Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 23, 2015 | |
Document Information [Line Items] | ||
Document type | 10-Q | |
Amendment flag | false | |
Document period end date | Sep. 30, 2015 | |
Document fiscal year focus | 2,015 | |
Document fiscal period focus | Q3 | |
Entity registrant name | Discover Financial Services | |
Entity central index key | 1,393,612 | |
Current fiscal year end date | --12-31 | |
Entity filer category | Large Accelerated Filer | |
Entity common stock, shares outstanding | 427,483,802 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Condition - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Cash and cash equivalents | $ 10,250 | $ 7,284 |
Restricted cash | 98 | 106 |
Investment securities (includes $3,178 and $3,847 at fair value at September 30, 2015 and December 31, 2014, respectively) | 3,302 | 3,949 |
Loan receivables | ||
Loan receivables (includes $1 and $122 at fair value at September 30, 2015 and December 31, 2014, respectively) | 70,078 | 69,969 |
Allowance for loan losses | (1,743) | (1,746) |
Net loan receivables | 68,335 | 68,223 |
Premises and equipment, net | 684 | 670 |
Goodwill | 255 | 257 |
Intangible assets, net | 169 | 176 |
Other assets | 2,518 | 2,461 |
Total assets | 85,611 | 83,126 |
Deposits | ||
Interest-bearing deposit accounts | 46,246 | 45,792 |
Non-interest bearing deposit accounts | 359 | 297 |
Total deposits | 46,605 | 46,089 |
Short-term borrowings | 0 | 113 |
Long-term borrowings | 23,800 | 22,544 |
Accrued expenses and other liabilities | 3,903 | 3,246 |
Total liabilities | $ 74,308 | $ 71,992 |
Commitments, contingencies and guarantees (Notes 9, 12 and 13) | ||
Stockholders’ Equity: | ||
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 560,637,020 and 558,194,324 shares issued at September 30, 2015 and December 31, 2014, respectively | $ 5 | $ 5 |
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 575,000 shares issued and outstanding and aggregate liquidation preference of $575 at September 30, 2015 and December 31, 2014 | 560 | 560 |
Additional paid-in capital | 3,868 | 3,790 |
Retained earnings | 12,880 | 11,467 |
Accumulated other comprehensive loss | (180) | (138) |
Treasury stock, at cost; 131,119,784 and 109,006,038 shares at September 30, 2015 and December 31, 2014, respectively | (5,830) | (4,550) |
Total stockholders’ equity | 11,303 | 11,134 |
Total liabilities and stockholders’ equity | 85,611 | 83,126 |
Variable Interest Entity, Primary Beneficiary [Member] | ||
Assets | ||
Restricted cash | 98 | 102 |
Loan receivables | ||
Loan receivables (includes $1 and $122 at fair value at September 30, 2015 and December 31, 2014, respectively) | 29,980 | 32,304 |
Allowance for loan losses | (776) | (833) |
Other assets | 34 | 37 |
Deposits | ||
Long-term borrowings | 15,866 | 17,395 |
Accrued expenses and other liabilities | $ 11 | $ 11 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Financial Condition (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | |
Statement of Financial Position [Abstract] | |||
Amount of total investment securities at fair value (in dollars) | [1] | $ 3,178,000,000 | $ 3,847,000,000 |
Amount of total loan receivables at fair value (in dollars) | $ 1,000,000 | $ 122,000,000 | |
Common stock, par value per share (in dollars per share) | $ 0.01 | $ 0.01 | |
Common stock, shares authorized | 2,000,000,000 | 2,000,000,000 | |
Common stock, shares issued | 560,637,020 | 558,194,324 | |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.01 | $ 0.01 | |
Preferred stock, shares authorized | 200,000,000 | 200,000,000 | |
Preferred stock, shares issued | 575,000 | 575,000 | |
Preferred stock, shares outstanding | 575,000 | 575,000 | |
Preferred stock, liquidation preference (in dollars) | $ 575,000,000 | $ 575,000,000 | |
Treasury stock, shares | 131,119,784 | 109,006,038 | |
[1] | Available-for-sale investment securities are reported at fair value. |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Interest income | ||||
Credit card loans | $ 1,676 | $ 1,613 | $ 4,902 | $ 4,710 |
Other loans | 314 | 291 | 926 | 848 |
Investment securities | 11 | 17 | 36 | 50 |
Other interest income | 7 | 5 | 20 | 14 |
Total interest income | 2,008 | 1,926 | 5,884 | 5,622 |
Interest expense | ||||
Deposits | 157 | 153 | 464 | 457 |
Short-term borrowings | 0 | 0 | 1 | 1 |
Long-term borrowings | 166 | 135 | 469 | 374 |
Total interest expense | 323 | 288 | 934 | 832 |
Net interest income | 1,685 | 1,638 | 4,950 | 4,790 |
Provision for loan losses | 332 | 354 | 1,028 | 986 |
Net interest income after provision for loan losses | 1,353 | 1,284 | 3,922 | 3,804 |
Other income | ||||
Discount and interchange revenue, net | 288 | 295 | 854 | 876 |
Protection products revenue | 62 | 78 | 201 | 239 |
Loan fee income | 87 | 85 | 248 | 248 |
Transaction processing revenue | 39 | 46 | 121 | 136 |
Gain on investments | 0 | 0 | 8 | 4 |
Gain on origination and sale of mortgage loans | 2 | 19 | 68 | 57 |
Other income | 25 | 29 | 84 | 90 |
Total other income | 503 | 552 | 1,584 | 1,650 |
Other expense | ||||
Employee compensation and benefits | 337 | 320 | 994 | 928 |
Marketing and business development | 168 | 182 | 549 | 519 |
Information processing and communications | 84 | 87 | 262 | 258 |
Professional fees | 160 | 111 | 440 | 322 |
Premises and equipment | 24 | 23 | 71 | 68 |
Other expense | 109 | 104 | 366 | 313 |
Total other expense | 882 | 827 | 2,682 | 2,408 |
Income before income tax expense | 974 | 1,009 | 2,824 | 3,046 |
Income tax expense | 362 | 365 | 1,027 | 1,127 |
Net income | 612 | 644 | 1,797 | 1,919 |
Net income allocated to common stockholders | $ 599 | $ 630 | $ 1,758 | $ 1,878 |
Basic earnings per common share (in dollars per share) | $ 1.38 | $ 1.37 | $ 3.99 | $ 4.03 |
Diluted earnings per common share (in dollars per share) | 1.38 | 1.37 | 3.98 | 4.02 |
Dividends declared per common share (in dollars per share) | $ 0.28 | $ 0.24 | $ 0.80 | $ 0.68 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Net income | $ 612 | $ 644 | $ 1,797 | $ 1,919 |
Other comprehensive (loss) income, net of taxes | ||||
Unrealized gain (loss) on available-for-sale investment securities, net of tax | 3 | (9) | (7) | 1 |
Unrealized (loss) gain on cash flow hedges, net of tax | (22) | 12 | (34) | (2) |
Foreign currency translation adjustments, net of tax | (1) | (1) | (1) | (1) |
Other comprehensive (loss) income | (20) | 2 | (42) | (2) |
Comprehensive income | $ 592 | $ 646 | $ 1,755 | $ 1,917 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Millions | Total | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Loss [Member] | Treasury Stock [Member] |
Preferred stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2013 | 575,000 | ||||||
Stockholders' equity, balance at beginning of period at Dec. 31, 2013 | $ 10,809 | $ 560 | $ 5 | $ 3,687 | $ 9,611 | $ (68) | $ (2,986) |
Common stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2013 | 555,350,000 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 1,919 | 1,919 | |||||
Other comprehensive loss | (2) | (2) | |||||
Purchases of treasury stock | (1,165) | (1,165) | |||||
Common stock issued under employee benefit plans (in shares) | 45,000 | ||||||
Common stock issued under employee benefit plans | 3 | $ 0 | 3 | ||||
Common stock issued and stock-based compensation expense (in shares) | 2,766,000 | ||||||
Common stock issued and stock-based compensation expense | 85 | $ 0 | 85 | ||||
Dividends — common stock | (320) | (320) | |||||
Dividends — preferred stock | (28) | (28) | |||||
Preferred stock, shares outstanding, balance at end of period (in shares) at Sep. 30, 2014 | 575,000 | ||||||
Stockholders' equity, balance at end of period at Sep. 30, 2014 | $ 11,301 | $ 560 | $ 5 | 3,775 | 11,182 | (70) | (4,151) |
Common stock, shares outstanding, balance at end of period (in shares) at Sep. 30, 2014 | 558,161,000 | ||||||
Preferred stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2014 | 575,000 | 575,000 | |||||
Stockholders' equity, balance at beginning of period at Dec. 31, 2014 | $ 11,134 | $ 560 | $ 5 | 3,790 | 11,467 | (138) | (4,550) |
Common stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2014 | 558,194,000 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 1,797 | 1,797 | |||||
Other comprehensive loss | (42) | (42) | |||||
Purchases of treasury stock | (1,280) | (1,280) | |||||
Common stock issued under employee benefit plans (in shares) | 61,000 | ||||||
Common stock issued under employee benefit plans | 3 | $ 0 | 3 | ||||
Common stock issued and stock-based compensation expense (in shares) | 2,382,000 | ||||||
Common stock issued and stock-based compensation expense | 75 | $ 0 | 75 | ||||
Dividends — common stock | (356) | (356) | |||||
Dividends — preferred stock | $ (28) | (28) | |||||
Preferred stock, shares outstanding, balance at end of period (in shares) at Sep. 30, 2015 | 575,000 | 575,000 | |||||
Stockholders' equity, balance at end of period at Sep. 30, 2015 | $ 11,303 | $ 560 | $ 5 | $ 3,868 | $ 12,880 | $ (180) | $ (5,830) |
Common stock, shares outstanding, balance at end of period (in shares) at Sep. 30, 2015 | 560,637,000 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities | ||
Net income | $ 1,797 | $ 1,919 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Provision for loan losses | 1,028 | 986 |
Depreciation and amortization | 291 | 274 |
Amortization of deferred revenues and accretion of accretable yield on acquired loans | (329) | (358) |
Net gain on origination and sale of loans, investments and other assets | (39) | (42) |
Proceeds from sale of mortgage loans originated for sale | 2,713 | 1,962 |
Net principal disbursed on mortgage loans originated for sale | (2,519) | (1,903) |
Other, net | 18 | 122 |
Changes in assets and liabilities: | ||
Increase in other assets | (145) | (94) |
Decrease in accrued expenses and other liabilities | (5) | (40) |
Net cash provided by operating activities | 2,810 | 2,826 |
Cash flows from investing activities | ||
Maturities and sales of available-for-sale investment securities | 1,330 | 1,395 |
Purchases of available-for-sale investment securities | 0 | (390) |
Maturities of held-to-maturity investment securities | 13 | 9 |
Purchases of held-to-maturity investment securities | (36) | (31) |
Net principal disbursed on loans originated for investment | (953) | (2,243) |
Purchases of other investments | (32) | (42) |
Decrease in restricted cash | 8 | 79 |
Proceeds from sale of premises and equipment | 1 | 0 |
Purchases of premises and equipment | (119) | (102) |
Net cash provided by (used for) investing activities | 212 | (1,325) |
Cash flows from financing activities | ||
Net decrease in short-term borrowings | (113) | (1) |
Proceeds from issuance of securitized debt | 1,750 | 3,849 |
Maturities and repayment of securitized debt | (3,303) | (4,590) |
Proceeds from issuance of other long-term borrowings | 2,759 | 1,147 |
Proceeds from issuance of common stock | 3 | 4 |
Purchases of treasury stock | (1,280) | (1,165) |
Net increase in deposits | 513 | 431 |
Dividends paid on common and preferred stock | (385) | (348) |
Net cash used for financing activities | (56) | (673) |
Net increase in cash and cash equivalents | 2,966 | 828 |
Cash and cash equivalents, at beginning of period | 7,284 | 6,554 |
Cash and cash equivalents, at end of period | $ 10,250 | $ 7,382 |
Background and Basis of Present
Background and Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background and Basis of Presentation | Background and Basis of Presentation Description of Business Discover Financial Services (“DFS” or the “Company”) is a direct banking and payment services company. The Company is a bank holding company under the Bank Holding Company Act of 1956 as well as a financial holding company under the Gramm-Leach-Bliley Act and therefore is subject to oversight, regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Company provides direct banking products and services and payment services through its subsidiaries. The Company offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products. The Company also operates the Discover Network, the PULSE network (“PULSE”) and Diners Club International (“Diners Club”). The Discover Network processes transactions for Discover-branded credit cards and also provides payment transaction processing and settlement services. 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 charge cards and/or provide card acceptance services. The Company’s business segments are Direct Banking and Payment Services. The Direct Banking segment includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home equity loans, prepaid cards, other consumer lending and deposit products, and home loans until the closing of the mortgage origination business as described in Note 2: Business Dispositions . The majority of Direct Banking revenues relate to interest income earned on the segment's loan products. Additionally, the Company's credit card products generate substantially all revenues related to discount and interchange, protection products and loan fee income. The Payment Services segment includes PULSE, Diners Club and the Company’s Network Partners business, which provides payment transaction processing and settlement services on the Discover Network. This segment also includes the business operations of Diners Club Italy, which primarily consist of issuing Diners Club charge cards. The majority of Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue (included in other income) from Diners Club. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the financial statements reflect all adjustments which are necessary for a fair presentation of the results for the interim period. All such adjustments are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. The Company believes that the estimates used in the preparation of the condensed consolidated financial statements are reasonable. Actual results could differ from these estimates. These interim condensed consolidated financial statements should be read in conjunction with the Company’s 2014 audited consolidated financial statements filed with the Company’s annual report on Form 10-K for the calendar year ended December 31, 2014 . Recently Issued Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This ASU addresses whether a cloud computing arrangement contains a software license. Under the new guidance, a cloud computing arrangement contains a software license if the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and provided it is feasible for the customer to either host the software internally or with an external party unrelated to the original vendor. Upon meeting both of these criteria, a customer should account for the software license within a cloud computing arrangement in a manner consistent with the acquisition of other software licenses. If a cloud computing arrangement does not meet both criteria, a customer will account for the arrangement entirely as a service contract. The new guidance will become effective for the Company on January 1, 2016. Management is in the process of evaluating existing contractual arrangements to determine whether any will be impacted by the ASU. In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The guidance in this update makes the presentation of debt issuance costs consistent with that of debt discounts and premiums. The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The new guidance will become effective for the Company on January 1, 2016 and is not expected to have a material impact to the financial statements. In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The guidance in this update was issued to improve targeted areas of the accounting rules for consolidation. The ASU changes the analysis companies will use to determine if certain types of legal entities should be consolidated. In addition, it modifies the determination of whether a limited partnership (“LP”) should be evaluated as a variable interest entity ("VIE") or a voting interest entity and eliminates the presumption that a general partner should consolidate a LP. The amendments will primarily trigger a review of the Company’s tax credit investments, which typically utilize limited liability entities. Management is in the process of reviewing those and all other involvements with potential VIEs to determine if its prior conclusions about consolidation or non-consolidation of those entities continue to be appropriate in light of the amended guidance. The new guidance will become effective for the Company on January 1, 2016. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes existing revenue recognition requirements in Topic 605, Revenue Recognition, including an assortment of transaction-specific and industry-specific rules. The ASU establishes a principles-based model under which revenue from a contract is allocated to the distinct performance obligations within the contract and recognized in income as each performance obligation is satisfied. ASU Topic 606 does not apply to rights or obligations associated with financial instruments (for example, interest income from loans or investments, or interest expense on debt), and therefore the Company’s net interest income should not be affected. The Company’s revenue from discount and interchange, protection products, transaction processing and certain fees are within the scope of these rules. Management has not yet completed its evaluation of the impact, if any, of the new guidance on these revenues. As issued, the new revenue recognition rules were to become effective January 1, 2017. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU No. 2014-09 to January 1, 2018. Upon adoption in 2018, the Company will record any necessary adjustment to retained earnings as of the beginning of the year of initial application, which can be either the earliest comparative period presented, with all periods presented under the new rules, or January 1, 2018, without restating prior periods presented. Management has not yet determined which transition reporting option it will apply. |
Business Dispositions
Business Dispositions | 9 Months Ended |
Sep. 30, 2015 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Business Dispositions | Business Dispositions On June 16, 2015, the Company announced that it is closing the mortgage origination business it acquired in 2012, which is part of its Direct Banking segment. The disposition represents the exiting of an ancillary business that will not have a major impact on the Company’s operations. As part of the restructuring, the Company incurred approximately $3 million and $26 million of exit expenses for the three and nine months ended September 30, 2015 , respectively, recorded in other expense within the condensed consolidated statements of income, and expects to incur exit expenses of approximately $5 million through the end of the wind-down period of the business over the remainder of 2015. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments The Company’s investment securities consist of the following (dollars in millions): September 30, December 31, U.S. Treasury securities (1) $ 1,282 $ 1,330 U.S. government agency securities 622 1,033 States and political subdivisions of states 7 10 Residential mortgage-backed securities - Agency (2) 1,391 1,576 Total investment securities $ 3,302 $ 3,949 (1) Includes $4 million and $16 million of U.S. Treasury securities pledged as swap collateral in lieu of cash as of September 30, 2015 and December 31, 2014 , respectively. (2) Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. 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 millions): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value At September 30, 2015 Available-for-Sale Investment Securities (1) U.S. Treasury securities $ 1,277 $ 4 $ — $ 1,281 U.S. government agency securities 618 4 — 622 Residential mortgage-backed securities - Agency 1,258 18 (1 ) 1,275 Total available-for-sale investment securities $ 3,153 $ 26 $ (1 ) $ 3,178 Held-to-Maturity Investment Securities (2) U.S. Treasury securities (3) $ 1 $ — $ — $ 1 States and political subdivisions of states 7 — — 7 Residential mortgage-backed securities - Agency (4) 116 2 — 118 Total held-to-maturity investment securities $ 124 $ 2 $ — $ 126 At December 31, 2014 Available-for-Sale Investment Securities (1) U.S. Treasury securities $ 1,317 $ 12 $ — $ 1,329 U.S. government agency securities 1,021 12 — 1,033 Residential mortgage-backed securities - Agency 1,473 13 (1 ) 1,485 Total available-for-sale investment securities $ 3,811 $ 37 $ (1 ) $ 3,847 Held-to-Maturity Investment Securities (2) U.S. Treasury securities (3) $ 1 $ — $ — $ 1 States and political subdivisions of states 10 — — 10 Residential mortgage-backed securities - Agency (4) 91 2 — 93 Total held-to-maturity investment securities $ 102 $ 2 $ — $ 104 (1) Available-for-sale investment securities are reported at fair value. (2) Held-to-maturity investment securities are reported at amortized cost. (3) Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period. (4) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives. The following table provides information about investment securities with aggregate gross unrealized losses and the length of time that individual investment securities have been in a continuous unrealized loss position (dollars in millions). Number of Securities in a Loss Position Less than 12 months More than 12 months Fair Value Unrealized Losses Fair Value Unrealized Losses At September 30, 2015 Available-for-Sale Investment Securities Residential mortgage-backed securities - Agency 6 $ 189 $ (1 ) $ — $ — At December 31, 2014 Available-for-Sale Investment Securities Residential mortgage-backed securities - Agency 8 $ 97 $ — $ 225 $ (1 ) There were no losses related to other-than-temporary impairments during the three and nine months ended September 30, 2015 and 2014 , respectively. The following table provides information about proceeds from sales, recognized gains and losses and net unrealized gains and losses on available-for-sale securities (dollars in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Proceeds from the sales of available-for-sale investment securities $ — $ — $ 899 $ 1,220 Gain on sales of available-for-sale investment securities $ — $ — $ 8 $ 4 Net unrealized gain (loss) recorded in other comprehensive income, before-tax $ 4 $ (15 ) $ (12 ) $ 1 Net unrealized gain (loss) recorded in other comprehensive income, after-tax $ 3 $ (9 ) $ (7 ) $ 1 Maturities of available-for-sale debt securities and held-to-maturity debt securities are provided in the table below (dollars in millions): One Year or Less After One Year Through Five Years After Five Years Through Ten Years After Ten Years Total At September 30, 2015 Available-for-Sale Investment Securities—Amortized Cost U.S. Treasury securities $ 600 $ 677 $ — $ — $ 1,277 U.S. government agency securities 618 — — — 618 Residential mortgage-backed securities - Agency — — 408 850 1,258 Total available-for-sale investment securities $ 1,218 $ 677 $ 408 $ 850 $ 3,153 Held-to-Maturity Investment Securities—Amortized Cost U.S. Treasury securities $ 1 $ — $ — $ — $ 1 State and political subdivisions of states — — — 7 7 Residential mortgage-backed securities - Agency — — — 116 116 Total held-to-maturity investment securities $ 1 $ — $ — $ 123 $ 124 Available-for-Sale Investment Securities—Fair Values U.S. Treasury securities $ 604 $ 677 $ — $ — $ 1,281 U.S. government agency securities 622 — — — 622 Residential mortgage-backed securities - Agency — — 412 863 1,275 Total available-for-sale investment securities $ 1,226 $ 677 $ 412 $ 863 $ 3,178 Held-to-Maturity Investment Securities—Fair Values U.S. Treasury securities $ 1 $ — $ — $ — $ 1 State and political subdivisions of states — — — 7 7 Residential mortgage-backed securities - Agency — — — 118 118 Total held-to-maturity investment securities $ 1 $ — $ — $ 125 $ 126 Other Investments As a part of the Company's community reinvestment initiatives, the Company has made equity investments in certain limited partnerships and limited liability companies that finance the construction and rehabilitation of affordable rental housing, as well as stimulate economic development in low to moderate income communities. These investments are accounted for using the equity method of accounting and are recorded within other assets. The related commitment for future investments is recorded in accrued expenses and other liabilities within the condensed consolidated statements of financial condition. The portion of each investment's operating results allocable to the Company is recorded in other expense within the condensed consolidated statements of income. The Company earns a return primarily through the receipt of tax credits allocated to the affordable housing projects and the community revitalization projects. These investments are not consolidated as the Company does not have a controlling financial interest in the entities. As of September 30, 2015 and December 31, 2014 , the Company had outstanding investments in these entities of $294 million and $325 million , respectively, and related contingent liabilities of $28 million and $51 million , respectively. Of the above outstanding equity investments, the Company had $196 million and $201 million , respectively, of investments related to affordable housing projects, which had $28 million and $38 million related contingent liabilities as of September 30, 2015 and December 31, 2014 , respectively. |
Loan Receivables
Loan Receivables | 9 Months Ended |
Sep. 30, 2015 | |
Loans and Leases Receivable Disclosure [Abstract] | |
Loan Receivables | Loan Receivables The Company has three loan portfolio segments: credit card loans, other loans and purchased credit-impaired ("PCI") loans. The Company's classes of receivables within the three portfolio segments are depicted in the table below (dollars in millions): September 30, December 31, Loan receivables Credit card loans (1) $ 55,655 $ 56,128 Other loans Personal loans 5,425 5,007 Private student loans 5,520 4,850 Mortgage loans held for sale (2) 1 122 Other (3) 228 202 Total other loans 11,174 10,181 Purchased credit-impaired loans (4) 3,249 3,660 Total loan receivables 70,078 69,969 Allowance for loan losses (1,743 ) (1,746 ) Net loan receivables $ 68,335 $ 68,223 (1) Amounts include $20.2 billion and $21.7 billion underlying investors’ interest in trust debt at September 30, 2015 and December 31, 2014 and $8.0 billion and $8.6 billion in seller's interest at September 30, 2015 and December 31, 2014 , respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information. (2) On June 16, 2015, the Company announced that it is closing the mortgage origination business, as disclosed in Note 2: Business Dispositions. Pursuant to that announcement, the Company has sold substantially all mortgage loans held for sale in its portfolio and ceased originating new mortgages. (3) Other includes home equity loans. (4) Amounts include $1.7 billion and $2.0 billion of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at September 30, 2015 and December 31, 2014 , respectively. See Note 5: Credit Card and Student Loan Securitization Activities. Credit Quality Indicators The Company regularly reviews its collection experience (including delinquencies and net charge-offs) in determining its allowance for loan losses. Information related to the delinquent and non-accruing loans in the Company’s loan portfolio is shown below by each class of loan receivables except for mortgage loans held for sale and PCI student loans, which is shown under the heading “— Purchased Credit-Impaired Loans” (dollars in millions): 30-89 Days Delinquent 90 or More Days Delinquent Total Past Due 90 or More Days Delinquent and Accruing Total Non-accruing (1) At September 30, 2015 Credit card loans (2) $ 482 $ 437 $ 919 $ 384 $ 188 Other loans Personal loans (3) 31 13 44 12 7 Private student loans (excluding PCI) (4) 76 28 104 28 — Other — 3 3 — 21 Total other loans (excluding PCI) 107 44 151 40 28 Total loan receivables (excluding PCI) $ 589 $ 481 $ 1,070 $ 424 $ 216 At December 31, 2014 Credit card loans (2) $ 491 $ 480 $ 971 $ 442 $ 157 Other loans Personal loans (3) 29 11 40 10 5 Private student loans (excluding PCI) (4) 62 25 87 25 — Other 1 1 2 — 21 Total other loans (excluding PCI) 92 37 129 35 26 Total loan receivables (excluding PCI) $ 583 $ 517 $ 1,100 $ 477 $ 183 (1) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $8 million and $7 million for the three months ended September 30, 2015 and 2014 , respectively, and $21 million and $20 million for the nine months ended September 30, 2015 and 2014 , respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. This amount was estimated based on customers' current balances and most recent interest rates. (2) Credit card loans that are 90 or more days delinquent and accruing interest include $38 million and $43 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014 , respectively. (3) Personal loans that are 90 or more days delinquent and accruing interest include $3 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014 . (4) Private student loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014 , respectively. Information related to the net charge-offs in the Company's loan portfolio is shown below by each class of loan receivables except for mortgage loans held for sale and PCI student loans, which is shown under the heading "— Purchased Credit-Impaired Loans" (dollars in millions): For the Three Months Ended September 30, 2015 2014 Net Net Charge-off Net Net Charge-off Credit card loans $ 285 2.04 % $ 289 2.16 % Other loans Personal loans 26 1.99 % 23 1.92 % Private student loans (excluding PCI) 13 0.94 % 12 1.14 % Other — — % — 0.60 % Total other loans (excluding PCI) 39 1.44 % 35 1.50 % Net charge-offs as a percentage of total loans (excluding PCI) $ 324 1.94 % $ 324 2.06 % Net charge-offs as a percentage of total loans (including PCI) $ 324 1.85 % $ 324 1.94 % For the Nine Months Ended September 30, 2015 2014 Net Net Charge-off Net Net Charge-off Credit card loans $ 911 2.24 % $ 883 2.27 % Other loans Personal loans 81 2.10 % 66 1.98 % Private student loans (excluding PCI) 39 0.99 % 40 1.25 % Other — — % 1 0.88 % Total other loans (excluding PCI) 120 1.51 % 107 1.58 % Net charge-offs as a percentage of total loans (excluding PCI) $ 1,031 2.12 % $ 990 2.16 % Net charge-offs as a percentage of total loans (including PCI) $ 1,031 2.01 % $ 990 2.03 % 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 the Company as well as information from credit bureaus, such as FICO or other credit scores, relating to the customer’s broader credit performance. FICO scores are generally obtained at origination of the account and are refreshed monthly or quarterly thereafter to assist in predicting customer behavior. Historically, the Company has noted that a significant proportion of delinquent accounts have FICO scores below 660. The following table provides the most recent FICO scores available for the Company’s customers as a percentage of each class of loan receivables: Credit Risk Profile 660 and Above Less than 660 or No Score At September 30, 2015 Credit card loans 83 % 17 % Personal loans 96 % 4 % Private student loans (excluding PCI) (1) 96 % 4 % At December 31, 2014 Credit card loans 83 % 17 % Personal loans 96 % 4 % Private student loans (excluding PCI) (1) 96 % 4 % (1) PCI loans are discussed under the heading "— Purchased Credit-Impaired Loans." For private student loans, additional credit risk management activities include monitoring the amount of loans in forbearance. Forbearance allows borrowers experiencing temporary financial difficulties and willing to make payments, the ability to temporarily suspend payments. Eligible borrowers have a lifetime cap on forbearance of 12 months . At September 30, 2015 and December 31, 2014 , there were $39 million and $49 million of private student loans, including PCI, in forbearance, respectively, which as a percentage of student loans in repayment and forbearance were 0.7% and 0.8% , respectively. Allowance for Loan Losses The following tables provide changes in the Company’s allowance for loan losses (dollars in millions): For the Three Months Ended September 30, 2015 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,441 $ 131 $ 143 $ 20 $ 1,735 Additions Provision for loan losses 303 30 — (1 ) 332 Deductions Charge-offs (394 ) (31 ) (15 ) — (440 ) Recoveries 109 5 2 — 116 Net charge-offs (285 ) (26 ) (13 ) — (324 ) Balance at end of period $ 1,459 $ 135 $ 130 $ 19 $ 1,743 For the Three Months Ended September 30, 2014 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,359 $ 109 $ 128 $ 18 $ 1,614 Additions Provision for loan losses 318 22 16 (2 ) 354 Deductions Charge-offs (400 ) (26 ) (14 ) — (440 ) Recoveries 111 3 2 — 116 Net charge-offs (289 ) (23 ) (12 ) — (324 ) Balance at end of period $ 1,388 $ 108 $ 132 $ 16 $ 1,644 The following tables provide changes in the Company’s allowance for loan losses (dollars in millions): For the Nine Months Ended September 30, 2015 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,474 $ 120 $ 135 $ 17 $ 1,746 Additions Provision for loan losses 896 96 34 2 1,028 Deductions Charge-offs (1,245 ) (93 ) (45 ) — (1,383 ) Recoveries 334 12 6 — 352 Net charge-offs (911 ) (81 ) (39 ) — (1,031 ) Balance at end of period $ 1,459 $ 135 $ 130 $ 19 $ 1,743 For the Nine Months Ended September 30, 2014 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,406 $ 112 $ 113 $ 17 $ 1,648 Additions Provision for loan losses 865 62 59 — 986 Deductions Charge-offs (1,223 ) (74 ) (44 ) (1 ) (1,342 ) Recoveries 340 8 4 — 352 Net charge-offs (883 ) (66 ) (40 ) (1 ) (990 ) Balance at end of period $ 1,388 $ 108 $ 132 $ 16 $ 1,644 (1) Includes both PCI and non-PCI private student loans. Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income) $ 65 $ 69 $ 210 $ 211 Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income) $ 16 $ 16 $ 53 $ 50 The following tables provide additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio by impairment methodology (dollars in millions): Credit Card Personal Loans Student Loans (3) Other Loans (4) Total At September 30, 2015 Allowance for loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 1,302 $ 130 $ 88 $ 1 $ 1,521 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 157 5 14 18 194 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 28 — 28 Total allowance for loan losses $ 1,459 $ 135 $ 130 $ 19 $ 1,743 Recorded investment in loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 54,647 $ 5,361 $ 5,475 $ 168 $ 65,651 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 1,008 64 45 60 1,177 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 3,249 — 3,249 Total recorded investment $ 55,655 $ 5,425 $ 8,769 $ 228 $ 70,077 At December 31, 2014 Allowance for loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 1,314 $ 114 $ 96 $ 1 $ 1,525 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 160 6 11 16 193 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 28 — 28 Total allowance for loan losses $ 1,474 $ 120 $ 135 $ 17 $ 1,746 Recorded investment in loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 55,091 $ 4,952 $ 4,812 $ 142 $ 64,997 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 1,037 55 38 60 1,190 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 3,660 — 3,660 Total recorded investment $ 56,128 $ 5,007 $ 8,510 $ 202 $ 69,847 (1) Loan receivables evaluated for impairment in accordance with Accounting Standards Codification ("ASC") 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. Other loans are individually evaluated for impairment and generally do not represent troubled debt restructurings. (2) The unpaid principal balance of credit card loans was $858 million and $878 million at September 30, 2015 and December 31, 2014 , respectively. The unpaid principal balance of personal loans was $64 million and $54 million at September 30, 2015 and December 31, 2014 , respectively. The unpaid principal balance of student loans was $44 million and $37 million at September 30, 2015 and December 31, 2014 , respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses. (3) Includes both PCI and non-PCI private student loans. (4) Excludes mortgage loans held for sale. Certain other loans, including non-performing Diners Club licensee loans, are individually evaluated for impairment. Troubled Debt Restructurings The Company has internal loan modification programs that provide relief to credit card, personal loan and student loan borrowers who are experiencing financial hardship. The internal loan modification programs include both temporary and permanent programs which vary by product. External loan modification programs are also available for credit card and personal loans. Temporary and permanent modifications on credit card and personal loans, as well as temporary modifications on student loans and certain grants of student loan forbearance, are considered to be individually impaired. In addition, loans that defaulted or graduated from modification programs or forbearance are considered to be individually impaired. As a result, the above mentioned loans are accounted for as troubled debt restructurings . For credit card customers, the temporary hardship program primarily consists of a reduced minimum payment and an interest rate reduction, both lasting for a period no longer than 12 months . The permanent workout program involves changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months and reducing the interest rate on the loan. The permanent modification program does not normally provide for the forgiveness of unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. The Company also makes loan modifications for customers who request financial assistance through external sources, such as a consumer credit counseling agency program (referred to here as external programs). These loans typically receive a reduced interest rate but continue to be subject to the original minimum payment terms and do not normally include waiver of unpaid principal, interest or fees. To assist student loan borrowers who are experiencing temporary financial difficulties but are willing to resume making payments, the Company may offer hardship forbearance periods of up to 12 months over the life of the loan. Forbearance provides borrowers a deferment in making payments, during which time loan interest continues to accrue at contractual rates. The Company does not anticipate significant shortfalls in the contractual amount due for borrowers using a first hardship forbearance period as the historical performance of these borrowers is not significantly different from the overall portfolio. However, when a borrower is 30 or more days delinquent and granted a second hardship forbearance period, the forbearance is considered a troubled debt restructuring. In addition, the Company offers temporary reduced payment programs, which normally consist of a reduction of the minimum payment for a period of no longer than 12 months . When a student loan borrower is enrolled in a temporary reduced payment program for 12 months or fewer over the life of the loan, the modification is not considered a troubled debt restructuring. No loans have been in a temporary modification program for greater than 12 months . For personal loan customers, in certain situations the Company offers various payment programs, including temporary and permanent programs. The temporary programs normally consist of a reduction of the minimum payment for a period of no longer than 12 months with the option of a final balloon payment required at the end of the loan term or an extension of the maturity date with the total term not exceeding nine years . Further, in certain circumstances the interest rate on the loan is reduced. The permanent program involves changing the terms of the loan in order to pay off the outstanding balance over a longer term and also in certain circumstances reducing the interest rate on the loan. Similar to the temporary programs, the total term may not exceed nine years . The Company also allows loan modifications for customers who request financial assistance through external sources, similar to the credit card customers discussed above. Payments are modified based on the new terms agreed upon with the credit counseling agency. Personal loans included in temporary and permanent programs are accounted for as troubled debt restructurings. The Company monitors borrower performance after using payment programs or forbearance and the Company believes the programs help to prevent defaults and are useful in assisting customers experiencing financial difficulties. The Company plans to continue to use payment programs and forbearance and, as a result, expects to have additional loans classified as troubled debt restructurings in the future. Additional information about modified loans classified as troubled debt restructurings is shown below (dollars in millions): Average recorded investment in loans Interest income recognized during period loans were impaired (1) Gross interest income that would have been recorded with original terms (2) For the Three Months Ended September 30, 2015 Credit card loans Modified credit card loans (3) $ 263 $ 12 $ — Internal programs $ 446 $ 3 $ 16 External programs $ 300 $ 5 $ 2 Personal loans $ 63 $ 2 $ 1 Private student loans $ 44 $ — N/A For the Three Months Ended September 30, 2014 Credit card loans Modified credit card loans (3) $ 248 $ 11 $ 1 Internal programs $ 449 $ 3 $ 15 External programs $ 353 $ 7 $ 4 Personal loans $ 49 $ 2 $ — Private student loans $ 33 $ 1 N/A For the Nine Months Ended September 30, 2015 Credit card loans Modified credit card loans (3) $ 258 $ 35 $ 2 Internal programs $ 449 $ 9 $ 46 External programs $ 311 $ 17 $ 8 Personal loans $ 60 $ 5 $ 2 Private student loans $ 42 $ 2 N/A For the Nine Months Ended September 30, 2014 Credit card loans Modified credit card loans (3) $ 251 $ 34 $ 3 Internal programs $ 452 $ 9 $ 46 External programs $ 374 $ 21 $ 10 Personal loans $ 46 $ 4 $ 1 Private student loans $ 31 $ 2 N/A (1) The Company does not separately track interest income on loans in modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs. (2) The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs. (3) This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings, but are no longer enrolled in troubled debt restructuring program due to noncompliance with the terms of the modification or successful completion of a program. In order to evaluate the primary financial effects that resulted from credit card loans entering into a loan modification program during the three and nine months ended September 30, 2015 and 2014 , the Company quantified the amount by which interest and fees were reduced during the periods. During the three months ended September 30, 2015 and 2014 , the Company forgave approximately $11 million of interest and fees as a result of accounts entering into a credit card loan modification program. During the nine months ended September 30, 2015 and 2014 , the Company forgave approximately $33 million and $30 million , respectively, of interest and fees as a result of accounts entering into a credit card loan modification program. The following table provides information on loans that entered a loan modification program during the period (dollars in millions): For the Three Months Ended September 30, 2015 2014 Number of Accounts Balances Number of Accounts Balances Accounts that entered a loan modification program during the period Credit card loans: Internal programs 12,701 $ 80 12,115 $ 80 External programs 7,818 $ 39 8,203 $ 42 Personal loans 1,107 $ 13 980 $ 12 Private student loans 307 $ 4 393 $ 6 For the Nine Months Ended September 30, 2015 2014 Number of Accounts Balances Number of Accounts Balances Accounts that entered a loan modification program during the period Credit card loans Internal programs 37,933 $ 244 35,199 $ 232 External programs 22,731 $ 115 24,458 $ 128 Personal loans 3,082 $ 37 2,512 $ 30 Private student loans 1,067 $ 15 1,045 $ 15 The following table presents the carrying value of loans that experienced a payment default during the period that had been modified in a troubled debt restructuring during the 15 months preceding the end of each period (dollars in millions): For the Three Months Ended September 30, 2015 2014 Number of Accounts Aggregated Outstanding Balances Upon Default Number of Accounts Aggregated Outstanding Balances Upon Default Troubled debt restructurings that subsequently defaulted Credit card loans: Internal programs (1)(2) 2,466 $ 15 2,488 $ 15 External programs (1)(2) 1,833 $ 7 1,874 $ 8 Personal loans (2) 160 $ 2 118 $ 2 Private student loans (3) 243 $ 4 286 $ 4 For the Nine Months Ended September 30, 2015 2014 Number of Accounts Aggregated Outstanding Balances Upon Default Number of Accounts Aggregated Outstanding Balances Upon Default Troubled debt restructurings that subsequently defaulted Credit card loans Internal programs (1)(2) 8,665 $ 53 7,282 $ 44 External programs (1)(2) 5,067 $ 20 5,440 $ 23 Personal loans (2) 445 $ 5 321 $ 4 Private student loans (3) 827 $ 12 820 $ 12 (1) The outstanding balance upon default is the loan balance at the end of the month prior to default. Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked in most cases. (2) A customer defaults from a modification program after two consecutive missed payments. (3) Student loan defaults have been defined as loans that are 60 or more days delinquent. Of the account balances that defaulted as shown above for the three months ended September 30, 2015 and 2014 , approximately 36% and 34% , respectively, of the total balances were charged off at the end of the month in which they defaulted. Of the account balances that defaulted as shown above for the nine months ended September 30, 2015 and 2014 , approximately 41% and 36% , respectively, of the total balances were charged off at the end of the month in which they defaulted. For accounts that have defaulted from a loan modification program and have not been subsequently charged off, the balances are included in the allowance for loan loss analysis discussed above under "— Allowance for Loan Losses." Purchased Credit-Impaired Loans Purchased loans with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are considered impaired at acquisition and are reported as PCI loans. The private student loans acquired in the SLC transaction, as well as the additional acquired private student loan portfolio comprise the Company’s only PCI loans at September 30, 2015 and December 31, 2014 . Total PCI student loans had an outstanding balance of $3.5 billion and $3.9 billion , including accrued interest, and a related carrying amount of $3.2 billion and $3.7 billion as of September 30, 2015 and December 31, 2014 , respectively. The following table provides changes in accretable yield for the acquired loans during each period (dollars in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Balance at beginning of period $ 1,124 $ 1,450 $ 1,341 $ 1,580 Accretion into interest income (53 ) (64 ) (169 ) (198 ) Other changes in expected cash flows (68 ) — (169 ) 4 Balance at end of period $ 1,003 $ 1,386 $ 1,003 $ 1,386 Periodically, the Company updates the estimate of cash flows expected to be collected based on management's latest expectations of future credit losses, borrower prepayments and certain other assumptions that affect cash flows. No provision expense was recorded during the three and nine months ended September 30, 2015 and 2014 . The allowance for PCI loan losses at September 30, 2015 and December 31, 2014 was $28 million . For the three and nine months ended September 30, 2015 , the changes in expected cash flow assumptions resulted in a decrease in accretable yield primarily related to an increase in the borrower prepayment assumptions on certain pools as well as an increase in actual prepayments since the last reforecast. For the three months ended September 30, 2014 , there were no changes in other cash flow assumptions. For the nine months ended September 30, 2014 , changes in other cash flows assumptions resulted in an increase in accretable yield primarily related to change in borrower prepayments. Changes to accretable yield are recognized prospectively as an adjustment to yield over the remaining life of the pools. At September 30, 2015 , the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which include loans not yet in repayment) were 2.68% and 0.89% , respectively. At December 31, 2014 , the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which include loans not yet in repayment) were 2.35% and 0.75% , respectively. These rates include private student loans that are greater than 120 days delinquent that are covered by an indemnification agreement or insurance arrangements through which the Company expects to recover a substantial portion of the loan. The net charge-off rate on PCI student loans was 0.53% and 0.63% for the three months ended September 30, 2015 and 2014 , respectively, and 0.47% and 0.63% for the nine months ended September 30, 2015 and 2014 , respectively. Mortgage Loans Held For Sale The following table provides a summary of the initial unpaid principal balance of mortgage loans sold during each period, by type of loan (dollars in millions): For the Three Months Ended September 30, 2015 2014 Amount % Amount % Conforming (1) $ 369 79.01 % $ 704 90.03 % FHA (2) 89 19.06 64 8.18 Jumbo (3) — — 11 1.41 VA (4) 9 1.93 3 0.38 Total $ 467 100.00 % $ 782 100.00 % For the Nine Months Ended September 30, 2015 2014 Amount % Amount % Conforming (1) $ 2,307 87.55 % $ 1,723 90.16 % FHA (2) 307 11.65 161 8.42 Jumbo (3) 6 0.23 24 1.26 VA (4) 15 0.57 3 0.16 Total $ 2,635 100.00 % $ 1,911 100.00 % (1) Conforming loans are loans that conform to Government-Sponsored Enterprises guidelines. (2) FHA loans are loans that are insured by the Federal Housing Administration and are typically made to borrowers with low down payments. The initial loan amount must be within certain limits. (3) Jumbo loans are loans with an initial amount larger than the limits set by a Government-Sponsored Enterprise. (4) VA loans are loans that are insured by and conform to the Department of Veteran Affairs guidelines. |
Credit Card and Student Loan Se
Credit Card and Student Loan Securitization Activities | 9 Months Ended |
Sep. 30, 2015 | |
Variable Interest Entities Disclosure [Abstract] | |
Credit Card and Student Loan Securitization Activities | 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 receivables are transferred (or, in the case of DCENT, into which beneficial interests in DCMT are transferred) and from which DCENT issues notes to investors. The DCENT debt structure consists of four classes of securities (DiscoverSeries Class A, B, C and D notes), 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, the majority of which are held by wholly-owned subsidiaries of Discover Bank. The credit-related risk of loss associated with trust assets as of the balance sheet date to which the Company is exposed through the retention of these subordinated interests is fully captured in the allowance for loan losses recorded by the Company. The Company’s credit card securitizations are accounted for as secured borrowings and the trusts are treated as consolidated subsidiaries of the Company. The Company’s retained interests in the assets of the trusts, consisting of investments in DCENT notes and previously outstanding DCMT certificates held by subsidiaries of Discover Bank, constitute intercompany positions which are eliminated in the preparation of the Company’s condensed consolidated statements of financial condition. Upon transfer of credit card loan receivables to the trust, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the trusts’ creditors. Further, the transferred credit card loan receivables are owned by the trust and are not available to third-party creditors of the Company. The trusts have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. Investment of trust cash balances is limited to investments that are permitted under the governing documents of the trusts and which have maturities no later than the related date on which funds must be made available for distribution to trust investors. With the exception of the seller’s interest in trust receivables, the Company’s interests in trust assets are generally subordinate to the interests of third-party investors and, as such, may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts’ debt. The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions): September 30, December 31, Restricted cash $ 17 $ 16 Investors’ interests held by third-party investors 14,650 15,950 Investors’ interests held by wholly-owned subsidiaries of Discover Bank 5,566 5,789 Seller’s interest 8,015 8,596 Loan receivables (1) 28,231 30,335 Allowance for loan losses allocated to securitized loan receivables (1) (748 ) (805 ) Net loan receivables 27,483 29,530 Other 34 37 Carrying value of assets of consolidated variable interest entities $ 27,534 $ 29,583 (1) The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables 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 trusts are subject to credit, payment and interest rate risks on the transferred credit card loan receivables. To protect investors, the securitization structures include certain features that could result in earlier-than-expected repayment of the securities. The primary investor protection feature relates to the availability and adequacy of cash flows in the securitized pool of receivables to meet contractual requirements. Insufficient cash flows would trigger the early repayment of the securities. This is referred to as the “economic early amortization” feature. Investors are allocated cash flows derived from activities related to the accounts comprising the securitized pool of receivables, the amounts of which reflect finance charges billed, certain fee assessments, allocations of merchant discount and interchange, and recoveries on charged-off accounts. From these cash flows, investors are reimbursed for charge-offs occurring within the securitized pool of receivables and receive a contractual rate of return and Discover Bank is paid a servicing fee as servicer. Any cash flows remaining in excess of these requirements are reported to investors as excess spread. An excess spread rate of less than 0% for a contractually specified period, generally a three-month average, would trigger an economic early amortization event. In such an event, the Company would be required to seek immediate sources of replacement funding. Apart from the restricted assets related to securitization activities, the investors and the securitization trusts have no recourse to the Company’s other assets or the Company's general credit for a shortage in cash flows. The Company is required to maintain a contractual minimum level of receivables in the trust in excess of the face value of outstanding investors’ interests. This excess is referred to as the minimum seller’s interest requirement. The required minimum seller’s interest in the pool of trust receivables, which is included in credit card loan receivables restricted for securitization investors, is set at approximately 7% in excess of the total investors’ interests (which includes interests held by third parties as well as those certificated interests held by the Company). If the level of receivables in the trust was to fall below the required minimum, the Company would be required to add receivables from the unrestricted pool of receivables, which would increase the amount of credit card loan receivables restricted for securitization investors. A decline in the amount of the excess seller’s interest could occur if balance repayments and charge-offs exceeded new lending on the securitized accounts or as a result of changes in total outstanding investors’ interests. Seller's interest is impacted by seasonality as higher balance repayments tend to occur in the first calendar year quarter. If the Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of investors’ interests would be triggered. The Company retains significant exposure to the performance of trust assets through holdings of the seller's interest and subordinated security classes of DCENT and previously issued DCMT. In addition, the Company has the right to remove a random selection of accounts, which would serve to decrease the amount of credit card loan receivables restricted for securitization investors, subject to certain requirements including that the minimum seller's interest is still met. Another feature of the Company’s credit card securitization structure that is designed to protect investors’ interests from loss is a reserve account funding requirement in which excess cash flows generated by the transferred loan receivables are held at the trust. This funding requirement is triggered when DCENT’s three-month average excess spread rate decreases to below 4.5% , with increasing funding requirements as excess spread levels decline below preset levels to 0% . In addition to performance measures associated with the transferred credit card loan receivables or the inability to add receivables to satisfy the seller's interest requirement, there are other events or conditions which could trigger an early amortization event, such as non-payment of principal at expected maturity. As of September 30, 2015 , no economic or other early amortization events have occurred. The table below provides information concerning investors’ interests and related excess spread (dollars in millions): At September 30, 2015 Investors’ Interests (1) # of Series Outstanding 3-Month Rolling Average Excess Spread Discover Card Execution Note Trust (DiscoverSeries notes) $ 20,216 37 13.73 % (1) Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank. The Company continues to own and service the accounts that generate the loan receivables held by the trusts. Discover Bank receives servicing fees from the trusts based on a percentage of the monthly investor principal balance outstanding. Although the fee income to Discover Bank offsets the fee expense to the trusts and thus is eliminated in consolidation, failure to service the transferred loan receivables in accordance with contractual requirements could lead to a termination of the servicing rights and the loss of future servicing income, net of related expenses. Student Loan Securitization Activities The Company’s student loan securitizations are accounted for as secured borrowings and the trusts are treated as consolidated subsidiaries of the Company. Trust receivables underlying third-party investors’ interests are recorded in PCI loans and the related debt issued by the trusts is reported in long-term borrowings. The assets of the Company’s consolidated VIEs are restricted from being sold or pledged as collateral for other borrowings and the cash flows from these restricted assets may be used only to pay obligations of the trusts. Currently there are three trusts from which securities were issued to investors. Principal payments on the long-term secured borrowings are made as cash is collected on the underlying loans that are used as collateral on the secured borrowings. The Company does not have access to cash collected by the securitization trusts until cash is released in accordance with the trust indenture agreements and, for certain securitizations, no cash will be released to the Company until all outstanding trust borrowings have been repaid. Similar to the credit card securitizations, the Company continues to own and service the accounts that generate the student loan receivables held by the trusts and receives servicing fees from the trusts based on either a percentage of the principal balance outstanding or a flat fee per borrower. Although the servicing fee income offsets the fee expense related to the trusts and thus is eliminated in consolidation, failure to service the transferred loan receivables in accordance with contractual requirements could lead to a termination of the servicing rights and the loss of future servicing income, net of related expenses. Under terms of all the trust arrangements, the Company has the option, but not the obligation, to provide financial support to the trusts, but has never provided such support. A substantial portion of 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 condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions): September 30, December 31, Restricted cash $ 81 $ 86 Student loan receivables (1) 1,749 1,969 Allowance for loan losses allocated to securitized loan receivables (1) (28 ) (28 ) Net student loan receivables 1,721 1,941 Carrying value of assets of consolidated variable interest entities $ 1,802 $ 2,027 (1) The Company maintains its allowance for loan losses on PCI loans sufficient to absorb probable decreases in cash flows that were previously expected. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company's balance sheet in accordance with GAAP. |
Deposits
Deposits | 9 Months Ended |
Sep. 30, 2015 | |
Deposits [Abstract] | |
Deposits | Deposits The Company offers its deposit products to customers through two channels: (i) through direct marketing, internet origination and affinity relationships (“direct-to-consumer deposits”); and (ii) indirectly through contractual arrangements with securities brokerage firms (“brokered deposits”). Direct-to-consumer deposits include certificates of deposit, money market accounts, online savings and checking accounts and IRA certificates of deposit, while brokered deposits include certificates of deposit and sweep accounts. The following table provides a summary of interest-bearing deposit accounts (dollars in millions): September 30, December 31, Certificates of deposit in amounts less than $100,000 $ 20,692 $ 21,502 Certificates of deposit in amounts $100,000 or greater (1) 5,271 5,634 Savings deposits, including money market deposit accounts 20,283 18,656 Total interest-bearing deposits $ 46,246 $ 45,792 (1) Includes $1.1 billion and $1.2 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of September 30, 2015 and December 31, 2014 , respectively. The following table summarizes certificates of deposit in amounts of $100,000 or greater by contractual maturity (dollars in millions): Maturity Period September 30, 2015 Three months or less $ 885 Over three months through six months 743 Over six months through twelve months 1,156 Over twelve months 2,487 Total $ 5,271 The following table summarizes certificates of deposit maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions): Year September 30, 2015 2015 $ 2,710 2016 9,636 2017 5,101 2018 3,129 2019 1,830 Thereafter 3,557 Total $ 25,963 |
Long-Term Borrowings
Long-Term Borrowings | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Long-Term Borrowings | 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 Company’s long-term borrowings and weighted-average interest rates on outstanding balances (dollars in millions): September 30, 2015 December 31, 2014 Maturity Interest Weighted-Average Interest Rate Outstanding Amount Outstanding Amount Securitized Debt Fixed-rate asset-backed securities (1) 2016-2020 0.69%-5.65% 1.98% $ 7,950 $ 8,950 Floating-rate asset-backed securities (2)(3) 2015-2019 0.39%-0.66% 0.55% 6,700 7,000 Total Discover Card Master Trust I and Discover Card Execution Note Trust 14,650 15,950 Floating-rate asset-backed securities (4)(5)(6)(7) 2031-2042 0.46%-4.25% 1.99% 1,216 1,445 Total SLC Private Student Loan Trusts 1,216 1,445 Total long-term borrowings - owed to securitization investors 15,866 17,395 Discover Financial Services (Parent Company) Fixed-rate senior notes (1) 2017-2025 3.75%-10.25% 4.75% 2,075 1,558 Fixed-rate retail notes 2025 4.05% 4.05% 10 — Discover Bank Fixed-rate senior bank notes (1) 2018-2026 2.00%-4.25% 3.16% 5,151 2,892 Fixed-rate subordinated bank notes 2019-2020 7.00%-8.70% 7.49% 698 698 Capital lease obligations (8) 2016 4.51% 4.51% — 1 Total long-term borrowings $ 23,800 $ 22,544 (1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate (“LIBOR”). Use of these interest rate swaps impacts carrying value of the debt. (2) Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 18 to 45 basis points and 3-month LIBOR + 20 basis points . (3) The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 15: Derivatives and Hedging Activities. (4) SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points , Prime rate + 75 to 100 basis points and 1-month LIBOR + 350 basis points . (5) The Company acquired an interest rate swap related to the securitized debt assumed in the SLC transaction. The swap does not qualify for hedge accounting and has no impact on debt carrying value. See Note 15: Derivatives and Hedging Activities. (6) Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates. (7) Includes $321 million of senior notes maturing in 2031, $699 million of senior and subordinated notes maturing in 2036 and $196 million of senior notes maturing in 2042 as of September 30, 2015 . (8) As of September 30, 2015 , the outstanding amount of capital lease obligations was not material. The following table summarizes long-term borrowings maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions): Year September 30, 2015 2015 $ 250 2016 3,050 2017 5,106 2018 4,609 2019 3,278 Thereafter 7,507 Total $ 23,800 The Company has access to committed undrawn capacity through private securitizations to support the funding of its credit card loan receivables. As of September 30, 2015 , the total commitment of secured credit facilities through private providers was $7.8 billion , none of which was drawn as of September 30, 2015 . On October 15, 2015, $1.0 billion of the total commitment of secured credit facilities through private providers was terminated by the Company. The Company determined that appropriate levels of capacity are in place following the termination of this agreement. Access to the unused portions of the secured credit facilities is subject to the terms of the agreements with each of the providers which have various expirations in 2016, 2017 and 2018. Borrowings outstanding under each facility bear interest at a margin above LIBOR or the asset-backed commercial paper costs of each individual conduit provider. The terms of each agreement provide for a commitment fee to be paid on the unused capacity and include various affirmative and negative covenants, including performance metrics and legal requirements similar to those required to issue any term securitization transaction. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 9 Months Ended |
