Discover 2012 Annual Report Download

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2012
Annual Report
the power of a brand

Table of contents

  • Page 1
    the power of a brand Annual Report 2012

  • Page 2
    ... exceeding for itself customer expectations in the credit card industry. We have built on our brand to expand into private student loans, personal loans, home loans and deposit products. We have also expanded in the payments industry by partnering with innovative companies and leading financial...

  • Page 3
    ... company's ï¬,agship credit card business, the Direct Banking segment includes personal loans, student loans, home loans, prepaid cards and deposit products. PAYME NT SERVIC ES The Payment Services segment consists of PULSE, one of the nation's leading ATM/debit networks; Diners Club International...

  • Page 4
    ... returning excess capital to shareholders via stock repurchases and dividends. We are focused on being the leading direct bank and payments partner, and our results in 2012 are proof that our strategy and business model are working. Today, we are successful and profitable- and gaining market share...

  • Page 5
    ...credit card business is the cornerstone of our direct banking operations, and the Discover brand is known for rewards, service and value in the card industry. We have built on our brand by expanding into private student loans, personal loans, home loans, savings accounts and certificates of deposit...

  • Page 6
    ... contribute to new account and wallet share growth for Discover. We also expect our cash rewards program to help us achieve loan growth. More U.S. households have a Discover card than any other cash rewards card (TNS 2012 Consumer Card Strategies Research), and as we enter our 27th year, we have...

  • Page 7
    ... is making a difference, as evidenced by increased card usage by cardmembers following interactions with our account managers, and as evidenced by strong third-party assessments of both our online capabilities and superior telephone customer service. Other Direct Banking recent accomplishments...

  • Page 8
    ..., we also help customers consolidate and pay down debt through our popular and successful personal loans product. In June 2012, we further expanded our suite of direct banking products with the launch of Discover Home Loans. Our goal is to become a market leader in direct home loan originations, and...

  • Page 9
    ... a partner as a Diners Club International franchise, and is now going to The Power of a Brand Over the past several years, your company has demonstrated the power of the Discover brand. We have expanded our product offerings and market share in direct banking. We have grown in the payments industry...

  • Page 10
    ...talented Board of Directors. Thank you all for helping to make Discover one of the strongest and most reputable brands in financial services. Together, we will continue to build on our brand as we focus on being the leading direct bank and payments partner. David Nelms Chairman and Chief Executive...

  • Page 11
    ... EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 2012 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...

  • Page 12
    ... and service marks that we use in conjunction with the operation of our business, including, but not limited to: Discover®, PULSE®, Cashback Bonus®, Discover® More® Card, Discover it SM , Discover® MotivaSM Card, Discover® Open Road® Card, Discover® Network and Diners Club International...

  • Page 13
    ... Direct Banking and Payment Services. Our Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer banking products and services, including private student loans, personal loans, home loans, prepaid cards...

  • Page 14
    ... additional financial information relating to our business and our operating segments, see Note 23: Segment Disclosures to our consolidated financial statements. Direct Banking Set forth below are descriptions of our credit cards, student loans, personal loans, home loans and deposit products. For...

  • Page 15
    ...graduation reward as a credit to the balance of any of their Discover student loans or as a direct deposit to a bank account. Personal Loans Our personal loans are unsecured loans with fixed interest rates, terms and payments. These loans are primarily intended to help customers consolidate existing...

  • Page 16
    ...America and on the PULSE and Diners Club network domestically and internationally. Network Partners Business We have agreements related to issuing credit, debit and prepaid cards with a number of other financial institutions or networks for issuance of card products on the Discover Network. We refer...

  • Page 17
    ... credit card, student loan, personal loan, home loan and deposit products issued through our Direct Banking segment require significant investments in credit risk management, marketing, customer service and technology, whereas the operation of the Discover Network and our Payment Services business...

  • Page 18
    ... annual percentage rate ("APR") using an analytical pricing strategy that provides competitive pricing for customers and seeks to maximize revenue on a risk-adjusted basis. For our credit card loans, we also assign a revolving credit line based on risk level and expected return. Portfolio Management...

  • Page 19
    ... miles, partner gift cards starting at 1,000 miles, Discover gift cards starting at 5,000 miles, cash in the form of statement credits or direct deposit to a bank account starting at 5,000 miles, or charitable donations starting at 5,000 miles. Protection Products We currently service and maintain...

  • Page 20
    ... merchants using their Discover card. Our student loan, personal loan and deposit product customers can utilize our online account services to manage their accounts, and to use interactive tools and calculators. For the home loan origination process, we have an online portal for home loan customers...

  • Page 21
    ... we process and bill to customers all activity that occurred in the related accounts during a period of approximately 28 to 32 days that ends on the billing date. Discover card accounts are assessed periodic finance charges using fixed and/or variable interest rates. Certain account balances, such...

  • Page 22
    ...the current year or deferred through either traditional or Roth IRA structures. Money market accounts are transactional accounts with minimum balance requirements. Money market account funds may be accessed through electronic fund transfer, checks, wire transfer and debit cards. Savings accounts may...

  • Page 23
    ...payments processing package to such merchants. Merchants also can apply to our merchant acquirer partners directly to accept Discover Network cards through the acquirers' integrated payments solutions. Merchant acquirers provide merchants with consolidated servicing for Discover, Visa and MasterCard...

  • Page 24
    ...fees, fees paid to networks (including switch fees), merchant acceptance, network functionality, customer perception of service quality, brand image, reputation and market share. The Diners Club and Discover networks' primary competitors are Visa, MasterCard and American Express, and PULSE's network...

