross-sold accounts by year end, and we look forward to a broad market launch in 2015. Payments Accomplishments In 2014, Discover achieved growth in dollar volume on our networks while expanding acceptance to more than 31 million global merchant locations...

  • Page 9
    ... customers, compared with only 21% who prefer branches and 14% who prefer ATMs. Our unique business model puts us in excellent position to better connect customers with this increasingly direct future. As a bank and a network, Discover interacts on a daily basis with consumers, merchants, acquirers...

  • Page 10
    As we move forward, Discover will be guided by long-term principles, including our focus on providing outstanding rewards, service and value for our customers, and on being a ï¬,exible partner in the payments industry. Our plans for 2015 include the new Discover it Miles card, which we launched in ...

  • Page 11
    ... of non-profit organizations in 2014. I thank Discover employees for their generous spirit and for their commitment to Discover, our customers and our communities. Finally, I want to recognize the Discover Board of Directors. Our Board includes executives who have led major corporations, as well as...

  • Page 12
    ... To be the leading direct bank and payments partner. MISSION To help people spend smarter, manage debt better and save more so they achieve a brighter financial future. VALUES Doing the right thing Innovation Simplicity Collaboration Openness Volunteerism Enthusiasm Respect Discover.com/company

  • Page 13
    ... calendar year ended December 31, 2014 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...

  • Page 14
    ...Bonus®, Discover Cashback Checking®, Discover® More® Card, Discover it®, Discover® MotivaSM Card, Discover® Open Road® Card, Discover® Network and Diners Club International®. All other trademarks, trade names and service marks included in this annual report on Form 10-K are the property of...

  • Page 15
    ...Discover Network and other consumer banking products and services, including private student loans, personal loans, home loans, home equity loans, prepaid cards and other consumer lending and deposit products. Our Payment Services segment includes PULSE, Diners Club and our Network Partners business...

  • Page 16
    ...cards, student loans, personal loans, home loans, home equity loans and deposit products. For additional information regarding the terms and conditions of these products, see "- Product Terms and Conditions." Credit Cards We currently offer credit cards issued to consumers. Our credit card customers...

  • Page 17
    ...services to home loan customers. For more information regarding our warehouse line of credit, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Funding Sources - Short-Term Borrowings." We offer closed-end home equity loans...

  • Page 18
    ...cards on the Discover Network in North America and on the PULSE and Diners Club network domestically and internationally. Network Partners Business We have agreements with a number of financial institutions, networks and commercial service providers for issuance of products or processing of payments...

  • Page 19
    .... The credit card, student loan, personal loan, home loan, home equity loan and deposit products issued through our Direct Banking segment require significant consumer portfolio investments in risk management, marketing, customer service and related technology, whereas the operation of our Payment...

  • Page 20
    ... management. Product Development In order to attract and retain customers and merchants, we continue to develop new programs, features, and benefits and market them through a variety of channels, including mail, phone and online. Targeted marketing efforts may include balance transfer offers...

  • Page 21
    ...for 180 days and alerting them to key changes to their credit files, providing up to $100 to replace the customer's wallet or purse and, if needed, allowing the customer up to a $1,000 cash advance on his or her Discover card account. Credit ScoreTracker. This product offers customers resources that...

  • Page 22
    ... terms. Each cardmember agreement provides that the account can be used for purchases, cash advances and balance transfers. Each Discover card account is assigned a credit limit when the account is initially opened. Thereafter, individual credit limits may be increased or decreased from time to time...

  • Page 23
    ... due date, balance transfer fees and returned payment fees. We also charge fees each time we decline to honor a balance transfer check, cash advance check, or other promotional check due to such reasons as insufficient credit availability, delinquency or default. The Credit Card Accountability...

  • Page 24
    ... of deposit products directly to consumers on a national basis: certificates of deposit, savings accounts, money market and checking accounts, though at the current time we are offering checking accounts only to existing credit card or deposit customers. All of these deposits are FDIC insured to...

  • Page 25
    ...on a semi-annual basis. Discover card transaction volume was concentrated among our top 100 merchants in the 2014 calendar year with our largest merchant accounting for approximately 8% of total Discover card transaction volume. In order to increase merchant acceptance, Discover Network services the...

  • Page 26
    ... make investments in expanding Discover and Diners Club acceptance in key international markets where an acceptance gap exists. In our payment services business, we compete with other networks for volume and to attract network partners to issue credit, debit and prepaid cards on the Discover, PULSE...

  • Page 27
    ... PULSE and Diners Club brands are important assets, and we take steps to protect the value of these assets and our reputation. Employees As of January 31, 2015, we employed approximately 14,676 individuals. Risk Management Our business exposes us to strategic (including reputational), credit, market...

  • Page 28
    ... Bank Credit Committee, Asset/Liability Management Committees (Discover Financial Services and Discover Bank), the Counterparty Credit Committee, the New Initiatives Committee, the Operational Risk Committee, the Capital Planning Committee, and the Compliance Committee. Chief Executive Officer...

  • Page 29
    ... risk management philosophy and current business model that, in turn, influences our culture and operating style. The determination of risk appetite is directly linked to the strategic and capital planning process and is consistent with our aspirations and mission statement. The expressions of risk...

  • Page 30
    ... credit risk. Consumer credit risk is primarily incurred by Discover Bank through the issuance of (i) unsecured credit including credit cards, student loans and personal loans and (ii) secured credit including secured credit cards, deposit secured loans and home equity loans. Discover Home Loans...

  • Page 31
    ...providing an independent risk perspective to the new initiatives process; and (iii) assessing if there is effective alignment of management's proposed long-term strategic objectives with the risk appetite limits approved by our Board of Directors. Capital Planning Our capital planning and management...

  • Page 32
    ... which is in the United States. Discover Bank, our main banking subsidiary, offers credit card loans, student loans, personal loans and home equity loans as well as certificates of deposit, savings and checking accounts and other types of deposit accounts. Discover Bank is chartered and regulated by...