Sep. 30, 2015 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income Changes in each component of accumulated other comprehensive income (loss) ("AOCI") were as follows (dollars in millions): Unrealized Gain (Loss) on Available-for-Sale Investment Securities, Net of Tax (Loss) Gain on Cash Flow Hedges, Net of Tax Foreign Currency Translation Adjustments, Net of Tax (1) Pension Plan Loss, Net of Tax AOCI For the Three Months Ended September 30, 2015 Balance at June 30, 2015 $ 13 $ (19 ) $ — $ (154 ) $ (160 ) Net change 3 (22 ) (1 ) — (20 ) Balance at September 30, 2015 $ 16 $ (41 ) $ (1 ) $ (154 ) $ (180 ) For the Three Months Ended September 30, 2014 Balance at June 30, 2014 $ 29 $ (1 ) $ 1 $ (101 ) $ (72 ) Net change (9 ) 12 (1 ) — 2 Balance at September 30, 2014 $ 20 $ 11 $ — $ (101 ) $ (70 ) For the Nine Months Ended September 30, 2015 Balance at December 31, 2014 $ 23 $ (7 ) $ — $ (154 ) $ (138 ) Net change (7 ) (34 ) (1 ) — (42 ) Balance at September 30, 2015 $ 16 $ (41 ) $ (1 ) $ (154 ) $ (180 ) For the Nine Months Ended September 30, 2014 Balance at December 31, 2013 $ 19 $ 13 $ 1 $ (101 ) $ (68 ) Net change 1 (2 ) (1 ) — (2 ) Balance at September 30, 2014 $ 20 $ 11 $ — $ (101 ) $ (70 ) (1) Includes unrealized gains/losses on hedge of net investment in foreign subsidiary, net of tax expense/benefit and net gains/losses on foreign currency translation adjustments. The table below presents each component of other comprehensive income (loss) ("OCI") before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions): Before Tax Tax (Expense) Benefit Net of Tax For the Three Months Ended September 30, 2015 Available-for-Sale Investment Securities Net unrealized holding gain arising during the period $ 4 $ (1 ) $ 3 Net change $ 4 $ (1 ) $ 3 Cash Flow Hedges Net unrealized loss arising during the period $ (49 ) $ 19 $ (30 ) Amounts reclassified from AOCI 12 (4 ) 8 Net change $ (37 ) $ 15 $ (22 ) Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) For the Three Months Ended September 30, 2014 Available-for-Sale Investment Securities Net unrealized holding loss arising during the period $ (15 ) $ 6 $ (9 ) Net change $ (15 ) $ 6 $ (9 ) Cash Flow Hedges Net unrealized gain arising during the period $ 10 $ (4 ) $ 6 Amounts reclassified from AOCI 11 (5 ) 6 Net change $ 21 $ (9 ) $ 12 Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) The table below presents each component of OCI before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions): Before Tax Tax Benefit (Expense) Net of Tax For the Nine Months Ended September 30, 2015 Available-for-Sale Investment Securities Net unrealized holding loss arising during the period $ (4 ) $ 2 $ (2 ) Amounts reclassified from AOCI (8 ) 3 (5 ) Net change $ (12 ) $ 5 $ (7 ) Cash Flow Hedges Net unrealized loss arising during the period $ (90 ) $ 34 $ (56 ) Amounts reclassified from AOCI 35 (13 ) 22 Net change $ (55 ) $ 21 $ (34 ) Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) For the Nine Months Ended September 30, 2014 Available-for-Sale Investment Securities Net unrealized holding gain arising during the period $ 5 $ (2 ) $ 3 Amounts reclassified from AOCI (4 ) 2 (2 ) Net change $ 1 $ — $ 1 Cash Flow Hedges Net unrealized loss arising during the period $ (28 ) $ 10 $ (18 ) Amounts reclassified from AOCI 26 (10 ) 16 Net change $ (2 ) $ — $ (2 ) Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table presents the calculation of the Company's effective income tax rate (dollars in millions, except effective income tax rate): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Income before income tax expense $ 974 $ 1,009 $ 2,824 $ 3,046 Income tax expense $ 362 $ 365 $ 1,027 $ 1,127 Effective income tax rate 37.2 % 36.2 % 36.4 % 37.0 % Income tax expense decreased $3 million for the three months ended September 30, 2015 as compared to the same period in 2014 reflecting a decrease in pretax income. The effective tax rate increased 1.0% , for the three months ended September 30, 2015 as compared to the same period in 2014 due to an increase in state income tax rates as a result of changes in state apportionment factors. The 2014 prior period included a one-time tax benefit related to the prior year. Income tax expense and the effective tax rate decreased $100 million and 0.6% , respectively, for the nine months ended September 30, 2015 as compared to the same period in 2014 reflecting a decrease in pretax income and favorable adjustments to unrecognized tax benefits as a result of resolution of certain tax matters. The Company is subject to examination by the Internal Revenue Service ("IRS") and the tax authorities in various state and foreign tax jurisdictions. The tax years under examination vary by jurisdiction. The IRS is currently examining 2011 through 2012. The Company is pursuing an administrative appeal of the IRS’s proposed assessment for the years 1999 through 2005 and 2008 through 2010. It is reasonably possible that a settlement of the IRS appeals and certain state audits may be made within 12 months of the reporting date. The Company believes it is reasonably possible that a reduction of unrecognized tax benefits in the range of $100 million to $350 million could be recognized. The Company regularly assesses the likelihood of additional assessments or settlements in each of the taxing jurisdictions resulting from these and subsequent years' examinations. The Company believes that its reserves are sufficient to cover any tax, penalties and interest that could result from such examinations. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The following table presents the calculation of basic and diluted earnings per share ("EPS") (in millions, except per share amounts): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Numerator Net income $ 612 $ 644 $ 1,797 $ 1,919 Preferred stock dividends (9 ) (9 ) (28 ) (28 ) Net income available to common stockholders 603 635 1,769 1,891 Income allocated to participating securities (4 ) (5 ) (11 ) (13 ) Net income allocated to common stockholders $ 599 $ 630 $ 1,758 $ 1,878 Denominator Weighted-average shares of common stock outstanding 433 460 440 466 Effect of dilutive common stock equivalents 1 1 1 1 Weighted-average shares of common stock outstanding and common stock equivalents 434 461 441 467 Basic earnings per common share $ 1.38 $ 1.37 $ 3.99 $ 4.03 Diluted earnings per common share $ 1.38 $ 1.37 $ 3.98 $ 4.02 Anti-dilutive securities were not material and had no impact on the computation of diluted EPS for the three and nine months ended September 30, 2015 and 2014 . |
Capital Adequacy
Capital Adequacy | 9 Months Ended |
Sep. 30, 2015 | |
Regulatory Capital Requirements [Abstract] | |
Capital Adequacy | Capital Adequacy The Company is subject to the capital adequacy guidelines of the Federal Reserve, and Discover Bank, the Company’s main banking subsidiary, is subject to various regulatory capital requirements as administered by 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 Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Discover Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. In 2013, the Federal Reserve, the Office of the Comptroller of the Currency and the FDIC issued final capital rules under the Basel Committee’s December 2010 framework (referred to as “Basel III”) establishing a new comprehensive capital framework for U.S. banking organizations. The final capital rules of Basel III ("Basel III rules") substantially revise Basel I rules regarding the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company. The Basel III rules became effective for the Company on January 1, 2015. This timing is based on the Company being classified as a "Standardized Approach" entity. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources — Capital" for additional information about "Standardized Approach ." Among other things, the Basel III rules (i) introduce a new capital measure called Common Equity Tier 1 (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and additional Tier 1 capital instruments meeting specified requirements, (iii) apply most deductions/adjustments to regulatory capital measures to CET1 and not to the other components of capital, thus potentially requiring higher levels of CET1 in order to meet minimum ratios and (iv) expand the scope of the deductions/adjustments from capital as compared to existing regulations. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources — Capital" for a detailed discussion of additional Basel III requirements. The Basel III minimum capital ratios as of January 1, 2015 are as follows: • 8.0% Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets; • 6.0% Tier 1 capital (i.e., CET1 plus Additional Tier 1) to risk-weighted assets; • 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”); and • 4.5% CET1 to risk-weighted assets. As of September 30, 2015 , the Company and Discover Bank met all capital adequacy requirements to which they were subject. To be categorized as “well-capitalized,” the Company and Discover Bank must maintain minimum total capital risk-based, Tier 1 risk-based, Tier 1 leverage and CET1 ratios as set forth in the table below. As of September 30, 2015 , the Company and Discover Bank met the requirements for well-capitalized status and there have been no conditions or events that management believes have changed the Company’s or Discover Bank’s category. The following table shows the actual capital amounts and ratios of the Company and Discover Bank and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in millions): Actual Minimum Capital Requirements Capital Requirements To Be Classified as Well-Capitalized Amount Ratio Amount Ratio Amount Ratio At September 30, 2015 (1) Total capital (to risk-weighted assets) Discover Financial Services $ 12,546 17.1 % $ 5,882 ≥8.0% $ 7,353 ≥10.0% Discover Bank $ 11,926 16.4 % $ 5,816 ≥8.0% $ 7,270 ≥10.0% Tier 1 capital (to risk-weighted assets) Discover Financial Services $ 11,172 15.2 % $ 4,412 ≥6.0% $ 5,882 ≥8.0% Discover Bank $ 9,949 13.7 % $ 4,362 ≥6.0% $ 5,816 ≥8.0% Tier 1 capital (to average assets) Discover Financial Services $ 11,172 13.1 % $ 3,406 ≥4.0% $ 4,257 ≥5.0% Discover Bank $ 9,949 11.8 % $ 3,365 ≥4.0% $ 4,207 ≥5.0% CET1 capital (to risk-weighted assets) (Basel III transition) Discover Financial Services $ 10,612 14.4 % $ 3,309 ≥4.5% $ 4,779 ≥6.5% Discover Bank $ 9,949 13.7 % $ 3,272 ≥4.5% $ 4,726 ≥6.5% CET1 capital (to risk-weighted assets) (Basel III fully phased-in) (2) Discover Financial Services $ 10,530 14.3 % $ 3,304 ≥4.5% $ 4,773 ≥6.5% Discover Bank $ 9,945 13.7 % $ 3,271 ≥4.5% $ 4,725 ≥6.5% At December 31, 2014 (1) Total capital (to risk-weighted assets) Discover Financial Services $ 12,418 17.0 % $ 5,831 ≥8.0% $ 7,289 ≥10.0% Discover Bank $ 11,040 15.3 % $ 5,767 ≥8.0% $ 7,209 ≥10.0% Tier 1 capital (to risk-weighted assets) Discover Financial Services $ 10,839 14.9 % $ 2,916 ≥4.0% $ 4,373 ≥6.0% Discover Bank $ 9,470 13.1 % $ 2,884 ≥4.0% $ 4,326 ≥6.0% Tier 1 capital (to average assets) Discover Financial Services $ 10,839 13.2 % $ 3,288 ≥4.0% $ 4,111 ≥5.0% Discover Bank $ 9,470 11.7 % $ 3,252 ≥4.0% $ 4,066 ≥5.0% CET1 capital (to risk-weighted assets) (Basel III transition) Discover Financial Services N/A N/A N/A N/A N/A N/A Discover Bank N/A N/A N/A N/A N/A N/A CET1 capital (to risk-weighted assets) (Basel III fully phased-in) (2) Discover Financial Services $ 10,305 14.1 % $ 3,299 ≥4.5% $ 4,765 ≥6.5% Discover Bank N/A N/A N/A N/A N/A N/A (1) As of January 1, 2015, actual capital amounts and ratios are calculated under Basel III rules subject to transition provisions. The Company reported under Basel I at December 31, 2014 . (2) CET1 (Basel III fully phased-in) is calculated using Basel III fully phased-in CET1 capital, a non-GAAP measure. The Company believes that the CET1 capital ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of CET1 capital to risk-weighted assets calculated under fully phased-in Basel III rules to CET1 capital and risk-weighted assets calculated under Basel III transition rules see "Management's Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources — Capital". |
Commitments, Contingencies and
Commitments, Contingencies and Guarantees | 9 Months Ended |
Sep. 30, 2015 | |
Commitments Contingencies and Guarantees [Abstract] | |
Commitments, Contingencies and Guarantees | 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 2028. Future minimum payments on capital leases were not material at September 30, 2015. The following table shows future minimum payments on non-cancelable operating leases with original terms in excess of one year (dollars in millions): September 30, 2015 2015 $ 4 2016 15 2017 14 2018 12 2019 10 Thereafter 45 Total minimum lease payments $ 100 Unused Commitments to Extend Credit At September 30, 2015 , the Company had unused commitments to extend credit for loans of approximately $180.3 billion . Such commitments arise primarily from agreements with customers for unused lines of credit on certain credit cards and certain other loan products, provided there is no violation of conditions in the related agreements. 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, customer creditworthiness and loan qualification. Securitizations Representations and Warranties As part of the Company’s financing activities, the Company provides representations and warranties that certain assets pledged as collateral in secured borrowing arrangements conform to specified guidelines. Due diligence is performed by the Company which is intended to ensure that asset guideline qualifications are met. If the assets pledged as collateral do not meet certain conforming guidelines, the Company may be required to replace, repurchase or sell such assets. In its credit card securitization activities, the Company would replace nonconforming receivables through the allocation of excess seller’s interest or from additional transfers from the unrestricted pool of receivables. If the Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of investors’ interests would be triggered. In its student loan securitizations, the Company would generally repurchase the loans from the trust at the outstanding principal amount plus interest. The maximum potential amount of future payments the Company could be required to make would be equal to the current outstanding balances of third-party investor interests in credit card asset-backed securities plus the principal amount of any other outstanding secured borrowings. The Company has recorded substantially all of the maximum potential amount of future payments in long-term borrowings on the Company’s condensed consolidated statements of financial condition. The Company has not recorded any incremental contingent liability associated with its secured borrowing representations and warranties. Management believes that the probability of having to replace, repurchase or sell assets pledged as collateral under secured borrowing arrangements, including an early amortization event, is low. Mortgage Loans Representations and Warranties The Company sold loans it originated to investors on a servicing-released basis and the risk of loss or default by the borrower is generally transferred to the investor. However, the Company was required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the mortgage loan, even though the Company closed the mortgage origination business . Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual mortgage loans, the Company may be obligated to repurchase the respective mortgage loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery. The Company has established a repurchase reserve based on expected losses. At September 30, 2015 , this amount was not material and was included in accrued expenses and other liabilities on the condensed consolidated statements of financial condition. The related provision was included in other income on the condensed consolidated statements of income. Guarantees The Company has obligations under certain guarantee arrangements, including contracts and indemnification agreements, which 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 entity’s failure to perform under an agreement. The Company’s use of guarantees is disclosed below by type of guarantee. Counterparty Settlement 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 the benefit of all Diners Club licensees. The licensees hold the primary liability to settle the transactions of their customers with these merchants. However, Diners Club retains a counterparty exposure if a licensee fails to meet its financial payment obligation to one of these merchants. • ATM Guarantee. PULSE entered into contractual relationships with certain international ATM acquirers in which DFS Services LLC retains counterparty exposure if an issuer fails to fulfill its settlement obligation. The maximum potential amount of future payments related to such contingent obligations is dependent upon the transaction volume processed between the time a counterparty defaults on its settlement and the time at which the Company disables the settlement of any further transactions for the defaulting party, which could be one month depending on the type of guarantee/counterparty. However, there is no limitation on the maximum amount the Company may be liable to pay. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether particular counterparties will fail to meet their settlement obligations. While the Company has some contractual remedies to offset these counterparty settlement exposures (such as letters of credit or pledged deposits), in the event that all licensees and/or issuers were to become unable to settle their transactions, the Company estimates its maximum potential counterparty exposures to these settlement guarantees, based on historical transaction volume, would be as follows (dollars in millions): September 30, Diners Club: Merchant guarantee $ 112 PULSE: ATM guarantee $ 1 With regard to the counterparty settlement guarantees discussed above, the Company believes that the estimated amounts of maximum potential future payments are not representative of the Company’s actual potential loss exposure given Diners Club’s and PULSE’s insignificant historical losses from these counterparty exposures. As of September 30, 2015 , the Company had not recorded any contingent liability in the condensed consolidated financial statements for these counterparty exposures, and management believes that the probability of any payments under these arrangements is low. The Company also retains counterparty exposure for the obligations of Diners Club licensees that participate in the Citishare network, an electronic funds processing network. Through the Citishare network, Diners Club customers are able to access certain ATMs directly connected to the Citishare network. The Company’s maximum potential future payment under this counterparty exposure is limited to $15 million subject to annual adjustment based on actual transaction experience. However, as of September 30, 2015 , the Company had not recorded any contingent liability in the condensed consolidated financial statements related to this counterparty exposure, and management believes that the probability of any payments under this arrangement is low. Merchant Chargeback Guarantees The Company operates the Discover Network, issues payment cards and permits third parties to issue payment cards. The Company is contingently liable for certain transactions processed on the Discover Network in the event of a dispute between the payment card customer and a merchant. The contingent liability arises if the disputed transaction involves a merchant or merchant acquirer with whom the Discover Network has a direct relationship. If a dispute is resolved in the customer’s favor, the Discover Network will credit or refund the disputed amount to the Discover Network card issuer, who in turn credits its customer’s account. The Discover Network will then charge back the disputed amount of the payment card transaction to the merchant or merchant acquirer, where permitted by the applicable agreement, to seek recovery of amounts already paid to the merchant for payment card transactions. If the Discover Network is unable to collect the amount subject to dispute from the merchant or merchant acquirer ( e.g. , in the event of merchant default or dissolution) or after expiration of the time period for chargebacks in the applicable agreement, the Discover Network will bear the loss for the amount credited or refunded to the customer. In most instances, a loss by the Discover Network is unlikely to arise in 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, where the product or service is not scheduled to be provided to the customer until a later date following the purchase, the likelihood of a contingent payment obligation by the Discover Network increases. Losses related to merchant chargebacks were not material for the three and nine months ended September 30, 2015 and 2014 . The maximum potential amount of obligations of the Discover Network arising as a result of such contingent obligations is estimated to be the portion of the total Discover Network transaction volume processed to date for which timely and valid disputes may be raised under applicable law and relevant issuer and customer agreements. There is no limitation on the maximum amount the Company may be liable to pay to issuers. However, the Company believes that such amount is not representative of the Company’s actual potential loss exposure based on the Company’s historical experience. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether the current or cumulative transaction volumes may include or result in disputed transactions. The table below summarizes certain information regarding merchant chargeback guarantees (in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Aggregate sales transaction volume (1) $ 33,761 $ 31,963 $ 97,058 $ 92,262 (1) Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume. The Company did not record any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees as of September 30, 2015 or December 31, 2014 . The Company mitigates the risk of potential loss exposure by withholding settlement from merchants, obtaining third-party guarantees, or obtaining escrow deposits or letters of credit from certain merchant acquirers or merchants that are considered higher risk due to various factors such as time delays in the delivery of products or services. The table below provides information regarding escrow deposits and settlement withholdings, which are recorded in interest-bearing deposit accounts and accrued expenses and other liabilities on the Company’s condensed consolidated statements of financial condition, respectively (dollars in millions): September 30, December 31, Settlement withholdings and escrow deposits $ 9 $ 16 |
Litigation and Regulatory Matte
Litigation and Regulatory Matters | 9 Months Ended |
Sep. 30, 2015 | |
Loss Contingency [Abstract] | |
Litigation and Regulatory Matters | Litigation and Regulatory Matters 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 contests liability and/or the amount of damages as appropriate in each pending matter. The Company has historically relied on the arbitration clause in its cardmember agreements, which has in some instances limited the costs of, and the Company’s 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. The Company is involved in pending legal actions challenging its arbitration clause. Bills are periodically introduced in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") authorized the Consumer Financial Protection Bureau (the "CFPB") to conduct a study on pre-dispute arbitration clauses and, based on the study, potentially limit or ban arbitration clauses. On March 10, 2015, the CFPB released its report to Congress on pre-dispute arbitration as required by the Dodd-Frank Act. On October 7, 2015, the CFPB published a potential rulemaking on arbitration agreements that would (i) effectively ban consumer financial companies from using arbitration clauses to prevent class action cases and (ii) require records of all other arbitrations to be provided to the CFPB for potential publication on its website. The timing and provisions of any final rule are uncertain at this time. The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding the Company’s business including, among other matters, consumer regulatory, accounting, tax and other operational matters, some of which may result in significant adverse judgments, settlements, fines, penalties, injunctions, decreases in regulatory ratings, customer restitution or other relief, which could materially impact the Company's condensed consolidated financial statements, increase its cost of operations, or limit its ability to execute its business strategies and engage in certain business activities. For example, Discover Bank and Discover Financial Services have been the subject of actions by the FDIC and the Federal Reserve, respectively, with respect to anti-money laundering and related compliance programs as described more fully below. In addition, certain subsidiaries of the Company are subject to a consent order with the CFPB regarding certain student loan servicing practices, as described below. Supervisory actions generally can include demands for civil money penalties, changes to certain business practices and customer restitution. Supervisory actions related to anti-money laundering and related laws and regulations will limit for a period of time the Company's ability to enter into certain types of acquisitions and make certain types of investments. In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal and regulatory matters when those matters present loss contingencies which are both probable and estimable. Litigation related expense of $22 million was recognized for the nine months ended September 30, 2015 . Litigation expense was not material for the three months ended September 30, 2015 and for the three and nine months ended September 30, 2014 . There may be an exposure to loss in excess of any amounts accrued. The Company believes the estimate of the aggregate range of reasonably possible losses (meaning those losses the likelihood of which is more than remote but less than likely) in excess of the amounts that the Company has accrued for legal and regulatory proceedings is up to $150 million . This estimated range of reasonably possible losses is based upon currently available information for those proceedings in which the Company is involved, takes into account the Company’s best estimate of such losses for those matters for which an estimate can be made, and does not represent the Company’s maximum potential loss exposure. Various aspects of the legal proceedings underlying the estimated range will change from time to time and actual results may vary significantly from the estimate. The Company’s estimated range above involves significant judgment, given the varying stages of the proceedings, the existence of numerous yet to be resolved issues, the breadth of the claims (often spanning multiple years and, in some cases, a wide range of business activities), unspecified damages and/or the novelty of the legal issues presented. The outcome of pending matters could be material to the Company’s condensed consolidated financial condition, operating results and cash flows for a particular future period, depending on, among other things, the level of the Company’s income for such period, and could adversely affect the Company’s reputation. On July 5, 2012, the Antitrust Division of the United States Department of Justice (the “Division”) issued a CID to the Company seeking information regarding an investigation related to potential violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§1-2, by an unidentified party other than Discover. The CID seeks documents, data and narrative responses to several interrogatories and document requests, related to the debit card market. A CID is a request for information in the course of a civil investigation and does not constitute the commencement of legal proceedings. The Division is permitted by statute to issue a CID to anyone whom it believes may have information relevant to an investigation. The receipt of a CID does not presuppose that there is probable cause to believe that a violation of the antitrust laws has occurred or that a formal complaint ultimately will be filed. The Company is cooperating with the Division in connection with the CID. On August 14, 2012, a purported shareholder, James Groen, filed a shareholder derivative action in the U.S. District Court for the Northern District of Illinois (Groen v. Nelms et al.) against the Company’s board of directors, certain current and former officers and directors and the Company as nominal defendant. On August 27, 2012, a second purported shareholder, the Charter Township of Clinton Police and Fire Retirement System, filed a substantially identical shareholder derivative action in the same court against the same parties (Charter Township of Clinton Police and Fire Retirement System v. Nelms et al.). On September 25, 2012, the actions were consolidated, and on February 19, 2013, the plaintiffs filed an amended consolidated complaint. The consolidated complaint asserts claims against the board of directors and certain current and former officers and directors for alleged breach of fiduciary duty, corporate waste and unjust enrichment arising out of the Company’s alleged violations of the law in connection with the marketing and sale of its protection products. The relief sought in the consolidated complaint includes changes to the Company’s corporate governance procedures; unspecified damages, injunctive relief, restitution and disgorgement from the individual defendants; and attorneys’ fees. On April 5, 2013, the defendants filed a motion to dismiss the amended consolidated complaint, and on June 5, 2013, briefing on the motion to dismiss was completed. On March 23, 2015, the Court granted the defendants’ motion to dismiss the amended consolidated shareholder derivative complaint without prejudice, while also allowing the plaintiffs until April 10, 2015 to request permission to file a further amended complaint in order to avoid having the case dismissed with prejudice. On April 6, 2015, the plaintiffs filed a motion requesting reconsideration by the Court of its order dismissing the complaint. In addition, on April 10, 2015, the plaintiffs filed a motion requesting permission to file a further amended complaint. On September 2, 2014, a purported shareholder, Steamfitters Local 449 Pension Fund, filed a shareholder derivative action in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois (Steamfitters Local 449 Pension Fund, derivatively on behalf of Discover Financial Services v. David W. Nelms, et al.) against the Company’s board of directors and certain current and former officers and directors of the Company. The complaint asserts claims for alleged breach of fiduciary duty, corporate waste and unjust enrichment arising out of the Company’s alleged violations of the law in connection with the marketing and sale of protection products. The relief sought in the consolidated complaint includes changes to the Company’s corporate governance procedures, unspecified damages, restitution and disgorgement from the individual defendants and attorneys’ fees. On September 25, 2014, the court entered an order staying the case until 30 days after the U.S. District Court for the Northern District of Illinois enters an order on defendants’ motion to dismiss the amended consolidated complaint in Groen v. Nelms et al. and Charter Township of Clinton Police and Fire Retirement System v. Nelms et al. (as consolidated, the Groen and Charter Township cases are now captioned: In re Discover Financial Services Derivative Litigation). The case remains stayed. On November 21, 2014, a patent infringement lawsuit was filed against the Company by Maxim Integrated Products, Inc. in the United States District Court for the Western District of Texas (Maxim Integrated Products, Inc. v. Discover Financial Services). The complaint asserts that the Company has infringed on three patents owned by Maxim relating to various systems and methods for performing secure transactions using mobile devices and also involving secure exchanges of information using mobile encryption and decryption. The plaintiff seeks unspecified damages for alleged past infringement, an award of attorneys’ fees and expenses, and a permanent injunction. The Company will seek to vigorously defend against the claims asserted in this matter. On May 26, 2015, the Company entered into a written agreement with the Federal Reserve Bank of Chicago where the Company agreed to enhance the Company’s enterprise-wide anti-money laundering and related compliance programs. The agreement does not include civil money penalties. This agreement follows the consent order that Discover Bank entered into with the FDIC on June 13, 2014 related to Discover Bank’s anti-money laundering and related compliance programs. In the consent order, Discover Bank agreed to, among other things, enhance its anti-money laundering and related compliance programs. On July 9, 2015, a class action lawsuit was filed against the Company in the U.S. District Court for the Northern District of Illinois (Polly Hansen v. Discover Financial Services and Discover Home Loans, Inc.). The plaintiff alleges that the Company contacted her, and members of the class she seeks to represent, on their cellular and residential telephones without their express consent or after consent was revoked in violation of the Telephone Consumer Protection Act ("TCPA"). Plaintiff seeks statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees, costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ( $1,500 for willful violations). The Company is not in a position at this time to assess the likely outcome or its exposure, if any, with respect to this matter, but will seek to vigorously defend against all claims asserted by the plaintiff. On July 20, 2015, the CFPB and the FDIC terminated the joint consent order that they issued in September 2012 related to the marketing, sales and servicing by Discover Bank of the payment protection, identity theft protection, wallet protection and credit score tracker products. On July 22, 2015, the Company announced that its subsidiaries, Discover Bank, The Student Loan Corporation and Discover Products, Inc. (the “Discover Subsidiaries”), agreed to a consent order with the CFPB resolving the agency’s investigation with respect to certain student loan servicing practices. The CFPB’s investigation into these practices has been previously disclosed by the Company, initially in February 2014. The order requires the Discover Subsidiaries to provide redress of approximately $16 million to consumers who may have been affected by the activities described in the order related to certain collection calls, overstatements of minimum payment due amounts in billing statements, and provision of interest paid information to consumers, and provide regulatory disclosures with respect to loans acquired in default. In addition, the Discover Subsidiaries are required to pay a $2.5 million civil money penalty to the CFPB. In the first quarter of 2015, adequate provision was made to cover these costs in the Company’s financial statements. As required by the consent order, on October 19, 2015, the Discover Subsidiaries submitted to the CFPB a redress plan and a compliance plan designed to ensure that the Discover Subsidiaries provide redress and otherwise comply with the terms of the order. |
Fair Value Measurements and Dis