  • Page 25
    ... impact on our PULSE network business. We currently expect competitor strategies following such reforms to result in fewer transactions being routed to PULSE and a decline in the rate of PULSE transaction volume growth;" "- We face competition from other consumer financial service providers, and we...

  • Page 26
    ... of our board of directors and chaired by our Corporate Risk Officer, that provides a forum for our senior management team to review and discuss credit, market, liquidity, operational, legal and compliance, and strategic risks across the company and for each business unit. Risk Committee membership...

  • Page 27
    ...Risk Officer and supports business units by providing objective oversight of our risk profile and ensuring risks are managed as defined by policy. Our corporate risk management department also provides risk management tools and policies, and aggregates and reports our risks to our board of directors...

  • Page 28
    ... practices and workplace safety; customer, products and business practices; technology; physical asset and data security; processing; financial and reporting; and external provider. Operational risk exposures are managed through a combination of business line management and enterprise-wide oversight...

  • Page 29
    ...of the Consumer Financial Protection Bureau (the "CFPB"). We operate two banking subsidiaries, each of which is in the United States. Discover Bank, our main banking subsidiary, offers credit card loans, student loans and personal loans, as well as certificates of deposit, savings accounts and other...

  • Page 30
    ... our businesses. For more information regarding the Reform Act, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Environment and Developments" and "Risk Factors." Capital, Dividends and Share Repurchases We, Discover Bank and Bank of New Castle...

  • Page 31
    ... company and depend on payments from our subsidiaries," "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital" and Note 18: Capital Adequacy to our consolidated financial statements. FDIA The Federal Deposit Insurance...

  • Page 32
    ... of interest that may be charged on loans of the type offered by Discover Bank or Bank of New Castle. This flexibility facilitates the current nationwide lending activities of Discover Bank and Bank of New Castle. The FDIA subjects Discover Bank to deposit insurance assessments. Under the Reform Act...

  • Page 33
    ...rates on existing balances to respond to market conditions and credit risk ultimately limits our ability to extend credit to new customers and provide additional credit to current customers. Other CARD Act restrictions have resulted and will continue to result in reduced interest income and loan fee...

  • Page 34
    ... reforms related to the debit card market may have a significant impact on our PULSE network business. We currently expect competitor strategies following such reforms to result in fewer transactions being routed to PULSE and a decline in the rate of PULSE transaction volume growth" and "Management...

  • Page 35
    ... as Executive Vice President and Chief Financial Officer since April 2011. He was also Chief Accounting Officer until December 2012. Prior to joining us, Mr. Graf was an investment advisor with Aquiline Capital Partners, a private equity firm specializing in investments in the financial services...

  • Page 36
    ..., he served as Executive Vice President, Card Programs and Chief Marketing Officer since December 2008 and Executive Vice President, Discover Network since December 2003. From 2000 to 2003, Mr. Talwar was Managing Director for our international business. Mr. Talwar held a number of positions at...

  • Page 37
    ... us. Our business, financial condition, cash flows and/or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks. This annual report on Form 10-K also contains forward-looking statements that...

  • Page 38
    ... markets for our funding, impact the value of our assets, or otherwise adversely affect our businesses. To date, compliance requirements and expenditures have increased for financial services firms, including Discover, and we expect them to continue to increase. In September 2012, Discover Bank...

  • Page 39
    ... regulatory reforms related to the debit card market may have a significant impact on our PULSE network business. We currently expect competitor strategies following such reforms to result in fewer transactions being routed to PULSE and a decline in the rate of PULSE transaction volume growth. The...

  • Page 40
    ... business is highly competitive. We compete with other consumer financial services providers on the basis of a number of factors, including brand, reputation, customer service, product offerings, incentives, pricing and other terms. Competition in credit cards is also based on merchant acceptance...

  • Page 41
    ... the rate of PULSE transaction volume growth. For more information, see the risk factor above addressing legislative and regulatory reforms related to the debit card market. American Express is also a strong competitor, with international acceptance, high transaction fees and an upscale brand image...

  • Page 42
    ... increased the size of our private student loan portfolio, which has grown from $1.0 billion at November 30, 2010 to $7.3 billion at November 30, 2011 and $7.7 billion at November 30, 2012. The long-term success of our student loan strategy depends upon our ability to manage the credit risk, pricing...

  • Page 43
    ... Discover Home Loans, substantially all of the operating and related assets of Home Loan Center, a subsidiary of Tree.com, adding a residential mortgage component to our direct banking business. We are now originating residential mortgages for sale in the secondary mortgage markets on a servicing...

  • Page 44
    ... liability, an inability to maintain or enter into new arrangements with secondary mortgage market purchasers or warehouse lenders and reputational risk. The long-term success of our mortgage business depends upon our ability to manage our expenses and risks. If we are unable to build scale as...

  • Page 45
    ... our business, profitability and financial condition. Our success depends on our ability to manage our credit risk while attracting new customers with profitable usage patterns. We select our customers, manage their accounts and establish terms and credit limits using proprietary scoring models and...

  • Page 46
    ... our deposit products. Our ability to obtain deposit funding and offer competitive interest rates on deposits is also dependent on capital levels of our bank subsidiaries. The Federal Deposit Insurance Act (the "FDIA") prohibits insured banks, including our subsidiary Discover Bank, from accepting...

  • Page 47
    ...-capitalized" at any time and have authority to place limitations on our deposit businesses, including the interest rate we pay on deposits. If we are unable to securitize our receivables, it may have a material adverse effect on our liquidity, cost of funds and overall financial condition. We use...

  • Page 48
    ...materially adversely affect our business and financial condition. We, along with Discover Bank, are regularly evaluated by the ratings agencies, and their ratings for our long-term debt and other securities, including asset-backed securities issued by our securitization trusts, are based on a number...

