Discover Financial Services (DFS) 10-K 28 Jan 10 2009 FY Annual report Financial data

Statement Of Financial Position

Statement Of Financial Position Unclassified - Deposit Based Operations (USD $)
In Thousands	Nov. 30, 2009	Nov. 30, 2008
Assets
Cash and cash equivalents	$13,020,719	$10,171,143
Restricted cash - special dividend escrow	643,311	0
Other short-term investments	1,350,000	0
Investment securities:
Available-for-sale (amortized cost of $2,743,729 and $1,211,245 at November 30, 2009 and 2008, respectively)	2,645,481	1,127,119
Held-to-maturity (fair value of $1,953,990 and $84,167 at November 30, 2009 and 2008, respectively)	2,389,816	100,825
Total investments securities	5,035,297	1,227,944
Loan receivables:
Credit card	20,230,302	23,814,307
Other	3,394,782	1,402,304
Total loan receivables	23,625,084	25,216,611
Allowance for loan losses	(1,757,899)	(1,374,585)
Net loan receivables	21,867,185	23,842,026
Amounts due from asset securitization	1,692,051	2,233,600
Premises and equipment, net	499,303	552,502
Goodwill	255,421	255,421
Intangible assets, net	195,636	203,319
Other assets	1,462,064	1,406,427
Total assets	46,020,987	39,892,382
Deposits:
Interest-bearing deposit accounts	32,028,506	28,452,146
Non-interest bearing deposit accounts	64,506	78,375
Total deposits	32,093,012	28,530,521
Short-term borrowings	0	500,000
Long-term borrowings	2,428,101	1,735,383
Special dividend - Morgan Stanley	808,757	473,000
Accrued expenses and other liabilities	2,255,570	2,737,655
Total liabilities	37,585,440	33,976,559
Stockholders' Equity:
Preferred stock, par value $.01 per share; 200,000,000 shares authorized, 1,224,558 and 0 issued or outstanding at November 30, 2009 and 2008, respectively	1,158,066	0
Common stock, par value $.01 per share; 2,000,000,000 shares authorized; 544,799,041 and 480,517,188 shares issued at November 30, 2009 and 2008, respectively	5,448	4,805
Additional paid-in capital	3,573,231	2,938,657
Retained earnings	3,873,262	3,046,956
Accumulated other comprehensive (loss) income	(154,818)	(66,338)
Treasury stock, at cost; 1,876,795 and 530,549 shares at November 30, 2009 and 2008, respectively	(19,642)	(8,257)
Total stockholders' equity	8,435,547	5,915,823
Total liabilities and stockholders' equity	$46,020,987	$39,892,382

1_Statement Of Financial Positi

Statement Of Financial Position Unclassified - Deposit Based Operations (Parenthetical) (USD $)
In Thousands, except Share data	Nov. 30, 2009	Nov. 30, 2008
Available-for-sale, amortized cost	$2,743,729	$1,211,245
Held-to-maturity, fair value	$1,953,990	$84,167
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	200,000,000	200,000,000
Preferred stock, issued	1,224,558	0
Preferred stock, outstanding	1,224,558	0
Common stock, par value	0.01	0.01
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	544,799,041	480,517,188
Treasury stock, shares	1,876,795	530,549

Statement Of Income Interest Ba

Statement Of Income Interest Based Revenue (USD $)
In Thousands, except Per Share data	12 Months Ended Nov. 30, 2009	12 Months Ended Nov. 30, 2008	12 Months Ended Nov. 30, 2007
Interest income:
Credit card loans	$2,835,767	$2,245,719	$2,134,188
Other loans	168,517	79,695	6,442
Investment securities	68,694	51,345	10,502
Other interest income	72,102	315,804	433,270
Total interest income	3,145,080	2,692,563	2,584,402
Interest expense:
Deposits	1,187,084	1,199,436	1,044,574
Short-term borrowings	2,538	343	89,319
Long-term borrowings	61,662	88,225	89,377
Total interest expense	1,251,284	1,288,004	1,223,270
Net interest income	1,893,796	1,404,559	1,361,132
Provision for loan losses	2,362,405	1,595,615	733,887
Net interest income after provision for loan losses	(468,609)	(191,056)	627,245
Other income:
Securitization income	1,879,304	2,429,158	2,323,623
Loan fee income	247,267	262,576	338,053
Discount and interchange revenue	222,835	187,657	241,070
Fee products	295,066	249,805	214,572
Merchant fees	44,248	67,027	92,518
Transaction processing revenue	125,201	115,914	99,653
Loss on investment securities	(3,826)	(50,294)	(11,409)
Antitrust litigation settlement	1,891,698	863,634	0
Other income	138,802	138,981	78,602
Total other income	4,840,595	4,264,458	3,376,682
Other expense:
Employee compensation and benefits	827,683	845,392	850,065
Marketing and business development	406,020	530,901	576,263
Information processing and communications	289,209	315,943	330,053
Professional fees	321,329	349,484	361,409
Premises and equipment	73,014	80,394	79,442
Other expense	333,833	293,683	280,982
Total other expense	2,251,088	2,415,797	2,478,214
Income from continuing operations before income tax expense	2,120,898	1,657,605	1,525,713
Income tax expense	844,713	594,692	561,514
Income from continuing operations	1,276,185	1,062,913	964,199
Loss from discontinued operations, net of tax	0	(135,163)	(375,569)
Net income	1,276,185	927,750	588,630
Preferred stock dividends and accretion of discount	(53,255)	0	0
Net income available to common stockholders	$1,222,930	$927,750	$588,630
Basic earnings per share
Income from continuing operations	2.42	2.22	2.02
Loss from discontinued operations, net of tax	$0	-0.28	-0.79
Net income	2.42	1.94	1.23
Diluted earnings per share
Income from continuing operations	2.39	2.2	2.01
Loss from discontinued operations, net of tax	$0	-0.28	-0.78
Net income	2.39	1.92	1.23
Dividends paid per share	0.12	0.24	0.06

Statement Of Shareholders Equit

Statement Of Shareholders Equity And Other Comprehensive Income (USD $)
In Thousands	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Total
Beginning Balance at Nov. 30, 2006	$0	$100	$2,636,265	$3,008,421	$129,986	$0	$5,774,772
Beginning Balance at Nov. 30, 2006	0	1
Comprehensive income:
Net income				588,630			588,630
Foreign currency translation, net of tax					(81,626)
Adjustments related to investment securities, net of tax					(3,264)
Minimum pension liability adjustment, net of tax					69
Other comprehensive income (loss)					(84,821)		(84,821)
Adoption of FASB Statement No. 158 (ASC 715), net of tax					(13,133)		(13,133)
Consummation of spin-off transaction on June 30, 2007, and distribution of Discover Financial Services common stock by Morgan Stanley		526,233
Consummation of spin-off transaction on June 30, 2007, and distribution of Discover Financial Services common stock by Morgan Stanley		5,162	(5,162)				0
Purchases of treasury stock						(1,419)	(1,419)
Common stock issued and stock-based compensation expense		527
Common stock issued and stock-based compensation expense		5	35,705				35,710
Capital contribution from Morgan Stanley			178,829				178,829
Cash dividends paid to Morgan Stanley				(850,000)			(850,000)
Dividends				(29,146)			(29,146)
Other		(48,999)
Other		(490)	490				0
Ending Balance at Nov. 30, 2007	0	477,762
Ending Balance at Nov. 30, 2007	0	4,777	2,846,127	2,717,905	32,032	(1,419)	5,599,422
Adoption of FASB Interpretation No. 48 (ASC 740)				(8,743)			(8,743)
Comprehensive income:
Net income				927,750			927,750
Foreign currency translation, net of tax					(21,282)
Realization of foreign exchange translation gains upon sale of Goldfish business					(27,076)
Adjustments related to investment securities, net of tax					(50,158)
Adjustments related to pension and postretirement benefits, net of tax					146
Other comprehensive income (loss)					(98,370)		(98,370)
Purchases of treasury stock						(6,838)	(6,838)
Common stock issued under employee benefit plans		1,183
Common stock issued under employee benefit plans		12	16,621				16,633
Common stock issued and stock-based compensation expense		1,572
Common stock issued and stock-based compensation expense		16	75,909				75,925
Dividends paid - common stock				(116,956)			(116,956)
Special dividend - Morgan Stanley				(473,000)			(473,000)
Ending Balance at Nov. 30, 2008	0	480,517
Ending Balance at Nov. 30, 2008	0	4,805	2,938,657	3,046,956	(66,338)	(8,257)	5,915,823
Comprehensive income:
Net income				1,276,185			1,276,185
Adjustments related to investment securities, net of tax					(8,527)
Adjustments related to pension and postretirement benefits, net of tax					(79,953)
Other comprehensive income (loss)					(88,480)		(88,480)
Adoption of FASB Statement No. 158 (ASC 715), net of tax				(1,110)			(1,110)
Purchases of treasury stock						(11,385)	(11,385)
Common stock issued under employee benefit plans		135
Common stock issued under employee benefit plans		1	1,157				1,158
Common stock issued and stock-based compensation expense		4,093
Common stock issued and stock-based compensation expense		42	42,929	120			43,091
Income tax deficiency on stock-based compensation plans			(18,601)				(18,601)
Issuance of common stock		60,054
Issuance of common stock		600	533,222				533,822
Dividends paid - common stock				(59,877)			(59,877)
Issuance of preferred stock	1,225
Issuance of preferred stock	1,148,691		75,867				1,224,558
Accretion of preferred stock discount	9,375			(9,375)			0
Dividends - preferred stock				(43,880)			(43,880)
Special dividend - Morgan Stanley				(335,757)			(335,757)
Ending Balance at Nov. 30, 2009	1,225	544,799
Ending Balance at Nov. 30, 2009	$1,158,066	$5,448	$3,573,231	$3,873,262	($154,818)	($19,642)	$8,435,547