Fair Value Measurements and Disclosures | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements and Disclosures | Fair Value Measurements and Disclosures Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820, Fair Value Measurement , provides a three-level hierarchy for classifying financial instruments, which is based on whether the inputs to the valuation techniques used to measure the fair value of each financial instrument are observable or unobservable. It also requires certain disclosures about those measurements. The three-level valuation hierarchy is as follows: • Level 1 : Fair values determined by Level 1 inputs are defined as those that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2 : Fair values determined by Level 2 inputs are those that utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active or inactive markets, quoted prices for the identical assets in an inactive market, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company evaluates factors such as the frequency of transactions, the size of the bid-ask spread and the significance of adjustments made when considering transactions involving similar assets or liabilities to assess the relevance of those observed prices. If relevant and observable prices are available, the fair values of the related assets or liabilities would be classified as Level 2. • Level 3 : Fair values determined by Level 3 inputs are those based on unobservable inputs and include situations where there is little, if any, market activity for the asset or liability being valued. In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety is classified is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company may utilize both observable and unobservable inputs in determining the fair values of financial instruments classified within the Level 3 category. The determination of classification of its financial instruments within the fair value hierarchy is performed at least quarterly by the Company. For transfers in and out of the levels of the fair value hierarchy, the Company discloses the fair value measurement based on the value immediately preceding the transfer. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and involves consideration of factors specific to the asset or liability. Furthermore, certain techniques used to measure fair value involve some degree of judgment and, as a result, are not necessarily indicative of the amounts the Company would realize in a current market exchange. During the nine months ended September 30, 2015 , there were no changes to the Company's valuation techniques that had, or are expected to have, a material impact on the Company's condensed consolidated financial position or results of operations. Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis are as follows (dollars in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Balance at September 30, 2015 Assets U.S. Treasury securities $ 1,281 $ — $ — $ 1,281 U.S. government agency securities 622 — — 622 Residential mortgage-backed securities - Agency — 1,275 — 1,275 Available-for-sale investment securities $ 1,903 $ 1,275 $ — $ 3,178 Mortgage loans held for sale $ — $ — $ 1 $ 1 Interest rate lock commitments $ — $ — $ — $ — Forward delivery contracts — — — — Other derivative financial instruments — 46 — 46 Derivative financial instruments $ — $ 46 $ — $ 46 Liabilities Forward delivery contracts $ — $ — $ — $ — Other derivative financial instruments — 69 — 69 Derivative financial instruments $ — $ 69 $ — $ 69 Balance at December 31, 2014 Assets U.S. Treasury securities $ 1,329 $ — $ — $ 1,329 U.S. government agency securities 1,033 — — 1,033 Residential mortgage-backed securities - Agency — 1,485 — 1,485 Available-for-sale investment securities $ 2,362 $ 1,485 $ — $ 3,847 Mortgage loans held for sale $ — $ 122 $ — $ 122 Interest rate lock commitments $ — $ — $ 7 $ 7 Forward delivery contracts — 1 — 1 Other derivative financial instruments — 35 — 35 Derivative financial instruments $ — $ 36 $ 7 $ 43 Liabilities Forward delivery contracts $ — $ 3 $ — $ 3 Other derivative financial instruments — 20 — 20 Derivative financial instruments $ — $ 23 $ — $ 23 There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three or nine months ended September 30, 2015 and 2014 . Available-for-Sale Investment Securities Investment securities classified as available-for-sale consist of U.S. Treasury securities, U.S. government agency securities and residential mortgage-backed securities. 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 the same securities. The Company classifies all other available-for-sale investment securities as Level 2, the fair value estimates of which are primarily obtained from pricing services, where fair values are estimated using pricing models based on observable market inputs or recent trades of similar securities. The fair value estimates of residential mortgage-backed securities are based on the best information available. This data may consist of observed market prices, broker quotes or discounted cash flow models that incorporate assumptions such as benchmark yields, issuer spreads, prepayment speeds, credit ratings and losses, the priority of which may vary based on availability of information. The Company validates the fair value estimates provided by the pricing services primarily by comparison to valuations obtained through other pricing sources. The Company evaluates pricing variances amongst different pricing sources to ensure that the valuations utilized are reasonable. The Company also corroborates the reasonableness of the fair value estimates with analysis of trends of significant inputs, such as market interest rate curves. The Company further performs due diligence in understanding the procedures and techniques performed by the pricing services to derive fair value estimates. At September 30, 2015 , amounts reported in residential mortgage-backed securities reflect government-rated obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae with a par value of $1.2 billion , a weighted-average coupon of 2.81% and a weighted-average remaining maturity of three years . Mortgage Loans Held for Sale and Related Derivative Instruments The Company enters into commitments with consumers to originate mortgage loans at a specified interest rate, known as interest rate lock commitments (“IRLCs”). The Company reports IRLCs as derivative instruments at fair value with changes in fair value being recorded in other income. IRLCs and mortgage loans held for sale under certain loan programs are hedged in aggregate using “to be announced mortgage-backed securities” (“TBA MBS”). IRLCs and mortgage loans held for sale under loan programs that generally have lower volume are hedged on an individual loan-level using best-efforts forward delivery contracts. Fair values for each of these instruments are determined using quantitative risk models. The Company has various monitoring processes in place to validate these valuations, including valuations of Level 3 assets. Valuation results are reviewed in comparison to expected results, recent activity and historical trends. Any significant or unusual fluctuations in value are analyzed. • Mortgage loans held for sale . Valuations of mortgage 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. Mortgage loans held for sale are classified as Level 2 as the investor pricing tables used to value them are an observable input. Impaired mortgage loans held for sale are classified as Level 3 as loss severity is an unobservable input used in valuation. The Company recognizes interest income separately from changes in fair value. • Interest rate lock commitments . IRLCs for loans to be sold to investors using a mandatory or assignment of trade method derive their base value from an underlying loan type with similar characteristics using the TBA MBS market, which is actively quoted and easily validated through external sources. The data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program and commitment term. IRLCs for loans to be sold to investors on a best-efforts basis derive their base value from the value of the underlying loans using investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. These valuations are adjusted at the loan-level to consider the servicing release premium and loan pricing adjustments specific to each loan. For all IRLCs, this base value is then adjusted for the anticipated loan funding probability, or pull through rate. The anticipated loan funding probability is an unobservable input based on historical experience, which results in classification of IRLCs as Level 3. • Forward delivery contracts. Under the Company's risk management policy, the Company economically hedges the changes in fair value of IRLCs and mortgage loans held for sale caused by changes in interest rates by using TBA MBS and entering into best-efforts forward delivery contracts. These hedging instruments are recorded at fair value with changes in fair value recorded in other income. TBA MBS used to hedge both IRLCs and loans held for sale are valued based primarily on observable inputs related to characteristics of the underlying MBS stratified by product, coupon and settlement date. Therefore, these derivatives are classified as Level 2. Best-efforts forward delivery contracts are valued based on investor pricing tables, which are observable inputs, stratified by product, note rate and term, adjusted for current market conditions. An anticipated loan funding probability is applied to value best-efforts contracts hedging IRLCs, which results in the classification of these contracts as Level 3. The current base loan price and, for best-efforts contracts hedging IRLCs, the anticipated loan funding probability, are the most significant assumptions affecting the value of the best-efforts contracts. The best-efforts forward delivery contracts hedging loans held for sale are classified as Level 2, so such contracts are transferred from Level 3 to Level 2 at the time the underlying loan is originated. For the purposes of the tables below, the Company refers to TBA MBS and best-efforts forward delivery contracts as forward delivery contracts. Other Derivative Financial Instruments The Company's other derivative financial instruments consist of interest rate swaps and foreign exchange forward contracts. These instruments are classified as Level 2 as their fair values are estimated using proprietary pricing models, containing certain assumptions based on readily observable market-based inputs, including interest rate curves, option volatility and foreign currency forward and spot rates. In determining fair values, the pricing models use widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity and the observable market-based inputs. The fair values of the interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments are based on an expectation of future interest rates derived from the observable market interest rate curves. The Company considers collateral and master netting agreements that mitigate credit exposure to counterparties in determining the counterparty credit risk valuation adjustment. The fair values of the currency instruments are valued comparing the contracted forward exchange rate pertaining to the specific contract maturities to the current market exchange rate. The Company validates the fair value estimates of interest rate swaps primarily through comparison to the fair value estimates computed by the counterparties to each of the derivative transactions. The Company evaluates pricing variances amongst different pricing sources to ensure that the valuations utilized are reasonable. The Company also corroborates the reasonableness of the fair value estimates with analysis of trends of significant inputs, such as market interest rate curves. The Company performs due diligence in understanding the impact to any changes to the valuation techniques performed by proprietary pricing models prior to implementation, working closely with the third-party valuation service, and reviews the control objectives of the service at least annually. The Company corroborates the fair value of foreign exchange forward contracts through independent calculation of the fair value estimates. Assets and Liabilities under the Fair Value Option The Company has elected to account for mortgage loans held for sale at fair value. Electing the fair value option allows a better offset of the changes in fair values of the loans and the forward delivery contracts used to economically hedge them without the burden of complying with the requirements for hedge accounting. At September 30, 2015 and December 31, 2014 , the aggregate unpaid principal balance of loans held for sale for which the fair value option had been elected was $1 million and $117 million , respectively. At September 30, 2015 and December 31, 2014 , the same loans had a fair value of $1 million and $122 million , respectively. For the three and nine months ended September 30, 2015 , respectively, $5 million and $17 million of losses from fair value adjustments on mortgage loans held for sale were recorded in other income on the condensed consolidated statements of income. For the three and nine months ended September 30, 2014 , respectively, $10 million and $13 million of losses from fair value adjustments on mortgage loans held for sale were recorded in other income on the condensed consolidated statements of income. Level 3 Financial Instruments Only Changes in Level 3 Assets and Liabilities Measure at Fair Value on a Recurring Basis The following tables provide changes in the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis (dollars in millions): For the Three Months Ended September 30, 2015 Balance at June 30, 2015 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2015 Interest rate lock commitments $ 5 — — 3 — — 1 (9 ) $ — Mortgage loans held for sale $ 2 2 — — 1 (3 ) (1 ) — $ 1 For the Three Months Ended September 30, 2014 Balance at June 30, 2014 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2014 Interest rate lock commitments $ 8 — — 18 — — 2 (22 ) $ 6 Mortgage loans held for sale $ — 1 — — 1 (1 ) — — $ 1 For the Nine Months Ended September 30, 2015 Balance at December 31, 2014 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2015 Interest rate lock commitments $ 7 — — 71 — — 7 (85 ) $ — Forward delivery contracts $ — — (1 ) 1 — — — — $ — Mortgage loans held for sale $ — 5 — — 2 (5 ) (1 ) — $ 1 For the Nine Months Ended September 30, 2014 Balance at December 31, 2013 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2014 Interest rate lock commitments $ 4 — — 61 — — 4 (63 ) $ 6 Forward delivery contracts $ — — (1 ) 1 — — — — $ — Mortgage loans held for sale $ — 2 — — 1 (2 ) — — $ 1 Unobservable Inputs and Sensitivities The following table presents information about significant unobservable inputs related to the Company's Level 3 financial assets and liabilities measured at fair value on a recurring and non-recurring basis (dollars in millions): Fair Value Valuation Technique Significant Unobservable Input Ranges of Inputs Weighted Average At September 30, 2015 Low High Mortgage loans held for sale $ 1 Market comparables Loss severity 17 % 29 % 23 % Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include those associated with acquired businesses, including goodwill and other intangible assets. For these assets, measurement at fair value in periods subsequent to the initial recognition of the assets is applicable if one or more of the assets is determined to be impaired. During the three and nine months ended September 30, 2015 and 2014 , the Company had no material impairments related to these assets. Financial Instruments Measured at Other Than Fair Value The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Carrying Value Balance at September 30, 2015 Assets U.S Treasury securities $ 1 $ — $ — $ 1 $ 1 States and political subdivisions of states — 7 — 7 7 Residential mortgage-backed securities - Agency — 118 — 118 116 Held-to-maturity investment securities $ 1 $ 125 $ — $ 126 $ 124 Cash and cash equivalents $ 10,250 $ — $ — $ 10,250 $ 10,250 Restricted cash $ 98 $ — $ — $ 98 $ 98 Net loan receivables (1) $ — $ — $ 69,204 $ 69,204 $ 68,334 Accrued interest receivables $ — $ 656 $ — $ 656 $ 656 Liabilities Deposits $ — $ 46,759 $ — $ 46,759 $ 46,605 Short-term borrowings $ — $ — $ — $ — $ — Long-term borrowings - owed to securitization investors $ — $ 14,769 $ 1,300 $ 16,069 $ 15,866 Other long-term borrowings $ — $ 8,376 $ — $ 8,376 $ 7,934 Accrued interest payables $ — $ 155 $ — $ 155 $ 155 Balance at December 31, 2014 Assets U.S Treasury securities $ 1 $ — $ — $ 1 $ 1 States and political subdivisions of states — 10 — 10 10 Residential mortgage-backed securities - Agency — 93 — 93 91 Held-to-maturity investment securities $ 1 $ 103 $ — $ 104 $ 102 Cash and cash equivalents $ 7,284 $ — $ — $ 7,284 $ 7,284 Restricted cash $ 106 $ — $ — $ 106 $ 106 Net loan receivables (1) $ — $ — $ 69,316 $ 69,316 $ 68,101 Accrued interest receivables $ — $ 618 $ — $ 618 $ 618 Liabilities Deposits $ — $ 46,242 $ — $ 46,242 $ 46,089 Short-term borrowings $ — $ 113 $ — $ 113 $ 113 Long-term borrowings - owed to securitization investors $ — $ 16,067 $ 1,561 $ 17,628 $ 17,395 Other long-term borrowings $ — $ 5,721 $ 1 $ 5,722 $ 5,149 Accrued interest payables $ — $ 132 $ — $ 132 $ 132 (1) Net loan receivables exclude mortgage loans held for sale that are measured at fair value on a recurring basis. The fair values of these financial assets and liabilities, which are not carried at fair value on the condensed consolidated statements of financial condition, were determined by applying the fair value provisions discussed herein. The use of different assumptions or estimation techniques may have a material effect on these estimated fair value amounts. The following describes the valuation techniques of these financial instruments measured at other than fair value. 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, as well as the relatively liquid nature of these assets, particularly given their short maturities. Held-to-Maturity Investment Securities Held-to-maturity investment securities consist of residential mortgage-backed securities issued by agencies and municipal bonds. The fair value of residential mortgage-backed securities included in the held-to-maturity portfolio is estimated similarly to residential mortgage-backed securities carried at fair value on a recurring basis discussed herein. Municipal bonds are valued based on quoted market prices for the same or similar securities. Net Loan Receivables The Company's loan receivables are comprised of credit card and installment loans, including the PCI student loans. Fair value estimates are derived utilizing discounted cash flow analyses, the calculations of which are performed on groupings of loan receivables that are similar in terms of loan type and characteristics. Inputs to the cash flow analysis of each grouping consider recent prepayment and interest accrual trends and leverage forecasted loss estimates. The expected future cash flows, derived through the cash flow analysis, of each grouping are discounted at rates at which similar loans within each grouping could be originated under current market conditions. Significant inputs to the fair value measurement of the loan portfolio are unobservable and, as such, are classified as Level 3. Accrued Interest Receivables The carrying value of accrued interest receivables, which is included in other assets on the condensed consolidated statements of financial condition, approximates fair value as it is due in less than one year. Deposits The carrying values of money market deposits, savings deposits and demand deposits approximate fair value due to the potentially liquid nature of these deposits. For time deposits for which readily available market rates do not exist, fair values are estimated by discounting expected future cash flows using market rates currently offered for deposits with similar remaining maturities. Short-Term Borrowings The carrying values of short-term borrowings approximate fair value as they have maturities of less than one year. Long-Term Borrowings - Owed to Securitization Investors Fair values of long-term borrowings owed to credit card securitization investors are determined utilizing quoted market prices of the same transactions and, as such, are classified as Level 2. Fair values of long-term borrowings owed to student loan securitization investors are calculated by discounting cash flows using estimated assumptions including, among other things, maturity and market discount rates. A portion of the difference between the carrying value and the fair value of the long-term borrowings owed to student loan securitization investors relates to purchase accounting adjustments recorded in connection with the December 2010 purchase of SLC. Significant inputs to these fair value measurements are unobservable and, as such, are classified as Level 3. Other Long-Term Borrowings Fair values of other long-term borrowings, consisting of subordinated and senior debt, are determined utilizing current observable market prices for those transactions and, as such, are classified as Level 2. A portion of the difference between the carrying value and the fair value of other long-term borrowings relates to the cash premiums paid in connection with the 2012 fiscal year debt exchanges. The fair values of other long-term borrowings classified as Level 3 consist of capital leases. Accrued Interest Payables The carrying value of accrued interest payables, which is included in accrued expenses and other liabilities on the condensed consolidated statements of financial condition, approximates fair value as it is payable in less than one year. |
Derivatives and Hedging Activit
Derivatives and Hedging Activities | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging Activities | Derivatives and Hedging Activities The Company uses derivatives to manage its exposure to various financial risks. The Company does not enter into derivatives for trading or speculative purposes. Certain derivatives used to manage the Company’s exposure to interest rate movements and other identified risks are not designated as hedges and do not qualify for hedge accounting. Derivatives may give rise to counterparty credit risk, which generally is addressed through collateral arrangements as described under the sub-heading "— Collateral Requirements and Credit-Risk Related Contingency Features." The Company enters into derivative transactions with established dealers that meet minimum credit criteria established by the Company. All counterparties must be pre-approved prior to engaging in any transaction with the Company. Counterparties are monitored on a regular basis by the Company to ensure compliance with the Company’s risk policies and limits. In determining the counterparty credit risk valuation adjustment for the fair values of derivatives, the Company considers collateral and legally enforceable master netting agreements that mitigate credit exposure to related counterparties. All derivatives are recorded in other assets at their gross positive fair values and in accrued expenses and other liabilities at their gross negative fair values. See Note 14: Fair Value Measurements and Disclosures for a description of the valuation methodologies of derivatives. Cash collateral posted and held balances are recorded in other assets and deposits, respectively, in the condensed consolidated statements of financial condition. Collateral amounts recorded in the condensed consolidated statements of financial condition are based on the net collateral posted or held position for each applicable legal entity's master netting arrangement with each counterparty. Derivatives Designated as Hedges Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows arising from changes in interest rates, or other types of forecasted transactions, are considered cash flow hedges. Derivatives designated and qualifying as a hedge of the exposure to fluctuations in foreign exchange rates on investments in foreign entities are referred to as net investment hedges. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Cash Flow Hedges The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on credit card securitized debt and deposits, and previously from interest receipts on credit card loan receivables. The Company's outstanding cash flow hedges are for an initial maximum period of five years for securitized debt and seven years for deposits. The derivatives are designated as hedges of the risk of changes in cash flows on the Company's LIBOR or Federal Funds rate-based interest payments and qualify for hedge accounting in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). The effective portion of the change in the fair value of derivatives designated as cash flow hedges is recorded in OCI and is subsequently reclassified into earnings in the period that the hedged forecasted cash flows affect earnings. The ineffective portion of the change in fair value of the derivative, if any, is recognized directly in earnings. Amounts reported in AOCI related to derivatives at September 30, 2015 will be reclassified to interest expense as interest payments are made on certain of the Company's floating-rate securitized debt or deposits. During the next 12 months, the Company estimates it will reclassify $38 million of pretax losses to interest expense related to its derivatives designated as cash flow hedges. Net Investment Hedges The Company is exposed to fluctuations in foreign exchange rates on investments it holds in foreign entities with a functional currency other than the U.S. dollar. The Company used foreign exchange forward contracts to hedge its exposure to changes in foreign exchange rates on its net investment in Diners Club Italy. Foreign exchange forward contracts utilized by the Company involve fixing the U.S. dollar-euro exchange rate for delivery of a specified amount of foreign currency on a specified date. These derivatives are designated as net investment hedges, with the effective portion of changes in the fair value of the derivatives reported in OCI as part of the cumulative translation adjustment. The ineffective portion of the change in fair value of the derivatives, if any, is recognized directly in earnings. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. The Company has classified Diners Club Italy as held for sale as of December 31, 2014 and the investment has been written down to fair value. As a result, the Company is no longer hedging its investment in Diners Club Italy and the cumulative amount in AOCI will be reclassified in the fourth quarter of 2015 as the sale closed October 1, 2015. Fair Value Hedges The Company is exposed to changes in fair value of certain of its fixed-rate debt obligations due to changes in interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value of certain fixed-rate senior notes, securitized debt, bank notes and interest-bearing brokered deposits attributable to changes in LIBOR, a benchmark interest rate as defined by ASC 815. These interest rate swaps qualify as fair value hedges in accordance with ASC 815. Changes in both (i) the fair values of the derivatives and (ii) the hedged fixed-rate senior notes, securitized debt, bank notes and interest-bearing brokered deposits relating to the risk being hedged are recorded in interest expense. The changes generally provide substantial offset to one another, with any difference, or ineffectiveness recorded in interest expense. Any basis differences between the fair value and the carrying amount of the hedged item at the inception of the hedging relationship are amortized to interest expense. Derivatives Not Designated as Hedges Interest Rate Swaps The Company may have, from time to time, interest rate swap agreements that are not designated as hedges. As part of its acquisition of SLC, the Company also acquired an interest rate swap related to the securitized debt assumed in the transaction. Such agreements are not speculative and are also used to manage interest rate risk but are not designated for hedge accounting. Changes in the fair value of these contracts are recorded in other income. Foreign Exchange Forward Contracts The Company has foreign exchange forward contracts that are economic hedges and are not designated as accounting hedges. The Company enters into foreign exchange forward contracts to manage foreign currency risk. Changes in the fair value of these contracts are recorded in other income. Forward Delivery Contracts The Company economically hedged the changes in fair value of IRLCs and mortgage loans held for sale caused by changes in interest rates by using TBA MBS and entering into best-efforts forward delivery commitments. These derivative instruments were recorded at fair value with changes in fair value recorded in other income. As previously disclosed , the Company is closing the mortgage origination business it acquired in 2012, and, as a result, the Company does not have any forward delivery contracts as of September 30, 2015. Interest Rate Lock Commitments The Company entered into commitments with consumers to originate residential mortgage loans at a specified interest rate. The Company reported IRLCs that relate to the origination of mortgage loans that were held for sale as derivative instruments at fair value with changes in fair value recorded in other income. As previously disclosed , the Company is closing the mortgage origination business it acquired in 2012, and, as a result, the Company does not have any interest rate lock commitments as of September 30, 2015. The following table summarizes the fair value (including accrued interest) and outstanding notional amounts of derivative instruments and related collateral balances (dollars in millions): September 30, 2015 December 31, 2014 Notional Amount Number of Outstanding Derivative Contracts Derivative Assets Derivative Liabilities Notional Amount Derivative Assets Derivative Liabilities Derivatives designated as hedges Interest rate swaps—cash flow hedge $ 4,100 8 $ — $ 69 $ 4,100 $ 4 $ 18 Interest rate swaps—fair value hedge $ 3,645 123 46 — $ 5,507 31 2 Foreign exchange forward contract - net investment hedge (1) $ — — — — $ 7 — — Derivatives not designated as hedges Foreign exchange forward contracts (2) $ 35 7 — — $ 53 — — Interest rate swap (3) $ 236 1 — — $ 359 — — Forward delivery contracts $ — — — — $ 761 1 3 Interest rate lock commitments (3) $ — — — — $ 406 7 — Total gross derivative assets / liabilities (4) 46 69 43 23 Less: Collateral held/posted (5) (21 ) (51 ) (20 ) (23 ) Total net derivative assets / liabilities $ 25 $ 18 $ 23 $ — (1) The foreign exchange forward contract had a notional amount of EUR 6 million as of December 31, 2014 . (2) The foreign exchange forward contracts have notional amounts of EUR 21 million , GBP 7 million and SGD 1 million as of September 30, 2015 , and notional amounts of EUR 27 million , GBP 8 million , SGD 1 million and CHF 8 million as of December 31, 2014 . (3) Interest rate swaps not designated as hedges and interest rate lock commitments do not have associated master netting arrangements. (4) In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At December 31, 2014 , the Company had one outstanding contract with a notional amount of $33 million and immaterial fair value. (5) Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged. The following tables summarize the impact of the derivative instruments on income and OCI and indicates where within the condensed consolidated financial statements such impact is reported (dollars in millions): Amount of (Loss) Gain Recognized in OCI For the Three Months Ended September 30, For the Nine Months Ended September 30, Location 2015 2014 2015 2014 Derivatives designated as hedges Interest rate swaps - cash flow/net investment hedges Total (loss) gain recognized in OCI after amounts reclassified into earnings, pre-tax OCI $ (37 ) $ 23 $ (54 ) $ — Total (loss) gain recognized in OCI $ (37 ) $ 23 $ (54 ) $ — Amount of (Loss) Gain Recognized in Income For the Three Months Ended September 30, For the Nine Months Ended September 30, Location 2015 2014 2015 2014 Derivatives designated as hedges Interest rate swaps - cash flow hedges Amount reclassified from OCI into income Interest Expense $ (12 ) $ (11 ) $ (35 ) $ (26 ) Total amount reclassified from OCI into income (12 ) (11 ) (35 ) (26 ) Interest rate swaps - fair value hedges Adjustments - ineffectiveness 12 (14 ) 13 (13 ) Adjustments - other 8 9 23 29 Gain (loss) on interest rate swaps Interest Expense 20 (5 ) 36 16 Adjustments - ineffectiveness (11 ) 16 (8 ) 18 Adjustments - other (2 ) (2 ) (5 ) (1 ) (Loss) gain on hedged item Interest Expense (13 ) 14 (13 ) 17 Total (loss) gain on derivatives designated as hedges recognized in income $ (5 ) $ (2 ) $ (12 ) $ 7 Derivatives not designated as hedges Gain on forward contracts Other Income $ — $ 4 $ 2 $ 4 (Loss) on interest rate swaps Other Income (1 ) — (1 ) (1 ) (Loss) gain on forward delivery contracts Other Income (4 ) 3 2 (4 ) Gain on interest rate lock commitments Other Income 3 18 71 61 Total (loss) gain on derivatives not designated as hedges recognized in income $ (2 ) $ 25 $ 74 $ 60 Collateral Requirements and Credit-Risk Related Contingency Features The Company has master netting arrangements and minimum collateral posting thresholds with its counterparties for its fair value and cash flow hedge interest rate swaps, foreign exchange forward contracts and forward delivery contracts. The Company has not sought a legal opinion in relation to the enforceability of its master netting arrangements and, as such, does not report any of these positions on a net basis. Collateral is required by either the Company or its subsidiaries or the counterparty depending on the net fair value position of these derivatives held with that counterparty. The Company may also be required to post collateral with a counterparty for its fair value and cash flow hedge interest rate swaps depending on the credit rating it or Discover Bank receives from specified major credit rating agencies. Collateral receivable or payable amounts are not offset against the fair value of these derivatives, but are recorded separately in other assets or deposits. As of September 30, 2015 , DFS had a right to reclaim $4 million of cash collateral that had been posted (net of amounts required to be posted by the counterparty) because the credit rating of the Company did not meet specified thresholds. At September 30, 2015 , Discover Bank’s credit rating met specified thresholds set by its counterparties. However, if its credit rating is reduced by one ratings notch, Discover Bank would be required to post additional collateral, which would have been $74 million as of September 30, 2015 . The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. |
Segment Disclosures
Segment Disclosures | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Segment Disclosures | Segment Disclosures The Company’s business activities are managed in two segments: Direct Banking and Payment Services. • Direct Banking: The Direct Banking segment includes Discover-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home equity loans, prepaid cards, other consumer lending and deposit products , and home loans until the closing of the mortgage origination business as described in Note 2: Business Dispositions . The majority of Direct Banking revenues relate to interest income earned on the segment's loan products. Additionally, the Company's credit card products generate substantially all revenues related to discount and interchange, protection products and loan fee income. • 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 Company’s Network Partners business, which provides payment transaction processing and settlement services on the Discover Network. This segment also includes the business operations of Diners Club Italy, which primarily consists of activity related to issuing Diners Club charge cards in Italy and was classified as held for sale as of December 31, 2014 and subsequently sold on October 1, 2015 . The majority of Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue (included in other income) from Diners Club. The business segment reporting provided to and used by the Company’s chief operating decision maker is prepared using the following principles and allocation conventions: • The Company aggregates operating segments when determining reportable segments. • 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 segments, with the exception of an allocation of direct and incremental costs driven by the Company's Payment Services segment. • The assets of the Company are not allocated among the operating segments in the information reviewed by the Company’s chief operating decision maker. • The revenues of each segment are derived from external sources. The segments do not earn revenue from intercompany sources. • Income taxes are not specifically allocated between the operating segments in the information reviewed by the Company’s chief operating decision maker. The following table presents segment data (dollars in millions): Direct Banking Payment Services Total For the Three Months Ended September 30, 2015 Interest income Credit card loans $ 1,676 $ — $ 1,676 Private student loans 95 — 95 PCI student loans 54 — 54 Personal loans 161 — 161 Other 22 — 22 Total interest income 2,008 — 2,008 Interest expense 323 — 323 Net interest income 1,685 — 1,685 Provision for loan losses 332 — 332 Other income 435 68 503 Other expense 838 44 882 Income before income tax expense $ 950 $ 24 $ 974 For the Three Months Ended September 30, 2014 Interest income Credit card loans $ 1,613 $ — $ 1,613 Private student loans 80 — 80 PCI student loans 64 — 64 Personal loans 145 — 145 Other 24 — 24 Total interest income 1,926 — 1,926 Interest expense 288 — 288 Net interest income 1,638 — 1,638 Provision for loan losses 356 (2 ) 354 Other income 475 77 552 Other expense 776 51 827 Income before income tax expense $ 981 $ 28 $ 1,009 The following table presents segment data (dollars in millions): Direct Banking Payment Services Total For the Nine Months Ended September 30, 2015 Interest income Credit card loans $ 4,902 $ — $ 4,902 Private student loans 277 — 277 PCI student loans 170 — 170 Personal loans 468 — 468 Other 67 — 67 Total interest income 5,884 — 5,884 Interest expense 934 — 934 Net interest income 4,950 — 4,950 Provision for loan losses 1,026 2 1,028 Other income 1,371 213 1,584 Other expense 2,550 132 2,682 Income before income tax expense $ 2,745 $ 79 $ 2,824 For the Nine Months Ended September 30, 2014 Interest income Credit card loans $ 4,710 $ — $ 4,710 Private student loans 228 — 228 PCI student loans 198 — 198 Personal loans 415 — 415 Other 71 — 71 Total interest income 5,622 — 5,622 Interest expense 832 — 832 Net interest income 4,790 — 4,790 Provision for loan losses 986 — 986 Other income 1,414 236 1,650 Other expense 2,259 149 2,408 Income before income tax expense $ 2,959 $ 87 $ 3,046 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company has evaluated events and transactions that have occurred subsequent to September 30, 2015 and determined that other than the matters disclosed in Note 7: Long-Term Borrowings, Note 15: Derivatives and Hedging Activities and Note 16: Segment Disclosures, there were no subsequent events that would require recognition or disclosure in the condensed consolidated financial statements. |