  • Page 49
    ... from our subsidiaries. Discover Financial Services, our parent holding company, depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments, share repurchases, payments on its obligations, including debt obligations, and to provide funding and capital as...

  • Page 50
    ...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 to continued participation in the Discover Network and PULSE network. -38...

  • Page 51
    ... 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 results of operations could be materially adversely affected if fraudulent activity were to significantly increase. High...

  • Page 52
    ...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 53
    ... and retain customers is highly dependent upon the external perception of our company and brands. Our brands are licensed for use to business partners and network participants, some of whom have contractual obligations to promote and develop our brands. For example, the Discover card brand is now...

  • Page 54
    ...of our risk management program; business strategy, earnings, capital and cash flow; antimoney laundering program; and examination of our non-bank businesses, including Discover Network, PULSE and Diners Club, and their relationships with our banking subsidiaries. Our banking subsidiaries are subject...

  • Page 55
    ...our business, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Environment and Developments." Current and proposed regulation addressing consumer privacy and data use and security could inhibit the number of payment cards issued and increase our...

  • Page 56
    ... investment portfolio; • limits on our ability to pay dividends and repurchase our common stock; • limits on our ability to receive payments from our subsidiaries; • fraudulent activities or material security breaches of key systems; • our ability to increase or sustain Discover card usage...

  • Page 57
    ... Discover Home Loans offices and a SLC office. The call centers, processing center and SLC 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; and our corporate headquarters...

  • Page 58
    ... our stock" and "- We are a holding company and depend on payments from our subsidiaries," "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital" and Note 18: Capital Adequacy to our consolidated financial statements. -46...

  • Page 59
    ... Securities The table below sets forth information regarding purchases of our common stock related to our share repurchase program and employee transactions that were made by us or on our behalf during the three months ended November 30, 2012. Total Number of Shares Purchased as Part of Publicly...

  • Page 60
    ... The statement of income data for each of the years in the three-year period ended November 30, 2012 and the statement of financial condition data as of November 30, 2012 and 2011 have been derived from our audited consolidated financial statements included elsewhere in this annual report on Form 10...

  • Page 61
    ... loan receivables, total assets, return on average assets and average stockholders' equity to average total assets have been modified to include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting Policies for further discussion. The years ended...

  • Page 62
    ... loan receivables, average loan receivables, interest yield, principal net charge-off rate, delinquency rate over 30 days and delinquency rate over 90 days have been modified to include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting Policies...

  • Page 63
    ... the three-year period ended November 30, 2012. Introduction and Overview Discover Financial Services is a direct banking and payment services company. Through our Discover Bank subsidiary, we offer our customers credit card loans, private student loans, personal loans and deposit products. Through...

  • Page 64
    ... used in management's decision-making process and in evaluating the business. The non-GAAP as-adjusted amounts related to Statement No. 167 show how our financial data would have been presented if the trusts used in our securitization activities were consolidated into our financial statements...

  • Page 65
    ... the full impact the consolidation of our trusts would have had if we had adopted Statement No. 167 retrospectively. Loan Receivables Data and Reconciliation As of and for the Year Ended November 30, 2009 Total Loan Receivables Loan portfolio GAAP ...Adjustments for Statement No. 167...Non-GAAP...

  • Page 66
    ...No. 167...Non-GAAP As-Adjusted...Discover Card Total Discover Card Loans GAAP ...Adjustments for Statement No. 167...Non-GAAP As-Adjusted...Total Credit Card Loans Loan receivables GAAP ...Adjustments for Statement No. 167...Non-GAAP As-Adjusted...Allowance for loan losses (beginning of period) GAAP...

  • Page 67
    ... the Year Ended November 30, 2009 Total Credit Card Loans (continued) Delinquencies (over 30 Days) GAAP ...Adjustments for Statement No. 167...Non-GAAP As-Adjusted...Delinquencies (over 90 Days) GAAP ...Adjustments for Statement No. 167...Non-GAAP As-Adjusted...Delinquency Rate (over 30 days) GAAP...

  • Page 68
    Average Balance Sheet Reconciliation For the Year Ended November 30, 2009 Total average loan receivables GAAP ...Adjustments for Statement No. 167...Non-GAAP As-Adjusted...Total loans interest yield GAAP ...Adjustments for Statement No. 167...Non-GAAP As-Adjusted...Total average credit card loan ...

  • Page 69
    ...%, compared to the prior year net charge-off rate of 4.47%. • We began offering residential mortgage loans through Discover Home Loans following our acquisition in June of substantially all of the operating and related assets of Home Loan Center, a subsidiary of Tree.com, Inc. • Payment Services...

  • Page 70
    ... in the second quarter of 2013. We also continue to invest in global brand awareness and acceptance through support of our Diners Club network and arrangements with other banks, networks and merchant acquirers. We expect to see a decline in the rate of PULSE transaction volume growth in 2013 as...

  • Page 71
    ... other private student lenders, we utilize cohort default rates in the determination of eligibility, and we have reviewed our business needs supporting their use. Congress or the Administration may take actions as a result of these studies, or otherwise, that impact the student loan market in the...

  • Page 72
    ... in fewer debit transactions being routed to PULSE and a decline in the rate of PULSE transaction volume growth. Capital In June 2012, the Federal Reserve approved proposed rules that would substantially amend the regulatory risk-based capital rules applicable to us and Discover Bank. The FDIC...

  • Page 73
    ... Discover card-branded credit cards issued to individuals and small businesses and other consumer products and services, including private student loans, personal loans, home loans, prepaid cards and other consumer lending and deposit products. The majority of our Direct Banking revenues relate...