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect Deposit Based Operations (USD $)
In Thousands	12 Months Ended Nov. 30, 2009	12 Months Ended Nov. 30, 2008	12 Months Ended Nov. 30, 2007
Cash flows from operating activities
Net income	$1,276,185	$927,750	$588,630
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of mortgages and installment loans	0	0	(3,105)
Net principal disbursed on loans originated for sale	0	0	(99,158)
Proceeds from sales of loans originated for sale	0	0	106,010
Loss on sale of Goldfish business	0	165,694	0
Impairment of Goldfish business	0	0	391,119
Loss on investment securities	9,239	50,294	11,409
Loss on equipment	6,436	0	0
Stock-based compensation expense	44,249	92,558	35,710
Deferred income taxes	(61,995)	(262,354)	(218,215)
Pension curtailment	0	(38,891)	0
Depreciation and amortization on premises and equipment	97,930	107,151	122,934
Amortization of deferred revenues	(133,384)	(84,174)	(22,484)
Other depreciation and amortization	105,562	124,247	134,197
Provision for loan losses	2,362,405	1,615,625	950,165
Changes in assets and liabilities:
(Increase) decrease in amounts due from asset securitization	541,549	805,292	79,124
(Increase) decrease in other assets	(104,724)	(171,801)	(129,266)
Increase (decrease) in accrued expenses and other liabilities	(545,560)	1,172,768	90,955
Net cash provided by operating activities	3,597,892	4,504,159	2,038,025
Cash flows from investing activities
Proceeds from the sale of Goldfish business	0	69,529	0
Payments for business and other acquisitions, net of cash acquired	0	(160,278)	(5,000)
Maturities of other short-term investments	919,700	0	0
Purchases of other short-term investments	(2,269,700)	0	0
Maturities and sales of available-for-sale investment securities	423,014	0	0
Purchases of available-for-sale investment securities	(683,980)	(85,740)	(120,085)
Maturities of held-to-maturity investment securities	8,286	37,200	10,556
Purchases of held-to-maturity investment securities	(1,269)	(33,581)	(32,990)
Proceeds from securitization and sale of loans held for investment	3,542,850	5,562,195	8,434,488
Net principal disbursed on loans held for investment	(7,403,826)	(11,426,755)	(9,763,849)
(Increase) in restricted cash - special dividend escrow	(643,311)	0	0
Proceeds from sale of equipment	1,249	0	0
Purchases of premises and equipment	(53,793)	(93,532)	(118,265)
Net cash used for investing activities	(6,160,780)	(6,130,962)	(1,595,145)
Cash flows from financing activities
Proceeds from the issuance of preferred stock and warrant	1,224,558	0	0
Proceeds from the issuance of common stock	533,822	0	0
Net (decrease) increase in short-term borrowings	(500,000)	(259,314)	(3,895,600)
Proceeds from issuance of long-term borrowings and bank notes	1,098,194	0	2,102,951
Repayment of long-term borrowings and bank notes	(404,211)	(397,606)	(1,486,271)
Purchases of treasury stock	(11,385)	(6,838)	(1,419)
Net increase (decrease) in deposits	3,572,520	3,816,157	11,345,340
Capital contributions from Morgan Stanley	0	0	273,138
Dividends paid to Morgan Stanley	0	0	(850,000)
Dividends paid on common and preferred stock	(101,034)	(116,956)	(29,146)
Net cash provided by financing activities	5,412,464	3,035,443	7,458,993
Effect of exchange rate changes on cash and cash equivalents	0	(24,592)	10,865
Net increase in cash and cash equivalents	2,849,576	1,384,048	7,912,738
Cash and cash equivalents, at beginning of year	10,171,143	8,787,095	874,357
Cash and cash equivalents, at end of year	13,020,719	10,171,143	8,787,095
Cash paid during the year for:
Interest expense	1,266,427	1,305,554	1,233,366
Income taxes, net of income tax refunds	913,988	670,763	531,253
Non-cash transactions:
Acquisition of certificated beneficial interests in DCENT and DCMT, net of maturities	3,561,139	750,000	315,000
Special dividend - Morgan Stanley	(335,757)	(473,000)	0
Capital contributions to Morgan Stanley	$0	$0	($94,309)

Background and Basis of Present

Background and Basis of Presentation
	12 Months Ended Nov. 30, 2009 USD / shares
Background and Basis of Presentation	1. Background and Basis of Presentation Description of Business. Discover Financial Services (DFS or the Company) is a leading credit card issuer in the United States and an electronic payment services company. In March 2009, the Company became a bank holding company under the Bank Holding Company Act of 1956 and a financial holding company under the Gramm-Leach-Bliley Act in connection with its participation in the U.S. Treasurys Capital Purchase Program (CPP). Therefore, the Company is now subject to oversight, regulation and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve). Through its Discover Bank subsidiary, a Delaware state-chartered bank, the Company offers its customers credit card, other consumer loans and deposit products. Through its DFS Services LLC subsidiary and its subsidiaries, the Company operates the Discover Network, the PULSE Network (PULSE) and Diners Club International (Diners Club). The Discover Network operates a credit card transaction processing network for Discover card-branded and third-party issued credit cards. PULSE operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE network with access to ATMs domestically and internationally, as well 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, which are generally financial institutions, that issue Diners Club branded credit cards and/or provide card acceptance services. The Companys business segments are Direct Banking, formerly referred to as U.S. Card, and Payment Services, formerly referred to as Third-Party Payments. The Company changed the names of its segments to better reflect the nature of the products and services included in its segments. The composition of each segment, however, has not changed. The Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer products and services, including personal loans, student loans, prepaid cards and other consumer lending and deposit products offered through the Companys Discover Bank subsidiary. The Payment Services segment includes PULSE, Diners Club and the Companys third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties. On March31, 2008, the Company sold its U.K. credit card business (Goldfish) to Barclays Bank PLC. This business represented substantially all of the Companys International Card segment. The International Card segment is presented in discontinued operations in this report and except where noted, all amounts in the notes to the consolidated financial statements relate solely to continuing operations. Distribution. The Company was formerly the Discover segment of Morgan Stanley. On June30, 2007, the Company was spun-off from Morgan Stanley through the distribution of shares of DFS common stock to holders of Morgan Stanley common stock (the Distribution). Prior to the Distribution, the Discover segment consisted of Discover Fi

Summary of Significant Accounti

Summary of Significant Accounting Policies
	12 Months Ended Nov. 30, 2009 USD / shares
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies Cash and Cash Equivalents. Cash and due from banks is defined by the Company as cash on hand and on deposit with banks, including time deposits and other highly liquid investments with maturities of 90 days or less when purchased. Cash and cash equivalents included $0.5 billion and $0.8 billion of cash and due from banks, $0 and $1.1 billion of Federal Funds sold, and $12.5 billion and $8.3 billion of interest-earning deposits in other banks at November30, 2009 and 2008, respectively. Restricted Cash. Restricted cash includes cash whereby the Companys ability to withdraw funds at any time is contractually limited. Restricted cash is generally designated for specific purposes arising out of certain contractual or other obligations. Short-term investments. Short-term investments include certificates of deposit with maturities greater than 90 days but less than one year when purchased. Investment Securities. Investment securities consist of certificated retained beneficial interests in Discover Card Execution Note Trust (DCENT) issued in the form of Class B, Class C and Class D notes, certificated retained beneficial interests in Discover Card Master Trust I (DCMT) issued in the form of Series CE and Series SD certificates, credit card asset-backed securities issued by other institutions, asset-backed commercial paper notes of one issuer, U.S. Treasury obligations, mortgage-backed securities issued by government and government-sponsored agencies and state agency bonds. Investment securities which the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and are reported at amortized cost. All other investment securities are classified as available-for-sale, as the Company does not hold investment securities for trading purposes. Available-for-sale investment securities are reported at fair value with unrealized gains and losses, net 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 pursuant to the guidance in ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820). The amortized cost for each held-to-maturity and available-for-sale investment security is adjusted for amortization of premiums or accretion of discounts, as appropriate. Such amortization or accretion is included in interest income. The Company evaluates its unrealized loss positions for other-than-temporary impairment in accordance with GAAP applicable for investments in debt and equity securities or for beneficial interests in securitized financial assets, as applicable, and in accordance with SEC Staff Accounting Bulletin Topic 5M. Realized gains and losses and other-than-temporary impairments related to investment securities are determined at the individual security level and are reported in other income. Loans Held for Sale. Loans held for sale include the amount of credit card receivables necessary to support net new securitization transactions expected to take place in the next three months. Management believes its abil

Discontinued Operations

Discontinued Operations
	12 Months Ended Nov. 30, 2009 USD / shares
Discontinued Operations	3. Discontinued Operations On March31, 2008, the Company completed the sale of the Goldfish business, previously reported as the International Card segment, to Barclays Bank PLC. The aggregate sale price under the agreement was 35million (equivalent to approximately $70 million), which was paid in cash at closing. The following table provides summary financial information for discontinued operations related to the sale of the Companys Goldfish business (dollars in thousands): For the Years Ended November30, 2008 2007 Revenues(1) $ 130,935 $ 314,058 Income (loss) from discontinued operations(2) $ 50,505 $ (188,393 ) Impairment loss on goodwill and intangibles(3) (391,119 ) Loss on the sale of discontinued operations(4) (225,289 ) (1,007 ) Pretax loss from discontinued operations (174,784 ) (580,519 ) Income tax benefit(4) (39,621 ) (204,950 ) Loss from discontinued operations, net of tax $ (135,163 ) $ (375,569 ) (1) Revenues are the sum of net interest income and other income. (2) During the year ended November30, 2007, the Goldfish business incurred $96.7 million of expenses related to transactions with Morgan Stanley, substantially all of which were related to interest expense on borrowings that were repaid in full prior to the Distribution. (3) Impairment loss for the year ended November30, 2007 represents non-cash write-downs of $291.2 million of goodwill and $99.9 million of intangible assets. (4) Loss on the sale of discontinued operations for the year ended November30, 2008 includes a $27.1 million realization of cumulative foreign currency translation adjustments which were previously recorded net of tax. As a result, there is no tax impact for the year ended November30, 2008 related to the realization of cumulative foreign currency translation adjustments.