Background and Basis of Prese25
Background and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Significant Accounting Policies | The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the financial statements reflect all adjustments which are necessary for a fair presentation of the results for the interim period. All such adjustments are of a normal, recurring nature. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. The Company believes that the estimates used in the preparation of the condensed consolidated financial statements are reasonable. Actual results could differ from these estimates. |
Fair Value of Financial Instruments | The fair values of these financial assets and liabilities, which are not carried at fair value on the condensed consolidated statements of financial condition, were determined by applying the fair value provisions discussed herein. The use of different assumptions or estimation techniques may have a material effect on these estimated fair value amounts. The following describes the valuation techniques of these financial instruments measured at other than fair value. 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, as well as the relatively liquid nature of these assets, particularly given their short maturities. Held-to-Maturity Investment Securities Held-to-maturity investment securities consist of residential mortgage-backed securities issued by agencies and municipal bonds. The fair value of residential mortgage-backed securities included in the held-to-maturity portfolio is estimated similarly to residential mortgage-backed securities carried at fair value on a recurring basis discussed herein. Municipal bonds are valued based on quoted market prices for the same or similar securities. Net Loan Receivables The Company's loan receivables are comprised of credit card and installment loans, including the PCI student loans. Fair value estimates are derived utilizing discounted cash flow analyses, the calculations of which are performed on groupings of loan receivables that are similar in terms of loan type and characteristics. Inputs to the cash flow analysis of each grouping consider recent prepayment and interest accrual trends and leverage forecasted loss estimates. The expected future cash flows, derived through the cash flow analysis, of each grouping are discounted at rates at which similar loans within each grouping could be originated under current market conditions. Significant inputs to the fair value measurement of the loan portfolio are unobservable and, as such, are classified as Level 3. Accrued Interest Receivables The carrying value of accrued interest receivables, which is included in other assets on the condensed consolidated statements of financial condition, approximates fair value as it is due in less than one year. Deposits The carrying values of money market deposits, savings deposits and demand deposits approximate fair value due to the potentially liquid nature of these deposits. For time deposits for which readily available market rates do not exist, fair values are estimated by discounting expected future cash flows using market rates currently offered for deposits with similar remaining maturities. Short-Term Borrowings The carrying values of short-term borrowings approximate fair value as they have maturities of less than one year. Long-Term Borrowings - Owed to Securitization Investors Fair values of long-term borrowings owed to credit card securitization investors are determined utilizing quoted market prices of the same transactions and, as such, are classified as Level 2. Fair values of long-term borrowings owed to student loan securitization investors are calculated by discounting cash flows using estimated assumptions including, among other things, maturity and market discount rates. A portion of the difference between the carrying value and the fair value of the long-term borrowings owed to student loan securitization investors relates to purchase accounting adjustments recorded in connection with the December 2010 purchase of SLC. Significant inputs to these fair value measurements are unobservable and, as such, are classified as Level 3. Other Long-Term Borrowings Fair values of other long-term borrowings, consisting of subordinated and senior debt, are determined utilizing current observable market prices for those transactions and, as such, are classified as Level 2. A portion of the difference between the carrying value and the fair value of other long-term borrowings relates to the cash premiums paid in connection with the 2012 fiscal year debt exchanges. The fair values of other long-term borrowings classified as Level 3 consist of capital leases. Accrued Interest Payables The carrying value of accrued interest payables, which is included in accrued expenses and other liabilities on the condensed consolidated statements of financial condition, approximates fair value as it is payable in less than one year. |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of Investment Securities | The Company’s investment securities consist of the following (dollars in millions): September 30, December 31, U.S. Treasury securities (1) $ 1,282 $ 1,330 U.S. government agency securities 622 1,033 States and political subdivisions of states 7 10 Residential mortgage-backed securities - Agency (2) 1,391 1,576 Total investment securities $ 3,302 $ 3,949 (1) Includes $4 million and $16 million of U.S. Treasury securities pledged as swap collateral in lieu of cash as of September 30, 2015 and December 31, 2014 , respectively. (2) Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. |
Schedule of Amortized Cost, Gross Unrealized Gains, Gross Unrealized Losses and Fair Value | 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 millions): Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value At September 30, 2015 Available-for-Sale Investment Securities (1) U.S. Treasury securities $ 1,277 $ 4 $ — $ 1,281 U.S. government agency securities 618 4 — 622 Residential mortgage-backed securities - Agency 1,258 18 (1 ) 1,275 Total available-for-sale investment securities $ 3,153 $ 26 $ (1 ) $ 3,178 Held-to-Maturity Investment Securities (2) U.S. Treasury securities (3) $ 1 $ — $ — $ 1 States and political subdivisions of states 7 — — 7 Residential mortgage-backed securities - Agency (4) 116 2 — 118 Total held-to-maturity investment securities $ 124 $ 2 $ — $ 126 At December 31, 2014 Available-for-Sale Investment Securities (1) U.S. Treasury securities $ 1,317 $ 12 $ — $ 1,329 U.S. government agency securities 1,021 12 — 1,033 Residential mortgage-backed securities - Agency 1,473 13 (1 ) 1,485 Total available-for-sale investment securities $ 3,811 $ 37 $ (1 ) $ 3,847 Held-to-Maturity Investment Securities (2) U.S. Treasury securities (3) $ 1 $ — $ — $ 1 States and political subdivisions of states 10 — — 10 Residential mortgage-backed securities - Agency (4) 91 2 — 93 Total held-to-maturity investment securities $ 102 $ 2 $ — $ 104 (1) Available-for-sale investment securities are reported at fair value. (2) Held-to-maturity investment securities are reported at amortized cost. (3) Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period. (4) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives. |
Schedule of Fair Value of Securities in a Continuous Unrealized Loss Position for Less Than 12 Months and More Than 12 Months | The following table provides information about investment securities with aggregate gross unrealized losses and the length of time that individual investment securities have been in a continuous unrealized loss position (dollars in millions). Number of Securities in a Loss Position Less than 12 months More than 12 months Fair Value Unrealized Losses Fair Value Unrealized Losses At September 30, 2015 Available-for-Sale Investment Securities Residential mortgage-backed securities - Agency 6 $ 189 $ (1 ) $ — $ — At December 31, 2014 Available-for-Sale Investment Securities Residential mortgage-backed securities - Agency 8 $ 97 $ — $ 225 $ (1 ) |
Schedule of Proceeds, Recognized Gains and Losses and Net Unrealized Gains and Losses | The following table provides information about proceeds from sales, recognized gains and losses and net unrealized gains and losses on available-for-sale securities (dollars in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Proceeds from the sales of available-for-sale investment securities $ — $ — $ 899 $ 1,220 Gain on sales of available-for-sale investment securities $ — $ — $ 8 $ 4 Net unrealized gain (loss) recorded in other comprehensive income, before-tax $ 4 $ (15 ) $ (12 ) $ 1 Net unrealized gain (loss) recorded in other comprehensive income, after-tax $ 3 $ (9 ) $ (7 ) $ 1 |
Schedule of Maturities of Available-for-Sale Debt Securities and Held-to-Maturity Debt Securities | Maturities of available-for-sale debt securities and held-to-maturity debt securities are provided in the table below (dollars in millions): One Year or Less After One Year Through Five Years After Five Years Through Ten Years After Ten Years Total At September 30, 2015 Available-for-Sale Investment Securities—Amortized Cost U.S. Treasury securities $ 600 $ 677 $ — $ — $ 1,277 U.S. government agency securities 618 — — — 618 Residential mortgage-backed securities - Agency — — 408 850 1,258 Total available-for-sale investment securities $ 1,218 $ 677 $ 408 $ 850 $ 3,153 Held-to-Maturity Investment Securities—Amortized Cost U.S. Treasury securities $ 1 $ — $ — $ — $ 1 State and political subdivisions of states — — — 7 7 Residential mortgage-backed securities - Agency — — — 116 116 Total held-to-maturity investment securities $ 1 $ — $ — $ 123 $ 124 Available-for-Sale Investment Securities—Fair Values U.S. Treasury securities $ 604 $ 677 $ — $ — $ 1,281 U.S. government agency securities 622 — — — 622 Residential mortgage-backed securities - Agency — — 412 863 1,275 Total available-for-sale investment securities $ 1,226 $ 677 $ 412 $ 863 $ 3,178 Held-to-Maturity Investment Securities—Fair Values U.S. Treasury securities $ 1 $ — $ — $ — $ 1 State and political subdivisions of states — — — 7 7 Residential mortgage-backed securities - Agency — — — 118 118 Total held-to-maturity investment securities $ 1 $ — $ — $ 125 $ 126 |
Loan Receivables (Tables)
Loan Receivables (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Loans and Leases Receivable Disclosure [Abstract] | |
Schedule of Loan Receivables | The Company's classes of receivables within the three portfolio segments are depicted in the table below (dollars in millions): September 30, December 31, Loan receivables Credit card loans (1) $ 55,655 $ 56,128 Other loans Personal loans 5,425 5,007 Private student loans 5,520 4,850 Mortgage loans held for sale (2) 1 122 Other (3) 228 202 Total other loans 11,174 10,181 Purchased credit-impaired loans (4) 3,249 3,660 Total loan receivables 70,078 69,969 Allowance for loan losses (1,743 ) (1,746 ) Net loan receivables $ 68,335 $ 68,223 (1) Amounts include $20.2 billion and $21.7 billion underlying investors’ interest in trust debt at September 30, 2015 and December 31, 2014 and $8.0 billion and $8.6 billion in seller's interest at September 30, 2015 and December 31, 2014 , respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information. (2) On June 16, 2015, the Company announced that it is closing the mortgage origination business, as disclosed in Note 2: Business Dispositions. Pursuant to that announcement, the Company has sold substantially all mortgage loans held for sale in its portfolio and ceased originating new mortgages. (3) Other includes home equity loans. (4) Amounts include $1.7 billion and $2.0 billion of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at September 30, 2015 and December 31, 2014 , respectively. See Note 5: Credit Card and Student Loan Securitization Activities. |
Schedule of Delinquent and Non-Accruing Loans | Information related to the delinquent and non-accruing loans in the Company’s loan portfolio is shown below by each class of loan receivables except for mortgage loans held for sale and PCI student loans, which is shown under the heading “— Purchased Credit-Impaired Loans” (dollars in millions): 30-89 Days Delinquent 90 or More Days Delinquent Total Past Due 90 or More Days Delinquent and Accruing Total Non-accruing (1) At September 30, 2015 Credit card loans (2) $ 482 $ 437 $ 919 $ 384 $ 188 Other loans Personal loans (3) 31 13 44 12 7 Private student loans (excluding PCI) (4) 76 28 104 28 — Other — 3 3 — 21 Total other loans (excluding PCI) 107 44 151 40 28 Total loan receivables (excluding PCI) $ 589 $ 481 $ 1,070 $ 424 $ 216 At December 31, 2014 Credit card loans (2) $ 491 $ 480 $ 971 $ 442 $ 157 Other loans Personal loans (3) 29 11 40 10 5 Private student loans (excluding PCI) (4) 62 25 87 25 — Other 1 1 2 — 21 Total other loans (excluding PCI) 92 37 129 35 26 Total loan receivables (excluding PCI) $ 583 $ 517 $ 1,100 $ 477 $ 183 (1) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $8 million and $7 million for the three months ended September 30, 2015 and 2014 , respectively, and $21 million and $20 million for the nine months ended September 30, 2015 and 2014 , respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. This amount was estimated based on customers' current balances and most recent interest rates. (2) Credit card loans that are 90 or more days delinquent and accruing interest include $38 million and $43 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014 , respectively. (3) Personal loans that are 90 or more days delinquent and accruing interest include $3 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014 . (4) Private student loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014 , respectively. |
Schedule of Net Charge-offs | Information related to the net charge-offs in the Company's loan portfolio is shown below by each class of loan receivables except for mortgage loans held for sale and PCI student loans, which is shown under the heading "— Purchased Credit-Impaired Loans" (dollars in millions): For the Three Months Ended September 30, 2015 2014 Net Net Charge-off Net Net Charge-off Credit card loans $ 285 2.04 % $ 289 2.16 % Other loans Personal loans 26 1.99 % 23 1.92 % Private student loans (excluding PCI) 13 0.94 % 12 1.14 % Other — — % — 0.60 % Total other loans (excluding PCI) 39 1.44 % 35 1.50 % Net charge-offs as a percentage of total loans (excluding PCI) $ 324 1.94 % $ 324 2.06 % Net charge-offs as a percentage of total loans (including PCI) $ 324 1.85 % $ 324 1.94 % For the Nine Months Ended September 30, 2015 2014 Net Net Charge-off Net Net Charge-off Credit card loans $ 911 2.24 % $ 883 2.27 % Other loans Personal loans 81 2.10 % 66 1.98 % Private student loans (excluding PCI) 39 0.99 % 40 1.25 % Other — — % 1 0.88 % Total other loans (excluding PCI) 120 1.51 % 107 1.58 % Net charge-offs as a percentage of total loans (excluding PCI) $ 1,031 2.12 % $ 990 2.16 % Net charge-offs as a percentage of total loans (including PCI) $ 1,031 2.01 % $ 990 2.03 % |
Schedule of Credit Risk Profile by FICO Score | The following table provides the most recent FICO scores available for the Company’s customers as a percentage of each class of loan receivables: Credit Risk Profile 660 and Above Less than 660 or No Score At September 30, 2015 Credit card loans 83 % 17 % Personal loans 96 % 4 % Private student loans (excluding PCI) (1) 96 % 4 % At December 31, 2014 Credit card loans 83 % 17 % Personal loans 96 % 4 % Private student loans (excluding PCI) (1) 96 % 4 % (1) PCI loans are discussed under the heading "— Purchased Credit-Impaired Loans." |
Schedule of Changes in the Allowance for Loan Losses | The following tables provide changes in the Company’s allowance for loan losses (dollars in millions): For the Three Months Ended September 30, 2015 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,441 $ 131 $ 143 $ 20 $ 1,735 Additions Provision for loan losses 303 30 — (1 ) 332 Deductions Charge-offs (394 ) (31 ) (15 ) — (440 ) Recoveries 109 5 2 — 116 Net charge-offs (285 ) (26 ) (13 ) — (324 ) Balance at end of period $ 1,459 $ 135 $ 130 $ 19 $ 1,743 For the Three Months Ended September 30, 2014 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,359 $ 109 $ 128 $ 18 $ 1,614 Additions Provision for loan losses 318 22 16 (2 ) 354 Deductions Charge-offs (400 ) (26 ) (14 ) — (440 ) Recoveries 111 3 2 — 116 Net charge-offs (289 ) (23 ) (12 ) — (324 ) Balance at end of period $ 1,388 $ 108 $ 132 $ 16 $ 1,644 The following tables provide changes in the Company’s allowance for loan losses (dollars in millions): For the Nine Months Ended September 30, 2015 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,474 $ 120 $ 135 $ 17 $ 1,746 Additions Provision for loan losses 896 96 34 2 1,028 Deductions Charge-offs (1,245 ) (93 ) (45 ) — (1,383 ) Recoveries 334 12 6 — 352 Net charge-offs (911 ) (81 ) (39 ) — (1,031 ) Balance at end of period $ 1,459 $ 135 $ 130 $ 19 $ 1,743 For the Nine Months Ended September 30, 2014 Credit Card Personal Loans Student Loans (1) Other Total Balance at beginning of period $ 1,406 $ 112 $ 113 $ 17 $ 1,648 Additions Provision for loan losses 865 62 59 — 986 Deductions Charge-offs (1,223 ) (74 ) (44 ) (1 ) (1,342 ) Recoveries 340 8 4 — 352 Net charge-offs (883 ) (66 ) (40 ) (1 ) (990 ) Balance at end of period $ 1,388 $ 108 $ 132 $ 16 $ 1,644 (1) Includes both PCI and non-PCI private student loans. |
Schedule of Net Charge-offs of Interest and Fee Revenues on Loan Receivables | Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income) $ 65 $ 69 $ 210 $ 211 Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income) $ 16 $ 16 $ 53 $ 50 |
Schedule of Allowance for Loan Losses and Recorded Investment in its Loan Portfolio by Impairment Methodology | The following tables provide additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio by impairment methodology (dollars in millions): Credit Card Personal Loans Student Loans (3) Other Loans (4) Total At September 30, 2015 Allowance for loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 1,302 $ 130 $ 88 $ 1 $ 1,521 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 157 5 14 18 194 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 28 — 28 Total allowance for loan losses $ 1,459 $ 135 $ 130 $ 19 $ 1,743 Recorded investment in loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 54,647 $ 5,361 $ 5,475 $ 168 $ 65,651 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 1,008 64 45 60 1,177 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 3,249 — 3,249 Total recorded investment $ 55,655 $ 5,425 $ 8,769 $ 228 $ 70,077 At December 31, 2014 Allowance for loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 1,314 $ 114 $ 96 $ 1 $ 1,525 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 160 6 11 16 193 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 28 — 28 Total allowance for loan losses $ 1,474 $ 120 $ 135 $ 17 $ 1,746 Recorded investment in loans evaluated for impairment as Collectively evaluated for impairment in accordance with ASC 450-20 $ 55,091 $ 4,952 $ 4,812 $ 142 $ 64,997 Evaluated for impairment in accordance with ASC 310-10-35 (1)(2) 1,037 55 38 60 1,190 Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 — — 3,660 — 3,660 Total recorded investment $ 56,128 $ 5,007 $ 8,510 $ 202 $ 69,847 (1) Loan receivables evaluated for impairment in accordance with Accounting Standards Codification ("ASC") 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. Other loans are individually evaluated for impairment and generally do not represent troubled debt restructurings. (2) The unpaid principal balance of credit card loans was $858 million and $878 million at September 30, 2015 and December 31, 2014 , respectively. The unpaid principal balance of personal loans was $64 million and $54 million at September 30, 2015 and December 31, 2014 , respectively. The unpaid principal balance of student loans was $44 million and $37 million at September 30, 2015 and December 31, 2014 , respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses. (3) Includes both PCI and non-PCI private student loans. (4) Excludes mortgage loans held for sale. Certain other loans, including non-performing Diners Club licensee loans, are individually evaluated for impairment. |
Schedule of Troubled Debt Restructurings | Additional information about modified loans classified as troubled debt restructurings is shown below (dollars in millions): Average recorded investment in loans Interest income recognized during period loans were impaired (1) Gross interest income that would have been recorded with original terms (2) For the Three Months Ended September 30, 2015 Credit card loans Modified credit card loans (3) $ 263 $ 12 $ — Internal programs $ 446 $ 3 $ 16 External programs $ 300 $ 5 $ 2 Personal loans $ 63 $ 2 $ 1 Private student loans $ 44 $ — N/A For the Three Months Ended September 30, 2014 Credit card loans Modified credit card loans (3) $ 248 $ 11 $ 1 Internal programs $ 449 $ 3 $ 15 External programs $ 353 $ 7 $ 4 Personal loans $ 49 $ 2 $ — Private student loans $ 33 $ 1 N/A For the Nine Months Ended September 30, 2015 Credit card loans Modified credit card loans (3) $ 258 $ 35 $ 2 Internal programs $ 449 $ 9 $ 46 External programs $ 311 $ 17 $ 8 Personal loans $ 60 $ 5 $ 2 Private student loans $ 42 $ 2 N/A For the Nine Months Ended September 30, 2014 Credit card loans Modified credit card loans (3) $ 251 $ 34 $ 3 Internal programs $ 452 $ 9 $ 46 External programs $ 374 $ 21 $ 10 Personal loans $ 46 $ 4 $ 1 Private student loans $ 31 $ 2 N/A (1) The Company does not separately track interest income on loans in modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs. (2) The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs. (3) This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings, but are no longer enrolled in troubled debt restructuring program due to noncompliance with the terms of the modification or successful completion of a program. |
Schedule of Loans That Entered a Modification Program During the Period | The following table provides information on loans that entered a loan modification program during the period (dollars in millions): For the Three Months Ended September 30, 2015 2014 Number of Accounts Balances Number of Accounts Balances Accounts that entered a loan modification program during the period Credit card loans: Internal programs 12,701 $ 80 12,115 $ 80 External programs 7,818 $ 39 8,203 $ 42 Personal loans 1,107 $ 13 980 $ 12 Private student loans 307 $ 4 393 $ 6 For the Nine Months Ended September 30, 2015 2014 Number of Accounts Balances Number of Accounts Balances Accounts that entered a loan modification program during the period Credit card loans Internal programs 37,933 $ 244 35,199 $ 232 External programs 22,731 $ 115 24,458 $ 128 Personal loans 3,082 $ 37 2,512 $ 30 Private student loans 1,067 $ 15 1,045 $ 15 |
Schedule of Troubled Debt Restructurings That Subsequently Defaulted | The following table presents the carrying value of loans that experienced a payment default during the period that had been modified in a troubled debt restructuring during the 15 months preceding the end of each period (dollars in millions): For the Three Months Ended September 30, 2015 2014 Number of Accounts Aggregated Outstanding Balances Upon Default Number of Accounts Aggregated Outstanding Balances Upon Default Troubled debt restructurings that subsequently defaulted Credit card loans: Internal programs (1)(2) 2,466 $ 15 2,488 $ 15 External programs (1)(2) 1,833 $ 7 1,874 $ 8 Personal loans (2) 160 $ 2 118 $ 2 Private student loans (3) 243 $ 4 286 $ 4 For the Nine Months Ended September 30, 2015 2014 Number of Accounts Aggregated Outstanding Balances Upon Default Number of Accounts Aggregated Outstanding Balances Upon Default Troubled debt restructurings that subsequently defaulted Credit card loans Internal programs (1)(2) 8,665 $ 53 7,282 $ 44 External programs (1)(2) 5,067 $ 20 5,440 $ 23 Personal loans (2) 445 $ 5 321 $ 4 Private student loans (3) 827 $ 12 820 $ 12 (1) The outstanding balance upon default is the loan balance at the end of the month prior to default. Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked in most cases. (2) A customer defaults from a modification program after two consecutive missed payments. (3) Student loan defaults have been defined as loans that are 60 or more days delinquent. |
Schedule of Changes in Accretable Yield for the Acquired Loans | The following table provides changes in accretable yield for the acquired loans during each period (dollars in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Balance at beginning of period $ 1,124 $ 1,450 $ 1,341 $ 1,580 Accretion into interest income (53 ) (64 ) (169 ) (198 ) Other changes in expected cash flows (68 ) — (169 ) 4 Balance at end of period $ 1,003 $ 1,386 $ 1,003 $ 1,386 |
Schedule of Initial Unpaid Principal Balance of Mortgage Loans Sold by Type | The following table provides a summary of the initial unpaid principal balance of mortgage loans sold during each period, by type of loan (dollars in millions): For the Three Months Ended September 30, 2015 2014 Amount % Amount % Conforming (1) $ 369 79.01 % $ 704 90.03 % FHA (2) 89 19.06 64 8.18 Jumbo (3) — — 11 1.41 VA (4) 9 1.93 3 0.38 Total $ 467 100.00 % $ 782 100.00 % For the Nine Months Ended September 30, 2015 2014 Amount % Amount % Conforming (1) $ 2,307 87.55 % $ 1,723 90.16 % FHA (2) 307 11.65 161 8.42 Jumbo (3) 6 0.23 24 1.26 VA (4) 15 0.57 3 0.16 Total $ 2,635 100.00 % $ 1,911 100.00 % (1) Conforming loans are loans that conform to Government-Sponsored Enterprises guidelines. (2) FHA loans are loans that are insured by the Federal Housing Administration and are typically made to borrowers with low down payments. The initial loan amount must be within certain limits. (3) Jumbo loans are loans with an initial amount larger than the limits set by a Government-Sponsored Enterprise. (4) VA loans are loans that are insured by and conform to the Department of Veteran Affairs guidelines. |
Credit Card and Student Loan 28
Credit Card and Student Loan Securitization Activities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Variable Interest Entities Disclosure [Abstract] | |
Schedule of Restricted Credit Card Securitized Assets [Text Block] | The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions): September 30, December 31, Restricted cash $ 17 $ 16 Investors’ interests held by third-party investors 14,650 15,950 Investors’ interests held by wholly-owned subsidiaries of Discover Bank 5,566 5,789 Seller’s interest 8,015 8,596 Loan receivables (1) 28,231 30,335 Allowance for loan losses allocated to securitized loan receivables (1) (748 ) (805 ) Net loan receivables 27,483 29,530 Other 34 37 Carrying value of assets of consolidated variable interest entities $ 27,534 $ 29,583 (1) The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP. |
Schedule of Investors' Interests and Related Excess Spreads | The table below provides information concerning investors’ interests and related excess spread (dollars in millions): At September 30, 2015 Investors’ Interests (1) # of Series Outstanding 3-Month Rolling Average Excess Spread Discover Card Execution Note Trust (DiscoverSeries notes) $ 20,216 37 13.73 % (1) Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank. |
Schedule of Restricted Student Loan Securitized Assets [Text Block] | The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions): September 30, December 31, Restricted cash $ 81 $ 86 Student loan receivables (1) 1,749 1,969 Allowance for loan losses allocated to securitized loan receivables (1) (28 ) (28 ) Net student loan receivables 1,721 1,941 Carrying value of assets of consolidated variable interest entities $ 1,802 $ 2,027 (1) The Company maintains its allowance for loan losses on PCI loans sufficient to absorb probable decreases in cash flows that were previously expected. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company's balance sheet in accordance with GAAP. |
Deposits (Tables)
Deposits (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Deposits [Abstract] | |
Schedule of Interest Bearing Deposit Accounts | The following table provides a summary of interest-bearing deposit accounts (dollars in millions): September 30, December 31, Certificates of deposit in amounts less than $100,000 $ 20,692 $ 21,502 Certificates of deposit in amounts $100,000 or greater (1) 5,271 5,634 Savings deposits, including money market deposit accounts 20,283 18,656 Total interest-bearing deposits $ 46,246 $ 45,792 (1) Includes $1.1 billion and $1.2 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of September 30, 2015 and December 31, 2014 , respectively. |
Schedule of $100,000 or More Certificates of Deposit Maturities | The following table summarizes certificates of deposit in amounts of $100,000 or greater by contractual maturity (dollars in millions): Maturity Period September 30, 2015 Three months or less $ 885 Over three months through six months 743 Over six months through twelve months 1,156 Over twelve months 2,487 Total $ 5,271 |
Schedule of Certificates of Deposit Maturities | The following table summarizes certificates of deposit maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions): Year September 30, 2015 2015 $ 2,710 2016 9,636 2017 5,101 2018 3,129 2019 1,830 Thereafter 3,557 Total $ 25,963 |
Long-Term Borrowings (Tables)
Long-Term Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Borrowings and Weighted Average Interest Rates | 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 Company’s long-term borrowings and weighted-average interest rates on outstanding balances (dollars in millions): September 30, 2015 December 31, 2014 Maturity Interest Weighted-Average Interest Rate Outstanding Amount Outstanding Amount Securitized Debt Fixed-rate asset-backed securities (1) 2016-2020 0.69%-5.65% 1.98% $ 7,950 $ 8,950 Floating-rate asset-backed securities (2)(3) 2015-2019 0.39%-0.66% 0.55% 6,700 7,000 Total Discover Card Master Trust I and Discover Card Execution Note Trust 14,650 15,950 Floating-rate asset-backed securities (4)(5)(6)(7) 2031-2042 0.46%-4.25% 1.99% 1,216 1,445 Total SLC Private Student Loan Trusts 1,216 1,445 Total long-term borrowings - owed to securitization investors 15,866 17,395 Discover Financial Services (Parent Company) Fixed-rate senior notes (1) 2017-2025 3.75%-10.25% 4.75% 2,075 1,558 Fixed-rate retail notes 2025 4.05% 4.05% 10 — Discover Bank Fixed-rate senior bank notes (1) 2018-2026 2.00%-4.25% 3.16% 5,151 2,892 Fixed-rate subordinated bank notes 2019-2020 7.00%-8.70% 7.49% 698 698 Capital lease obligations (8) 2016 4.51% 4.51% — 1 Total long-term borrowings $ 23,800 $ 22,544 (1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate (“LIBOR”). Use of these interest rate swaps impacts carrying value of the debt. (2) Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 18 to 45 basis points and 3-month LIBOR + 20 basis points . (3) The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 15: Derivatives and Hedging Activities. (4) SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points , Prime rate + 75 to 100 basis points and 1-month LIBOR + 350 basis points . (5) The Company acquired an interest rate swap related to the securitized debt assumed in the SLC transaction. The swap does not qualify for hedge accounting and has no impact on debt carrying value. See Note 15: Derivatives and Hedging Activities. (6) Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates. (7) Includes $321 million of senior notes maturing in 2031, $699 million of senior and subordinated notes maturing in 2036 and $196 million of senior notes maturing in 2042 as of September 30, 2015 . (8) As of September 30, 2015 , the outstanding amount of capital lease obligations was not material. |
Schedule of Long-Term Borrowings Maturities | The following table summarizes long-term borrowings maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions): Year September 30, 2015 2015 $ 250 2016 3,050 2017 5,106 2018 4,609 2019 3,278 Thereafter 7,507 Total $ 23,800 |
Accumulated Other Comprehensi31
Accumulated Other Comprehensive Income (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of Changes in Accumulated Other Comprehensive Income (Loss) | Changes in each component of accumulated other comprehensive income (loss) ("AOCI") were as follows (dollars in millions): Unrealized Gain (Loss) on Available-for-Sale Investment Securities, Net of Tax (Loss) Gain on Cash Flow Hedges, Net of Tax Foreign Currency Translation Adjustments, Net of Tax (1) Pension Plan Loss, Net of Tax AOCI For the Three Months Ended September 30, 2015 Balance at June 30, 2015 $ 13 $ (19 ) $ — $ (154 ) $ (160 ) Net change 3 (22 ) (1 ) — (20 ) Balance at September 30, 2015 $ 16 $ (41 ) $ (1 ) $ (154 ) $ (180 ) For the Three Months Ended September 30, 2014 Balance at June 30, 2014 $ 29 $ (1 ) $ 1 $ (101 ) $ (72 ) Net change (9 ) 12 (1 ) — 2 Balance at September 30, 2014 $ 20 $ 11 $ — $ (101 ) $ (70 ) For the Nine Months Ended September 30, 2015 Balance at December 31, 2014 $ 23 $ (7 ) $ — $ (154 ) $ (138 ) Net change (7 ) (34 ) (1 ) — (42 ) Balance at September 30, 2015 $ 16 $ (41 ) $ (1 ) $ (154 ) $ (180 ) For the Nine Months Ended September 30, 2014 Balance at December 31, 2013 $ 19 $ 13 $ 1 $ (101 ) $ (68 ) Net change 1 (2 ) (1 ) — (2 ) Balance at September 30, 2014 $ 20 $ 11 $ — $ (101 ) $ (70 ) (1) Includes unrealized gains/losses on hedge of net investment in foreign subsidiary, net of tax expense/benefit and net gains/losses on foreign currency translation adjustments. |