  • Page 33
    ... by Discover Financial Services and Discover Bank may differ after 2015 based on recently updated rules adopted by the Federal Reserve and the FDIC. For more information, including additional conditions and limits on our ability to pay dividends and repurchase our stock, see "Risk Factors - Credit...

  • Page 34
    ... - Credit, Market and Liquidity Risk - An inability to accept or maintain deposits in the future could materially adversely affect our liquidity position and our ability to fund our business." The FDIA also affords FDIC-insured depository institutions, such as Discover Bank and Bank of New Castle...

  • Page 35
    ... debts incurred prior to the commencement of active duty (including credit card and other open-end debt) and limits the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability. Violations...

  • Page 36
    ... of the federal bank regulators and the National Credit Union Association. In addition, as our payments business has expanded globally through Diners Club, we are subject to government regulation in countries in which our networks operate or our cards are used, either directly or indirectly through...

  • Page 37
    ...advisor with Aquiline Capital Partners, a private equity firm specializing in investments in the financial services industry. From 2006 to 2008, Mr. Graf was a partner at Barrett Ellman Stoddard Capital. Mr. Graf was Executive Vice President and Chief Financial Officer for Fifth Third Bank from 2004...

  • Page 38
    ..., he served as Executive Vice President, Card Programs and Chief Marketing Officer (2008 to 2010), Executive Vice President, Discover Network (2003 to 2008), and Managing Director for our international business (2000 to 2003). Prior to joining us, Mr. Talwar held a number of positions at Citigroup...

  • Page 39
    ... our business strategies or require us to: limit or change our business practices, restructure our products in ways that we may not currently anticipate, limit our product offerings, invest more management time and resources in compliance efforts, limit the fees we can charge for services, or limit...

  • Page 40
    ... Strategic Business Risk We face competition in the credit card market from other consumer financial services providers, and we may not be able to compete effectively, which could result in fewer customers and lower account balances and could materially adversely affect our financial condition, cash...

  • Page 41
    ... credit and debit cards and other card products on the Discover, PULSE and Diners Club networks. Competition with other operators of payment networks is generally based on issuer fees, fees paid to networks (including switch fees), merchant acceptance, network functionality and other economic terms...

  • Page 42
    ...to use their cards at merchant and ATM locations that accept Diners Club cards around the world and would allow Diners Club customers to use their cards on the Discover Network in North America and on the PULSE network both domestically and internationally. Our international network business depends...

  • Page 43
    ...servicing, or retain our warehouse facility, we could incur additional credit risk and losses, and funding costs and liquidity could be adversely impacted. The long-term success of our home loans strategy depends partly upon our ability to manage the expenses and risks of offering home loan products...

  • Page 44
    ...transaction costs, and our business, reputation and financial condition may be harmed as a result. Credit, Market and Liquidity Risk Our business depends on our ability to manage our credit risk, and failing to manage this risk successfully may result in high charge-off rates, which would materially...

  • Page 45
    ... techniques and models. We continue to expand our marketing of our personal, private student loan and home loan products, including the launch of a new home equity loan product in late 2013. We have less experience in these areas as compared to our traditional credit card lending business, and there...

  • Page 46
    ...prohibits insured banks, such as our subsidiary Discover Bank, from accepting brokered deposits (as defined in the FDIA) and applies other restrictions, such as a cap on interest rates we may pay. See "Business - Supervision and Regulation" and Note 17: Capital Adequacy to our consolidated financial...

  • Page 47
    ...could materially adversely affect our cost of funds, access to capital and funding, and overall financial condition. There can be no assurance that we will be able to maintain our current credit ratings or that our credit ratings will not be lowered or withdrawn. We may not be successful in managing...

  • Page 48
    ...or financial condition. For information related to interest rate risk sensitivities, see "Quantitative and Qualitative Disclosures About Market Risk." We may be limited in our ability to pay dividends on and repurchase our stock. In the year ended December 31, 2014, we increased our quarterly common...

  • Page 49
    ... loan-level, portfolio segments, entire portfolios and products. These models use a set of computational rules to generate numerical estimates of uncertain values to be used for assessment of price, financial forecasts, and estimates of credit, interest rate, market, and operational risk. All models...

  • Page 50
    ... to security systems as we increase acceptance of the Discover card internationally, expand our suite of online direct banking products, enhance our mobile payment technologies, acquire new or outsource some of our business operations, expand our internal usage of web-based products and applications...

  • Page 51
    ... success of both our card-issuing and payment processing businesses. Merchants are concerned with the fees charged by credit card and debit card networks. They seek to negotiate better pricing or other financial incentives as a condition of continued participation in the Discover Network and PULSE...

  • Page 52
    ... fraud continues to increase for the financial services industry in general. Additionally, our risk of fraud continues to increase as acceptance of the Discover card grows internationally and we expand our direct banking business. Our financial condition, the level of our fraud charge-offs and other...

  • Page 53
    ...financial condition, cash flows and results of operations. As an issuer and merchant acquirer in the United States on the Discover Network, and as a holder of certain merchant agreements internationally for the Diners Club network, we may be contingently liable for certain disputed credit card sales...

  • Page 54
    ... our business strategies or require us to: limit or change our business practices, restructure our products in ways that we may not currently anticipate, limit our product offerings, invest more management time and resources in compliance efforts, limit the fees we can charge for services, or limit...

  • Page 55
    ... in requirements on Discover and other card issuers or networks that could increase costs or adversely affect the competitiveness of our credit card or debit card products. See the discussion on recent security developments in "Management's Discussion and Analysis of Financial Condition and Results...

  • Page 56
    ... investments in new businesses, products or technologies; our ability to manage our credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit...

  • Page 57
    ...Home Loans offices and a Student Loan Corporation office. The call centers, processing center and Student Loan Corporation offices largely support our Direct Banking segment; the PULSE headquarters is used by our Payment Services segment; the Discover Home Loans offices support our mortgage business...

  • Page 58
    ... and Share Repurchases," "Risk Factors - Credit, Market and Liquidity Risk - We may be limited in our ability to pay dividends on and repurchase our stock" and "- We are a holding company and depend on payments from our subsidiaries," "Management's Discussion and Analysis of Financial Condition and...