  • Page 74
    ... from data provided by licensees for Diners Club branded cards issued outside North America and is subject to subsequent revision or amendment. Represents gross proprietary sales volume on the Discover Network. Represents Discover card activity related to net sales, balance transfers, cash advances...

  • Page 75
    ... customers using their Discover card. Net interest margin increased for the year ended November 30, 2012 as compared to the same period in 2011. This was driven by improved funding rates on our deposit products, partially offset by lower yields on credit cards and growth in private student loans...

  • Page 76
    ... services agreement related to the acquisition of SLC in first quarter 2011 (see Note 3: Business Combinations to our consolidated financial statements). Furthermore, discount and interchange revenue and revenue from protection products increased during the year ended November 30, 2011 as compared...

  • Page 77
    ... volume. The number of transactions on the PULSE network increased by 16% for the year ended November 30, 2011, as compared to the same period in 2010. Critical Accounting Estimates In preparing our consolidated financial statements in conformity with GAAP, management must make judgments and use...

  • Page 78
    ... purchase activity and the terms of the current rewards programs. We generally recognize reward costs as a reduction of discount and interchange revenue in the consolidated statements of income. If management used a different estimate of forfeitures, our consolidated statement of financial condition...

  • Page 79
    ... loans held for sale are based on the 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. In periods of normal market activity, sufficient market data...

  • Page 80
    ...the year ended November 30, 2012 as compared to the same period in 2011. This increase was primarily due to improved funding rates on our deposit products, partially offset by lower yields on credit cards and growth in private student loans, which have lower yields as compared to other products. -68...

  • Page 81
    ... growth in personal loans. For the year ended November 30, 2011, the decline in interest income from credit card loans was mostly driven by a decline in yield caused by an increase in promotional rate balances and a decrease in customers who carry a balance on their cards, partially offset by lower...

  • Page 82
    ... and interest rate spread for the years ended November 30, 2011 and November 30, 2010 have been modified to include credit card loans in process and the related liability. See Note 2: Summary of Significant Accounting Policies for further discussion. (2) Average balances of loan receivables include...

  • Page 83
    ... 2012 vs. 2011(2) Volume Increase/(decrease) in net interest income due to changes in: Interest-earning assets: Cash and cash equivalents...Restricted cash ...Other short-term investments ...Investment securities...Loan receivables: Credit card ...Personal loans ...Federal student loans ...Private...

  • Page 84
    ...-GAAP As-Adjusted Data." Represents purchased credit-impaired private student loans which do not have a related allowance for loan losses or charge-offs (see Note 5: Loan Receivables to our consolidated financial statements). Provision and Allowance for Loan Losses Provision for loan losses is the...

  • Page 85
    ... to the increase in private student loan receivables as well as the seasoning of the loan portfolio. The following tables provide changes in our allowance for loan losses for the periods presented (dollars in millions): For the Year Ended November 30, 2012 Credit Card Balance at beginning of period...

  • Page 86
    ...(Non-GAAP As-Adjusted) Credit Card Balance at beginning of period ...Additions: Provision for loan losses ...Deductions: Charge-offs ...Recoveries...Net charge-offs ...Balance at end of period...$ $ 2,697 5,001 (4,304) 398 (3,906) 3,792 $ Personal Loans $ 52 111 (69) 1 (68) 95 Student Loans $ 4 11...

  • Page 87
    ... the calculation. See Note 5: Loan Receivables to our consolidated financial statements for more information regarding the accounting for charge-offs on PCI loans. The net charge-off rate on our credit card loan receivables decreased 185 basis points for the year ended November 30, 2012 as compared...

  • Page 88
    ... customer account management. The rate for over 30-day delinquency balances increased for private student loan balances due to the seasoning of our loan portfolio for the year ended November 30, 2011 as compared to the same period in 2010. The rate for over 90-day delinquency balances for private...

  • Page 89
    ... information regarding the accounting treatment for these loans as well as amounts recorded in the financial statements related to these loans, see Note 5: Loan Receivables to our consolidated financial statements. For student loan borrowers, in certain situations we offer payment forbearance to...

  • Page 90
    ...products income increased for the year ended November 30, 2011 as compared to the year ended November 30, 2010 primarily due to lower charge-offs related to these products. Loan Fee Income Loan fee income consists primarily of fees on credit card loans and includes late, overlimit, cash advance, pay...

  • Page 91
    ... fees charged to financial institutions and merchants for processing ATM, debit and point-of-sale transactions over the PULSE network, as well as various participation and membership fees. Switch fees are charged on a per transaction basis. Transaction processing revenue increased for the year ended...

  • Page 92
    ... the loan portfolio, network acceptance and deposits, and the associated impacts on headcount and compensation. Increased marketing and business development costs were primarily driven by higher investments in new credit card account acquisitions and new originations in student and personal loans...

  • Page 93
    ...an additional source of funding. We access the asset-backed securitization market using the Discover Card Master Trust I ("DCMT") and the Discover Card Execution Note Trust ("DCENT"), through which we issue asset-backed securities both publicly and through private transactions. We retain significant...

  • Page 94
    ... 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 6: Credit Card and Student Loan Securitization Activities to our consolidated financial statements for additional...

  • Page 95
    ... below investment grade. Discover Bank's subordinated notes are comprised of a $200 million issuance due in November 2019 and a $500 million issuance due in April 2020. For more information, see Note 10: Borrowings to our consolidated financial statements. Other Long-Term Borrowings - Student Loans...

  • Page 96
    ... notes are 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 both at the parent company...

  • Page 97
    .... During the year ended November 30, 2012, the average balance of our liquidity portfolio was $11.8 billion. November 30, 2012 Liquidity portfolio Cash and cash equivalents(1) ...Investment securities ...Total liquidity portfolio...Undrawn credit facilities(2) Private asset-backed securitizations...