Investment Securities

Investment Securities
	12 Months Ended Nov. 30, 2009 USD / shares
Investment Securities	4. Investment Securities The Companys investment securities consist of the following (dollars in thousands): November30, 2009 2008 2007 U.S. Treasury and other U.S. government agency obligations $ 12,929 $ 16,495 $ 23,160 States and political subdivisions of states 68,553 70,290 61,091 Other securities: Certificated retained interests in DCENT and DCMT 4,501,108 981,742 310,861 Credit card asset-backed securities of other issuers 381,705 85,762 Asset-backed commercial paper notes 58,792 59,586 108,681 Other debt and equity securities 12,210 14,069 21,646 Total other securities 4,953,815 1,141,159 441,188 Total investment securities $ 5,035,297 $ 1,227,944 $ 525,439 The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale and held-to-maturity investment securities are as follows (dollars in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value At November30, 2009 Available-for-Sale Investment Securities(1) Certificated retained interests in DCENT $ 2,330,000 $ 978 $ (126,009 ) $ 2,204,969 Credit card asset-backed securities of other issuers 362,377 19,362 (34 ) 381,705 Asset-backed commercial paper notes 51,337 7,455 58,792 Equity securities 15 15 Total available-for-sale investment securities $ 2,743,729 $ 27,795 $ (126,043 ) $ 2,645,481 Held-to-Maturity Investment Securities(2) U.S. Treasury and other government agency residential mortgage-backed securities $ 12,929 $ 972 $ $ 13,901 Certificated retained interests in DCENT and DCMT 2,296,139 (430,655 ) 1,865,484 States and political subdivisions of states 68,553 19 (6,162 ) 62,410 Other debt securities(3) 12,195 12,195 Total held-to-maturity investment securities $ 2,389,816 $ 991 $ (436,817 ) $ 1,953,990 At November30, 2008 Available-for-Sale Investment Securities(1) Certificated retained interests in DCENT $ 1,065,000 $ $ (83,258 ) $ 981,742 Credit card asset-backed securities of other issuers 85,843 627 (708 ) 85,762 Asset-backed commercial paper notes 59,586 59,586 Equity securities 816 (787 ) 29 Total available-for-sale investment securities $ 1,211,245 $ 627 $ (84,753 ) $ 1,127,119 Held-to-Maturity Investment Securities(2) U.S. Treasury and other U.S. government agency obligations: Residential mortgage-backed securi

Loan Receivables

Loan Receivables
	12 Months Ended Nov. 30, 2009 USD / shares
Loan Receivables	5. Loan Receivables Loan receivables consist of the following (dollars in thousands): November30, 2009 2008 Credit card loans: Discover Card(1) $ 19,826,153 $ 23,348,134 Discover Business Card 404,149 466,173 Total credit card loans 20,230,302 23,814,307 Other consumer loans: Personal loans 1,394,379 1,028,093 Student loans 1,932,266 299,929 Other 68,137 74,282 Total other consumer loans 3,394,782 1,402,304 Total loan receivables 23,625,084 25,216,611 Allowance for loan losses (1,757,899 ) (1,374,585 ) Net loan receivables $ 21,867,185 $ 23,842,026 (1) Amounts include $9.9 billion and $14.8 billion of the Companys sellers interest in credit card securitizations at November30, 2009 and 2008, respectively. See Note 6: Credit Card Securitization Activities for further information. The following table provides changes in the Companys allowance for credit card loan losses for the years ended November30, 2009, 2008 and 2007 (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Balance at beginning of year $ 1,317,811 $ 750,786 $ 701,162 Additions: Provision for loan losses 2,240,232 1,540,507 726,632 Deductions: Charge-offs (2,096,573 ) (1,139,176 ) (837,210 ) Recoveries 185,616 165,694 160,202 Net charge-offs (1,910,957 ) (973,482 ) (677,008 ) Balance at end of year $ 1,647,086 $ 1,317,811 $ 750,786 The following table provides changes in the Companys allowance for other consumer loan losses for the years ended November30, 2009, 2008 and 2007 (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Balance at beginning of year $ 56,774 $ 9,139 $ 2,755 Additions: Provision for loan losses 122,173 55,108 7,255 Deductions: Charge-offs (69,080 ) (8,065 ) (1,882 ) Recoveries 946 592 1,011 Net charge-offs (68,134 ) (7,473 ) (871 ) Balance at end of year $ 110,813 $ 56,774 $ 9,139 Information regarding net charge-offs of interest and fee revenues on credit card loans is as follows (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income) $ 465,283 $ 257,543 $ 175,383 Fees accrued subsequently charged off, net of recoveries (recorded as a reducti

Credit Card Securitization Acti

Credit Card Securitization Activities
	12 Months Ended Nov. 30, 2009 USD / shares
Credit Card Securitization Activities	6. Credit Card Securitization Activities The Company accesses the term asset securitization market through DCMT and DCENT, which are trusts into which credit card loan receivables generated in the Direct Banking segment, formerly referred to as the U.S. Card segment, are transferred (or, in the case of DCENT, into which beneficial interests in DCMT are transferred) and from which beneficial interests are issued to investors. The Company continues to own and service the accounts that generate the transferred loan receivables. The DCMT debt structure consists of ClassA, triple-A rated certificates and Class B, single-A rated certificates held by third parties. Credit enhancement is provided by the subordinated Class B certificates, a cash collateral account, and beginning July 2009, a more subordinated Series 2009-CE certificate that is retained by the Company. DCENT consists of four classes of securities (Class A, B, C and D), with the most senior class generally receiving a triple-A rating. In this structure, in order to issue senior, higher rated classes of notes, it is necessary to obtain the appropriate amount of credit enhancement, generally through the issuance of junior, lower rated or more highly subordinated classes of notes. In addition, there is another series of certificates (Series 2009-SD) issued by DCMT which provides increased excess spread levels to all other outstanding securities of DCMT and DCENT. DCMT and DCENT are not subsidiaries of the Company and, as such, are excluded from the consolidated financial statements in accordance with GAAP. The Companys securitization activities generally qualify as sales under GAAP which applied in the periods presented in the accompanying consolidated financial statements and, accordingly, are not treated as secured financing transactions. As such, credit card loan receivables equal to the amount of the investors interests in transferred loan receivables are removed from the consolidated statements of financial condition. However, as described in Note 1: Background and Basis of Presentation, pursuant to Statements No.166 and 167, the transferred loan receivables will be consolidated in the Companys financial statements effective December1, 2009. In the first half of 2009, substantially all of the securities issued by the trusts were placed on negative ratings watch by the rating agencies. To address these ratings watches, in July 2009, DCMT and DCENT issued two new subordinated classes of securities, Series 2009-CE certificates and Class D notes, respectively. The issuance of Series 2009-CE certificates from DCMT provides credit enhancement to all outstanding series of DCMT other than Series 2007-CC which supports the DCENT notes. The issuance of Class D notes from DCENT provides enhancement to the more senior outstanding ClassA, B and C notes of DCENT. In addition to these actions, in September 2009, DCMT also issued Series 2009-SD certificates to increase the levels of excess spread for all outstanding issuances of DCMT and DCENT. Series 2009-SD certificates make their principal collections available for reallocation to all other outstanding series of DCMT and DCENT on an a

Premises and Equipment

Premises and Equipment
	12 Months Ended Nov. 30, 2009 USD / shares
Premises and Equipment	7. Premises and Equipment A summary of premises and equipment, net is as follows (dollars in thousands): November30, 2009 2008 Land $ 41,816 $ 43,201 Buildings and improvements 494,511 510,302 Capitalized equipment leases 7,132 7,924 Furniture, fixtures and equipment 490,594 490,178 Software 276,298 250,376 Premises and equipment 1,310,351 1,301,981 Less: Accumulated depreciation (593,295 ) (550,582 ) Less: Accumulated amortization of software (223,871 ) (198,897 ) Premises and equipment held for investment, net 493,185 552,502 Premises and equipment held for sale, net 6,118 Total premises and equipment, net $ 499,303 $ 552,502 Depreciation expense, including amortization of assets recorded under capital leases, was $72.7 million, $75.8 million and $81.6 million for the years ended November30, 2009, 2008 and 2007, respectively. This includes depreciation expense associated with held-for-sale property of $0.8 million for each of these years. Amortization expense on capitalized software was $24.9 million, $24.7 million and $27.1 million for the years ended November30, 2009, 2008 and 2007, respectively. On November12, 2009, the Company announced plans to close one of its processing centers in 2010. As such, this property was classified as held for sale, and the Company recorded a loss of $5.6 million, which is included in other expense in the consolidated statement of income, to reduce the recorded value of the property to its fair value less cost to sell as of that date.