  • Page 59
    ... common stock related to our share repurchase program and employee transactions that were made by us or on our behalf during the most recent quarter: Total Number of Shares Purchased Total Number of Shares Purchased as Part of Publicly Announced Plan or Program(1) Maximum Dollar Value of Shares that...

  • Page 60
    ... year ended November 30, 2012 and one month ended December 31, 2012 and the statement of financial condition data as of December 31, 2014 and 2013 have been derived from our audited consolidated financial statements included elsewhere in this annual report on Form 10-K. The statement of financial...

  • Page 61
    Discover Financial Services Selected Financial Data For the Calendar Years Ended December 31, 2014 2013 2012 For the Fiscal Years Ended November 30, 2011 2010 For the One Month Ended December 31, 2012 (dollars in millions, except per share amounts) Statement of Income Data: Interest income ...$ ...

  • Page 62
    ...One Month Ended December 31, 2012 (dollars in millions) Selected Statistics: Total Loan Receivables Loan receivables ...$ 69,969 Average loan receivables ...$ 65,853 Interest yield ...Net principal charge-off rate ...Delinquency rate (over 30 days) ...Delinquency rate (over 90 days) ...Credit Card...

  • Page 63
    ... services and payment services through our subsidiaries. We offer our customers credit card loans, private student loans, personal loans, home loans, home equity loans and deposit products. We also operate the Discover Network, the PULSE network ("PULSE") and Diners Club International ("Diners Club...

  • Page 64
    ... year, our capital market activities included issuances of approximately $4.7 billion in public credit card asset-backed securities. Discover Bank issued $1.7 billion in senior bank notes. We repurchased approximately 27 million shares of common stock for $1.3 billion, reducing our number of shares...

  • Page 65
    ... in an increase in supervisory examinations of Discover related to private student loans. The CFPB is currently investigating certain student loan servicing practices of Discover Bank. See Note 19: Litigation and Regulatory Matters to our consolidated financial statements for more information...

  • Page 66
    ... fee limitations. The changing debit card environment, including competitor actions related to merchant and acquirer pricing and transaction routing strategies, has adversely affected and is expected to continue to adversely affect our PULSE network's business practices, network transaction volume...

  • Page 67
    ... rules applicable to bank holding companies with $50 billion or more in total consolidated assets, including Discover, became effective in November 2014. The rule provides guidance with respect to the current capital plan and stress testing cycle. It also modifies the start date of the capital plan...

  • Page 68
    ...Discover-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home loans, home equity loans, prepaid cards and other consumer lending and deposit products. The majority of Direct Banking revenues...

  • Page 69
    ... presents segment data (dollars in millions): For the Calendar Years Ended December 31, 2014 Direct Banking Interest income Credit card ...$ Private student loans ...PCI student loans ...Personal loans ...Other ...Total interest income ...Interest expense ...Net interest income ...Provision for loan...

  • Page 70
    ... card activity related to net sales, balance transfers, cash advances and other activity. Represents Discover card activity related to net sales. Direct Banking For the Year Ended December 31, 2014 compared to the Year Ended December 31, 2013 Our Direct Banking segment reported pretax income...

  • Page 71
    ... as compared to the fiscal year ended November 30, 2012 primarily due to higher average balances of credit card loans, personal loans and private student loans resulting from growth across these products combined with lower credit card loan interest charge-offs. The increase in interest income from...

  • Page 72
    ...Diners Club Italy as held-for-sale in 2014. The decrease in other income was primarily driven by a decrease in transaction processing revenue reflecting the impact of merchant rerouting and lower rates. Transaction dollar volume increased $5.8 billion for the year ended December 31, 2014 as compared...

  • Page 73
    ... relates. Because market data concerning acquisitions of comparable businesses typically are not readily obtainable, other valuation techniques such as earnings multiples and cash flow models are used in estimating the fair values of these reporting units. In applying these techniques, management...

  • Page 74
    ..., could have a material impact on our consolidated financial condition and results of operations. At December 31, 2014, based on the annual impairment testing performed, there was the recognition of an impairment charge of $27 million related to the Discover Home Loans business. No other impairment...

  • Page 75
    ... an increase in provision for loan losses and a decrease in the carrying value of the PCI loans. The accounting and estimates used in our calculations are discussed further in Note 4: Loan Receivables to our consolidated financial statements. Earnings Summary The following table outlines changes in...

  • Page 76
    ... as compared to the fiscal year ended November 30, 2012 primarily due to higher interest income from credit card loans, personal loans and private student loans resulting from growth across these products combined with lower credit card loan interest charge-offs. The increase in interest income from...

  • Page 77
    ... year ended December 31, 2013, fiscal year ended November 30, 2012 and one month ended December 31, 2012 include the impact of interest rate swap agreements used to change a portion of certain floating-rate credit card loan receivables to fixed-rate. (4) Includes federal student loans held for sale...

  • Page 78
    ... Year Ended December 31, 2013 Volume Increase/(decrease) in net interest income due to changes in: Interest-earning assets: Cash and cash equivalents ...$ Restricted cash ...Investment securities ...Loan receivables: Credit card ...Personal loans ...Federal student loans ...Private student loans...

  • Page 79
    ... 31, 2014 Student loans held for sale ...$ Loan portfolio: Credit card loans ...Other loans: Personal loans ...Private student loans ...Mortgage loans held for sale...Other ...Total other loans ...PCI loans(1) ...Total loan portfolio ...Total loan receivables ...Allowance for loan losses ...Net loan...

  • Page 80
    ...2012. The increase was due to lower levels of reserve releases during the calendar year ended December 31, 2013 as compared to the fiscal year ended November 30, 2012, partially offset by a decrease in net charge-offs. For the one month ended December 31, 2012, the provision for loan losses was $178...