  • Page 98
    ... quarter-end date, based on our projected future taxable income for that year; or (ii) 10% of the amount of our Tier 1 capital. At November 30, 2012, no portion of our deferred tax asset was disallowed for regulatory capital purposes. At November 30, 2012, Discover Financial Services and Discover...

  • Page 99
    ... under an agreement. Our guarantees relate to transactions processed on the Discover Network and certain transactions processed by PULSE and Diners Club. See Note 19: Commitments, Contingencies and Guarantees to our consolidated financial statements for further discussion regarding our guarantees...

  • Page 100
    ... parties. The activities of the subsidiaries covered by any such guarantees are included in our consolidated financial statements. Prior to its acquisition by Discover Bank on December 31, 2010, SLC had an agreement with Citi providing for the origination and servicing of private student loans. Citi...

  • Page 101
    ...rate risk by adjusting rates on existing balances. At November 30, 2012, the majority of our credit card and student loans were at variable rates. Assets with rates that are fixed at period end but which will mature, or otherwise contractually reset to a market-based indexed rate or other fixed rate...

  • Page 102
    ... 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 November 30, 2012 of the Company and our report dated...

  • Page 103
    ...IL We have audited the accompanying consolidated statements of financial condition of Discover Financial Services (the "Company") as of November 30, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for each of the...

  • Page 104
    ... balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services. November 30, 2012 Assets Restricted cash...Credit card loan receivables ...Purchased credit-impaired loans...Allowance for loan...

  • Page 105
    DISCOVER FINANCIAL SERVICES Consolidated Statements of Income For the Years Ended November 30, 2012 2011 2010 (dollars in millions, except per share amounts) Interest income: Credit card loans...Other loans ...Investment securities ...Other interest income ...Total interest income ...Interest ...

  • Page 106
    DISCOVER FINANCIAL SERVICES Consolidated Statements of Comprehensive Income For the Years Ended November 30, 2012 Net income ...Other comprehensive (loss) income, net of taxes Unrealized gain (loss) on securities available for sale, net of tax...Unrealized gain reversed upon the liquidation of an ...

  • Page 107
    DISCOVER FINANCIAL SERVICES Consolidated Statements of Changes in Stockholders' Equity Preferred Stock Shares Balance at November 30, 2009 ...Adoption of ASC 810 (FASB Statement No. 167), net of tax ...Net income ...Other comprehensive loss ...Purchases of treasury stock...Common stock issued under ...

  • Page 108
    DISCOVER FINANCIAL SERVICES Consolidated Statements of Cash Flows For the Years Ended November 30, 2012 Cash flows from operating activities Net income ...Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses...Deferred income taxes......

  • Page 109
    ... as point of sale terminals at retail locations throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees that issue Diners Club branded credit cards and/or provide card acceptance services. The Company's business segments are Direct Banking and Payment...

  • Page 110
    ...associated with its PULSE network and Discover Home Loans, Inc. Because this standard impacts the impairment analysis only, it will have no effect on the Company's financial condition, results of operations or cash flows. In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220...

  • Page 111
    ... date of the loan and, most significantly, investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. The Company recognizes interest income on these loans separately from changes in their fair value. Student Loans Held for Sale. When management makes...

  • Page 112
    .... Credit card loan receivables are reported at their principal amounts outstanding and include uncollected billed interest and fees and are reduced for unearned revenue related to balance transfer fees (also see "- Loan Interest and Fee Income"). Other loans consist of student loans, personal loans...

  • Page 113
    ... filed, annual or quarterly consolidated financial statements. Delinquent Loans. 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 or more days...

  • Page 114
    ... computer software for internal use are capitalized. Amortization of capitalized costs begins when the software is ready for its intended use. Capitalized software is included in premises and equipment, net in the Company's consolidated statements of financial condition. See Note 7: Premises and...

  • Page 115
    ... of assets and liabilities using currently enacted tax rates. See Note 16: Income Taxes for more information about the Company's income taxes. Financial Instruments Used for Asset and Liability Management. The Company enters into interest rate swaps to manage interest rate risk arising from certain...

  • Page 116
    ...the consolidated statements of financial condition. Interest related to purchased credit-impaired loans is discussed in Note 5: Loan Receivables. The Company recognizes fees (except annual fees, balance transfer fees and certain product fees) on loan receivables in interest income or loan fee income...

  • Page 117
    ... liabilities on the consolidated statement of financial condition. Protection Products. The Company earns revenue related to fees received for marketing products or services that are ancillary to the Company's credit card and personal loans, including payment protection products and identity theft...

  • Page 118
    ... for the year ended November 30, 2012 on the Company's consolidated financial condition, results of operations or cash flows or on the Direct Banking reportable segment in which it is included. Acquisition of The Student Loan Corporation. On December 31, 2010, the Company acquired The Student Loan...

  • Page 119
    ... student loan insurance policies covering loans in one of the three trusts. The bargain purchase gain is recorded in other income on the Company's consolidated statement of income. During the fourth quarter of 2011, the Company finalized its purchase accounting, which resulted in a decrease of...

  • Page 120
    ... consolidated statement of income. 4. Investments The Company's investment securities consist of the following (dollars in millions): November 30, 2012 U.S. Treasury securities ...U.S. government agency securities ...States and political subdivisions of states...Other securities: Credit card asset...

  • Page 121
    ... (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 beyond the normal...

  • Page 122
    ... of corporate debt securities. For the years ended November 30, 2011 and 2010, $843 million and $650 million of these proceeds related to maturities of credit card asset-backed securities of other issuers. The Company records gains and losses on investment securities in other income when investments...