Business Combinations

Business Combinations
	12 Months Ended Nov. 30, 2009 USD / shares
Business Combinations	8. Business Combinations On June30, 2008, the Company purchased Diners Club International for $168 million in cash from Citibank, N.A. The Company acquired the Diners Club brand, trademarks, employees, and license agreements. Diners Club currently has 79 network licensees, which are generally financial institutions, that issue Diners Club branded credit cards and/or provide card acceptance services for a network consisting of merchant and cash access locations in over 185 countries and territories. Diners Club does not issue cards or extend consumer credit in international markets. Diners Club is included in the Companys Payment Services segment, formerly referred to as the Third-Party Payments segment. Since the acquisition date, the results of operations and cash flows of Diners Club have been included in the Companys consolidated results of operations and cash flows, although no pro forma data is provided as the impact of the Diners Club acquisition was not significant to the Companys consolidated results of operations or cash flows. The Company allocated $20.4 million of the purchase price to tangible net assets acquired based on their fair values at June30, 2008 and $151.0 million to identified intangible assets. These intangible assets consist of the international transaction processing rights and brand-related intangibles. International transaction processing rights relate to the revenue stream Diners Club receives for cross border processing activities related to the acceptance of Diners Club cards. Trade name intangibles relate to the licensing of the use of the Diners Club name and brand to various financial institutions around the world which then allows participants to issue Diners Club branded charge card products. These intangible assets are deemed to have indefinite useful lives and are therefore not subject to amortization. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the Diners Club acquisition (dollars in thousands): At June30, 2008 Trade name intangibles $ 127,980 International transaction processing rights 23,047 Total intangible assets 151,027 Other assets 91,674 Total assets acquired 242,701 Total liabilities assumed 71,322 Net assets acquired $ 171,379

Goodwill and Other Intangible A

Goodwill and Other Intangible Assets
	12 Months Ended Nov. 30, 2009 USD / shares
Goodwill and Other Intangible Assets	9. Goodwill and Other Intangible Assets Goodwill As of November30, 2009 and 2008, the Company had goodwill of $255.4 million recorded in connection with its acquisition of PULSE in January 2005, which was allocated to the Payment Services segment, formerly referred to as the Third-Party Payments segment. Subsequent to the acquisition date, no adjustments have been made to the Companys goodwill balance. The Company conducted its annual goodwill impairment testing on June1, 2009 and 2008, at which times management concluded that goodwill was not impaired. Other Intangible Assets The Companys amortizable intangible assets consist primarily of acquired customer relationships and trade name intangibles recognized in the acquisition of PULSE in January 2005, and its non-amortizable intangible assets consist of international transaction processing rights and trade name intangibles recognized in the acquisition of Diners Club in June 2008. Acquired customer relationships consist of those relationships in existence between PULSE and the numerous financial institutions that participate in its network, as valued at the date of the Companys acquisition of PULSE. For more information on the nature of the intangibles recognized in the Companys acquisition of Diners Club, see Note 8: Business Combinations. The following table summarizes the Companys other intangible assets (dollars in thousands): November30, 2009 November30, 2008 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization NetBook Value Amortizable intangible assets: Customer relationships 15years $ 69,400 $ 31,431 $ 37,969 $ 69,400 $ 24,056 $ 45,344 Trade name and other 25years 7,700 1,060 6,640 7,700 752 6,948 Total amortizable intangible assets 77,100 32,491 44,609 77,100 24,808 52,292 Non-amortizable intangible assets: Trade name N/A 127,980 127,980 127,980 127,980 International transaction processing rights N/A 23,047 23,047 23,047 23,047 Total non-amortizable intangible assets 151,027 151,027 151,027 151,027 Total intangible assets $ 228,127 $ 32,491 $ 195,636 $ 228,127 $ 24,808 $ 203,319 Amortization expense related to the Companys intangible assets was $7.7 million, $7.5 million and $6.7 million for the years ended November30, 2009, 2008 and 2007, respectively. The following table presents expected intangible asset amortization expense for the next five years based on intangible assets at November30, 2009 (dollars in thousands): Year Amount 2010 $ 6,662 2011 $ 6,576 2012 $ 5,742 2013 $ 4,770

Deposits

Deposits
	12 Months Ended Nov. 30, 2009 USD / shares
Deposits	10. Deposits The Company offers its deposit products, including certificates of deposit, money market accounts, online savings accounts and Individual Retirement Account (IRA) certificates of deposit, to customers through two channels (i)directly through direct mail, internet origination and affinity relationships (direct-to-consumer deposits); and (ii)indirectly through contractual arrangements with brokerage firms (brokered deposits). As of November30, 2009 and 2008, the Company had issued approximately $12.6 billion and $6.2 billion, respectively, of direct-to-consumer deposits and approximately $19.5 billion and $22.3 billion, respectively, of brokered deposits. As of November30, 2009 and 2008, $8.2 billion and $11.7 billion, respectively, of the Companys brokered deposits had been distributed through one brokerage. A summary of interest-bearing deposit accounts is as follows (dollars in thousands): November30, 2009 2008 Certificates of deposit in amounts less than $100,000(1) $ 22,587,898 $ 22,083,962 Certificates of deposit in amounts of $100,000(1) or greater 4,047,949 1,808,320 Savings deposits, including money market deposit accounts 5,392,659 4,559,864 Total interest-bearing deposits $ 32,028,506 $ 28,452,146 Average annual interest rate 3.94 % 4.67 % (1) Represents the basic insurance amount covered by the FDIC although, effective May20, 2009, a higher amount of $250,000 of basic insurance per depositor is in effect through December31, 2013. At November30, 2009, certificates of deposit maturing over the next five years and thereafter were as follows (dollars in thousands): Year Amount 2010 $ 9,369,613 2011 $ 5,642,321 2012 $ 4,456,216 2013 $ 4,024,955 2014 $ 1,933,243 Thereafter(1) $ 1,209,499 (1) Includes certificates of deposits which may be called by the Company prior to their contractual maturity at specific intervals of time. In connection with related party transactions with the Companys former parent company, Morgan Stanley, the Company recorded $16.2 million in interest expense for the year ended November30, 2007. This amount related to amortization of commissions on brokered deposits. The Company also recorded servicing and administrative fees related to the Companys participation in the Morgan Stanley Global Wealth Management Bank Deposit Program of $19.4 million during the year ended November30, 2007.

Short-Term Borrowings

Short-Term Borrowings
	12 Months Ended Nov. 30, 2009 USD / shares
Short-Term Borrowings	11. Short-Term Borrowings Short-term borrowings consist of term and overnight Federal Funds purchased and other short-term borrowings with original maturities less than one year. The following table identifies the balances and weighted average interest rates on short-term borrowings outstanding at period end (dollars in thousands): November30,2009 November30, 2008 Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate Other short-term borrowings(1) $ $ 500,000 0.60 % Total short-term borrowings $ $ 500,000 0.60 % (1) Other short-term borrowings consist of amounts borrowed under the Federal Reserves Term Auction Facility. The Company was required to pledge $0.7 billion of loan receivables against this borrowing as of November30, 2008. The following table identifies the interest expense paid on short-term borrowings (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Overnight Federal Funds purchased $ 156 $ 136 $ 29,840 Term Federal Funds purchased 2,382 207 23,463 Other short-term borrowings 36,016 Total interest expense on short-term borrowings $ 2,538 $ 343 $ 89,319 In connection with related party transactions with the Companys former parent company, Morgan Stanley, the Company recorded $65.5 million in interest expense related to short-term borrowings for the year ended November30, 2007. Prior to the Distribution, the Company repaid all outstanding balances due to Morgan Stanley.