  • Page 81
    ...charge-offs ...Balance at end of period ...$ (1,604) 504 (1,100) 1,406 $ (86) 7 (79) 112 $ (48) 2 (46) 113 $ (1) - (1) 17 $ (1,739) 513 (1,226) 1,648 893 92 84 17 1,086 1,613 $ Personal Loans 99 Student Loans $ 75 $ Other 1 $ Total 1,788 For the One Month Ended December 31, 2012 Credit Card Balance...

  • Page 82
    ... $ Personal Loans 95 Student Loans $ 14 $ Other 1 $ Total 1,758 (1) On December 1, 2009, upon adoption of the Financial Accounting Standards Board ("FASB") Statements No. 166 and 167, we recorded $2.1 billion allowance for loan losses related to newly consolidated and reclassified credit card loan...

  • Page 83
    ...The net charge-off rate on our private student loans excluding PCI loans was relatively flat for the year ended December 31, 2014 as compared to year ended December 31, 2013. The net charge-off rate on our credit card loan receivables decreased 41 basis points for the calendar year ended December 31...

  • Page 84
    ...and 90-day delinquency rates for private student loan balances at December 31, 2014 increased compared to the prior year as a result of continued seasoning of the student loan portfolio. Both credit card and personal loan receivables 30-day and 90-day delinquency rates at December 31, 2013 decreased...

  • Page 85
    ...final balloon payment required at the end of the loan term or an extension of the maturity date with the total term not exceeding nine years. Further, in certain circumstances, the interest rate on the loan is reduced. The permanent programs involve changing the terms of the loan in order to pay off...

  • Page 86
    ...partners. We earn discount revenue from fees charged to merchants with whom we have entered into card acceptance agreements for processing credit card purchase transactions. We earn acquirer interchange revenue from merchant acquirers on all Discover Network card transactions and certain Diners Club...

  • Page 87
    ... product revenue reflects lower sales volume as we have stopped selling these products. Loan Fee Income Loan fee income consists primarily of fees on credit card loans and includes late, cash advance and other miscellaneous fees. Loan fee income increased slightly as compared to the year ended...

  • Page 88
    ... Discover Home Loans business along with fair value adjustment resulting from recording Diners Club Italy as held-for-sale. Total other expense increased $142 million for the calendar year ended December 31, 2013 as compared to the fiscal year ended November 30, 2012 primarily due to higher employee...

  • Page 89
    ... additional source of funding. We access the assetbacked securitization market using the Discover Card Master Trust I ("DCMT") and the Discover Card Execution Note Trust ("DCENT"), through which we issue DCENT DiscoverSeries notes both publicly and through private transactions. We retain significant...

  • Page 90
    ... when DCENT's three-month average excess spread rate decreases to below 4.50%, with increasing funding requirements as excess spread levels decline below preset levels to 0%. See Note 5: Credit Card and Student Loan Securitization Activities to our consolidated financial statements for additional...

  • Page 91
    ...see Note 9: Long-Term Borrowings to our consolidated financial statements. Short-Term Borrowings We utilize a warehouse line of credit available up to $205 million as a form of short-term borrowings. This line of credit is used for the sole purpose of funding consumer residential mortgage loans. The...

  • Page 92
    ... currently held by subsidiaries of Discover Bank and, therefore, are not publicly rated. Liquidity We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth and satisfy debt obligations under normal and stress conditions at the Discover Financial Services...

  • Page 93
    ...31, 2014, Discover Financial Services has sufficient cash resources to fund the dividend and debt service payments for at least the next 18 months, which exceeds current ALCO and board limits. We structure our debt maturity schedule to minimize the amount of debt maturing at the bank holding company...

  • Page 94
    ...We currently disclose our Tier 1 common capital ratio as calculated under Basel I for our bank holding company, which is a regulatory capital measure widely used by investors, analysts, rating agencies and bank regulatory agencies to assess the capital position of financial services companies. Since...

  • Page 95
    ... propose each year in our annual capital plan. Also in March 2014, the Federal Reserve published the results of its annual supervisory stress tests for bank holding companies with $50 billion or more in total consolidated assets, including Discover Financial Services. At that same time, we published...

  • Page 96
    ... under an agreement. Our guarantees relate to transactions processed on the Discover Network and certain transactions processed by PULSE and Diners Club. See Note 18: Commitments, Contingencies and Guarantees to our consolidated financial statements for further discussion regarding our guarantees...

  • Page 97
    ... to market risk primarily from changes in interest rates. Interest Rate Risk We borrow money from a variety of depositors and institutions in order to provide loans to our customers, as well as invest in other assets and our business. These loans and other assets earn interest, which we use to pay...

  • Page 98
    ... and competitor responses to those changes may influence customer payment rates, loan balances or deposit account activity. We may face higher-cost alternative sources of funding as a result, which has the potential to decrease earnings. Our interest rate risk management policies are designed to...

  • Page 99
    ... Accounting Oversight Board (United States), the consolidated statement of financial condition, and related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows as of and for the year ended December 31, 2014 of the Company and our report dated...

  • Page 100
    ...financial condition of Discover Financial Services (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the calendar years ended December 31, 2014 and 2013, the fiscal year ended...

  • Page 101
    Consolidated Statements of Financial Condition December 31, 2014 2013 (dollars in millions, except share amounts) Assets Cash and cash equivalents ...$ Restricted cash ...Investment securities (includes $3,847 and $4,931 at fair value at December 31, 2014 and 2013, respectively)...Loan receivables: ...

  • Page 102
    DISCOVER FINANCIAL SERVICES Consolidated Statements of Income For the Calendar Years Ended December 31, 2014 Interest income: Credit card loans ...$ Other loans ...Investment securities ...Other interest income ...Total interest income ...Interest expense: Deposits ...Short-term borrowings ...Long-...

  • Page 103
    ... 2013 For the Fiscal Year Ended November 30, 2012 $ 2,345 For the One Month Ended December 31, 2012 $ 170 DISCOVER FINANCIAL SERVICES (dollars in millions) Net income ...$ Other comprehensive (loss) income, net of taxes Unrealized gain (loss) on available-for-sale investment securities, net of tax...