Schedule of Other Comprehensive Income Before Reclassifications and Amounts Reclassified from AOCI | The table below presents each component of other comprehensive income (loss) ("OCI") before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions): Before Tax Tax (Expense) Benefit Net of Tax For the Three Months Ended September 30, 2015 Available-for-Sale Investment Securities Net unrealized holding gain arising during the period $ 4 $ (1 ) $ 3 Net change $ 4 $ (1 ) $ 3 Cash Flow Hedges Net unrealized loss arising during the period $ (49 ) $ 19 $ (30 ) Amounts reclassified from AOCI 12 (4 ) 8 Net change $ (37 ) $ 15 $ (22 ) Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) For the Three Months Ended September 30, 2014 Available-for-Sale Investment Securities Net unrealized holding loss arising during the period $ (15 ) $ 6 $ (9 ) Net change $ (15 ) $ 6 $ (9 ) Cash Flow Hedges Net unrealized gain arising during the period $ 10 $ (4 ) $ 6 Amounts reclassified from AOCI 11 (5 ) 6 Net change $ 21 $ (9 ) $ 12 Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) The table below presents each component of OCI before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions): Before Tax Tax Benefit (Expense) Net of Tax For the Nine Months Ended September 30, 2015 Available-for-Sale Investment Securities Net unrealized holding loss arising during the period $ (4 ) $ 2 $ (2 ) Amounts reclassified from AOCI (8 ) 3 (5 ) Net change $ (12 ) $ 5 $ (7 ) Cash Flow Hedges Net unrealized loss arising during the period $ (90 ) $ 34 $ (56 ) Amounts reclassified from AOCI 35 (13 ) 22 Net change $ (55 ) $ 21 $ (34 ) Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) For the Nine Months Ended September 30, 2014 Available-for-Sale Investment Securities Net unrealized holding gain arising during the period $ 5 $ (2 ) $ 3 Amounts reclassified from AOCI (4 ) 2 (2 ) Net change $ 1 $ — $ 1 Cash Flow Hedges Net unrealized loss arising during the period $ (28 ) $ 10 $ (18 ) Amounts reclassified from AOCI 26 (10 ) 16 Net change $ (2 ) $ — $ (2 ) Foreign Currency Translation Adjustments Net unrealized loss arising during the period $ (1 ) $ — $ (1 ) Net change $ (1 ) $ — $ (1 ) |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate Calculation | The following table presents the calculation of the Company's effective income tax rate (dollars in millions, except effective income tax rate): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Income before income tax expense $ 974 $ 1,009 $ 2,824 $ 3,046 Income tax expense $ 362 $ 365 $ 1,027 $ 1,127 Effective income tax rate 37.2 % 36.2 % 36.4 % 37.0 % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted EPS | The following table presents the calculation of basic and diluted earnings per share ("EPS") (in millions, except per share amounts): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Numerator Net income $ 612 $ 644 $ 1,797 $ 1,919 Preferred stock dividends (9 ) (9 ) (28 ) (28 ) Net income available to common stockholders 603 635 1,769 1,891 Income allocated to participating securities (4 ) (5 ) (11 ) (13 ) Net income allocated to common stockholders $ 599 $ 630 $ 1,758 $ 1,878 Denominator Weighted-average shares of common stock outstanding 433 460 440 466 Effect of dilutive common stock equivalents 1 1 1 1 Weighted-average shares of common stock outstanding and common stock equivalents 434 461 441 467 Basic earnings per common share $ 1.38 $ 1.37 $ 3.99 $ 4.03 Diluted earnings per common share $ 1.38 $ 1.37 $ 3.98 $ 4.02 |
Capital Adequacy (Tables)
Capital Adequacy (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Regulatory Capital Requirements [Abstract] | |
Schedule of Minimum and Well-Capitalized Requirements | The following table shows the actual capital amounts and ratios of the Company and Discover Bank and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in millions): Actual Minimum Capital Requirements Capital Requirements To Be Classified as Well-Capitalized Amount Ratio Amount Ratio Amount Ratio At September 30, 2015 (1) Total capital (to risk-weighted assets) Discover Financial Services $ 12,546 17.1 % $ 5,882 ≥8.0% $ 7,353 ≥10.0% Discover Bank $ 11,926 16.4 % $ 5,816 ≥8.0% $ 7,270 ≥10.0% Tier 1 capital (to risk-weighted assets) Discover Financial Services $ 11,172 15.2 % $ 4,412 ≥6.0% $ 5,882 ≥8.0% Discover Bank $ 9,949 13.7 % $ 4,362 ≥6.0% $ 5,816 ≥8.0% Tier 1 capital (to average assets) Discover Financial Services $ 11,172 13.1 % $ 3,406 ≥4.0% $ 4,257 ≥5.0% Discover Bank $ 9,949 11.8 % $ 3,365 ≥4.0% $ 4,207 ≥5.0% CET1 capital (to risk-weighted assets) (Basel III transition) Discover Financial Services $ 10,612 14.4 % $ 3,309 ≥4.5% $ 4,779 ≥6.5% Discover Bank $ 9,949 13.7 % $ 3,272 ≥4.5% $ 4,726 ≥6.5% CET1 capital (to risk-weighted assets) (Basel III fully phased-in) (2) Discover Financial Services $ 10,530 14.3 % $ 3,304 ≥4.5% $ 4,773 ≥6.5% Discover Bank $ 9,945 13.7 % $ 3,271 ≥4.5% $ 4,725 ≥6.5% At December 31, 2014 (1) Total capital (to risk-weighted assets) Discover Financial Services $ 12,418 17.0 % $ 5,831 ≥8.0% $ 7,289 ≥10.0% Discover Bank $ 11,040 15.3 % $ 5,767 ≥8.0% $ 7,209 ≥10.0% Tier 1 capital (to risk-weighted assets) Discover Financial Services $ 10,839 14.9 % $ 2,916 ≥4.0% $ 4,373 ≥6.0% Discover Bank $ 9,470 13.1 % $ 2,884 ≥4.0% $ 4,326 ≥6.0% Tier 1 capital (to average assets) Discover Financial Services $ 10,839 13.2 % $ 3,288 ≥4.0% $ 4,111 ≥5.0% Discover Bank $ 9,470 11.7 % $ 3,252 ≥4.0% $ 4,066 ≥5.0% CET1 capital (to risk-weighted assets) (Basel III transition) Discover Financial Services N/A N/A N/A N/A N/A N/A Discover Bank N/A N/A N/A N/A N/A N/A CET1 capital (to risk-weighted assets) (Basel III fully phased-in) (2) Discover Financial Services $ 10,305 14.1 % $ 3,299 ≥4.5% $ 4,765 ≥6.5% Discover Bank N/A N/A N/A N/A N/A N/A (1) As of January 1, 2015, actual capital amounts and ratios are calculated under Basel III rules subject to transition provisions. The Company reported under Basel I at December 31, 2014 . (2) CET1 (Basel III fully phased-in) is calculated using Basel III fully phased-in CET1 capital, a non-GAAP measure. The Company believes that the CET1 capital ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of CET1 capital to risk-weighted assets calculated under fully phased-in Basel III rules to CET1 capital and risk-weighted assets calculated under Basel III transition rules see "Management's Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources — Capital". |
Commitments, Contingencies an35
Commitments, Contingencies and Guarantees (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Guarantor Obligations [Line Items] | |
Schedule of Lease Commitments | The Company leases various office space and equipment under capital and non-cancelable operating leases, which expire at various dates through 2028. Future minimum payments on capital leases were not material at September 30, 2015. The following table shows future minimum payments on non-cancelable operating leases with original terms in excess of one year (dollars in millions): September 30, 2015 2015 $ 4 2016 15 2017 14 2018 12 2019 10 Thereafter 45 Total minimum lease payments $ 100 |
Schedule of Settlement Withholdings and Escrow Deposits | The table below provides information regarding escrow deposits and settlement withholdings, which are recorded in interest-bearing deposit accounts and accrued expenses and other liabilities on the Company’s condensed consolidated statements of financial condition, respectively (dollars in millions): September 30, December 31, Settlement withholdings and escrow deposits $ 9 $ 16 |
Counterparty Settlement Guarantees [Member] | |
Guarantor Obligations [Line Items] | |
Schedule of Maximum Potential Counterparty Exposures Related to Settlement Guarantees and Merchant Chargeback Guarantee | While the Company has some contractual remedies to offset these counterparty settlement exposures (such as letters of credit or pledged deposits), in the event that all licensees and/or issuers were to become unable to settle their transactions, the Company estimates its maximum potential counterparty exposures to these settlement guarantees, based on historical transaction volume, would be as follows (dollars in millions): September 30, Diners Club: Merchant guarantee $ 112 PULSE: ATM guarantee $ 1 |
Merchant Chargeback Guarantees [Member] | |
Guarantor Obligations [Line Items] | |
Schedule of Maximum Potential Counterparty Exposures Related to Settlement Guarantees and Merchant Chargeback Guarantee | The table below summarizes certain information regarding merchant chargeback guarantees (in millions): For the Three Months Ended September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Aggregate sales transaction volume (1) $ 33,761 $ 31,963 $ 97,058 $ 92,262 (1) Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume. |
Fair Value Measurements and D36
Fair Value Measurements and Disclosures (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis | Assets and liabilities measured at fair value on a recurring basis are as follows (dollars in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Balance at September 30, 2015 Assets U.S. Treasury securities $ 1,281 $ — $ — $ 1,281 U.S. government agency securities 622 — — 622 Residential mortgage-backed securities - Agency — 1,275 — 1,275 Available-for-sale investment securities $ 1,903 $ 1,275 $ — $ 3,178 Mortgage loans held for sale $ — $ — $ 1 $ 1 Interest rate lock commitments $ — $ — $ — $ — Forward delivery contracts — — — — Other derivative financial instruments — 46 — 46 Derivative financial instruments $ — $ 46 $ — $ 46 Liabilities Forward delivery contracts $ — $ — $ — $ — Other derivative financial instruments — 69 — 69 Derivative financial instruments $ — $ 69 $ — $ 69 Balance at December 31, 2014 Assets U.S. Treasury securities $ 1,329 $ — $ — $ 1,329 U.S. government agency securities 1,033 — — 1,033 Residential mortgage-backed securities - Agency — 1,485 — 1,485 Available-for-sale investment securities $ 2,362 $ 1,485 $ — $ 3,847 Mortgage loans held for sale $ — $ 122 $ — $ 122 Interest rate lock commitments $ — $ — $ 7 $ 7 Forward delivery contracts — 1 — 1 Other derivative financial instruments — 35 — 35 Derivative financial instruments $ — $ 36 $ 7 $ 43 Liabilities Forward delivery contracts $ — $ 3 $ — $ 3 Other derivative financial instruments — 20 — 20 Derivative financial instruments $ — $ 23 $ — $ 23 |
Schedule of Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following tables provide changes in the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis (dollars in millions): For the Three Months Ended September 30, 2015 Balance at June 30, 2015 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2015 Interest rate lock commitments $ 5 — — 3 — — 1 (9 ) $ — Mortgage loans held for sale $ 2 2 — — 1 (3 ) (1 ) — $ 1 For the Three Months Ended September 30, 2014 Balance at June 30, 2014 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2014 Interest rate lock commitments $ 8 — — 18 — — 2 (22 ) $ 6 Mortgage loans held for sale $ — 1 — — 1 (1 ) — — $ 1 For the Nine Months Ended September 30, 2015 Balance at December 31, 2014 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2015 Interest rate lock commitments $ 7 — — 71 — — 7 (85 ) $ — Forward delivery contracts $ — — (1 ) 1 — — — — $ — Mortgage loans held for sale $ — 5 — — 2 (5 ) (1 ) — $ 1 For the Nine Months Ended September 30, 2014 Balance at December 31, 2013 Transfers into Transfers out of Level 3 Total Net Gains included in Earnings Purchases Sales Settlements Transfers of IRLCs to Closed Loans Balance at September 30, 2014 Interest rate lock commitments $ 4 — — 61 — — 4 (63 ) $ 6 Forward delivery contracts $ — — (1 ) 1 — — — — $ — Mortgage loans held for sale $ — 2 — — 1 (2 ) — — $ 1 |
Schedule of Significant Unobservable Inputs Related to Level 3 Assets and Liabilities | The following table presents information about significant unobservable inputs related to the Company's Level 3 financial assets and liabilities measured at fair value on a recurring and non-recurring basis (dollars in millions): Fair Value Valuation Technique Significant Unobservable Input Ranges of Inputs Weighted Average At September 30, 2015 Low High Mortgage loans held for sale $ 1 Market comparables Loss severity 17 % 29 % 23 % |
Schedule of Financial Instruments Measured at Other Than Fair Value | The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Carrying Value Balance at September 30, 2015 Assets U.S Treasury securities $ 1 $ — $ — $ 1 $ 1 States and political subdivisions of states — 7 — 7 7 Residential mortgage-backed securities - Agency — 118 — 118 116 Held-to-maturity investment securities $ 1 $ 125 $ — $ 126 $ 124 Cash and cash equivalents $ 10,250 $ — $ — $ 10,250 $ 10,250 Restricted cash $ 98 $ — $ — $ 98 $ 98 Net loan receivables (1) $ — $ — $ 69,204 $ 69,204 $ 68,334 Accrued interest receivables $ — $ 656 $ — $ 656 $ 656 Liabilities Deposits $ — $ 46,759 $ — $ 46,759 $ 46,605 Short-term borrowings $ — $ — $ — $ — $ — Long-term borrowings - owed to securitization investors $ — $ 14,769 $ 1,300 $ 16,069 $ 15,866 Other long-term borrowings $ — $ 8,376 $ — $ 8,376 $ 7,934 Accrued interest payables $ — $ 155 $ — $ 155 $ 155 Balance at December 31, 2014 Assets U.S Treasury securities $ 1 $ — $ — $ 1 $ 1 States and political subdivisions of states — 10 — 10 10 Residential mortgage-backed securities - Agency — 93 — 93 91 Held-to-maturity investment securities $ 1 $ 103 $ — $ 104 $ 102 Cash and cash equivalents $ 7,284 $ — $ — $ 7,284 $ 7,284 Restricted cash $ 106 $ — $ — $ 106 $ 106 Net loan receivables (1) $ — $ — $ 69,316 $ 69,316 $ 68,101 Accrued interest receivables $ — $ 618 $ — $ 618 $ 618 Liabilities Deposits $ — $ 46,242 $ — $ 46,242 $ 46,089 Short-term borrowings $ — $ 113 $ — $ 113 $ 113 Long-term borrowings - owed to securitization investors $ — $ 16,067 $ 1,561 $ 17,628 $ 17,395 Other long-term borrowings $ — $ 5,721 $ 1 $ 5,722 $ 5,149 Accrued interest payables $ — $ 132 $ — $ 132 $ 132 (1) Net loan receivables exclude mortgage loans held for sale that are measured at fair value on a recurring basis. |
Derivatives and Hedging Activ37
Derivatives and Hedging Activities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Fair Value and Outstanding Notional Amounts of Derivative Instruments and Related Collateral Balances | The following table summarizes the fair value (including accrued interest) and outstanding notional amounts of derivative instruments and related collateral balances (dollars in millions): September 30, 2015 December 31, 2014 Notional Amount Number of Outstanding Derivative Contracts Derivative Assets Derivative Liabilities Notional Amount Derivative Assets Derivative Liabilities Derivatives designated as hedges Interest rate swaps—cash flow hedge $ 4,100 8 $ — $ 69 $ 4,100 $ 4 $ 18 Interest rate swaps—fair value hedge $ 3,645 123 46 — $ 5,507 31 2 Foreign exchange forward contract - net investment hedge (1) $ — — — — $ 7 — — Derivatives not designated as hedges Foreign exchange forward contracts (2) $ 35 7 — — $ 53 — — Interest rate swap (3) $ 236 1 — — $ 359 — — Forward delivery contracts $ — — — — $ 761 1 3 Interest rate lock commitments (3) $ — — — — $ 406 7 — Total gross derivative assets / liabilities (4) 46 69 43 23 Less: Collateral held/posted (5) (21 ) (51 ) (20 ) (23 ) Total net derivative assets / liabilities $ 25 $ 18 $ 23 $ — (1) The foreign exchange forward contract had a notional amount of EUR 6 million as of December 31, 2014 . (2) The foreign exchange forward contracts have notional amounts of EUR 21 million , GBP 7 million and SGD 1 million as of September 30, 2015 , and notional amounts of EUR 27 million , GBP 8 million , SGD 1 million and CHF 8 million as of December 31, 2014 . (3) Interest rate swaps not designated as hedges and interest rate lock commitments do not have associated master netting arrangements. (4) In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At December 31, 2014 , the Company had one outstanding contract with a notional amount of $33 million and immaterial fair value. (5) Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged. |
Schedule of Impact of the Derivative Instruments on Income and Other Comprehensive Income | The following tables summarize the impact of the derivative instruments on income and OCI and indicates where within the condensed consolidated financial statements such impact is reported (dollars in millions): Amount of (Loss) Gain Recognized in OCI For the Three Months Ended September 30, For the Nine Months Ended September 30, Location 2015 2014 2015 2014 Derivatives designated as hedges Interest rate swaps - cash flow/net investment hedges Total (loss) gain recognized in OCI after amounts reclassified into earnings, pre-tax OCI $ (37 ) $ 23 $ (54 ) $ — Total (loss) gain recognized in OCI $ (37 ) $ 23 $ (54 ) $ — Amount of (Loss) Gain Recognized in Income For the Three Months Ended September 30, For the Nine Months Ended September 30, Location 2015 2014 2015 2014 Derivatives designated as hedges Interest rate swaps - cash flow hedges Amount reclassified from OCI into income Interest Expense $ (12 ) $ (11 ) $ (35 ) $ (26 ) Total amount reclassified from OCI into income (12 ) (11 ) (35 ) (26 ) Interest rate swaps - fair value hedges Adjustments - ineffectiveness 12 (14 ) 13 (13 ) Adjustments - other 8 9 23 29 Gain (loss) on interest rate swaps Interest Expense 20 (5 ) 36 16 Adjustments - ineffectiveness (11 ) 16 (8 ) 18 Adjustments - other (2 ) (2 ) (5 ) (1 ) (Loss) gain on hedged item Interest Expense (13 ) 14 (13 ) 17 Total (loss) gain on derivatives designated as hedges recognized in income $ (5 ) $ (2 ) $ (12 ) $ 7 Derivatives not designated as hedges Gain on forward contracts Other Income $ — $ 4 $ 2 $ 4 (Loss) on interest rate swaps Other Income (1 ) — (1 ) (1 ) (Loss) gain on forward delivery contracts Other Income (4 ) 3 2 (4 ) Gain on interest rate lock commitments Other Income 3 18 71 61 Total (loss) gain on derivatives not designated as hedges recognized in income $ (2 ) $ 25 $ 74 $ 60 |
Segment Disclosures (Tables)
Segment Disclosures (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Schedule of Segment Disclosures | The following table presents segment data (dollars in millions): Direct Banking Payment Services Total For the Three Months Ended September 30, 2015 Interest income Credit card loans $ 1,676 $ — $ 1,676 Private student loans 95 — 95 PCI student loans 54 — 54 Personal loans 161 — 161 Other 22 — 22 Total interest income 2,008 — 2,008 Interest expense 323 — 323 Net interest income 1,685 — 1,685 Provision for loan losses 332 — 332 Other income 435 68 503 Other expense 838 44 882 Income before income tax expense $ 950 $ 24 $ 974 For the Three Months Ended September 30, 2014 Interest income Credit card loans $ 1,613 $ — $ 1,613 Private student loans 80 — 80 PCI student loans 64 — 64 Personal loans 145 — 145 Other 24 — 24 Total interest income 1,926 — 1,926 Interest expense 288 — 288 Net interest income 1,638 — 1,638 Provision for loan losses 356 (2 ) 354 Other income 475 77 552 Other expense 776 51 827 Income before income tax expense $ 981 $ 28 $ 1,009 The following table presents segment data (dollars in millions): Direct Banking Payment Services Total For the Nine Months Ended September 30, 2015 Interest income Credit card loans $ 4,902 $ — $ 4,902 Private student loans 277 — 277 PCI student loans 170 — 170 Personal loans 468 — 468 Other 67 — 67 Total interest income 5,884 — 5,884 Interest expense 934 — 934 Net interest income 4,950 — 4,950 Provision for loan losses 1,026 2 1,028 Other income 1,371 213 1,584 Other expense 2,550 132 2,682 Income before income tax expense $ 2,745 $ 79 $ 2,824 For the Nine Months Ended September 30, 2014 Interest income Credit card loans $ 4,710 $ — $ 4,710 Private student loans 228 — 228 PCI student loans 198 — 198 Personal loans 415 — 415 Other 71 — 71 Total interest income 5,622 — 5,622 Interest expense 832 — 832 Net interest income 4,790 — 4,790 Provision for loan losses 986 — 986 Other income 1,414 236 1,650 Other expense 2,259 149 2,408 Income before income tax expense $ 2,959 $ 87 $ 3,046 |
Business Dispositions (Narrativ
Business Dispositions (Narrative) (Details) - Discover Home Loans Business [Member] $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2015USD ($) | Sep. 30, 2015USD ($) | |
Restructuring Cost and Reserve [Line Items] | ||
Exit expenses incurred to date | $ 3 | $ 26 |
Expected exit expenses remaining | $ 5 | $ 5 |
Investments (Narrative) (Detail
Investments (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Investment Holdings [Line Items] | |||||
Other than temporary impairment loss on investments | $ 0 | $ 0 | $ 0 | $ 0 | |
Affordable housing project equity method investments | 196 | 196 | $ 201 | ||
Contingent liabilities related to affordable housing project equity method investments | 28 | 28 | 38 | ||
Community Reinvestment Act [Member] | Other Assets [Member] | |||||
Investment Holdings [Line Items] | |||||
Equity method investments | 294 | 294 | 325 | ||
Community Reinvestment Act [Member] | Other Liabilities [Member] | |||||
Investment Holdings [Line Items] | |||||
Contingent liabilities related to equity method investments | $ 28 | $ 28 | $ 51 |
Investments (Schedule of Invest
Investments (Schedule of Investment Securities) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Investment Holdings [Line Items] | |||
Investment securities | $ 3,302 | $ 3,949 | |
U.S. Treasury Securities [Member] | |||
Investment Holdings [Line Items] | |||
Investment securities | [1] | 1,282 | 1,330 |
Derivative collateral | 4 | 16 | |
U.S. Government Agency Securities [Member] | |||
Investment Holdings [Line Items] | |||
Investment securities | 622 | 1,033 | |
States and Political Subdivisions of States [Member] | |||
Investment Holdings [Line Items] | |||
Investment securities | 7 | 10 | |
Residential Mortgage-Backed Securities - Agency [Member] | |||
Investment Holdings [Line Items] | |||
Investment securities | [2] | $ 1,391 | $ 1,576 |
[1] | Includes $4 million and $16 million of U.S. Treasury securities pledged as swap collateral in lieu of cash as of September 30, 2015 and December 31, 2014, respectively. | ||
[2] | Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. |
Investments (Schedule of Amorti
Investments (Schedule of Amortized Cost, Gross Unrealized Gains, Gross Unrealized Losses and Fair Value) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, amortized cost | [1] | $ 3,153 | $ 3,811 |
Available-for-sale investment securities, gross unrealized gains | [1] | 26 | 37 |
Available-for-sale investment securities, gross unrealized losses | [1] | (1) | (1) |
Available-for-sale investment securities, fair value | [1] | 3,178 | 3,847 |
Held-to-maturity investment securities, amortized cost | [2] | 124 | 102 |
Held-to-maturity investment securities, gross unrealized gains | [2] | 2 | 2 |
Held-to-maturity investment securities, gross unrealized losses | [2] | 0 | 0 |
Held-to-maturity investment securities, fair value | [2] | 126 | 104 |
U.S. Treasury Securities [Member] | |||
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, amortized cost | [1] | 1,277 | 1,317 |
Available-for-sale investment securities, gross unrealized gains | [1] | 4 | 12 |
Available-for-sale investment securities, gross unrealized losses | [1] | 0 | 0 |
Available-for-sale investment securities, fair value | [1] | 1,281 | 1,329 |
Held-to-maturity investment securities, amortized cost | [2],[3] | 1 | 1 |
Held-to-maturity investment securities, gross unrealized gains | [2],[3] | 0 | 0 |
Held-to-maturity investment securities, gross unrealized losses | [2],[3] | 0 | 0 |
Held-to-maturity investment securities, fair value | [2],[3] | 1 | 1 |
U.S. Government Agency Securities [Member] | |||
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, amortized cost | [1] | 618 | 1,021 |
Available-for-sale investment securities, gross unrealized gains | [1] | 4 | 12 |
Available-for-sale investment securities, gross unrealized losses | [1] | 0 | 0 |
Available-for-sale investment securities, fair value | [1] | 622 | 1,033 |
Residential Mortgage-Backed Securities - Agency [Member] | |||
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, amortized cost | [1] | 1,258 | 1,473 |
Available-for-sale investment securities, gross unrealized gains | [1] | 18 | 13 |
Available-for-sale investment securities, gross unrealized losses | [1] | (1) | (1) |
Available-for-sale investment securities, fair value | [1] | 1,275 | 1,485 |
Held-to-maturity investment securities, amortized cost | [2],[4] | 116 | 91 |
Held-to-maturity investment securities, gross unrealized gains | [2],[4] | 2 | 2 |
Held-to-maturity investment securities, gross unrealized losses | [2],[4] | 0 | 0 |
Held-to-maturity investment securities, fair value | [2],[4] | 118 | 93 |
States and Political Subdivisions of States [Member] | |||
Investment Holdings [Line Items] | |||
Held-to-maturity investment securities, amortized cost | [2] | 7 | 10 |
Held-to-maturity investment securities, gross unrealized gains | [2] | 0 | 0 |
Held-to-maturity investment securities, gross unrealized losses | [2] | 0 | 0 |
Held-to-maturity investment securities, fair value | [2] | $ 7 | $ 10 |
[1] | Available-for-sale investment securities are reported at fair value. | ||
[2] | Held-to-maturity investment securities are reported at amortized cost. | ||
[3] | Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period. | ||
[4] | Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives. |
Investments (Schedule of Fair V
Investments (Schedule of Fair Value of Securities in a Continuous Unrealized Loss Position for Less Than 12 Months and More Than 12 Months) (Details) - Residential Mortgage-Backed Securities - Agency [Member] $ in Millions | Sep. 30, 2015USD ($)securities | Dec. 31, 2014USD ($)securities |
Investment Holdings [Line Items] | ||
Available-for-sale investment securities, number of securities in a loss position (in securities) | securities | 6 | 8 |
Available-for-sale investment securities, continuous unrealized loss position, less than 12 months, fair value | $ 189 | $ 97 |
Available-for-sale investment securities, continuous unrealized loss position, less than 12 months, unrealized losses | (1) | 0 |
Available-for-sale investment securities, continuous unrealized loss position, more than 12 months, fair value | 0 | 225 |
Available-for-sale investment securities, continuous unrealized loss position, more than 12 months, unrealized losses | $ 0 | $ (1) |
Investments (Schedule of Procee
Investments (Schedule of Proceeds, Recognized Gains and Losses and Net Unrealized Gains and Losses) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Investments, Debt and Equity Securities [Abstract] | ||||
Proceeds from the sales of available-for-sale investment securities | $ 0 | $ 0 | $ 899 | $ 1,220 |
Gain on sales of available-for-sale investment securities | 0 | 0 | 8 | 4 |
Net unrealized gain (loss) recorded in other comprehensive income, before-tax | 4 | (15) | (12) | 1 |
Net unrealized gain (loss) recorded in other comprehensive income, after-tax | $ 3 | $ (9) | $ (7) | $ 1 |
Investments (Schedule of Maturi
Investments (Schedule of Maturities of Available-for-Sale Debt Securities and Held-to-Maturity Debt Securities) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, debt maturities, one year or less, amortized cost | $ 1,218 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost | 677 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost | 408 | ||
Available-for-sale investment securities, debt maturities, after ten years, amortized cost | 850 | ||
Available-for-sale investment securities, amortized cost | [1] | 3,153 | $ 3,811 |
Held-to-maturity investment securities, debt maturities, one year or less, amortized cost | 1 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, amortized cost | 123 | ||
Held-to-maturity investment securities, amortized cost | [2] | 124 | 102 |
Available-for-sale investment securities, debt maturities, one year or less, fair value | 1,226 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, fair value | 677 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value | 412 | ||
Available-for-sale investment securities, debt maturities, after ten years, fair value | 863 | ||
Available-for-sale investment securities, fair value | [1] | 3,178 | 3,847 |
Held-to-maturity investment securities, debt maturities, one year or less, fair value | 1 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, fair value | 125 | ||
Held-to-maturity investment securities, fair value | [2] | 126 | 104 |
U.S. Treasury Securities [Member] | |||
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, debt maturities, one year or less, amortized cost | 600 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost | 677 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost | 0 | ||
Available-for-sale investment securities, debt maturities, after ten years, amortized cost | 0 | ||
Available-for-sale investment securities, amortized cost | [1] | 1,277 | 1,317 |
Held-to-maturity investment securities, debt maturities, one year or less, amortized cost | 1 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, amortized cost | 0 | ||
Held-to-maturity investment securities, amortized cost | [2],[3] | 1 | 1 |
Available-for-sale investment securities, debt maturities, one year or less, fair value | 604 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, fair value | 677 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value | 0 | ||
Available-for-sale investment securities, debt maturities, after ten years, fair value | 0 | ||
Available-for-sale investment securities, fair value | [1] | 1,281 | 1,329 |
Held-to-maturity investment securities, debt maturities, one year or less, fair value | 1 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, fair value | 0 | ||
Held-to-maturity investment securities, fair value | [2],[3] | 1 | 1 |
U.S. Government Agency Securities [Member] | |||
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, debt maturities, one year or less, amortized cost | 618 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost | 0 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost | 0 | ||
Available-for-sale investment securities, debt maturities, after ten years, amortized cost | 0 | ||
Available-for-sale investment securities, amortized cost | [1] | 618 | 1,021 |
Available-for-sale investment securities, debt maturities, one year or less, fair value | 622 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, fair value | 0 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value | 0 | ||
Available-for-sale investment securities, debt maturities, after ten years, fair value | 0 | ||
Available-for-sale investment securities, fair value | [1] | 622 | 1,033 |
Residential Mortgage-Backed Securities - Agency [Member] | |||
Investment Holdings [Line Items] | |||
Available-for-sale investment securities, debt maturities, one year or less, amortized cost | 0 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost | 0 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost | 408 | ||
Available-for-sale investment securities, debt maturities, after ten years, amortized cost | 850 | ||
Available-for-sale investment securities, amortized cost | [1] | 1,258 | 1,473 |
Held-to-maturity investment securities, debt maturities, one year or less, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, amortized cost | 116 | ||
Held-to-maturity investment securities, amortized cost | [2],[4] | 116 | 91 |
Available-for-sale investment securities, debt maturities, one year or less, fair value | 0 | ||
Available-for-sale investment securities, debt maturities, after one year through five years, fair value | 0 | ||
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value | 412 | ||
Available-for-sale investment securities, debt maturities, after ten years, fair value | 863 | ||
Available-for-sale investment securities, fair value | [1] | 1,275 | 1,485 |
Held-to-maturity investment securities, debt maturities, one year or less, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, fair value | 118 | ||
Held-to-maturity investment securities, fair value | [2],[4] | 118 | 93 |
States and Political Subdivisions of States [Member] | |||
Investment Holdings [Line Items] | |||
Held-to-maturity investment securities, debt maturities, one year or less, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, amortized cost | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, amortized cost | 7 | ||
Held-to-maturity investment securities, amortized cost | [2] | 7 | 10 |
Held-to-maturity investment securities, debt maturities, one year or less, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after one year through five years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after five years through ten years, fair value | 0 | ||
Held-to-maturity investment securities, debt maturities, after ten years, fair value | 7 | ||
Held-to-maturity investment securities, fair value | [2] | $ 7 | $ 10 |
[1] | Available-for-sale investment securities are reported at fair value. | ||
[2] | Held-to-maturity investment securities are reported at amortized cost. | ||
[3] | Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period. | ||
[4] | Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives. |
Loan Receivables (Narrative) (D
Loan Receivables (Narrative) (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)segment | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Dec. 31, 2013USD ($) | |||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Number of loan portfolio segments (in segments) | segment | 3 | |||||||||||
Private student loan forbearance lifetime cap (in months) | 12 months | |||||||||||
Private student loans including PCI in forbearance | $ 39 | $ 39 | $ 49 | |||||||||
Private student loans in forbearance as a percentage of student loans in repayment and forbearance (in percent) | 0.70% | 0.70% | 0.80% | |||||||||
Percentage of defaulted loans that were charged off at the end of the month in which they defaulted (in percent) | 36.00% | 34.00% | 41.00% | 36.00% | ||||||||
Provision for loan losses on PCI loans | $ 332 | $ 354 | $ 1,028 | $ 986 | ||||||||
Allowance for loan losses on PCI loans | 1,743 | 1,644 | $ 1,743 | 1,644 | $ 1,746 | $ 1,735 | $ 1,614 | $ 1,648 | ||||