Long-Term Borrowings

Long-Term Borrowings
	12 Months Ended Nov. 30, 2009 USD / shares
Long-Term Borrowings	12. Long-Term Borrowings Long-term borrowings consist of borrowings and capital leases having original maturities of one year or more. The following table provides a summary of the Companys long-term borrowings and weighted average interest rates on balances outstanding at period end (dollars in thousands): November30, 2009 November30, 2008 Funding source Outstanding Interest Rate Outstanding Interest Rate Interest Rate Terms Maturity Bank notes due 2009 $ $ 249,977 2.54 % 3-monthLIBOR(1) +15basispoints February 2009 Subordinated bank notes due 2019(2) 698,202 8.70 % 8.70% fixed November2019 Secured borrowings 528,246 0.74 % 682,456 3.05 % Commercial Paper rate + 50 basis points December2010(3) Unsecured borrowings: Floating rate senior notes 400,000 0.83 % 400,000 3.35 % 3-month LIBOR(1) + 53 basis points June 2010 Fixed rate senior notes due 2017(4) 399,385 6.45 % 399,304 6.45 % 6.45% fixed June 2017 Fixed rate senior notes due 2019(5) 400,000 10.25 % 10.25% fixed July 2019 Total unsecured borrowings 1,199,385 799,304 Capital lease obligations 2,268 6.26 % 3,646 6.26 % 6.26% fixed Various Total long-term borrowings $ 2,428,101 $ 1,735,383 (1) London Interbank Offered Rate (LIBOR). (2) Issued on November16, 2009 at a face value of $700 million. The difference between the face value and the book value reflects the amount of the unamortized discount. (3) Repayment is dependent upon the available balances of the cash collateral accounts at the various maturities of underlying securitization transactions, with final maturity in December 2010. (4) The difference between the $400 million face value and book value reflects the amount of the unamortized discount. (5) Issued on July15, 2009. Maturities. Long-term borrowings had the following maturities at November30, 2009 (dollars in thousands): DiscoverFinancial Services (Consolidated) DiscoverFinancial Services (ParentCompanyOnly) Due in 2010 $ 623,811 $ 400,000 Due in 2011 306,703 Due in 2012 Due in 2013 Due in 2014 Thereafter 1,497,587 799,385 Total $ 2,428,101 $ 1,199,385 In connection with related party transactions with the Companys former parent company, Morgan Stanley, the Company recorded $14.9 million in interest expense related to long-term borrowings for the year ended November30, 2007. Prior to the Distribution, the Company repaid all outstanding balances due to Morgan Stanley. The Company has entered into an unsecured credit agreement that is effective through May 2012. The agreement provides for a revolving credit commitment of up to

Stock-Based Compensation Plans

Stock-Based Compensation Plans
	12 Months Ended Nov. 30, 2009 USD / shares
Stock-Based Compensation Plans	13. Stock-Based Compensation Plans In connection with the Distribution, the Company adopted three stock-based compensation plans: the Discover Financial Services Omnibus Incentive Plan, the Discover Financial Services Directors Compensation Plan and the Discover Financial Services Employee Stock Purchase Plan. Omnibus Incentive Plan. The Discover Financial Services Omnibus Incentive Plan (Omnibus Plan), which is stockholder-approved, provides for the award of stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs) and other stock-based and/or cash awards (collectively, Awards). The total number of shares that may be granted is 45million shares, subject to adjustments for certain transactions as described in the Omnibus Plan document. Shares granted under the Omnibus Plan may be authorized but unissued shares or treasury shares that the Company acquires in the open market, in private transactions or otherwise. Option awards are generally granted with an exercise price equal to the fair market value of one Discover share at the date of grant; these types of awards expire ten years from the grant date and may be subject to restrictions on transfer, vesting requirements, which are set at the discretion of the Compensation Committee of the Board of Directors, or cancellation under specified circumstances. Stock awards also may be subject to similar restrictions determined at the time of grant under this plan. Certain option and stock awards provide for accelerated vesting if there is a change in control or upon certain terminations (as defined in the Omnibus Plan). 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 for grant under the Directors Compensation Plan equals the excess, if any, of (i)500,000 shares over (ii)the sum of (a)the number of shares subject to outstanding awards granted under the Directors Compensation Plan and (b)the number of shares previously issued pursuant to the Directors Compensation Plan. Shares of stock that are issuable pursuant to the awards granted under the Directors Compensation Plan may be authorized but unissued shares, treasury shares or shares that the Company acquires in the open market. A person that became an eligible director prior to December31, 2007 was entitled to receive a number of RSUs equal to the number obtained by dividing $350,000 by the fair market value of a share of stock on the date of grant. However, if such person was elected or appointed as a director after the date of the Distribution but before December31, 2007, this initial award was prorated for the two-year period following the Distribution. Subsequent awards for eligible directors are obtained by dividing $125,000 by the fair market value of a share of stock on the date of grant. The initial RSUs will be subject to a restriction period whereby 50% of such units shall vest on the first anniversary of the date of grant and the remaining units shall vest on the second anniversary of the date

Employee Benefit Plans

Employee Benefit Plans
	12 Months Ended Nov. 30, 2009 USD / shares
Employee Benefit Plans	14. Employee Benefit Plans The Company sponsors the Discover Financial Services Pension Plan, which is a non-contributory defined benefit plan that is qualified under Section401(a) of the Internal Revenue Code (the Qualified Plan), for eligible employees in the U.S. The Company also sponsors an unfunded supplementary plan (the Supplemental Plan) that covers certain executives, and the Discover Financial Services 401(k) Plan (the Discover 401(k) Plan) for its eligible U.S. employees. The Qualified Plan and the Supplemental Plan no longer provide for the accrual of future benefits, as described below. Defined Benefit Pension and Other Postretirement Plans. The Qualified and Supplemental Plans generally provide pension benefits that are based on each employees years of credited service and on compensation levels specified in the plans. For the Qualified Plan, the Companys policy is to fund at least the amounts sufficient to meet minimum funding requirements under the Employee Retirement Income Security Act of 1974 (ERISA). For the Supplemental Plan, the Companys policy is to fund benefits when amounts are paid to the beneficiaries. The Company previously used a measurement date of September30 to calculate the value of plan assets and obligations under its pension and postretirement plans. In accordance with amendments to ASC Topic 715, CompensationRetirement Benefits (ASC715) that require those measurements to be made as of the Companys fiscal year end date, the Company changed the measurement date to November30 effective for the fiscal year ended November30, 2009. The Company also participates in an unfunded postretirement benefit plan that provides medical and life insurance for eligible U.S. retirees and their dependents. All information related to pensions in this footnote is presented on an aggregate basis, unless otherwise specified. In conjunction with the Distribution, the Companys portion of the Morgan Stanley Employees Retirement Plan (MSERP) was spun off to the Qualified Plan effective December31, 2006. As a result, the net periodic pension cost for the year ended November30, 2007 was remeasured as of December31, 2006. The Qualified Plan assets and liabilities relating to the pre-Distribution participation of the Companys employees in the MSERP were transferred prior to November30, 2007. Historically, the Companys portion of pension and postretirement obligations and expense have been calculated using separate actuarial valuations based on the Companys specific demographic data and separately tracked plan assets. Unrecognized gains and losses and unrecognized prior service costs (plan amendments) have been calculated and tracked separately as well based on the Companys experience. Defined Benefit Pension Curtailment. On September26, 2008, the Company authorized the amendment of the Qualified Plan and the Supplemental Plan to discontinue the accrual of future benefits in the Qualified Plan and the Supplemental Plan. These amendments, which were communicated to employees on October8, 2008 and were effective December31, 2008, were considered a curtailment and resulted in the acceleration of a deferred benefit that resu

Common and Preferred Stock

Common and Preferred Stock
	12 Months Ended Nov. 30, 2009 USD / shares
Common and Preferred Stock	15. Common and Preferred Stock During the year ended November30, 2009, the Company raised approximately $534 million in capital through the issuance of 60,054,055 shares of common stock, par value of $0.01, at a public offering price of $9.25 per share ($8.89 per share net of underwriter discounts and commissions). This included 6,000,000 shares sold pursuant to the over-allotment option granted to the underwriters. On March13, 2009, the Company issued and sold to the United States Department of the Treasury (the U.S. Treasury) under the CPP (i)1,224,558 shares of the Companys Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the senior preferred stock) and (ii)a ten-year warrant to purchase 20,500,413 shares of the Companys common stock, par value $0.01 per share, for an aggregate purchase price of $1.225 billion. The senior preferred stock, which qualifies as Tier 1 capital, has a per share liquidation preference of $1,000, and pays a cumulative dividend rate of 5%per year for the first five years and a rate of 9%per year beginning May15, 2014. The warrant has a 10-year term and was immediately exercisable upon issuance, with an exercise price, subject to anti-dilution adjustments, equal to $8.96 per share of common stock. Of the aggregate amount of $1.225 billion received, approximately $1.15 billion was attributable to the senior preferred stock and approximately $75 million was attributable to the warrant, based on the relative fair values of these instruments on the date of issuance. The Company used a discounted cash flow analysis to determine the fair value of the senior preferred stock, which included the following key assumptions: (i)a discount rate of 15%, (ii)a dividend rate for the first five years of 5% and (iii)a dividend rate after five years of 9%. The Company used a binomial lattice model to determine the fair value of the warrant, which included the following key assumptions: (i)volatility of 50%, (ii)an exercise price of $8.96, (iii)a dividend yield of 2.57% and (iv)the ten-year risk-free rate of 3.5%. The resulting fair values of the preferred stock and stock warrants were used to allocate the aggregate purchase price of $1.225 billion on a pro rata basis. The Company used the effective interest rate method to amortize the discount and the senior preferred stock. As the senior preferred stock was initially valued at $1.15 billion, the difference between the initial value and the par value of the stock will be accreted over a period of five years through a reduction to retained earnings on an effective yield basis. While this accretion does not impact net income, it, along with the dividends, reduces the amount of net income available to common stockholders, and thus reduces both basic and diluted earnings per share. The senior preferred stock is generally non-voting, other than class voting rights on certain matters that could adversely affect the right of the holders of the stock. The senior preferred stock terms provide that the stock may not be redeemed prior to May15, 2012 unless the Company has received aggregate gross proceeds from one or more qualified equity offerings (as described belo