  • Page 104
    ...' Equity DISCOVER FINANCIAL SERVICES Retained Earnings Treasury Stock (dollars in millions, shares in thousands) Balance at November 30, 2011 .. Net income ...Other comprehensive loss ...Purchases of treasury stock ...Common stock issued under employee benefit plans ...Common stock issued and...

  • Page 105
    ...long-term borrowings ...Repayment of long-term borrowings and bank notes ...Payment of contingent consideration for purchase of net assets of a business, at fair value...Premium paid on debt exchange ...Proceeds from issuance of common stock ...Purchases of treasury stock ...Net increase in deposits...

  • Page 106
    ... and payment services through its subsidiaries. The Company offers its customers credit card loans, private student loans, personal loans, home loans, home equity loans and deposit products. The Company also operates the Discover Network, the PULSE network ("PULSE"), and Diners Club International...

  • Page 107
    ... model, the new guidance will have no effect on the Company's financial condition, results of operations or cash flows. 2. Summary of Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents is defined by the Company as cash on deposit with banks, including time deposits...

  • Page 108
    ... of tax, reported as a component of accumulated other comprehensive income included in stockholders' equity. The Company estimates the fair value of available-for-sale investment securities as more fully discussed in Note 20: Fair Value Measurements and Disclosures. The amortized cost for each held...

  • Page 109
    ... The entire balance of an account is contractually past due if the minimum payment is not received by the specified date on the customer's billing statement. Delinquency is reported on loans that are 30 days or more past due. Credit card loans are charged off at the end of the month during which...

  • Page 110
    ... difference between the loan balance and the discounted present value of cash flows expected to be collected. Consistent with the Company's measurement of impairment of modified loans on a pooled basis, the discount rate used for credit card loans in internal programs is the average current annual...

  • Page 111
    ... the three months ended December 31, 2014 related to the Discover Home Loans business. The impairment charge was recorded in the other expense line as a component of total other expense in the accompanying consolidated and combined statements of income and within the Direct Banking segment. See Note...

  • Page 112
    ... cash flows arising from changes in interest rates, or other types of forecasted transactions, and changes in foreign exchange rates. All derivatives are carried at their estimated fair values on the Company's consolidated statements of financial condition. Derivatives having gross positive fair...

  • Page 113
    ... fees charged to merchants with whom the Company has entered into card acceptance agreements for processing credit card purchase transactions. The Company earns acquirer interchange revenue from merchant acquirers on all Discover Network, Diners Club and PULSE transactions made by credit and debit...

  • Page 114
    ... debit point-of-sale transactions over the PULSE network and is recognized at the time the transactions are processed. Transaction processing revenue also includes network participant revenue earned by PULSE related to fees charged for maintenance, support, information processing and other services...

  • Page 115
    ... of cash as of December 31, 2014 and 2013, respectively. Amount represents corporate debt obligations issued under the Temporary Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC). Consists of residential mortgage-backed securities issued by...

  • Page 116
    ...58 $ - $ (2) $ (1) (2) (3) (4) Available-for-sale investment securities are reported at fair value. Held-to-maturity investment securities are reported at amortized cost. Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs...

  • Page 117
    ... 31, 2014 Available-for-Sale Investment Securities Residential mortgage-backed securities - Agency ...8 $ 97 $ - $ 225 $ (1) Less than 12 months Fair Value Unrealized Losses More than 12 months Fair Value Unrealized Losses December 31, 2013 Available-for-Sale Investment Securities Residential...

  • Page 118
    ... Ten Years After Ten Years Total Available-for-Sale-Fair Values U.S. Treasury securities ...$ U.S. government agency securities ...Residential mortgage-backed securities - Agency ...Total available-for-sale investment securities ...$ Held-to-Maturity-Fair Values U.S. Treasury securities ...$ State...

  • Page 119
    ... loans held for sale are pledged as collateral against the warehouse line of credit used to fund consumer residential loans. Other includes home equity loans. Amounts include $2.0 billion and $2.2 billion of loans pledged as collateral against the notes issued from the Student Loan Corporation...

  • Page 120
    ... month ended December 31, 2012, respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. This amount was estimated based on customers' current balances and most recent interest rates. Credit...

  • Page 121
    ... the One Month Ended December 31, 2012 Net Chargeoffs 106 Net Chargeoff Rate 2.47% 2.27% $ 2.21% $ 1,240 2.62% $ 2.14% $ 1,328 1.98% $ 1,328 As part of credit risk management activities, on an ongoing basis the Company reviews information related to the performance of a customer's account with...

  • Page 122
    ... 12 months at a time. Loans in these programs are not considered to be in forbearance. Allowance for Loan Losses The following tables provide changes in the Company's allowance for loan losses for the periods presented (dollars in millions): For the Calendar Year Ended December 31, 2014 Credit Card...

  • Page 123
    ... changes in the Company's allowance for loan losses for the periods presented (dollars in millions): For the Fiscal Year Ended November 30, 2012 Credit Card Balance at beginning of period ...$ Additions: Provision for loan losses ...Deductions: Charge-offs ...Recoveries ...Net charge-offs ...Balance...

  • Page 124
    ...-PCI private student loans. Excludes mortgage loans held for sale. Certain other loans, including non-performing Diners Club licensee loans, are individually evaluated for impairment. Troubled Debt Restructurings The Company has internal loan modification programs that provide relief to credit card...

  • Page 125
    ...the credit card customers discussed above. Payments are modified based on the new terms agreed upon with the credit counseling agency. Personal loans included in temporary and permanent programs are accounted for as troubled debt restructurings. Beginning in first quarter of 2014, loan modifications...

  • Page 126
    ... below (dollars in millions): Average recorded investment in loans For the Calendar Year Ended December 31, 2014 Credit card loans Modified credit card loans(3) ...$ Internal programs ...$ External programs ...$ Personal loans ...$ Private student loans (4) Interest income recognized during period...