Student Loans [Member] | ||||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Maximum period of payment reduction for the temporary reduced payment program (in months) | 12 months | |||||||||||
Maximum forbearance period for student loan borrowers (in months) | 12 months | |||||||||||
Period triggering TDR accounting for the temporary reduced payment program (in months) | 12 months | |||||||||||
Provision for loan losses on PCI loans | [1] | 0 | 16 | $ 34 | 59 | |||||||
Allowance for loan losses on PCI loans | [1] | 130 | [2] | 132 | $ 130 | [2] | 132 | 135 | [2] | 143 | 128 | 113 |
Personal Loans [Member] | ||||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Maximum period of payment reduction for the temporary reduced payment program (in months) | 12 months | |||||||||||
Maximum repayment term for temporary modification programs (in years) | 9 years | |||||||||||
Maximum repayment term for permanent modification programs (in years) | 9 years | |||||||||||
Credit Card Loans [Member] | ||||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Maximum period of payment reduction for the temporary reduced payment program (in months) | 12 months | |||||||||||
Permanent workout program maturity (in months) | 60 months | |||||||||||
Interest and fees forgiven due to credit card loan modification program | 11 | 11 | $ 33 | 30 | ||||||||
Provision for loan losses on PCI loans | 303 | 318 | 896 | 865 | ||||||||
Allowance for loan losses on PCI loans | 1,459 | 1,388 | 1,459 | 1,388 | 1,474 | $ 1,441 | $ 1,359 | $ 1,406 | ||||
PCI Student Loans [Member] | ||||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Purchased credit-impaired loans outstanding balance | 3,500 | 3,500 | 3,900 | |||||||||
Purchased credit-impaired loans | [3] | 3,249 | 3,249 | 3,660 | ||||||||
Provision for loan losses on PCI loans | 0 | $ 0 | 0 | $ 0 | ||||||||
Allowance for loan losses on PCI loans | $ 28 | $ 28 | $ 28 | |||||||||
Net charge-off rate on PCI student loans (in percent) | 0.53% | 0.63% | 0.47% | 0.63% | ||||||||
PCI Student Loans [Member] | 30 or More Days Delinquent [Member] | ||||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Delinquency rate on PCI student loans (in percent) | 2.68% | 2.35% | ||||||||||
PCI Student Loans [Member] | 90 or More Days Delinquent [Member] | ||||||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||||||
Delinquency rate on PCI student loans (in percent) | 0.89% | 0.75% | ||||||||||
[1] | Includes both PCI and non-PCI private student loans. | |||||||||||
[2] | Includes both PCI and non-PCI private student loans. | |||||||||||
[3] | Amounts include $1.7 billion and $2.0 billion of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at September 30, 2015 and December 31, 2014, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. |
Loan Receivables (Schedule of L
Loan Receivables (Schedule of Loan Receivables) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total loan receivables | $ 70,078 | $ 69,969 | |||||||
Allowance for loan losses | (1,743) | $ (1,735) | (1,746) | $ (1,644) | $ (1,614) | $ (1,648) | |||
Net loan receivables | 68,335 | 68,223 | |||||||
Variable Interest Entity, Primary Beneficiary [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total loan receivables | 29,980 | 32,304 | |||||||
Allowance for loan losses | (776) | (833) | |||||||
Credit Card Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Credit card loans | [1] | 28,231 | 30,335 | ||||||
Allowance for loan losses | [1] | (748) | (805) | ||||||
Sellers' interest | 8,015 | 8,596 | |||||||
Student Loan Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Purchased credit-impaired loans | [2] | 1,749 | 1,969 | ||||||
Allowance for loan losses | [2] | (28) | (28) | ||||||
Credit Card Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Credit card loans | [3] | 55,655 | 56,128 | ||||||
Allowance for loan losses | (1,459) | (1,441) | (1,474) | (1,388) | (1,359) | (1,406) | |||
Credit Card Loans [Member] | Credit Card Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Investors' interest | 20,200 | 21,700 | |||||||
Total Other Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total other loans | 11,174 | 10,181 | |||||||
Total Other Loans [Member] | Personal Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total other loans | 5,425 | 5,007 | |||||||
Allowance for loan losses | (135) | (131) | (120) | (108) | (109) | (112) | |||
Total Other Loans [Member] | Private Student Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total other loans | 5,520 | 4,850 | |||||||
Total Other Loans [Member] | Mortgage Loans Held For Sale [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total other loans | 1 | [4] | 122 | ||||||
Total Other Loans [Member] | Other Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total other loans | [5] | 228 | 202 | ||||||
Allowance for loan losses | (19) | [6] | $ (20) | (17) | [6] | $ (16) | $ (18) | $ (17) | |
Purchase Credit-Impaired Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Purchased credit-impaired loans | [7] | 3,249 | 3,660 | ||||||
Allowance for loan losses | (28) | (28) | |||||||
Purchase Credit-Impaired Loans [Member] | Student Loan Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Loans pledged as collateral | $ 1,700 | $ 2,000 | |||||||
[1] | The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP. | ||||||||
[2] | The Company maintains its allowance for loan losses on PCI loans sufficient to absorb probable decreases in cash flows that were previously expected. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company's balance sheet in accordance with GAAP. | ||||||||
[3] | Amounts include $20.2 billion and $21.7 billion underlying investors’ interest in trust debt at September 30, 2015 and December 31, 2014 and $8.0 billion and $8.6 billion in seller's interest at September 30, 2015 and December 31, 2014, respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information. | ||||||||
[4] | On June 16, 2015, the Company announced that it is closing the mortgage origination business, as disclosed in Note 2: Business Dispositions. Pursuant to that announcement, the Company has sold substantially all mortgage loans held for sale in its portfolio and ceased originating new mortgages. | ||||||||
[5] | Other includes home equity loans. | ||||||||
[6] | Excludes mortgage loans held for sale. Certain other loans, including non-performing Diners Club licensee loans, are individually evaluated for impairment. | ||||||||
[7] | Amounts include $1.7 billion and $2.0 billion of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at September 30, 2015 and December 31, 2014, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. |
Loan Receivables (Schedule of D
Loan Receivables (Schedule of Delinquent and Non-Accruing Loans) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | ||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | $ 1,070 | $ 1,070 | $ 1,100 | |||
Loan receivables, 90 or more days delinquent and accruing | 424 | 424 | 477 | |||
Loan receivables, total non-accruing | 216 | 216 | 183 | |||
30-89 Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 589 | 589 | 583 | |||
90 or More Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 481 | 481 | 517 | |||
Credit Card Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 919 | 919 | 971 | |||
Loan receivables, 90 or more days delinquent and accruing | [1] | 384 | 384 | 442 | ||
Loan receivables, total non-accruing | [2] | 188 | 188 | 157 | ||
Estimated gross interest income that would have been recorded based on original terms | 8 | $ 7 | 21 | $ 20 | ||
Credit Card Loans [Member] | Internal And External Loan Modification Programs [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, 90 or more days delinquent and accruing | 38 | 38 | 43 | |||
Credit Card Loans [Member] | 30-89 Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 482 | 482 | 491 | |||
Credit Card Loans [Member] | 90 or More Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 437 | 437 | 480 | |||
Total Other Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 151 | 151 | 129 | |||
Loan receivables, 90 or more days delinquent and accruing | 40 | 40 | 35 | |||
Loan receivables, total non-accruing | 28 | 28 | 26 | |||
Total Other Loans [Member] | 30-89 Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 107 | 107 | 92 | |||
Total Other Loans [Member] | 90 or More Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 44 | 44 | 37 | |||
Total Other Loans [Member] | Personal Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 44 | 44 | 40 | |||
Loan receivables, 90 or more days delinquent and accruing | [3] | 12 | 12 | 10 | ||
Loan receivables, total non-accruing | 7 | 7 | 5 | |||
Total Other Loans [Member] | Personal Loans [Member] | Internal And External Loan Modification Programs [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, 90 or more days delinquent and accruing | 3 | 3 | 3 | |||
Total Other Loans [Member] | Personal Loans [Member] | 30-89 Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 31 | 31 | 29 | |||
Total Other Loans [Member] | Personal Loans [Member] | 90 or More Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 13 | 13 | 11 | |||
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 104 | 104 | 87 | |||
Loan receivables, 90 or more days delinquent and accruing | [4] | 28 | 28 | 25 | ||
Loan receivables, total non-accruing | 0 | 0 | 0 | |||
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | Entity Loan Modification Program [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, 90 or more days delinquent and accruing | 4 | 4 | 5 | |||
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | 30-89 Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 76 | 76 | 62 | |||
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | 90 or More Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 28 | 28 | 25 | |||
Total Other Loans [Member] | Other Loans [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 3 | 3 | 2 | |||
Loan receivables, 90 or more days delinquent and accruing | 0 | 0 | 0 | |||
Loan receivables, total non-accruing | 21 | 21 | 21 | |||
Total Other Loans [Member] | Other Loans [Member] | 30-89 Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | 0 | 0 | 1 | |||
Total Other Loans [Member] | Other Loans [Member] | 90 or More Days Delinquent [Member] | ||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||||
Loan receivables, past due | $ 3 | $ 3 | $ 1 | |||
[1] | Credit card loans that are 90 or more days delinquent and accruing interest include $38 million and $43 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014, respectively. | |||||
[2] | The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $8 million and $7 million for the three months ended September 30, 2015 and 2014, respectively, and $21 million and $20 million for the nine months ended September 30, 2015 and 2014, respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. This amount was estimated based on customers' current balances and most recent interest rates. | |||||
[3] | Personal loans that are 90 or more days delinquent and accruing interest include $3 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014. | |||||
[4] | Private student loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as troubled debt restructurings at September 30, 2015 and December 31, 2014, respectively. |
Loan Receivables (Schedule of N
Loan Receivables (Schedule of Net Charge-offs) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Charge Offs [Line Items] | ||||
Net charge-offs | $ 324 | $ 324 | $ 1,031 | $ 990 |
Excluding PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 324 | $ 324 | $ 1,031 | $ 990 |
Net charge-off rate (in percent) | 1.94% | 2.06% | 2.12% | 2.16% |
Including PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 324 | $ 324 | $ 1,031 | $ 990 |
Net charge-off rate (in percent) | 1.85% | 1.94% | 2.01% | 2.03% |
Credit Card Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 285 | $ 289 | $ 911 | $ 883 |
Credit Card Loans [Member] | Excluding PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 285 | $ 289 | $ 911 | $ 883 |
Net charge-off rate (in percent) | 2.04% | 2.16% | 2.24% | 2.27% |
Total Other Loans [Member] | Excluding PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 39 | $ 35 | $ 120 | $ 107 |
Net charge-off rate (in percent) | 1.44% | 1.50% | 1.51% | 1.58% |
Total Other Loans [Member] | Personal Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 26 | $ 23 | $ 81 | $ 66 |
Total Other Loans [Member] | Personal Loans [Member] | Excluding PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 26 | $ 23 | $ 81 | $ 66 |
Net charge-off rate (in percent) | 1.99% | 1.92% | 2.10% | 1.98% |
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | Excluding PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 13 | $ 12 | $ 39 | $ 40 |
Net charge-off rate (in percent) | 0.94% | 1.14% | 0.99% | 1.25% |
Total Other Loans [Member] | Other Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 0 | $ 0 | $ 0 | $ 1 |
Total Other Loans [Member] | Other Loans [Member] | Excluding PCI Loans [Member] | ||||
Charge Offs [Line Items] | ||||
Net charge-offs | $ 0 | $ 0 | $ 0 | $ 1 |
Net charge-off rate (in percent) | 0.00% | 0.60% | 0.00% | 0.88% |
Loan Receivables (Schedule of C
Loan Receivables (Schedule of Credit Risk Profile by FICO Score) (Details) | Sep. 30, 2015 | Dec. 31, 2014 | |
Credit Card Loans [Member] | FICO Score, 660 and Above [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
FICO scores as a percentage of class of loan receivables | 83.00% | 83.00% | |
Credit Card Loans [Member] | FICO Score, Less Than 660 Or No Score [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
FICO scores as a percentage of class of loan receivables | 17.00% | 17.00% | |
Total Other Loans [Member] | Personal Loans [Member] | FICO Score, 660 and Above [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
FICO scores as a percentage of class of loan receivables | 96.00% | 96.00% | |
Total Other Loans [Member] | Personal Loans [Member] | FICO Score, Less Than 660 Or No Score [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
FICO scores as a percentage of class of loan receivables | 4.00% | 4.00% | |
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | FICO Score, 660 and Above [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
FICO scores as a percentage of class of loan receivables | [1] | 96.00% | 96.00% |
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | FICO Score, Less Than 660 Or No Score [Member] | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
FICO scores as a percentage of class of loan receivables | [1] | 4.00% | 4.00% |
[1] | PCI loans are discussed under the heading "— Purchased Credit-Impaired Loans." |
Loan Receivables (Schedule of51
Loan Receivables (Schedule of Changes in the Allowance for Loan Losses) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||||
Allowance for Loan and Lease Losses [Roll Forward] | |||||||
Balance at beginning of period | $ 1,735 | $ 1,614 | $ 1,746 | $ 1,648 | |||
Provision for loan losses | 332 | 354 | 1,028 | 986 | |||
Charge-offs | (440) | (440) | (1,383) | (1,342) | |||
Recoveries | 116 | 116 | 352 | 352 | |||
Net charge-offs | (324) | (324) | (1,031) | (990) | |||
Balance at end of period | 1,743 | 1,644 | 1,743 | 1,644 | |||
Student Loans [Member] | |||||||
Allowance for Loan and Lease Losses [Roll Forward] | |||||||
Balance at beginning of period | [1] | 143 | 128 | 135 | [2] | 113 | |
Provision for loan losses | [1] | 0 | 16 | 34 | 59 | ||
Charge-offs | [1] | (15) | (14) | (45) | (44) | ||
Recoveries | [1] | 2 | 2 | 6 | 4 | ||
Net charge-offs | [1] | (13) | (12) | (39) | (40) | ||
Balance at end of period | [1] | 130 | [2] | 132 | 130 | [2] | 132 |
Credit Card Loans [Member] | |||||||
Allowance for Loan and Lease Losses [Roll Forward] | |||||||
Balance at beginning of period | 1,441 | 1,359 | 1,474 | 1,406 | |||
Provision for loan losses | 303 | 318 | 896 | 865 | |||
Charge-offs | (394) | (400) | (1,245) | (1,223) | |||
Recoveries | 109 | 111 | 334 | 340 | |||
Net charge-offs | (285) | (289) | (911) | (883) | |||
Balance at end of period | 1,459 | 1,388 | 1,459 | 1,388 | |||
Total Other Loans [Member] | Personal Loans [Member] | |||||||
Allowance for Loan and Lease Losses [Roll Forward] | |||||||
Balance at beginning of period | 131 | 109 | 120 | 112 | |||
Provision for loan losses | 30 | 22 | 96 | 62 | |||
Charge-offs | (31) | (26) | (93) | (74) | |||
Recoveries | 5 | 3 | 12 | 8 | |||
Net charge-offs | (26) | (23) | (81) | (66) | |||
Balance at end of period | 135 | 108 | 135 | 108 | |||
Total Other Loans [Member] | Other Loans [Member] | |||||||
Allowance for Loan and Lease Losses [Roll Forward] | |||||||
Balance at beginning of period | 20 | 18 | 17 | [3] | 17 | ||
Provision for loan losses | (1) | (2) | 2 | 0 | |||
Charge-offs | 0 | 0 | 0 | (1) | |||
Recoveries | 0 | 0 | 0 | 0 | |||
Net charge-offs | 0 | 0 | 0 | (1) | |||
Balance at end of period | $ 19 | [3] | $ 16 | $ 19 | [3] | $ 16 | |
[1] | Includes both PCI and non-PCI private student loans. | ||||||
[2] | Includes both PCI and non-PCI private student loans. | ||||||
[3] | Excludes mortgage loans held for sale. Certain other loans, including non-performing Diners Club licensee loans, are individually evaluated for impairment. |
Loan Receivables (Schedule of52
Loan Receivables (Schedule of Net Charge-offs of Interest and Fee Revenues on Loan Receivables) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Loans and Leases Receivable Disclosure [Abstract] | ||||
Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income) | $ 65 | $ 69 | $ 210 | $ 211 |
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income) | $ 16 | $ 16 | $ 53 | $ 50 |
Loan Receivables (Schedule of A
Loan Receivables (Schedule of Allowance for Loan Losses and Recorded Investment in its Loan Portfolio by Impairment Methodology) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20 | $ 1,521 | $ 1,525 | |||||||
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 194 | 193 | ||||||
Total allowance for loan losses | 1,743 | $ 1,735 | 1,746 | $ 1,644 | $ 1,614 | $ 1,648 | |||
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20 | 65,651 | 64,997 | |||||||
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 1,177 | 1,190 | ||||||
Total recorded investment | 70,077 | 69,847 | |||||||
Receivables Acquired with Deteriorated Credit Quality [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 28 | 28 | |||||||
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 3,249 | 3,660 | |||||||
Student Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total allowance for loan losses | [3] | 130 | [4] | 143 | 135 | [4] | 132 | 128 | 113 |
Total recorded investment | [4] | 8,769 | 8,510 | ||||||
Credit Card Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20 | 1,302 | 1,314 | |||||||
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 157 | 160 | ||||||
Total allowance for loan losses | 1,459 | 1,441 | 1,474 | 1,388 | 1,359 | 1,406 | |||
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20 | 54,647 | 55,091 | |||||||
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 1,008 | 1,037 | ||||||
Total recorded investment | 55,655 | 56,128 | |||||||
Unpaid principal balance of modified loans accounted for as troubled debt restructurings | 858 | 878 | |||||||
Credit Card Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 0 | 0 | |||||||
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 0 | 0 | |||||||
Total Other Loans [Member] | Personal Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20 | 130 | 114 | |||||||
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 5 | 6 | ||||||
Total allowance for loan losses | 135 | 131 | 120 | 108 | 109 | 112 | |||
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20 | 5,361 | 4,952 | |||||||
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 64 | 55 | ||||||
Total recorded investment | 5,425 | 5,007 | |||||||
Unpaid principal balance of modified loans accounted for as troubled debt restructurings | 64 | 54 | |||||||
Total Other Loans [Member] | Personal Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 0 | 0 | |||||||
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 0 | 0 | |||||||
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20 | 88 | 96 | |||||||
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 14 | 11 | ||||||
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20 | 5,475 | 4,812 | |||||||
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2] | 45 | 38 | ||||||
Unpaid principal balance of modified loans accounted for as troubled debt restructurings | 44 | 37 | |||||||
Total Other Loans [Member] | Other Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20 | [5] | 1 | 1 | ||||||
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2],[5] | 18 | 16 | ||||||
Total allowance for loan losses | 19 | [5] | $ 20 | 17 | [5] | $ 16 | $ 18 | $ 17 | |
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20 | [5] | 168 | 142 | ||||||
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35 | [1],[2],[5] | 60 | 60 | ||||||
Total recorded investment | [5] | 228 | 202 | ||||||
Total Other Loans [Member] | Other Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | [5] | 0 | 0 | ||||||
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | [5] | 0 | 0 | ||||||
PCI Student Loans [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Total allowance for loan losses | 28 | 28 | |||||||
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | [6] | 3,249 | 3,660 | ||||||
PCI Student Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | |||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||||||||
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | 28 | 28 | |||||||
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30 | $ 3,249 | $ 3,660 | |||||||
[1] | Loan receivables evaluated for impairment in accordance with Accounting Standards Codification ("ASC") 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. Other loans are individually evaluated for impairment and generally do not represent troubled debt restructurings. | ||||||||
[2] | The unpaid principal balance of credit card loans was $858 million and $878 million at September 30, 2015 and December 31, 2014, respectively. The unpaid principal balance of personal loans was $64 million and $54 million at September 30, 2015 and December 31, 2014, respectively. The unpaid principal balance of student loans was $44 million and $37 million at September 30, 2015 and December 31, 2014, respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses. | ||||||||
[3] | Includes both PCI and non-PCI private student loans. | ||||||||
[4] | Includes both PCI and non-PCI private student loans. | ||||||||
[5] | Excludes mortgage loans held for sale. Certain other loans, including non-performing Diners Club licensee loans, are individually evaluated for impairment. | ||||||||
[6] | Amounts include $1.7 billion and $2.0 billion of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at September 30, 2015 and December 31, 2014, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. |
Loan Receivables (Schedule of T
Loan Receivables (Schedule of Troubled Debt Restructurings) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Credit Card Loans [Member] | Modified Credit Card Loans [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Average recorded investment in loans | [1] | $ 263 | $ 248 | $ 258 | $ 251 |
Interest income recognized during period loans were impaired | [1],[2] | 12 | 11 | 35 | 34 |
Gross interest income that would have been recorded with original terms | [1],[3] | 0 | 1 | 2 | 3 |
Credit Card Loans [Member] | Internal Programs [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Average recorded investment in loans | 446 | 449 | 449 | 452 | |
Interest income recognized during period loans were impaired | [2] | 3 | 3 | 9 | 9 |
Gross interest income that would have been recorded with original terms | [3] | 16 | 15 | 46 | 46 |
Credit Card Loans [Member] | External Programs [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Average recorded investment in loans | 300 | 353 | 311 | 374 | |
Interest income recognized during period loans were impaired | [2] | 5 | 7 | 17 | 21 |
Gross interest income that would have been recorded with original terms | [3] | 2 | 4 | 8 | 10 |
Total Other Loans [Member] | Personal Loans [Member] | Internal And External Loan Modification Programs [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Average recorded investment in loans | 63 | 49 | 60 | 46 | |
Interest income recognized during period loans were impaired | [2] | 2 | 2 | 5 | 4 |
Gross interest income that would have been recorded with original terms | [3] | 1 | 0 | 2 | 1 |
Total Other Loans [Member] | Private Student Loans [Member] | Entity Loan Modification Program [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Average recorded investment in loans | 44 | 33 | 42 | 31 | |
Interest income recognized during period loans were impaired | [2] | $ 0 | $ 1 | $ 2 | $ 2 |
[1] | This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings, but are no longer enrolled in troubled debt restructuring program due to noncompliance with the terms of the modification or successful completion of a program. | ||||
[2] | The Company does not separately track interest income on loans in modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs. | ||||
[3] | The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs. |
Loan Receivables (Schedule of55
Loan Receivables (Schedule of Loans That Entered a Modification Program During the Period) (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($)accounts | Sep. 30, 2014USD ($)accounts | Sep. 30, 2015USD ($)accounts | Sep. 30, 2014USD ($)accounts | |
Credit Card Loans [Member] | Internal Programs [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts | 12,701 | 12,115 | 37,933 | 35,199 |
Accounts that entered a loan modification program during the period, balances | $ 80 | $ 80 | $ 244 | $ 232 |
Credit Card Loans [Member] | External Programs [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts | 7,818 | 8,203 | 22,731 | 24,458 |
Accounts that entered a loan modification program during the period, balances | $ 39 | $ 42 | $ 115 | $ 128 |
Total Other Loans [Member] | Personal Loans [Member] | Internal And External Loan Modification Programs [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts | 1,107 | 980 | 3,082 | 2,512 |
Accounts that entered a loan modification program during the period, balances | $ 13 | $ 12 | $ 37 | $ 30 |
Total Other Loans [Member] | Private Student Loans [Member] | Entity Loan Modification Program [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts | 307 | 393 | 1,067 | 1,045 |
Accounts that entered a loan modification program during the period, balances | $ 4 | $ 6 | $ 15 | $ 15 |
Loan Receivables (Schedule of56
Loan Receivables (Schedule of Troubled Debt Restructurings That Subsequently Defaulted) (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015USD ($)accounts | Sep. 30, 2014USD ($)accounts | Sep. 30, 2015USD ($)missed_paymentsaccounts | Sep. 30, 2014USD ($)accounts | ||
Financing Receivable, Modifications [Line Items] | |||||
Amount of missed payments after which a customer defaults from a modification program (in payments) | missed_payments | 2 | ||||
Credit Card Loans [Member] | Internal Programs [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts | [1],[2] | 2,466 | 2,488 | 8,665 | 7,282 |
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | [1],[2] | $ 15 | $ 15 | $ 53 | $ 44 |
Credit Card Loans [Member] | External Programs [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts | [1],[2] | 1,833 | 1,874 | 5,067 | 5,440 |
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | [1],[2] | $ 7 | $ 8 | $ 20 | $ 23 |
Total Other Loans [Member] | Personal Loans [Member] | Internal And External Loan Modification Programs [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts | [1] | 160 | 118 | 445 | 321 |
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | [1] | $ 2 | $ 2 | $ 5 | $ 4 |
Total Other Loans [Member] | Private Student Loans [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Delinquency days to default (in days) | 60 days | ||||
Total Other Loans [Member] | Private Student Loans [Member] | Entity Loan Modification Program [Member] | |||||
Financing Receivable, Modifications [Line Items] | |||||
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts | [3] | 243 | 286 | 827 | 820 |
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | [3] | $ 4 | $ 4 | $ 12 | $ 12 |
[1] | A customer defaults from a modification program after two consecutive missed payments. | ||||
[2] | The outstanding balance upon default is the loan balance at the end of the month prior to default. Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked in most cases. | ||||
[3] | Student loan defaults have been defined as loans that are 60 or more days delinquent. |
Loan Receivables (Schedule of57
Loan Receivables (Schedule of Changes in Accretable Yield for the Acquired Loans) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward] | ||||
Accretable yield, balance at beginning of period | $ 1,124 | $ 1,450 | $ 1,341 | $ 1,580 |
Accretion into interest income | (53) | (64) | (169) | (198) |
Other changes in expected cash flows | (68) | 0 | (169) | 4 |
Accretable yield, balance at end of period | $ 1,003 | $ 1,386 | $ 1,003 | $ 1,386 |
Loan Receivables (Schedule of I
Loan Receivables (Schedule of Initial Unpaid Principal Balance of Mortgage Loans Sold by Type) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Mortgage Loans on Real Estate [Line Items] | |||||
Initial unpaid principal balance of mortgage loans, amount | $ 467 | $ 782 | $ 2,635 | $ 1,911 | |
Initial unpaid principal balance of mortgage loans, percentage (in percent) | 100.00% | 100.00% | 100.00% | 100.00% | |
Conforming [Member] | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Initial unpaid principal balance of mortgage loans, amount | [1] | $ 369 | $ 704 | $ 2,307 | $ 1,723 |
Initial unpaid principal balance of mortgage loans, percentage (in percent) | [1] | 79.01% | 90.03% | 87.55% | 90.16% |
FHA [Member] | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Initial unpaid principal balance of mortgage loans, amount | [2] | $ 89 | $ 64 | $ 307 | $ 161 |
Initial unpaid principal balance of mortgage loans, percentage (in percent) | [2] | 19.06% | 8.18% | 11.65% | 8.42% |
Jumbo [Member] | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Initial unpaid principal balance of mortgage loans, amount | [3] | $ 0 | $ 11 | $ 6 | $ 24 |
Initial unpaid principal balance of mortgage loans, percentage (in percent) | [3] | 0.00% | 1.41% | 0.23% | 1.26% |
VA [Member] | |||||
Mortgage Loans on Real Estate [Line Items] | |||||
Initial unpaid principal balance of mortgage loans, amount | [4] | $ 9 | $ 3 | $ 15 | $ 3 |
Initial unpaid principal balance of mortgage loans, percentage (in percent) | [4] | 1.93% | 0.38% | 0.57% | 0.16% |
[1] | Conforming loans are loans that conform to Government-Sponsored Enterprises guidelines. | ||||
[2] | FHA loans are loans that are insured by the Federal Housing Administration and are typically made to borrowers with low down payments. The initial loan amount must be within certain limits. | ||||
[3] | Jumbo loans are loans with an initial amount larger than the limits set by a Government-Sponsored Enterprise. | ||||
[4] | VA loans are loans that are insured by and conform to the Department of Veteran Affairs guidelines. |
Credit Card and Student Loan 59
Credit Card and Student Loan Securitization Activities (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2015classestrusts | |
Credit Card Securitization Trusts [Member] | |
Variable Interest Entity [Line Items] | |
Excess spread rate minimum | 0.00% |
Excess of the total investors' interests | 7.00% |
Student Loan Securitization Trusts [Member] | |
Variable Interest Entity [Line Items] | |
Number of trusts issuing securities (in trusts) | trusts | 3 |
Discover Card Execution Note Trust [Member] | Credit Card Securitization Trusts [Member] | |
Variable Interest Entity [Line Items] | |
Number of classes of securities in debt structure (in classes) | 4 |
Average excess spread rate calculation period (in months) | 3 months |
Excess spread rate for funding requirement trigger | 4.50% |
Excess spread rate for increasing funding requirements | 0.00% |
Credit Card and Student Loan 60
Credit Card and Student Loan Securitization Activities (Schedule of Restricted Credit Card Securitized Assets) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Variable Interest Entity [Line Items] | |||||||
Restricted cash | $ 98 | $ 106 | |||||
Allowance for loan losses allocated to securitized loan receivables | (1,743) | $ (1,735) | (1,746) | $ (1,644) | $ (1,614) | $ (1,648) | |
Other | 2,518 | 2,461 | |||||
Variable Interest Entity, Primary Beneficiary [Member] | |||||||
Variable Interest Entity [Line Items] | |||||||
Restricted cash | 98 | 102 | |||||
Allowance for loan losses allocated to securitized loan receivables | (776) | (833) | |||||
Other | 34 | 37 | |||||
Variable Interest Entity, Primary Beneficiary [Member] | Credit Card Securitization Trusts [Member] | |||||||
Variable Interest Entity [Line Items] | |||||||
Restricted cash | 17 | 16 | |||||
Investors’ interests held by third-party investors | 14,650 | 15,950 | |||||
Investors’ interests held by wholly-owned subsidiaries of Discover Bank | 5,566 | 5,789 | |||||
Seller’s interest | 8,015 | 8,596 | |||||
Loan receivables | [1] | 28,231 | 30,335 | ||||
Allowance for loan losses allocated to securitized loan receivables | [1] | (748) | (805) | ||||
Net loan receivables | 27,483 | 29,530 | |||||
Other | 34 | 37 | |||||
Carrying value of assets of consolidated variable interest entities | $ 27,534 | $ 29,583 | |||||
[1] | The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP. |
Credit Card and Student Loan 61
Credit Card and Student Loan Securitization Activities (Schedule of Investors' Interests and Related Excess Spreads) (Details) - Discover Card Execution Note Trust [Member] $ in Millions | 9 Months Ended | |
Sep. 30, 2015USD ($)series | ||
Variable Interest Entity [Line Items] | ||
Investors' interests | $ 20,216 | [1] |
Number of series outstanding (in series) | series | 37 | |
Three month rolling average excess spread (in percent) | 13.73% | |
[1] | Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank. |
Credit Card and Student Loan 62
Credit Card and Student Loan Securitization Activities (Schedule of Restricted Student Loan Securitized Assets) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Variable Interest Entity [Line Items] | |||||||
Restricted cash | $ 98 | $ 106 | |||||
Allowance for loan losses allocated to securitized loan receivables | (1,743) | $ (1,735) | (1,746) | $ (1,644) | $ (1,614) | $ (1,648) | |
Variable Interest Entity, Primary Beneficiary [Member] | |||||||
Variable Interest Entity [Line Items] | |||||||
Restricted cash | 98 | 102 | |||||
Allowance for loan losses allocated to securitized loan receivables | (776) | (833) | |||||