Changes in Accumulated Other Co

Changes in Accumulated Other Comprehensive Income (Loss)
	12 Months Ended Nov. 30, 2009 USD / shares
Changes in Accumulated Other Comprehensive Income (Loss)	16. Changes in Accumulated Other Comprehensive Income (Loss) Changes in each component of accumulated other comprehensive income (loss) were as follows (dollars in thousands): Net Unrealized Gains (Losses) on Securities Foreign Currency Translation Adjustment Adjustments Related to Pensionand Other Post Retirement Benefits Accumulated Other Comprehensive Income (Loss) Balance at November30, 2006 $ 203 $ 129,984 $ (201 ) $ 129,986 Net unrealized losses on investment securities, net of tax benefit of $1,894(1) (3,264 ) (3,264 ) Foreign currency translation, net of tax(2) (81,626 ) (81,626 ) Minimum pension liability adjustment, net of tax(3) 69 69 Adoption of FASB Statement No.158, net of tax of $7,654(4) (13,133 ) (13,133 ) Balance at November30, 2007 (3,061 ) 48,358 (13,265 ) 32,032 Net unrealized losses on investment securities, net of tax benefit of $29,124(1) (50,158 ) (50,158 ) Foreign currency translation, net of tax(2) (21,282 ) (21,282 ) Realization of foreign currency translation upon sale of Goldfish business (27,076 ) (27,076 ) Amortization of losses related to pension and postretirement benefits, net of tax(5) 146 146 Balance at November30, 2008 (53,219 ) (13,119 ) (66,338 ) Net unrealized losses on investment securities, net of tax benefit of $5,594(1) (8,527 ) (8,527 ) Amortization of losses related to pension and postretirement benefits, net of tax benefit of $46,335(5) (79,953 ) (79,953 ) Balance at November30, 2009 $ (61,746 ) $ $ (93,072 ) $ (154,818 ) (1) Represents the difference between the fair value and amortized cost of available-for-sale investment securities. (2) Represents translation gains and losses relating to the Companys Goldfish business resulting from the change in exchange rates, primarily of the British pound, and the related tax effects. (3) Represents additional minimum liability related to unfunded pension plans in accordance with FASB Statement of Financial Accounting Standards No.87, Employers Accounting for Pensions (codified within ASC 715). (4) Represents accumulated adjustment to initially apply the recognition provisions of Statement No.158 (ASC 715-30-25) which the Company adopted as of November30, 2007. (5) Represents amortization of losses related to pension and postretirement benefits in accordance with ASC 715-30-25.

Fee Products

Fee Products
	12 Months Ended Nov. 30, 2009 USD / shares
Fee Products	17. Fee Products Income from fee products includes the following components (dollars in thousands): FortheYearsEndedNovember30, 2009 2008 2007 Debt deferment/debt cancellation $ 125,621 $ 93,835 $ 73,949 Identity theft protection 92,557 80,840 66,325 Other fee products 76,888 75,130 74,298 Total fee products $ 295,066 $ 249,805 $ 214,572

Other Income and Other Expense

Other Income and Other Expense
	12 Months Ended Nov. 30, 2009 USD / shares
Other Income and Other Expense	18. Other Income and Other Expense Total other income includes the following components (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Royalty income $ 72,636 $ 27,605 $ Gain from sales of merchant contracts 17,511 34,324 38,306 Referral of declined applications 12,954 27,061 35,767 Other income 35,701 49,991 4,529 Total other income $ 138,802 $ 138,981 $ 78,602 Total other expense includes the following components (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Postage $ 92,914 $ 100,221 $ 101,033 Fraud losses 58,383 74,448 67,363 Supplies 23,313 27,200 28,825 Credit bureau inquiry fees 16,923 19,550 29,106 Other expense 142,300 72,264 54,655 Total other expense $ 333,833 $ 293,683 $ 280,982 Prior to the Distribution, the Company recorded allocations of intercompany expense from Morgan Stanley for certain corporate functions such as treasury, financial control, human resources, internal audit, legal, investor relations and various other functions historically provided by Morgan Stanley. Where possible, these allocations were made on a specific identification basis. Otherwise, such expenses were allocated by Morgan Stanley based on relative percentages of headcount or some other basis depending on the nature of the cost that was allocated. These intercompany expense allocations may not be indicative of costs the Company has incurred since the spin-off or will incur in the future to obtain these same services as an independent entity. The year ended November30, 2007, included the following amounts related to intercompany expense allocations from Morgan Stanley prior to the Distribution (dollars in thousands): FortheYearEnded November30,2007 Employee compensation and benefits $ 24,169 Marketing and business development 1,169 Information processing and communications 2,339 Professional fees 5,847 Premises and equipment 4,288 Other 1,169 Total Morgan Stanley allocations $ 38,981 Additionally, the Company recorded $0.1 million in other income and $2.9 million in other expense for the year ended November30, 2007, primarily related to rental expense and sublease rental income recorded as a result of transactions with the Companys former parent company, Morgan Stanley.

Income Taxes

Income Taxes
	12 Months Ended Nov. 30, 2009 USD / shares
Income Taxes	19. Income Taxes Income tax expense consisted of the following (dollars in thousands): For the Years Ended November30, 2009 2008 2007 Current: U.S. federal $ 759,683 $ 820,180 $ 596,158 U.S. state and local 143,610 67,696 42,074 International 3,415 907 (10 ) Total 906,708 888,783 638,222 Deferred: U.S. federal (50,110 ) (268,785 ) (70,435 ) U.S. state and local (11,612 ) (25,306 ) (6,273 ) International (273 ) Total (61,995 ) (294,091 ) (76,708 ) Income tax expense $ 844,713 $ 594,692 $ 561,514 The following table reconciles the Companys effective tax rate to the U.S. federal statutory income tax rate: FortheYearsEndedNovember30, 2009 2008 2007 U.S. federal statutory income tax rate 35.0 % 35.0 % 35.0 % U.S. state and local income taxes, net of U.S. federal income tax benefits 4.1 2.5 2.2 Valuation allowance capital loss 1.1 Non-deductible compensation 0.4 State examinations and settlements (0.9 ) (0.1 ) Non-deductible spin-off costs 0.2 Other (0.8 ) (0.7 ) (0.5 ) Effective income tax rate 39.8 % 35.9 % 36.8 % Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Valuation allowances are provided to reduce deferred tax assets to an amount that is more likely than not to be realized. The Company evaluates the likelihood of realizing its deferred tax assets by estimating sources of future taxable income and the impact of tax planning strategies. Significant components of the Companys net deferred income taxes, which are included in other assets in the consolidated statements of financial condition, were as follows (dollars in thousands): November30, 2009 2008 Deferred tax assets: Allowance for loan losses $ 703,563 $ 546,306 Compensation and benefits 68,219 49,611 Unrealized gains/losses 72,585 74,254 Customer fees and rewards 51,123 118,403 Unearned income 1,169 Other 126,705 131,497 Total deferred tax assets before valuation allowance 1,022,195 921,240 Valuation allowance (24,545 ) Total deferred tax assets (net of valuation allowance) 997,650 921,240 Deferred tax liabilities: Depreciation and software amortization (48,421 ) (41,011 ) Securitizations (45,209 ) (113,983 )

Earnings Per Share

Earnings Per Share
	12 Months Ended Nov. 30, 2009 USD / shares
Earnings Per Share	20. Earnings Per Share Basic earnings per share (EPS) is computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities. On June30, 2007, the Distribution by Morgan Stanley was completed to the Morgan Stanley stockholders of one share of DFS common stock for every two shares of Morgan Stanley common stock held on June18, 2007. As a result, on July2, 2007, the Company had 477,235,927 shares of common stock outstanding and for determining the weighted average shares outstanding for the 2007 EPS calculation, this number of shares was assumed to be outstanding at all times prior to the Distribution. The following table presents the calculation of basic and diluted EPS (dollars in thousands, except per share amounts): For the Years Ended November30, 2009 2008 2007 Numerator: Income from continuing operations $ 1,276,185 $ 1,062,913 $ 964,199 Preferred stock dividends (43,880 ) Preferred stock accretion (9,375 ) Income (loss) from discontinued operations, net of tax (135,163 ) (375,569 ) Net income available to common stockholders $ 1,222,930 $ 927,750 $ 588,630 Denominator: Weighted average shares of common stock outstanding 504,550 479,335 477,328 Effect of dilutive stock options and restricted stock units 3,896 4,135 1,551 Effect of dilutive stock warrant 3,357 Weighted average shares of common stock outstanding and common stock equivalents 511,803 483,470 478,879 Basic earnings per share: Income from continuing operations available to common stockholders $ 2.42 $ 2.22 $ 2.02 Income (loss) from discontinued operations, net of tax (0.28 ) (0.79 ) Net income available to common stockholders $ 2.42 $ 1.94 $ 1.23 Diluted earnings per share: Income from continuing operations available to common stockholders $ 2.39 $ 2.20 $ 2.01 Income (loss) from discontinued operations, net of tax (0.28 ) (0.78 ) Net income available to common stockholders $ 2.39 $ 1.92 $ 1.23 For the years ended November30, 2009, 2008 and 2007, the Company had 4.4million, 5.1million and 4.9million, respectively, of anti-dilutive securities related to stock options and restricted stock units. As a result, these securities were excluded from the computation of diluted EPS.