  • Page 127
    ... One Month Ended December 31, 2012 Number of Accounts Aggregated Outstanding Balances Upon Default Number of Accounts Troubled debt restructurings that subsequently defaulted: Credit card(1)(2): Internal programs ...External programs ...Personal loans(2) ...Private student loans ...(3) Number of...

  • Page 128
    ...include private student loans that are greater than 120 days delinquent that are covered by an indemnification agreement or insurance arrangements through which the Company expects to recover a substantial portion of the loan. The net charge-off rate on PCI student loans for the calendar years ended...

  • Page 129
    ...38.2 100.0% 5. Credit Card and Student Loan Securitization Activities Credit Card Securitization Activities The Company accesses the term asset securitization market through the Discover Card Master Trust I ("DCMT") and the Discover Card Execution Note Trust ("DCENT"), which are trusts into which...

  • Page 130
    ... certificates held by subsidiaries of Discover Bank, constitute intercompany positions which are eliminated in the preparation of the Company's consolidated statement of financial condition. Upon transfer of credit card loan receivables to the trust, the receivables and certain cash flows derived...

  • Page 131
    ... subsidiaries of Discover Bank. The Company continues to own and service the accounts that generate the loan receivables held by the trusts. Discover Bank receives servicing fees from the trusts based on a percentage of the monthly investor principal balance outstanding. Although the fee income...

  • Page 132
    ... loans has been transferred to third parties under private credit insurance or indemnification arrangements. The carrying values of these restricted assets, which are presented on the Company's condensed consolidated statements of financial condition as relating to securitization activities...

  • Page 133
    ...recognition of non-cash impairment charge of $27 million during the three months ended December 31, 2014 related to the Discover Home Loans business based on its carrying values exceeding its fair values. The Company reduced its fair value estimate as a result of a fourth quarter reevaluation of the...

  • Page 134
    ... based on intangible assets at the end of the current period (dollars in millions): Year 2015 2016 2017 2018 2019 Amount 5 4 3 3 2 8. Deposits The Company offers its deposit products to customers through two channels: (i) through direct marketing, internet origination and affinity relationships...

  • Page 135
    ... money market deposit accounts ...Total interest-bearing deposits ...$ Average annual interest rate ... (1) $100,000 represents the basic insurance amount previously covered by the FDIC. Effective July 21, 2010, the basic insurance per depositor was permanently increased to $250,000. At the end...

  • Page 136
    ... Hedging Activities. Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 18 to 58 basis points and 3-month LIBOR + 20 basis points. The Company uses interest rate swaps to manage its exposure to changes in...

  • Page 137
    ... open market, in private transactions or otherwise. Directors' Compensation Plan The Discover Financial Services Directors' Compensation Plan (the "Directors' Compensation Plan"), which is stockholder approved, permits the grant of RSUs to non-employee directors. The total number of units available...

  • Page 138
    ... The following table sets forth the activity related to vested and unvested RSUs: Number of Units RSUs at December 31, 2013 ...Granted ...Conversions to common stock ...Forfeited ...RSUs at December 31, 2014 ...4,143,915 567,506 $ $ WeightedAverage Grant-Date Fair Value 27.38 54.01 24.22 41.34...

  • Page 139
    ... 31, 2014 Intrinsic value of RSUs converted to common stock ...$ Grant-date fair value of RSUs vested ...$ Weighted-average grant-date fair value of RSUs granted ...$ 72 30 54.01 $ $ $ 2013 63 27 42.14 For the Fiscal Year Ended November 30, 2012 $ $ $ 49 28 25.64 For the One Month Ended December 31...

  • Page 140
    ... Month Ended December 31, 2012 $ 6 As of December 31, 2014 and 2013 there was no unrecognized compensation cost related to non-vested stock options granted under the Company's Omnibus Plan, as all these options have vested. The Company utilized the Black-Scholes pricing model to estimate the fair...

  • Page 141
    ... term equal to the expected life assumed at the date of grant. 11. Employee Benefit Plans The Company sponsors the Discover Financial Services Pension Plan (the "Discover Pension Plan"), which is a non-contributory defined benefit plan that is qualified under Section 401(a) of the Internal Revenue...

  • Page 142
    ... and fair value of plan assets as well as a summary of the Discover Pension Plan's funded status (dollars in millions): For the Calendar Years Ended December 31, 2014 Reconciliation of benefit obligation: Benefit obligation at beginning of year ...$ Service cost ...Interest cost ...Employee...

  • Page 143
    ... targets for the Discover Pension Plan based on its assessment of business and financial conditions, demographic and actuarial data, funding characteristics and related risk factors. Other relevant factors, including industry practices and long-term historical and prospective capital market returns...

  • Page 144
    ... investments that are traded on an active market. The fair value of the stable value product is calculated as the present value of future cash flows. There were no transfers between Levels 1 and 2 within the fair value hierarchy for the years ended December 31, 2014 and 2013. Cash Flows The Company...

  • Page 145
    ... price equal to $1,000 per share of preferred stock plus declared and unpaid dividends. Any dividends declared on the preferred stock will be payable quarterly in arrears at a rate of 6.50% per annum. Stock Repurchase Program On April 16, 2014, the Company's board of directors approved a share...

  • Page 146
    ...71 (52) 19 4 23 ... Balance at December 31, 2014 ...$ (1) (2) (3) (4) (5) Represents the difference between the fair value and amortized cost of available-for-sale investment securities. Represents unrealized gains (losses) related to effective portion of cash flow hedges. Reflects adjustments to...

  • Page 147
    ...): Before Tax For the Calendar Year Ended December 31, 2014 Available-for-Sale Investment Securities: Net unrealized holding gains arising during the period ...$ Amounts reclassified from accumulated other comprehensive income ...Net change ...$ Cash Flow Hedges: Net unrealized losses arising...

  • Page 148
    ... 15. Income Taxes Income tax expense consisted of the following (dollars in millions): For the Calendar Years Ended December 31, 2014 2013 For the Fiscal Year Ended November 30, 2012 $ 1,113 149 1,262 For the One Month Ended December 31, 2012 $ 101 15 116 Current: U.S. federal ...$ U.S. state and...