  • Page 123
    ... Year or Less Available-for-sale - Amortized Cost(1) U.S. Treasury securities...U.S. government agency securities ...Credit card asset-backed securities of other issuers ...Corporate debt securities ...Residential mortgage-backed securities - Agency ...Total available-for-sale investment securities...

  • Page 124
    ...for available-for-sale investment securities is calculated based on the amortized cost. The following table presents interest on investment securities (dollars in millions): For the Years Ended November 30, 2012 Taxable interest...Tax exempt interest...Total income from investment securities ...$78...

  • Page 125
    ...292 (1) (2) (3) (4) (5) Discover card and Discover business card loans at November 30, 2011 have been modified to include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting Policies for further discussion. All mortgage loans held for sale are...

  • Page 126
    ... customers' current balances and most recent rates. Consumer credit card loans that are 90 or more days delinquent and accruing interest include $55 million and $38 million of loans accounted for as troubled debt restructurings at November 30, 2012 and November 30, 2011, respectively. Personal loans...

  • Page 127
    ...include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting Policies for further discussion. 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 128
    ... for the Company's customers as of November 30, 2012 and 2011, as a percentage of each class of loan receivables: Credit Risk Profile by FICO Score 660 and Above For the Year Ended November 30, 2012 Discover card...Discover business card ...Personal loans...Private student loans (excluding PCI...

  • Page 129
    ... the 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 at end of period ...$ 2,070 724 (1,817) 577 (1,240) $ 1,554 Personal Loans $ 82 84 (73) 4 (69) $ 97 Student Loans...

  • Page 130
    ... related allowance for loan losses. Recorded investment in credit card loans collectively evaluated for impairment in accordance with ASC 450-20 at November 30, 2011 have been modified to include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting...

  • Page 131
    ... 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 percentage rate it...

  • Page 132
    ... interest income that would have been recorded with original terms(2) Average recorded investment in loans For the year ended November 30, 2012: Credit card loans Modified credit card loans(3) ...Internal programs...External programs ...Personal loans(4) ...Student loans (4) ...For the year ended...

  • Page 133
    ... in millions): For the Years Ended November 30, 2012 Number of Accounts Accounts that entered a loan modification program during the period: Credit card: Internal programs ...External programs ...Personal loans ...Student loans ... 2011 Number of Accounts Balances Balances 50,946 40,530 1,555...

  • Page 134
    ... with Citibank for credit losses. The indemnified loans are presented along with all other PCI student loans and the related indemnification asset is recognized as a separate asset on the Company's consolidated statement of financial condition. See Note 3: Business Combinations for a description...

  • Page 135
    ...): For the Years Ended November 30, 2012 Balance at beginning of period ...Acquisition of The Student Loan Corporation...Acquisition of the additional private student loan portfolio from Citibank ...Accretion into interest income ...Other changes in expected cash flows...Balance at end of period...

  • Page 136
    ... 3.8 3.0 2.9 45.8 100.0% % 8.8% 7.9 6.6 5.8 5.6 5.1 4.3 3.7 3.1 2.9 46.2 100.0% (1) Credit card loans at November 30, 2011 have been modified to include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting Policies for further discussion. -124...

  • Page 137
    ...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 credit card loan...

  • Page 138
    ...in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company's balance sheet in accordance with GAAP. The debt securities issued by the consolidated VIEs are subject to credit, payment and interest rate risks on the transferred credit card loan...

  • Page 139
    ... trusts. Discover Bank receives servicing fees from the trusts based on a percentage of the monthly investor principal balance outstanding. Although the fee income to Discover Bank offsets the fee expense to the trusts and thus is eliminated in consolidation, failure to service the transferred loan...

  • Page 140
    ... the credit risk associated with the securitized 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 consolidated statement of financial condition as relating...

  • Page 141
    ... (see Note 3: Business Combinations to our consolidated financial statements), which was allocated to the Direct Banking segment. Additionally, the Company had goodwill of $255 million recorded in connection with its acquisition of PULSE in January 2005, which was allocated to the Payment Services...

  • Page 142
    ...greater...Savings deposits, including money market deposit accounts ...Total interest-bearing deposits...Average annual interest rate ...$100,000(1) $21,039 5,460 1,276 14,259 $42,034 1.94% 2011 $20,114 5,290 1,190 12,870 $39,464 2.57% (1) $100,000 represents the basic insurance amount previously...

  • Page 143
    ... securities (including premium of $5) ...Total SLC Private Student Loan Trusts ...Total Long-Term Borrowings - owed to securitization investors ...Discover Financial Services (Parent Company) Fixed rate senior notes due 2017 Principal value ...Fair value adjustment(1) ...Book value ...Fixed rate...

  • Page 144
    ... expense on the consolidated statement of income. The Company has access to committed undrawn capacity through private securitizations to support the funding of its credit card loan receivables. As of November 30, 2012, the total commitment of secured credit facilities through private providers was...

  • Page 145
    ... in the 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...

  • Page 146
    ...cost is expected to be recognized over a total period of 3.1 years and a weighted average period of 1.8 years. Performance Stock Unit Activity. The following table sets forth the activity related to vested and unvested PSU's during the year ended November 30, 2012: Number of Shares Performance stock...

  • Page 147
    ...total period of 2.1 years for non-retirement eligible employees and 1.0 year for retirement eligible employees, with a weighted-average period of 1.3 years. Option awards are granted with an exercise price equal to the fair market value of one share of the Company's common stock at the date of grant...

  • Page 148
    ...price data over a time period similar to the expected option life. The risk-free interest rate was based on U.S. Treasury Strips with a remaining term equal to the expected life assumed at the date of grant. 12. Employee Benefit Plans The Company sponsors the Discover Financial Services Pension Plan...