Capital Adequacy

Capital Adequacy
	12 Months Ended Nov. 30, 2009 USD / shares
Capital Adequacy	21. Capital Adequacy The Company became subject to capital adequacy guidelines of the Federal Reserve in the second quarter 2009 upon becoming a bank holding company. Discover Bank (the Bank), the Companys main banking subsidiary, is subject to various regulatory capital requirements as administered 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 results of the Company and the Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (as defined in the regulations) of total and Tier 1 capital to risk-weighted assets, and of Tier I capital to average assets. Management believes that, as of November30, 2009, the Company and the Bank met all capital adequacy requirements to which they were subject. Under regulatory capital requirements, the Company and the Bank must maintain minimum levels of capital that are dependent upon the risk of the financial institutions assets, specifically (a)8% to 10% of total capital to risk-weighted assets (total risk-based capital ratio), (b)4% to 6% of Tier 1 capital to risk-weighted assets (Tier 1 risk-based capital ratio) and (c)4% to 5% of Tier 1 capital to average assets (Tier 1 leverage ratio). To be categorized as well-capitalized, the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. The Company and the Bank were well-capitalized as of November30, 2009, and the Bank was well-capitalized as of November30, 2008, under the regulatory framework for prompt corrective action established by the FDIC. As of November30, 2009, there have been no conditions or events that management believes have changed the Companys or the Banks category. Effective July 2009, the Company and the Bank began consolidating the trusts for purposes of computing regulatory capital as a result of actions taken to provide incremental credit enhancement to the trusts, which are discussed in greater detail in Note 6: Credit Card Securitization Activities. In accordance with regulatory capital requirements, the Company and the Bank now include the assets of the trusts, exclusive of any retained interests held on-balance sheet, in the Companys and the Banks regulatory capital calculations. As a result, the Companys and the Banks risk-weighted assets increased, causing its capital ratios to decrease, but both the Company and the Bank remain above well-capi

Commitments, Contingencies and

Commitments, Contingencies and Guarantees
	12 Months Ended Nov. 30, 2009 USD / shares
Commitments, Contingencies and Guarantees	22. Commitments, Contingencies and Guarantees Lease commitments. The Company leases various office space and equipment under capital and non-cancelable operating leases which expire at various dates through 2018. At November30, 2009, future minimum payments on leases with remaining terms in excess of one year, consist of the following (dollars in thousands): Capitalized Leases Operating Leases 2010 $ 1,948 $ 6,068 2011 394 5,403 2012 6,121 2013 4,606 2014 4,561 Thereafter 16,281 Total minimum lease payments 2,342 $ 43,040 Less: Amount representing interest 74 Present value of net minimum lease payments $ 2,268 Occupancy lease agreements, in addition to base rentals, generally provide for rent and operating expense escalations resulting from increased assessments for real estate taxes and other charges. Total rent expense under operating lease agreements, which considers contractual escalations, was $15.0 million, $15.1 million and $14.3 million for the years ended November30, 2009, 2008 and 2007, respectively. For the years ended November30, 2009, 2008 and 2007, sublease rental income was $1.0 million, $2.3 million and $5.2 million, respectively. Unused commitments to extend credit. At November30, 2009, the Company had unused commitments to extend credit for consumer and commercial loans of approximately $172 billion. Such commitments arise primarily from agreements with customers for unused lines of credit on certain credit cards and certain other consumer loan products, provided there is no violation of conditions in the related agreement. These commitments, substantially all of which the Company can terminate at any time and which do not necessarily represent future cash requirements, are periodically reviewed based on account usage and customer creditworthiness. Guarantees. The Company has certain obligations under certain guarantee arrangements, including contracts and indemnification agreements, that contingently require the Company to make payments to the guaranteed party based on changes in an underlying asset, liability or equity security of a guaranteed party, rate or index. Also included as guarantees are contracts that contingently require the Company to make payments to a guaranteed party based on another entitys failure to perform under an agreement. The Companys use of guarantees is disclosed below by type of guarantee. Securitized Asset Representations and Warranties. As part of the Companys securitization activities, the Company provides representations and warranties that certain securitized assets conform to specified guidelines. The Company may be required to repurchase such assets or indemnify the purchaser against losses if the assets do not meet certain conforming guidelines. Due diligence is performed by the Company to ensure that asset guideline qualifications are met. The maximum potential amount of future payments the Company could be required to make would be equal to the current outstanding balan

Litigation

Litigation
	12 Months Ended Nov. 30, 2009 USD / shares
Litigation	23. Litigation In the normal course of business, from time to time, the Company has been named as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. The Company has historically relied on the arbitration clause in its cardmember agreements, which has in some instances limited the costs of, and the Companys exposure to, litigation, but there can be no assurance that the Company will continue to be successful in enforcing its arbitration clause in the future. Legal challenges to the enforceability of these clauses have led most card issuers and may cause the Company to discontinue their use, and there are bills pending in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses. Further, the Company is involved in pending legal actions challenging its arbitration clause. The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding the Companys business including, among other matters, accounting, tax and operational matters, some of which may result in adverse judgments, settlements, fines, penalties, injunctions, or other relief. Litigation and regulatory actions could also adversely affect the reputation of the Company. The Company contests liability and/or the amount of damages as appropriate in each pending matter. In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, the Company cannot predict with certainty the loss or range of loss, if any, related to such matters, how such matters will be resolved, when they will ultimately be resolved, or what the eventual settlement, fine, penalty or other relief, if any, might be. Subject to the foregoing, the Company believes, based on current knowledge and after consultation with counsel, that the outcome of the pending matters will not have a material adverse effect on the consolidated financial condition of the Company, although the outcome of such matters could be material to the Companys operating results and cash flows for a particular future period, depending on, among other things, the level of the Companys income for such period. The Company filed a lawsuit captioned Discover Financial Services, Inc. v. Visa USA Inc., MasterCard Inc. et al. in the U.S. District Court for the Southern District of New York on October4, 2004. Through this lawsuit the Company sought to recover substantial damages and other appropriate relief in connection with Visas and MasterCards illegal anticompetitive practices that, among other things, foreclosed the Company from the credit and debit network services markets. The lawsuit followed the U.S. Supreme Courts October 2004 denial of Visas and MasterCards petition for review of the decision of the U.S. C

Fair Value Disclosures

Fair Value Disclosures
	12 Months Ended Nov. 30, 2009 USD / shares
Fair Value Disclosures	24. Fair Value Disclosures The Company is required to disclose the fair value of financial instruments for which it is practical to estimate fair value. To obtain fair values, observable market prices are used if available. In some instances, observable market prices are not readily available and fair value is determined using present value or other techniques appropriate for a particular financial instrument. These techniques 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. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts. The following table provides the estimated fair values of financial instruments (dollars in thousands): November30, 2009 November30, 2008 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Financial Assets Cash and cash equivalents $ 13,020,719 $ 13,020,719 $ 10,171,143 $ 10,171,143 Restricted cash $ 643,311 $ 643,311 $ $ Other short-term investments $ 1,350,000 $ 1,350,000 $ $ Investment securities: Available-for-sale $ 2,645,481 $ 2,645,481 $ 1,127,119 $ 1,127,119 Held-to-maturity $ 2,389,816 $ 1,953,990 $ 100,825 $ 84,167 Net loan receivables $ 21,867,185 $ 21,984,317 $ 23,842,026 $ 24,058,173 Amounts due from asset securitization $ 1,692,051 $ 1,692,051 $ 2,233,600 $ 2,233,600 Derivative financial instruments $ 1,369 $ 1,369 $ 4,102 $ 4,102 Financial Liabilities Deposits $ 32,093,012 $ 33,139,823 $ 28,530,521 $ 28,715,427 Short-term borrowings $ $ $ 500,000 $ 500,000 Long-term borrowings $ 2,428,101 $ 2,524,320 $ 1,735,383 $ 1,638,067 Derivative financial instruments $ $ $ 1,895 $ 1,895 Cash and cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the low level of risk these assets present to the Company as well as the relatively liquid nature of these assets, particularly given their short maturities. Restricted cash. The carrying value of restricted cash approximates fair value due to the low level of risk these assets present to the Company. Other short-term investments. The carrying value of other short-term investments approximates fair value due to the low level of risk these assets present to the Company as well as the relatively liquid nature of these assets, particularly given their maturities of less than one year. Available-for-sale investment securities. Investment securities classified as available for sale are recorded at their fair values. These financial assets consist primarily of certain certificated subordinated interests issued by DCENT that have been acquired by a wholly-owned subsidiary of the Company, credit card asset-backed securities issued by other institutions and mortga

Segment Disclosures

Segment Disclosures
	12 Months Ended Nov. 30, 2009 USD / shares
Segment Disclosures	25. Segment Disclosures The Companys business activities are managed in two segments: Direct Banking, formerly referred to as U.S. Card, and Payment Services, formerly referred to as Third-Party Payments. The Company changed the names of its segments to better reflect the nature of the products and services included in its segments. The composition of each segment, however, has not changed. Direct Banking. The Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer products and services, including personal loans, student loans, prepaid cards and other consumer lending and deposit products offered through the Companys Discover Bank subsidiary. Payment Services. The Payment Services segment includes PULSE, an automated teller machine, debit and electronic funds transfer network; Diners Club, a global payments network; and the Companys third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties. The business segment reporting provided to and used by the Companys chief operating decision maker is prepared using the following principles and allocation conventions: Segment information is presented on a managed basis because management considers the performance of the entire managed loan portfolio in managing the business. A managed basis presentation, which is a non-GAAP presentation, involves reporting securitized loans with the Companys owned loans in the managed basis statements of financial condition and reporting the earnings on securitized loans in the same manner as the owned loans instead of as securitization income. The managed basis presentation generally reverses the effects of securitization transactions. Other accounting policies applied to the operating segments are consistent with the accounting policies described in Note 2: Summary of Significant Accounting Policies. Corporate overhead is not allocated between segments; all corporate overhead is included in the Direct Banking segment. Through its operation of the Discover Network, the Direct Banking segment incurs fixed marketing, servicing and infrastructure costs that are not specifically allocated among the operating segments. The assets of the Company are not allocated among the operating segments in the information reviewed by the Companys chief operating decision maker. Income taxes are not specifically allocated among the operating segments in the information reviewed by the Companys chief operating decision maker. The following table presents segment data on a managed basis and a reconciliation to a GAAP presentation (dollars in thousands): Managed Basis Securitization Adjustment(2) GAAP Basis For the Years Ended November30, Direct Banking Payment Services(1) Total Total 2009 Interest income $ 6,459,974 $ 1,098 $ 6,461,072 $ (3,315,992 ) $ 3,145,080 Interest expense 1,648,198 222 1,64