  • Page 149
    ... Company's net deferred income taxes, which are included in other assets in the consolidated statements of financial condition, were as follows (dollars in millions): December 31, 2014 Deferred tax assets: Allowance for loan losses ...$ Customer fees and rewards ...Compensation and benefits ...State...

  • Page 150
    ... the fiscal year ended November 30, 2012 and increased by $2 million to $101 million for the one month ended December 31, 2012. The changes primarily relate to the revaluation of existing federal and state tax issues. The Company is subject to examination by the Internal Revenue Service ("IRS") and...

  • Page 151
    ...by the Federal Deposit Insurance Corporation (the "FDIC"). Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial position and...

  • Page 152
    ... regulatory restrictions. Under the current banking regulations, a bank may not pay dividends if such a payment would leave the bank inadequately capitalized. In the calendar years ended December 31, 2014 and 2013 and fiscal year ended November 30, 2012, Discover Bank paid dividends of $1.8 billion...

  • Page 153
    ... investor interests in credit card asset-backed securities plus the principal amount of any other outstanding secured borrowings. The Company has recorded substantially all of the maximum potential amount of future payments in long-term borrowings on the Company's statement of financial condition...

  • Page 154
    ... customers with these merchants. However, Diners Club retains a counterparty exposure if a licensee fails to meet its financial payment obligation to one of these merchants. ATM Guarantee. PULSE entered into contractual relationships with certain international ATM acquirers in which DFS Services...

  • Page 155
    ...customer until a later date following the purchase, the likelihood of a contingent payment obligation by the Discover Network increases. Losses related to merchant chargebacks were not material for the calendar years ended December 31, 2014 and 2013, fiscal year ended November 30, 2012 and one month...

  • Page 156
    ...ratings, customer restitution or other relief, which could materially impact the Company's financial statements, increase its cost of operations, or limit its ability to execute its business strategies and engage in certain business activities. For example, Discover Bank entered into a Consent Order...

  • Page 157
    ... (often spanning multiple years and, in some cases, a wide range of business activities), unspecified damages and/or the novelty of the legal issues presented. The outcome of pending matters could be material to the Company's consolidated financial condition, operating results and cash flows for...

  • Page 158
    ..., certain techniques used to measure fair value involve some degree of judgment and, as a result, are not necessarily indicative of the amounts the Company would realize in a current market exchange. During the years ended December 31, 2014 and 2013, there were no changes to the Company's valuation...

  • Page 159
    ... at fair value on a recurring basis are as follows (dollars in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Balance at December 31, 2014 Assets U.S. Treasury securities ...$ U.S. government agency securities ...Residential mortgage-backed securities - Agency ...Available...

  • Page 160
    ...loan amount, note rate, loan program, expected sale date of the loan and, most significantly, investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. Mortgage loans held for sale are classified as Level 2 as the investor pricing tables used to value...

  • Page 161
    ...to any changes to the valuation techniques performed by proprietary pricing models prior to implementation, working closely with the third-party valuation service, and reviews the control objectives of the service at least annually. The Company corroborates the fair value of foreign exchange forward...

  • Page 162
    ... to the Company's Level 3 financial assets and liabilities measured at fair value on a recurring and non-recurring basis at the end of the current period (dollars in millions): Fair Value At December 31, 2014 Interest rate lock commitments ...$ 7 Quantitative risk models Loan funding probability 13...

  • Page 163
    ... fair value (dollars in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Balance at December 31, 2014 Assets U.S. Treasury securities ...$ States and political subdivisions of states ...Residential mortgage-backed securities - Agency ...Held-to-maturity investment securities...

  • Page 164
    ... owed to credit card securitization investors are determined utilizing quoted market prices of the same transactions and, as such, are classified as Level 2. Fair values of long-term borrowings owed to student loan securitization investors are calculated by discounting cash flows using estimated...

  • Page 165
    ..., such as interest rate risk, are considered fair value hedges. Cash Flow Hedges The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on credit card securitized debt and deposits, and previously from...

  • Page 166
    ... in the transaction. Such agreements are not speculative and are also used to manage interest rate risk but are not designated for hedge accounting. Changes in the fair value of these contracts are recorded in other income. Foreign Exchange Forward Contracts The Company has foreign exchange forward...

  • Page 167
    ... and related collateral balances (dollars in millions). December 31, 2014 Number of Outstanding Derivative Contracts December 31, 2013 Notional Amount Derivatives designated as hedges: Interest rate swaps - cash flow hedge...$ Interest rate swaps - fair value hedge...$ Foreign exchange forward...

  • Page 168
    ... the consolidated financial statements such impact is reported for the period (dollars in millions): Amount of (Loss) Gain Recognized in Other Comprehensive Income For the Calendar Years Ended December 31, Location Derivatives designated as hedges: Interest rate swaps-cash flow/net investment hedges...

  • Page 169
    ...Discover-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home loans, home equity loans, prepaid cards and other consumer lending and deposit products. The majority of Direct Banking revenues...

  • Page 170
    ...presents segment data for the period (dollars in millions): Direct Banking For the Calendar Year Ended December 31, 2014 Interest income Credit card ...$ Private student loans ...PCI student loans ...Personal loans ...Other ...Total interest income...443 2,015 3,340 3,694 Payment Services Total -156-

  • Page 171
    ... products are offered on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties, and these receivables are included in the loan receivables in the Company's consolidated statements of financial condition. They were not material to the Company...

  • Page 172
    ...restricted net assets of consolidated subsidiaries exceed 25% of consolidated net assets. Condensed Statements of Financial Condition December 31, 2014 Assets: Cash and cash equivalents ...$ Notes receivable from subsidiaries (1) Discover Financial Services (Parent Company Only) 2013 (dollars in...

  • Page 173
    Discover Financial Services (Parent Company Only) Condensed Statements of Income For the Calendar Years Ended December 31, 2014 Interest income ...$ Interest expense ...Net interest expense ...Dividends from subsidiaries ...Total income (loss) ...Other expense Employee compensation and benefits ......