  • Page 149
    ... company under the Postretirement Plan and its employees were granted credit for past service for purposes of retiree medical eligibility. Assumptions. The following table presents the assumptions used to determine benefit obligations: Pension For the Years Ended November 30, 2012 Discount rate...

  • Page 150
    ... 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 were considered as well. The Discover Pension Plan return...

  • Page 151
    ..., see Note 21: Fair Value Disclosures. (dollars in millions): November 30, 2012 Level 1 Assets Cash and cash equivalents...Fixed income securities - U.S. treasuries ...Fixed income securities - corporate debt ...Registered Investment Company - International equity fund ...Common Collective Trusts...

  • Page 152
    ... at any time. For the year ended November 30, 2012, the Company repurchased 33,578,664 shares for $1.2 billion. Senior Preferred Stock and Warrant On March 13, 2009, the Company issued and sold to the United States Department of the Treasury (the "U.S. Treasury") under the Capital Purchase Program...

  • Page 153
    ... in millions): For the Years Ended November 30, 2012 Royalty and licensee revenue...Merchant fees ...Transition service agreement revenue ...Gain from sales of merchant contracts ...Adjustments related to non-mortgage loans sold and held for sale...Other income ...Total other income...$ 72 17 12...

  • Page 154
    ... For the Years Ended November 30, 2012 Postage ...Fraud losses ...Supplies...Credit related inquiry fees...Litigation expense......Years Ended November 30, 2012 Current: U.S. federal...U.S. state and local ...International ...Total ...Deferred: U.S. federal...U.S. state and local ...Total ...Income...

  • Page 155
    ... in other assets in the consolidated statements of financial condition, were as follows (dollars in millions): For the Years Ended November 30, 2012 Deferred tax assets: Allowance for loan losses ...Compensation and benefits...Customer fees and rewards...State income taxes...Other ...Total deferred...

  • Page 156
    ...diluted EPS (shares in millions): For the Years Ended November 30, 2012 Unexercised stock options ...- 2011 - 2010 3 18. Capital Adequacy The Company is subject to capital adequacy guidelines of the Federal Reserve, and Discover Bank (the "Bank"), the Company's main banking subsidiary, is subject...

  • Page 157
    .... Under the current banking regulations, a bank may not pay dividends if such a payment would leave the bank inadequately capitalized. In the years ended November 30, 2012, 2011 and 2010, Discover Bank paid dividends of $1.5 billion, $1.4 billion and $125 million, respectively, to the Company. -145...

  • Page 158
    ... which the Company can terminate at any time and which do not necessarily represent future cash requirements, are periodically reviewed based on account usage, customer creditworthiness and loan qualification. Commitments to purchase private student loans. On December 31, 2010, Discover Bank entered...

  • Page 159
    ... Guarantees. Diners Club and DFS Services LLC, on behalf of PULSE, have various counterparty exposures, which are listed below. • Merchant Guarantee. Diners Club has entered into contractual relationships with certain international merchants, which generally include travel-related businesses, for...

  • Page 160
    ...connection with payments on card transactions because most products or services are delivered when purchased, and credits are issued by merchants on returned items in a timely fashion, thus minimizing the likelihood of cardholder disputes with respect to amounts paid by the Discover Network. However...

  • Page 161
    ... 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. Such matters related to the IRS are discussed in Note 16: Income Taxes. In accordance with applicable accounting...

  • Page 162
    ... Hawaii filed a lawsuit against the Company in the Circuit Court of the First Circuit, Hawaii (Hawaii v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products...

  • Page 163
    ...has been made to cover these costs in the financial statements as of August 31, 2012. Discover Bank also agreed to make further enhancements to its quality control and other processes related to the marketing, sale and administration of its protection products. Discover Bank agreed to enter into the...

  • Page 164
    ...-backed securities, corporate debt and credit card asset-back securities issued by other financial institutions. The fair value estimates of investment securities classified as Level 1, consisting of U.S. Treasury and government agency securities, are determined based on quoted market prices for...

  • Page 165
    ... 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 them are an observable input. The Company recognizes interest income separately from changes in fair...

  • Page 166
    ... service that uses proprietary pricing models, where certain inputs to those models are readily observable market-based inputs, including interest rate curves and option volatility. In determining fair values, the pricing models use widely accepted valuation techniques including discounted cash...

  • Page 167
    ... is applicable if one or more is determined to be impaired. During the years ended November 30, 2012 and November 30, 2011, the Company had no impairments related to these assets. Fair value adjustments for student loans held for sale were periodically recorded in other income in the consolidated...

  • Page 168
    ... at November 30, 2011 excludes student loans held for sale that are measured at fair value on a non-recurring basis and have been modified to include credit card loans in process as of the balance sheet date. See Note 2: Summary of Significant Accounting Policies for further discussion. -156...

  • Page 169
    ... Note 10: Borrowings. Fair values of other long-term borrowing for which there are no observable market transactions, namely capitalized leases, are determined by discounting cash flows of future interest accruals at market rates currently offered for borrowings with similar credit risks, remaining...

  • Page 170
    ... directly in earnings. Amounts reported in accumulated other comprehensive income related to derivatives at November 30, 2012 will be reclassified to interest income as interest payments are received on certain of the Company's floating rate credit card loan receivables. During the next 12 months...

  • Page 171
    ... in the SLC 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...

  • Page 172
    ..., if Discover Bank's credit rating is reduced by one ratings notch, Discover Bank would be required to post additional collateral, which would have been $110 million as of November 30, 2012. The Company had an obligation to return $111 million cash collateral deposited with the Company (net of...