Related Party Transactions

Related Party Transactions
	12 Months Ended Nov. 30, 2009 USD / shares
Related Party Transactions	26. Related Party Transactions In the ordinary course of business, the Company offers consumer loan products to its directors, executive officers and certain members of their families. These 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 Companys consolidated statements of financial conditions. They were not material to the Companys financial position or results of operations. Morgan Stanley ceased to be a related party to the Company effective upon the Distribution on June30, 2007. Prior to the Distribution, Morgan Stanley provided a variety of products and services to the Company or on the Companys behalf and the Company provided certain products and services to Morgan Stanley. Information about the amounts recorded in the consolidated statements of financial condition as a result of transactions with Morgan Stanley prior to the Distribution can be found within the applicable notes to the consolidated financial statements.

Parent Company Condensed Financ

Parent Company Condensed Financial Information
	12 Months Ended Nov. 30, 2009 USD / shares
Parent Company Condensed Financial Information	27. Parent Company Condensed Financial Information The following Parent Company financial statements are provided in accordance with SEC Regulation S-X, which requires all issuers or guarantors of registered securities to include separate annual financial statements. Discover Financial Services (Parent Company Only) Condensed Statements of Financial Condition November30, 2009 2008 (dollars in thousands) Assets Cash and cash equivalents $ 1,035,606 $ 586,601 Interest-earning time deposits due from subsidiary 4,032 Restricted cash 643,311 Notes receivable from subsidiaries 1,808,339 913,473 Investments in subsidiaries 6,800,332 4,965,266 Premises and equipment, net 3 Other assets 389,727 834,302 Total assets $ 10,677,315 $ 7,303,677 Liabilities and Stockholders Equity Non-interest bearing deposit accounts $ 1,685 $ 8,004 Long-term borrowings 1,199,385 799,304 Special dividend Morgan Stanley 808,757 473,000 Accrued expenses and other liabilities 231,941 107,546 Total liabilities 2,241,768 1,387,854 Stockholders equity 8,435,547 5,915,823 Total liabilities and stockholders equity $ 10,677,315 $ 7,303,677 Discover Financial Services (Parent Company Only) Condensed Statements of Income For the Years Ended November30, 2009 2008 2007 (dollars in thousands) Interest income $ 53,696 $ 72,368 $ 103,320 Interest expense 49,324 43,135 99,159 Net interest income 4,372 29,233 4,161 Dividends from subsidiaries 95,000 589,265 Management fees from subsidiaries 31,374 Antitrust litigation settlement 1,153,936 526,817 Other income (497 ) (1,207 ) 894 Total income 1,157,811 649,843 625,694 Other expense Employee compensation and benefits 30,121 30,220 28,117 Marketing and business development 134 218 257 Information processing and communications 125 123 405 Professional fees 8,025 7,216 3,061 Premises and equipment 3,051 3,531 3,473 Other 29,309 2,514 1,250 Total other expense 70,765 43,822 36,563 Income before income tax (expense) benefit and equity in undistributed net income of subsidiaries and losses from discontinued operations 1,087,046 606,021 589,131 Income tax (expense) benefit (420,641 ) (197,082 ) 133 Equity in undistributed net income of subsidiaries 609,780 531,720 Loss from discontinued operations (12,909 ) (634 ) Net income $ 1,276,185 $ 927,75

Subsequent Events

Subsequent Events
	12 Months Ended Nov. 30, 2009 USD / shares
Subsequent Events	28. Subsequent Events As required by ASC Topic 855, Subsequent Events, the Company has evaluated subsequent events through January27, 2010, which is the date of the filing of its consolidated financial statements with the SEC. At the time of the Companys 2007 spin-off from Morgan Stanley, the Company entered into an agreement with Morgan Stanley regarding the manner in which the antitrust case against Visa and MasterCard was to be pursued and settled and how proceeds of the litigation would be shared (Special Dividend Agreement). In October 2008, the Company settled the antitrust lawsuit and became involved in a dispute over Morgan Stanleys right to a portion of the proceeds. On January4, 2010, the New York state court judge presiding over the lawsuit issued an order granting Morgan Stanleys motion for partial summary judgment seeking payment of Morgan Stanleys share of the proceeds. The Company intends to appeal the order and to continue to pursue its separate claims for damages. For additional background regarding the lawsuit, see Note 23: Litigation. Upon receipt of the settlement proceeds from MasterCard in the fourth quarter of fiscal 2008 and from Visa throughout 2009, the Company recorded the special dividend liability based on the terms of the agreement and its estimate of the liability at that time. The Company has funded an escrow account, with the disputed portion of the proceeds received from MasterCard in the fourth quarter of fiscal 2008 and from Visa in each of the quarters in fiscal 2009. Because of Morgan Stanleys actions, the Company did not remit payment to Morgan Stanley, and both the proceeds in the escrow account and the special dividend liability are reflected on the consolidated statement of financial condition as of November30, 2009. As a result of the courts order granting Morgan Stanleys motion for partial summary judgment, the Company has reassessed the amount of its potential liability related to the case. As of November30, 2009, the recorded liability was increased to $837.7 million. Of this amount, $808.8 million is recorded in the Special Dividend Morgan Stanley liability, and $28.9 million of interest related to delayed payment is reflected in other expenses in the consolidated statement of income for the year ended November30, 2009 and accrued expenses and other liabilities in the consolidated statement of financial condition as of November30, 2009. The Company did not have any other subsequent events that would require recognition or disclosure in the financial statements and footnotes as of and for the year ended November30, 2009.

Quarterly Results (unaudited)

Quarterly Results (unaudited) (dollars in thousands, except per share data):
	12 Months Ended Nov. 30, 2009 USD / shares
Quarterly Results (unaudited) (dollars in thousands, except per share data):	29. Quarterly Results (unaudited) (dollars in thousands, except per share data): November30, 2009 August31, 2009 May31, 2009 February28, 2009 November30, 2008 August31, 2008 May31, 2008 February29, 2008 Interest income $ 638,086 $ 833,217 $ 857,984 $ 815,793 $ 736,006 $ 681,692 $ 612,063 $ 662,802 Interest expense 314,158 304,401 320,005 312,720 329,672 305,643 313,248 339,441 Net interest income 323,928 528,816 537,979 503,073 406,334 376,049 298,815 323,361 Provision for loan losses 399,732 380,999 643,861 937,813 714,176 364,838 210,969 305,632 Other income(1) 1,253,559 1,315,960 1,081,120 1,189,956 1,568,901 875,121 844,892 975,544 Other expense 607,499 523,838 560,628 559,123 594,082 612,547 606,825 602,343 Income before income tax expense 570,256 939,939 414,610 196,093 666,977 273,785 325,913 390,930 Incometaxexpense 217,719 362,485 188,810 75,699 223,336 94,885 124,370 152,101 Incomefrom continuing operations 352,537 577,454 225,800 120,394 443,641 178,900 201,543 238,829 Income (loss) from discontinued operations, net of tax (11,306 ) 1,153 32,605 (157,615 ) Net income (loss) $ 352,537 $ 577,454 $ 225,800 $ 120,394 $ 432,335 $ 180,053 $ 234,148 $ 81,214 Net income available to common stockholders $ 333,903 $ 559,387 $ 209,246 $ 120,394 $ 432,335 $ 180,053 $ 234,148 $ 81,214 Basic earnings per common share Incomefrom continuing operations $ 0.62 $ 1.09 $ 0.43 $ 0.25 $ 0.92 $ 0.38 $ 0.42 $ 0.50 Income (loss) from discontinued operations, net of tax (0.02 ) 0.00 0.07 (0.33 ) Net income $ 0.62 $ 1.09 $ 0.43 $ 0.25 $ 0.90 $ 0.38 $ 0.49 $ 0.17 Diluted earnings per common share Incomefrom continuing operations $ 0.60 $ 1.07 $ 0.43 $ 0.25 $ 0.92 $ 0.37 $ 0.42 $ 0.50 Income (loss) from discontinued operations, net of tax (0.03 ) 0.00 0.06 (0.33 ) Net income $ 0.60 $ 1.07 $ 0.43 $ 0.25 $ 0.89 $ 0.37 $ 0.48 $ 0.17

Document Information

Document Information
	12 Months Ended Nov. 30, 2009 USD / shares
Document Information [Text Block]
Document Type	10-K
Amendment Flag	false
Document Period End Date	2009-11-30

Entity Information

Entity Information (USD $)
	12 Months Ended Nov. 30, 2009	Jan. 15, 2010	May. 31, 2009
Entity [Text Block]
Trading Symbol	DFS
Entity Registrant Name	Discover Financial Services
Entity Central Index Key	0001393612
Current Fiscal Year End Date	--11-30
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		543,609,676
Entity Public Float			$4,591,686,556