  • Page 174
    ...of long-term borrowings ...Proceeds from advances from subsidiaries ...Purchases of treasury stock ...Net (decrease) increase in deposits ...Premium paid on debt exchange ...Dividends paid on common and preferred stock ...Net cash used for financing activities ...Increase (decrease) in cash and cash...

  • Page 175
    ... During the three months ended December 31, 2014, the Company made certain changes to its customer rewards program eliminating forfeitures. These changes resulted in a one-time expense of $178 million due to the reversal of the estimate for customer rewards forfeiture, a contra-account to accrued...

  • Page 176
    ... registered public accounting firm, and the firm's report on this matter is included in Item 8 of this annual report on Form 10-K. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting (as such term is defined in Exchange Act...

  • Page 177
    ... - Board Meetings and Committees" Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our Chief Executive Officer and our Chief Financial Officer. You can find our Code of Ethics and Business Conduct on our internet site, www.discover.com. We will post...

  • Page 178
    "Other Matters - Certain Transactions" "Corporate Governance - Director Independence" Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services under the caption "Ratification of Appointment of Independent Registered Public Accounting Firm" in ...

  • Page 179
    ... to be filed in this annual report on Form 10-K are listed below and appear on pages 85 through 161 herein. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm ...85 Consolidated Statements of Financial Condition as of December 31, 2014 and 2013...

  • Page 180
    ...of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Discover Financial Services (Registrant) By: /s/ R. MARK GRAF R. Mark Graf Executive Vice President and Chief Financial Officer Date: February...

  • Page 181
    ... on Form 10-K. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 25, 2015. Signature /S/ DAVID W. NELMS Title Chairman and Chief Executive Officer...

  • Page 182
    ... the Sale and Purchase of the Goldfish Credit Card Business, dated February 7, 2008, among Discover Financial Services, Goldfish Bank Limited, Discover Bank, SCFC Receivables Corporation, and Barclays Bank Plc (filed as Exhibit 2.1 to Discover Financial Services' Current Report on Form 8-K filed on...

  • Page 183
    ...U.S. Bank National Association, as fiscal and paying agent (filed as Exhibit 4.1 to Discover Financial Services' Current Report on Form 8-K filed on August 7, 2014 and incorporated herein by reference thereto). Other instruments defining the rights of holders of long-term debt securities of Discover...

  • Page 184
    ...Services Employee Stock Purchase Plan (filed as Exhibit 10.3 to Discover Financial Services' Quarterly Report on Form 10-Q filed on September 28, 2011 and incorporated herein by reference thereto). Offer of Employment, dated as of January 8, 1999 (filed as Exhibit 10.2 to Discover Financial Services...

  • Page 185
    ... incorporated by reference thereto). Amendment to Purchase Price Adjustment Agreement by and among Citibank, N.A., The Student Loan Corporation and Discover Bank, dated December 30, 2010 (filed as Exhibit 10.33 to Discover Financial Services' Annual Report on Form 10-K filed on January 26, 2011 and...

  • Page 186
    ... to the Directors' Compensation Plan of Discover Financial Services, effective as of May 7, 2014 (filed as Exhibit 10.2 to Discover Financial Services' Quarterly Report on Form 10-Q filed on August 1, 2014 and incorporated herein by reference thereto). Statement Re: Computation of Per Share Earnings...

  • Page 187
    Exhibit Number Description 101.PRE * †XBRL Taxonomy Extension Presentation Linkbase Document. We agree to ...accordance with Item 601(b)(2) of Regulation S-K. Management contract or compensatory plan or arrangement required to be filed as an exhibit to Form 10-K pursuant to Item 15(b) of this...

  • Page 188
    Exhibit 12.1 DISCOVER FINANCIAL SERVICES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND COMPUT ATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (dollars in millions) For the Calendar Years Ended December 31, 2014 Earnings: Income before income tax expense ...$ Losses ...

  • Page 189
    ..., Inc...Discover Global Employment Company Private Limited ...Discover Home Loans, Inc...Discover Information Technology (Shanghai) Limited ...Discover Products Inc...Discover Properties LLC ...Discover Services Corporation ...DFS Corporate Services LLC ...DFS Escrow, Inc...DFS International Inc...

  • Page 190
    ...reports dated February 25, 2015, relating to the consolidated financial statements of Discover Financial Services, and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of Discover Financial Services for the calendar year ended...

  • Page 191
    ...; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. 5. Date: February 25, 2015 /s/ DAVID W. NELMS David W. Nelms Chairman of the Board and Chief Executive Officer

  • Page 192
    ...; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 3. 4. 5. b) Date: February 25, 2015 /s/ R. MARK GRAF R. Mark Graf Executive Vice President and Chief Financial Officer

  • Page 193
    ... Discover Financial Services (the "Company") on Form 10-K for the period ended December 31, 2014, as filed with the Securities and Exchange Commission (the "Report"), each of David W. Nelms, Chairman of the Board and Chief Executive Officer of the Company, and R. Mark Graf, Executive Vice President...

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  • Page 197
    ... of our business, including, but not limited to: Discover®, PULSE, Cashback Bonus®, Discover Cashback Checking , Discover More Card, Discover it , Discover Network and Diners Club International. All other trademarks, trade names and service marks included in this Annual Report are the property of...

  • Page 198
    ... Executive Vice President and Chief Financial Officer Kelly McNamara Corley Executive Vice President, General Counsel and Secretary Diane E. Offereins Executive Vice President, President-Payment Services Discover.com/company James V. Panzarino Executive Vice President, President-Credit and Card...

  • Page 199
    ... Corporate Web site: www.computershare.com/investor Annual Shareholders' Meeting The 2015 Annual Meeting of Shareholders Steven E. Cunningham Senior Vice President, Chief Risk Officer Carlos M. Minetti Executive Vice President, President -Consumer Banking of Discover Financial Services Wednesday...

  • Page 200
    2500 Lake Cook Road • Riverwoods, Illinois 60015 • Discover.com/company