  • Page 173
    ... activities are managed in two segments: Direct Banking and Payment Services. • Direct Banking. The Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses and other consumer products and services, including home loans, personal loans, student...

  • Page 174
    ... income ...Credit card ...Private student loans ...PCI student loans ...Personal loans ...Other ...Total interest income ...Interest expense ...Net interest income...Provision for loan losses...Other income ...Other expense...Income before income tax expense... Direct Banking Payment Services...

  • Page 175
    ... 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 176
    Discover Financial Services (Parent Company Only) Condensed Statements of Income For the Years Ended November 30, 2012 Interest income ...Interest expense...Net interest income...Dividends from subsidiaries...Other income...Total income...Other expense Employee compensation and benefits......

  • Page 177
    Discover Financial Services (Parent Company Only) Condensed Statements of Cash Flows For the Years Ended November 30, 2012 Cash flows from operating activities Net income...Adjustments to reconcile net income to net cash provided by operating activities: Non-cash charges included in net income: ...

  • Page 178
    ... and earnings per share are calculated using weighted averages for the quarter, the sum of all four quarters may differ from the year to date amounts in the consolidated statements of income. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item...

  • Page 179
    ..., 2013 Changes in Internal Control over Financial Reporting As previously disclosed, on June 6, 2012, through our Discover Home Loans, Inc. subsidiary, we acquired substantially all of the operating and related assets of Home Loan Center, Inc., a subsidiary of Tree.com, Inc. During the third quarter...

  • Page 180
    ...our Proxy Statement is incorporated by reference herein. "Executive and Director Compensation" "Compensation Discussion and Analysis" "2012 Executive Compensation" "Compensation Committee Report" Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...

  • Page 181
    ... and related transactions, and director independence under the following captions in our Proxy Statement is incorporated by reference herein. "Other Matters - Certain Transactions" "Corporate Governance - Director Independence" Item 14. Principal Accounting Fees and Services Information...

  • Page 182
    ...INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | Item 15. Exhibits, Financial Statement Schedules Reports of Independent Registered Public Accounting Firm ...90 Consolidated Statements of Financial Condition as of November 30, 2012 and 2011 ...92 Consolidated Statements of Income for the years ended...

  • Page 183
    ... 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: January...

  • Page 184
    ... and Chief Executive Officer Executive Vice President and Chief Financial Officer (Principal Financial Officer) Vice President, Controller and and Chief Accounting Officer (Principal Accounting Officer) Lead Director Director Director Director Director Director Director Director Director...

  • Page 185
    ... herein by reference thereto). Agreement and Plan of Merger by and among Discover Bank, Academy Acquisition Corp. and The Student Loan Corporation dated as of September 17, 2010 (filed as Exhibit 2.3 to Discover Financial Services' Annual Report on Form 10-K for the fiscal year ended November 30...

  • Page 186
    ...). Deposit Agreement, dated October 16, 2012 (filed as Exhibit 4.1 to Discover Financial Services' Current Report on Form 8-K filed on October 16, 2012 and incorporated herein by reference thereto). Form of Certificate Representing the Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series...

  • Page 187
    ...2009, between Discover Card Execution Note Trust, as Issuer, and U.S. Bank National Association, as Indenture Trustee (filed as Exhibit 4.1 to Discover Bank's Current Report on Form 8-K filed on July 6, 2009 and incorporated herein by reference thereto). Discover Financial Services Change-in-Control...

  • Page 188
    ...(filed as Exhibit 10.1 to Discover Financial Services' Current Report on Form 8-K filed on February 12, 2010 and incorporated herein by reference thereto). Purchase Price Adjustment Agreement by and among Citibank, N.A., The Student Loan Corporation and Discover Bank, dated September 17, 2010 (filed...

  • Page 189
    ...Discover Financial Services' Quarterly Report on Form 10-Q filed on April 3, 2012 and incorporated by reference thereto). Statement Re: Computation of Per Share Earnings (the calculation of per share earnings is in Part II, Item 8, Note 17: Earnings Per Share to the consolidated financial statements...

  • Page 190
    Exhibit 12.1 DISCOVER FINANCIAL SERVICES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (dollars in millions) For the Years Ended November 30, 2012 Earnings: Income from continuing operations before income tax ...

  • Page 191
    ... Limited...Discover Financial Services Insurance Agency, Inc...Discover Global Employment Company Private Limited...Discover Home Loans, Inc...Discover Information Technology (Shanghai) Limited...Discover Products Inc...Discover Properties LLC ...Discover Receivables Financing Corporation...Discover...

  • Page 192
    ...dated January 24, 2013, 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 year ended November 30, 2012...

  • Page 193
    ... information; 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. b) Date: January 24, 2013 /S/ DAVID W. NELMS David W. Nelms Chairman of the Board and Chief Executive Officer

  • Page 194
    ... information; 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. b) Date: January 24, 2013 /S/ R. MARK GRAF R. Mark Graf Executive Vice President and Chief Financial Officer

  • Page 195
    ... Financial Services (the "Company") on Form 10-K for the period ended November 30, 2012, 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 and Chief...

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  • Page 199
    ...: Discover®, PULSE, Cashback Bonus®, Discover Cashback Checking , Discover More Card, Discover it , Discover Motiva Card, Discover Open Road Card, Discover Network and Diners Club International. All other trademarks, trade names and service marks included in this Annual Report are the property of...

  • Page 200
    ... Cook Road • Riverwoods, Illinois 60015 • discoverfinancial.com OUR VISION To be the most rewarding relationship consumers and businesses have with a financial services company. OUR MISSION To help people spend smarter, manage debt better and save more so they achieve a brighter financial...