Discover 2015 Annual Report Download - page 96

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The following table provides a reconciliation of CET1 capital calculated under Basel III transition rules to CET1
capital calculated and risk-weighted assets under fully phased-in Basel III rules (dollars in millions):
December 31,
2015
Common equity Tier 1 capital (Basel III transition) ...................................................................................................................... $ 10,566
Adjustments related to capital components during transition(1) ................................................................................................. (82)
Common equity Tier 1 capital (Basel III fully phased-in) .............................................................................................................. $ 10,484
Risk-weighted assets (Basel III fully phased-in)(2) ......................................................................................................................... $ 75,685
Common equity Tier 1 capital ratio (Basel III fully phased-in) ...................................................................................................... 13.9%
(1) Adjustments related to capital components for fully phased-in Basel III include the phase-in of the intangible asset exclusion.
(2) Key differences under fully phased-in Basel III rules in the calculation of risk-weighted assets include higher risk weighting for past-due loans and unfunded
commitments.
Additionally, we are required to submit an annual capital plan to the Federal Reserve that includes an assessment
of our expected uses and sources of capital over the nine quarter planning horizon. In January 2015, we submitted our
annual capital plan to the Federal Reserve under the Federal Reserve’s Comprehensive Capital Analysis and Review, or
CCAR, program, which included planned dividends and share repurchases over the nine quarter planning horizon. In
March 2015, we received non-objection from the Federal Reserve with respect to our proposed capital actions through
June 30, 2016. Our ability to make capital distributions, including our ability to pay dividends or repurchase shares of
our common stock, will continue to be subject to the Federal Reserve’s review and non-objection of the actions that we
propose each year in our annual capital plan.
Also in March 2015, 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 company-run stress test results for Discover Financial Services and Discover Bank. Discover
Financial Services is required to publish company-run stress tests results twice each year in accordance with Federal
Reserve rules and Discover Bank is required to publish bank-run stress test results under FDIC rules. We published our
mid-year stress test results in July 2015.
We recently declared a quarterly cash dividend on our common stock of $0.28 per share, payable on
February 18, 2016 to holders of record on February 4, 2016, which is consistent with the dividend amount that we
paid in each of the second, third and fourth quarters of 2015. We also recently declared a quarterly cash dividend on
our preferred stock of $16.25 per share, equal to $0.40625 per depositary share, payable on February 29, 2016 to
holders of record on February 10, 2016, which was the same as the amount paid on our preferred stock in each of the
prior four quarters.
On April 16, 2015, our board of directors approved a five-quarter share repurchase program authorizing the
repurchase of up to $2.2 billion of our outstanding shares of common stock. The program expires on July 31, 2016
and may be terminated at any time. This program replaced the prior $3.2 billion program, which had $1.7 billion of
remaining authorization. During the year ended December 31, 2015, we repurchased approximately 29 million
shares, or 6%, of our outstanding common stock for $1.7 billion. We expect to continue to make share repurchases
under our repurchase program from time to time based on market conditions and other factors, subject to legal and
regulatory requirements and restrictions. Share repurchases under the program may be made through a variety of
methods, including open market purchases, privately negotiated transactions or other purchases, including block trades,
accelerated share repurchase transactions, or any combination of such methods.
The amount and size of any future dividends and share repurchases will depend upon our results of operations,
financial condition, capital levels, cash requirements, future prospects and other factors. The declaration and payment
of future dividends, as well as the amount thereof, are subject to the discretion of our board of directors. Holders of our
shares of common stock are subject to the prior dividend rights of holders of our preferred stock or the depositary
shares representing such preferred stock outstanding, and if full dividends have not been declared and paid on all
outstanding shares of preferred stock in any dividend period, no dividend may be declared or paid or set aside for
payment on our common stock. In addition, as noted above, banking laws and regulations and our banking regulators
may limit our ability to pay dividends and make share repurchases, including limitations on the extent to which our
banking subsidiaries can provide funds to us through dividends, loans or otherwise. Further, also noted above, current
or future regulatory initiatives may require us to hold more capital in the future. There can be no assurance that we will
declare and pay any dividends or repurchase any shares of our common stock in the future. There can be no assurance