Variable Interest Entity, Primary Beneficiary [Member] | Student Loan Securitization Trusts [Member] | |||||||
Variable Interest Entity [Line Items] | |||||||
Restricted cash | 81 | 86 | |||||
Purchased credit-impaired loans | [1] | 1,749 | 1,969 | ||||
Allowance for loan losses allocated to securitized loan receivables | [1] | (28) | (28) | ||||
Net student loan receivables | 1,721 | 1,941 | |||||
Carrying value of assets of consolidated variable interest entities | $ 1,802 | $ 2,027 | |||||
[1] | The Company maintains its allowance for loan losses on PCI loans sufficient to absorb probable decreases in cash flows that were previously expected. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company's balance sheet in accordance with GAAP. |
Deposits (Narrative) (Details)
Deposits (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2015channels | |
Deposits [Abstract] | |
Deposits source channels (in number of channels) | 2 |
Deposits (Schedule of Interest
Deposits (Schedule of Interest Bearing Deposit Accounts) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Deposits [Abstract] | |||
Certificates of deposit in amounts less than $100,000 | $ 20,692 | $ 21,502 | |
Certificates of deposit in amounts $100,000 or greater | [1] | 5,271 | 5,634 |
Savings deposits, including money market deposit accounts | 20,283 | 18,656 | |
Total interest-bearing deposits | 46,246 | 45,792 | |
Certificates of deposit greater than $250,000 | $ 1,100 | $ 1,200 | |
[1] | Includes $1.1 billion and $1.2 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of September 30, 2015 and December 31, 2014, respectively. |
Deposits (Schedule of $100,000
Deposits (Schedule of $100,000 or More Certificates of Deposit Maturities) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Deposits [Abstract] | |||
Three months or less | $ 885 | ||
Over three months through six months | 743 | ||
Over six months through twelve months | 1,156 | ||
Over twelve months | 2,487 | ||
Total | [1] | $ 5,271 | $ 5,634 |
[1] | Includes $1.1 billion and $1.2 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of September 30, 2015 and December 31, 2014, respectively. |
Deposits (Schedule of Certifica
Deposits (Schedule of Certificates of Deposit Maturities) (Details) $ in Millions | Sep. 30, 2015USD ($) |
Deposits [Abstract] | |
2,015 | $ 2,710 |
2,016 | 9,636 |
2,017 | 5,101 |
2,018 | 3,129 |
2,019 | 1,830 |
Thereafter | 3,557 |
Total | $ 25,963 |
Long-Term Borrowings (Narrative
Long-Term Borrowings (Narrative) (Details) - Discover Card Master Trust I and Discover Card Execution Note Trust [Member] - Secured Debt [Member] - USD ($) $ in Millions | Oct. 15, 2015 | Sep. 30, 2015 |
Debt Instrument [Line Items] | ||
Total commitment of secured credit facilities | $ 7,800 | |
Total used commitment of secured credit facilities | $ 0 | |
Subsequent Event [Member] | ||
Debt Instrument [Line Items] | ||
Total terminated commitment of secured credit facilities | $ 1,000 |
Long-Term Borrowings (Schedule
Long-Term Borrowings (Schedule of Long-Term Borrowings and Weighted Average Interest Rates) (Details) - USD ($) $ in Millions | 9 Months Ended | |||
Sep. 30, 2015 | Dec. 31, 2014 | |||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | $ 23,800 | $ 22,544 | ||
Variable Interest Entity, Primary Beneficiary [Member] | ||||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | 15,866 | 17,395 | ||
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | ||||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | $ 14,650 | 15,950 | ||
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Fixed-Rate Asset-Backed Securities [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate minimum | 0.69% | |||
Interest rate maximum | 5.65% | |||
Weighted-average interest rate | 1.98% | |||
Long-term borrowings (in dollars) | [1] | $ 7,950 | 8,950 | |
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating-Rate Asset-Backed Securities [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate minimum | 0.39% | |||
Interest rate maximum | 0.66% | |||
Weighted-average interest rate | 0.55% | |||
Long-term borrowings (in dollars) | [2],[3] | $ 6,700 | 7,000 | |
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus Various Basis Points [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate terms | 1-month LIBOR + 18 to 45 basis points | |||
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus Various Basis Points [Member] | Minimum [Member] | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 0.18% | |||
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus Various Basis Points [Member] | Maximum [Member] | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 0.45% | |||
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus 20 Basis Points [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate terms | 3-month LIBOR + 20 basis points | |||
Basis spread on variable rate | 0.20% | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | ||||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | $ 1,216 | 1,445 | ||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating-Rate Asset-Backed Securities [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate minimum | 0.46% | |||
Interest rate maximum | 4.25% | |||
Weighted-average interest rate | 1.99% | |||
Long-term borrowings (in dollars) | [5],[6],[7] | $ 1,216 | [4] | 1,445 |
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus Various Basis Points [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate terms | 3-month LIBOR + 17 to 45 basis points | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus Various Basis Points [Member] | Minimum [Member] | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 0.17% | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus Various Basis Points [Member] | Maximum [Member] | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 0.45% | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities Prime Rate Plus 75 to 100 Basis Points [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate terms | Prime rate + 75 to 100 basis points | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities Prime Rate Plus 75 to 100 Basis Points [Member] | Minimum [Member] | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 0.75% | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities Prime Rate Plus 75 to 100 Basis Points [Member] | Maximum [Member] | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 1.00% | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus 350 Basis Points [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate terms | 1-month LIBOR + 350 basis points | |||
Basis spread on variable rate | 3.50% | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Senior Notes Maturing 2031 [Member] | ||||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | $ 321 | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Senior and Subordinated Notes Maturing 2036 [Member] | ||||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | 699 | |||
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Senior Notes Maturing 2042 [Member] | ||||
Debt Instrument [Line Items] | ||||
Long-term borrowings (in dollars) | $ 196 | |||
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Senior Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate minimum | 3.75% | |||
Interest rate maximum | 10.25% | |||
Weighted-average interest rate | 4.75% | |||
Long-term borrowings (in dollars) | [1] | $ 2,075 | 1,558 | |
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Retail Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 4.05% | |||
Weighted-average interest rate | 4.05% | |||
Long-term borrowings (in dollars) | $ 10 | 0 | ||
Senior Notes [Member] | Discover Bank [Member] | Fixed-Rate Senior Bank Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate minimum | 2.00% | |||
Interest rate maximum | 4.25% | |||
Weighted-average interest rate | 3.16% | |||
Long-term borrowings (in dollars) | [1] | $ 5,151 | 2,892 | |
Subordinated Debt [Member] | Discover Bank [Member] | Fixed-Rate Subordinated Bank Notes [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate minimum | 7.00% | |||
Interest rate maximum | 8.70% | |||
Weighted-average interest rate | 7.49% | |||
Long-term borrowings (in dollars) | $ 698 | 698 | ||
Capital Lease Obligations [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest rate | 4.51% | |||
Weighted-average interest rate | 4.51% | |||
Long-term borrowings (in dollars) | $ 0 | [8] | $ 1 | |
[1] | The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate (“LIBOR”). Use of these interest rate swaps impacts carrying value of the debt. | |||
[2] | Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 18 to 45 basis points and 3-month LIBOR + 20 basis points. | |||
[3] | The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 15: Derivatives and Hedging Activities. | |||
[4] | Includes $321 million of senior notes maturing in 2031, $699 million of senior and subordinated notes maturing in 2036 and $196 million of senior notes maturing in 2042 as of September 30, 2015. | |||
[5] | Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates. | |||
[6] | SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points, Prime rate + 75 to 100 basis points and 1-month LIBOR + 350 basis points. | |||
[7] | The Company acquired an interest rate swap related to the securitized debt assumed in the SLC transaction. The swap does not qualify for hedge accounting and has no impact on debt carrying value. See Note 15: Derivatives and Hedging Activities. | |||
[8] | As of September 30, 2015, the outstanding amount of capital lease obligations was not material. |
Long-Term Borrowings (Schedul69
Long-Term Borrowings (Schedule of Long-Term Borrowings Maturities) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
2,015 | $ 250 | |
2,016 | 3,050 | |
2,017 | 5,106 | |
2,018 | 4,609 | |
2,019 | 3,278 | |
Thereafter | 7,507 | |
Total | $ 23,800 | $ 22,544 |
Accumulated Other Comprehensi70
Accumulated Other Comprehensive Income (Schedule of Changes in Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax | $ (160) | $ (72) | $ (138) | $ (68) | |
Net change in accumulated other comprehensive income (loss), net of tax | (20) | 2 | (42) | (2) | |
Accumulated other comprehensive income (loss), balance at end of period, net of tax | (180) | (70) | (180) | (70) | |
Unrealized Gain (Loss) on Available-for-Sale Investment Securities, Net of Tax [Member] | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax | 13 | 29 | 23 | 19 | |
Net change in accumulated other comprehensive income (loss), net of tax | 3 | (9) | (7) | 1 | |
Accumulated other comprehensive income (loss), balance at end of period, net of tax | 16 | 20 | 16 | 20 | |
(Loss) Gain on Cash Flow Hedges, Net of Tax [Member] | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax | (19) | (1) | (7) | 13 | |
Net change in accumulated other comprehensive income (loss), net of tax | (22) | 12 | (34) | (2) | |
Accumulated other comprehensive income (loss), balance at end of period, net of tax | (41) | 11 | (41) | 11 | |
Foreign Currency Translation Adjustments, Net of Tax [Member] | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax | [1] | 0 | 1 | 0 | 1 |
Net change in accumulated other comprehensive income (loss), net of tax | [1] | (1) | (1) | (1) | (1) |
Accumulated other comprehensive income (loss), balance at end of period, net of tax | [1] | (1) | 0 | (1) | 0 |
Pension Plan Loss, Net of Tax [Member] | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax | (154) | (101) | (154) | (101) | |
Net change in accumulated other comprehensive income (loss), net of tax | 0 | 0 | 0 | 0 | |
Accumulated other comprehensive income (loss), balance at end of period, net of tax | $ (154) | $ (101) | $ (154) | $ (101) | |
[1] | Includes unrealized gains/losses on hedge of net investment in foreign subsidiary, net of tax expense/benefit and net gains/losses on foreign currency translation adjustments. |
Accumulated Other Comprehensi71
Accumulated Other Comprehensive Income (Schedule of Other Comprehensive Income Before Reclassifications and Amounts Reclassified from AOCI) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||
Available-for-sale investment securities, net unrealized holding gain (loss) arising during the period, before tax | $ 4 | $ (15) | $ (4) | $ 5 |
Available-for-sale investment securities, net unrealized holding gain (loss) arising during the period, tax benefit (expense) | (1) | 6 | 2 | (2) |
Available-for-sale investment securities, net unrealized holding gain (loss) arising during the period, net of tax | 3 | (9) | (2) | 3 |
Available-for-sale investment securities, amounts reclassified from AOCI, before tax | (8) | (4) | ||
Available-for-sale investment securities, amounts reclassified from AOCI, tax benefit (expense) | 3 | 2 | ||
Available-for-sale investment securities, amounts reclassified from AOCI, net of tax | (5) | (2) | ||
Available-for-sale investment securities, net change, before tax | 4 | (15) | (12) | 1 |
Available-for-sale investment securities, net change, tax benefit (expense) | (1) | 6 | 5 | 0 |
Available-for-sale investment securities, net change, net of tax | 3 | (9) | (7) | 1 |
Cash flow hedges, net unrealized gain (loss) arising during the period, before tax | (49) | 10 | (90) | (28) |
Cash flow hedges, net unrealized gain (loss) arising during the period, tax benefit (expense) | 19 | (4) | 34 | 10 |
Cash flow hedges, net unrealized gain (loss) arising during the period, net of tax | (30) | 6 | (56) | (18) |
Cash flow hedges, amounts reclassified from AOCI, before tax | 12 | 11 | 35 | 26 |
Cash flow hedges, amounts reclassified from AOCI, tax benefit (expense) | (4) | (5) | (13) | (10) |
Cash flow hedges, amounts reclassified from AOCI, net of tax | 8 | 6 | 22 | 16 |
Cash flow hedges, net change, before tax | (37) | 21 | (55) | (2) |
Cash flow hedges, net change, tax benefit (expense) | 15 | (9) | 21 | 0 |
Cash flow hedges, net change, net of tax | (22) | 12 | (34) | (2) |
Foreign currency translation adjustments, net unrealized loss arising during the period, before tax | (1) | (1) | (1) | (1) |
Foreign currency translation adjustments, net unrealized loss arising during the period, tax benefit (expense) | 0 | 0 | 0 | 0 |
Foreign currency translation adjustments, net unrealized loss arising during the period, net of tax | (1) | (1) | (1) | (1) |
Foreign currency translation adjustments, net change, before tax | (1) | (1) | (1) | (1) |
Foreign currency translation adjustments, net change, tax benefit (expense) | 0 | 0 | 0 | 0 |
Foreign currency translation adjustments, net change, net of tax | $ (1) | $ (1) | $ (1) | $ (1) |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2015USD ($) | Sep. 30, 2015USD ($) | |
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items] | ||
Change in income tax expense | $ (3) | $ (100) |
Change in effective income tax rate (in percent) | 1.00% | 0.60% |
Period within which resolution of tax appeal is reasonably possible (in months) | 12 months | |
Settlement with Taxing Authority [Member] | Minimum [Member] | ||
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items] | ||
Minimum reasonably possible reduction in the amount of unrecognized tax benefits | $ 100 | $ 100 |
Settlement with Taxing Authority [Member] | Maximum [Member] | ||
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items] | ||
Minimum reasonably possible reduction in the amount of unrecognized tax benefits | $ 350 | $ 350 |
Income Taxes (Schedule of Effec
Income Taxes (Schedule of Effective Income Tax Rate Calculation) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ||||
Income before income tax expense | $ 974 | $ 1,009 | $ 2,824 | $ 3,046 |
Income tax expense | $ 362 | $ 365 | $ 1,027 | $ 1,127 |
Effective income tax rate (in percent) | 37.20% | 36.20% | 36.40% | 37.00% |
Earnings Per Share (Schedule of
Earnings Per Share (Schedule of Basic and Diluted EPS ) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Numerator: | ||||
Net income | $ 612 | $ 644 | $ 1,797 | $ 1,919 |
Preferred stock dividends | (9) | (9) | (28) | (28) |
Net income available to common stockholders | 603 | 635 | 1,769 | 1,891 |
Income allocated to participating securities | (4) | (5) | (11) | (13) |
Net income allocated to common stockholders | 599 | 630 | 1,758 | 1,878 |
Income allocated to participating securities, diluted | (4) | (5) | (11) | (13) |
Net income allocated to common stockholders, diluted | $ 599 | $ 630 | $ 1,758 | $ 1,878 |
Denominator: | ||||
Weighted-average shares of common stock outstanding (in shares) | 433 | 460 | 440 | 466 |
Effect of dilutive common stock equivalents (in shares) | 1 | 1 | 1 | 1 |
Weighted-average shares of common stock outstanding and common stock equivalents (in shares) | 434 | 461 | 441 | 467 |
Basic earnings per common share (in dollars per share) | $ 1.38 | $ 1.37 | $ 3.99 | $ 4.03 |
Diluted earnings per common share (in dollars per share) | $ 1.38 | $ 1.37 | $ 3.98 | $ 4.02 |
Capital Adequacy (Narrative) (D
Capital Adequacy (Narrative) (Details) | Sep. 30, 2015 |
Regulatory Capital Requirements [Abstract] | |
Basel III minimum total capital ratio requirement | 8.00% |
Basel III minimum tier 1 capital ratio requirement | 6.00% |
Basel III minimum leverage ratio requirement | 4.00% |
Basel III minimum CET1 ratio requirement | 4.50% |
Capital Adequacy (Schedule of M
Capital Adequacy (Schedule of Minimum and Well-Capitalized Requirements) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Compliance with Regulatory Capital Requirements [Line Items] | |||
Total capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | 8.00% | ||
Tier I capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | 6.00% | ||
Tier I capital to average assets, minimum capital requirements, ratio (in percent) | 4.00% | ||
CET1 capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | 4.50% | ||
Parent Company [Member] | |||
Compliance with Regulatory Capital Requirements [Line Items] | |||
Total capital to risk-weighted assets, actual amount | [1] | $ 12,546 | $ 12,418 |
Total capital to risk-weighted assets, actual ratio (in percent) | [1] | 17.10% | 17.00% |
Total capital to risk-weighted assets, minimum capital requirements, amount | [1] | $ 5,882 | $ 5,831 |
Total capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1] | 8.00% | 8.00% |
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 7,353 | $ 7,289 |
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 10.00% | 10.00% |
Tier I capital to risk-weighted assets, actual amount | [1] | $ 11,172 | $ 10,839 |
Tier I capital to risk-weighted assets, actual ratio (in percent) | [1] | 15.20% | 14.90% |
Tier I capital to risk-weighted assets, minimum capital requirements, amount | [1] | $ 4,412 | $ 2,916 |
Tier I capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1] | 6.00% | 4.00% |
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 5,882 | $ 4,373 |
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 8.00% | 6.00% |
Tier I capital to average assets, actual amount | [1] | $ 11,172 | $ 10,839 |
Tier I capital to average assets, actual ratio (in percent) | [1] | 13.10% | 13.20% |
Tier I capital to average assets, minimum capital requirements, amount | [1] | $ 3,406 | $ 3,288 |
Tier I capital to average assets, minimum capital requirements, ratio (in percent) | [1] | 4.00% | 4.00% |
Tier I capital to average assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 4,257 | $ 4,111 |
Tier I capital to average assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 5.00% | 5.00% |
Parent Company [Member] | Transition [Member] | |||
Compliance with Regulatory Capital Requirements [Line Items] | |||
CET1 capital to risk-weighted assets, actual amount | [1] | $ 10,612 | |
CET1 capital to risk-weighted assets, actual ratio (in percent) | [1] | 14.40% | |
CET1 capital to risk-weighted assets, minimum capital requirements, amount | [1] | $ 3,309 | |
CET1 capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1] | 4.50% | |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 4,779 | |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 6.50% | |
Parent Company [Member] | Fully Phased In [Member] | |||
Compliance with Regulatory Capital Requirements [Line Items] | |||
CET1 capital to risk-weighted assets, actual amount | [1],[2] | $ 10,530 | $ 10,305 |
CET1 capital to risk-weighted assets, actual ratio (in percent) | [1],[2] | 14.30% | 14.10% |
CET1 capital to risk-weighted assets, minimum capital requirements, amount | [1],[2] | $ 3,304 | $ 3,299 |
CET1 capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1],[2] | 4.50% | 4.50% |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1],[2] | $ 4,773 | $ 4,765 |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1],[2] | 6.50% | 6.50% |
Discover Bank [Member] | |||
Compliance with Regulatory Capital Requirements [Line Items] | |||
Total capital to risk-weighted assets, actual amount | [1] | $ 11,926 | $ 11,040 |
Total capital to risk-weighted assets, actual ratio (in percent) | [1] | 16.40% | 15.30% |
Total capital to risk-weighted assets, minimum capital requirements, amount | [1] | $ 5,816 | $ 5,767 |
Total capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1] | 8.00% | 8.00% |
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 7,270 | $ 7,209 |
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 10.00% | 10.00% |
Tier I capital to risk-weighted assets, actual amount | [1] | $ 9,949 | $ 9,470 |
Tier I capital to risk-weighted assets, actual ratio (in percent) | [1] | 13.70% | 13.10% |
Tier I capital to risk-weighted assets, minimum capital requirements, amount | [1] | $ 4,362 | $ 2,884 |
Tier I capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1] | 6.00% | 4.00% |
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 5,816 | $ 4,326 |
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 8.00% | 6.00% |
Tier I capital to average assets, actual amount | [1] | $ 9,949 | $ 9,470 |
Tier I capital to average assets, actual ratio (in percent) | [1] | 11.80% | 11.70% |
Tier I capital to average assets, minimum capital requirements, amount | [1] | $ 3,365 | $ 3,252 |
Tier I capital to average assets, minimum capital requirements, ratio (in percent) | [1] | 4.00% | 4.00% |
Tier I capital to average assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 4,207 | $ 4,066 |
Tier I capital to average assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 5.00% | 5.00% |
Discover Bank [Member] | Transition [Member] | |||
Compliance with Regulatory Capital Requirements [Line Items] | |||
CET1 capital to risk-weighted assets, actual amount | [1] | $ 9,949 | |
CET1 capital to risk-weighted assets, actual ratio (in percent) | [1] | 13.70% | |
CET1 capital to risk-weighted assets, minimum capital requirements, amount | [1] | $ 3,272 | |
CET1 capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1] | 4.50% | |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1] | $ 4,726 | |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1] | 6.50% | |
Discover Bank [Member] | Fully Phased In [Member] | |||
Compliance with Regulatory Capital Requirements [Line Items] | |||
CET1 capital to risk-weighted assets, actual amount | [1],[2] | $ 9,945 | |
CET1 capital to risk-weighted assets, actual ratio (in percent) | [1],[2] | 13.70% | |
CET1 capital to risk-weighted assets, minimum capital requirements, amount | [1],[2] | $ 3,271 | |
CET1 capital to risk-weighted assets, minimum capital requirements, ratio (in percent) | [1],[2] | 4.50% | |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount | [1],[2] | $ 4,725 | |
CET1 capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent) | [1],[2] | 6.50% | |
[1] | As of January 1, 2015, actual capital amounts and ratios are calculated under Basel III rules subject to transition provisions. The Company reported under Basel I at December 31, 2014. | ||
[2] | CET1 (Basel III fully phased-in) is calculated using Basel III fully phased-in CET1 capital, a non-GAAP measure. The Company believes that the CET1 capital ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of CET1 capital to risk-weighted assets calculated under fully phased-in Basel III rules to CET1 capital and risk-weighted assets calculated under Basel III transition rules see "Management's Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources — Capital". |
Commitments, Contingencies an77
Commitments, Contingencies and Guarantees (Narrative) (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Commitments, Contingencies and Guarantees [Line Items] | |
Period for disabling a counterparty settlement | 1 month |
ATM Guarantee [Member] | Citishare Network Guarantee [Member] | |
Commitments, Contingencies and Guarantees [Line Items] | |
Maximum potential future payment | $ 15 |
Commitments to Extend Credit [Member] | |
Commitments, Contingencies and Guarantees [Line Items] | |
Unused commitments to extend credit for loans | $ 180,300 |
Commitments, Contingencies an78
Commitments, Contingencies and Guarantees (Schedule of Lease Commitments) (Details) $ in Millions | Sep. 30, 2015USD ($) |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
2,015 | $ 4 |
2,016 | 15 |
2,017 | 14 |
2,018 | 12 |
2,019 | 10 |
Thereafter | 45 |
Total minimum lease payments | $ 100 |
Commitments, Contingencies an79
Commitments, Contingencies and Guarantees (Schedule of Maximum Potential Counterparty Exposures Related to Settlement Guarantees) (Details) $ in Millions | Sep. 30, 2015USD ($) |
Merchant Guarantee [Member] | Diners Club [Member] | |
Guarantor Obligations [Line Items] | |
Maximum potential counterparty exposures to settlement guarantees | $ 112 |
ATM Guarantee [Member] | PULSE [Member] | |
Guarantor Obligations [Line Items] | |
Maximum potential counterparty exposures to settlement guarantees | $ 1 |
Commitments, Contingencies an80
Commitments, Contingencies and Guarantees (Schedule of Merchant Chargeback Guarantee) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Merchant Chargebacks [Member] | |||||
Loss Contingencies [Line Items] | |||||
Aggregate sales transaction volume | [1] | $ 33,761 | $ 31,963 | $ 97,058 | $ 92,262 |
[1] | Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume. |
Commitments, Contingencies an81
Commitments, Contingencies and Guarantees (Schedule of Settlement Withholdings and Escrow Deposits) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Commitments Contingencies and Guarantees [Abstract] | ||
Settlement withholdings and escrow deposits | $ 9 | $ 16 |
Litigation and Regulatory Mat82
Litigation and Regulatory Matters (Narrative) (Details) | Jul. 22, 2015USD ($) | Sep. 30, 2015USD ($)patents | Jul. 09, 2015USD ($) |
Loss Contingencies [Line Items] | |||
Litigation expense | $ 22,000,000 | ||
Number of infringed patents (in number of patents) | patents | 3 | ||
TCPA statutory damages for each violation | $ 500 | ||
TCPA statutory damages for each willful violation | $ 1,500 | ||
Unfavorable Regulatory Action [Member] | CFPB Consent Order [Member] | |||
Loss Contingencies [Line Items] | |||
Amount of redress for CFPB consent order | $ 16,000,000 | ||
Amount of civil money penalty for CFPB consent order | $ 2,500,000 | ||
Pending and Threatened Litigation [Member] | |||
Loss Contingencies [Line Items] | |||
Aggregate range of reasonably possible losses | $ 150,000,000 |
Fair Value Measurements and D83
Fair Value Measurements and Disclosures (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Aggregate unpaid principal balance of loans held for sale, fair value option | $ 1 | $ 1 | $ 117 | ||
Fair value of loans held for sale, fair value option | 1 | 1 | $ 122 | ||
Other Income [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Loss from fair value adjustments on loans held for sale | 5 | $ 10 | 17 | $ 13 | |
Residential Mortgage-Backed Securities - Agency [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Available for sale securities, par value | $ 1,200 | $ 1,200 | |||
Available for sale securities, weighted average coupon rate (in percent) | 2.81% | 2.81% | |||
Available for sale securities, weighted average remaining maturity (in years) | 3 years | ||||
Fair Value, Measurements, Recurring [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Asset transfers from level 1 to level 2 within the fair value hierarchy | $ 0 | 0 | $ 0 | 0 | |
Asset transfers from level 2 to level 1 within the fair value hierarchy | 0 | 0 | 0 | 0 | |
Liability transfers from level 1 to level 2 within the fair value hierarchy | 0 | 0 | 0 | 0 | |
Liability transfers from level 2 to level 1 within the fair value hierarchy | $ 0 | $ 0 | $ 0 | $ 0 |
Fair Value Measurements and D84
Fair Value Measurements and Disclosures (Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Mortgage loans held for sale, fair value | $ 1 | $ 122 |
Fair Value, Measurements, Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 3,178 | 3,847 |
Mortgage loans held for sale, fair value | 1 | 122 |
Derivative financial instruments, assets, fair value | 46 | 43 |
Derivative financial instruments, liabilities, fair value | 69 | 23 |
Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 7 |
Fair Value, Measurements, Recurring [Member] | Forward Delivery Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 1 |
Derivative financial instruments, liabilities, fair value | 0 | 3 |
Fair Value, Measurements, Recurring [Member] | Other Derivative Financial Instruments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 46 | 35 |
Derivative financial instruments, liabilities, fair value | 69 | 20 |
Fair Value, Measurements, Recurring [Member] | U.S. Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 1,281 | 1,329 |
Fair Value, Measurements, Recurring [Member] | U.S. Government Agency Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 622 | 1,033 |
Fair Value, Measurements, Recurring [Member] | Residential Mortgage-Backed Securities - Agency [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 1,275 | 1,485 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 1,903 | 2,362 |
Mortgage loans held for sale, fair value | 0 | 0 |
Derivative financial instruments, assets, fair value | 0 | 0 |
Derivative financial instruments, liabilities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Interest Rate Lock Commitments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Forward Delivery Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 0 |
Derivative financial instruments, liabilities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Other Derivative Financial Instruments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 0 |
Derivative financial instruments, liabilities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | U.S. Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 1,281 | 1,329 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | U.S. Government Agency Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 622 | 1,033 |
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Residential Mortgage-Backed Securities - Agency [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 1,275 | 1,485 |
Mortgage loans held for sale, fair value | 0 | 122 |
Derivative financial instruments, assets, fair value | 46 | 36 |
Derivative financial instruments, liabilities, fair value | 69 | 23 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Interest Rate Lock Commitments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Forward Delivery Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 1 |
Derivative financial instruments, liabilities, fair value | 0 | 3 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Other Derivative Financial Instruments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 46 | 35 |
Derivative financial instruments, liabilities, fair value | 69 | 20 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | U.S. Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | U.S. Government Agency Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Residential Mortgage-Backed Securities - Agency [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 1,275 | 1,485 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 0 | 0 |
Mortgage loans held for sale, fair value | 1 | 0 |
Derivative financial instruments, assets, fair value | 0 | 7 |
Derivative financial instruments, liabilities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Interest Rate Lock Commitments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 7 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Forward Delivery Contracts [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 0 |
Derivative financial instruments, liabilities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Other Derivative Financial Instruments [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative financial instruments, assets, fair value | 0 | 0 |
Derivative financial instruments, liabilities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | U.S. Treasury Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | U.S. Government Agency Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | 0 | 0 |
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Residential Mortgage-Backed Securities - Agency [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale investment securities, fair value | $ 0 | $ 0 |
Fair Value Measurements and D85
Fair Value Measurements and Disclosures (Schedule of Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Interest Rate Lock Commitments [Member] | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||||
Level 3 assets and liabilities, balance at beginning of period | $ 5 | $ 8 | $ 7 | $ 4 |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Total net gains included in earnings | 3 | 18 | 71 | 61 |
Purchases | 0 | 0 | 0 | 0 |
Sales | 0 | 0 | 0 | 0 |
Settlements | 1 | 2 | 7 | 4 |
Transfers of IRLCs to closed loans | (9) | (22) | (85) | (63) |
Level 3 assets and liabilities, balance at end of period | 0 | 6 | 0 | 6 |
Forward Delivery Contracts [Member] | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||||
Level 3 assets and liabilities, balance at beginning of period | 0 | 0 | ||
Transfers into Level 3 | 0 | 0 | ||
Transfers out of Level 3 | (1) | (1) | ||
Total net gains included in earnings | 1 | 1 | ||
Purchases | 0 | 0 | ||
Sales | 0 | 0 | ||
Settlements | 0 | 0 | ||
Transfers of IRLCs to closed loans | 0 | 0 | ||
Level 3 assets and liabilities, balance at end of period | 0 | 0 | 0 | 0 |
Mortgage Loans Held For Sale [Member] | ||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||||
Level 3 assets and liabilities, balance at beginning of period | 2 | 0 | 0 | 0 |
Transfers into Level 3 | 2 | 1 | 5 | 2 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Total net gains included in earnings | 0 | 0 | 0 | 0 |
Purchases | 1 | 1 | 2 | 1 |
Sales | (3) | (1) | (5) | (2) |
Settlements | (1) | 0 | (1) | 0 |
Transfers of IRLCs to closed loans | 0 | 0 | 0 | 0 |
Level 3 assets and liabilities, balance at end of period | $ 1 | $ 1 | $ 1 | $ 1 |
Fair Value Measurements and D86
Fair Value Measurements and Disclosures (Schedule of Significant Unobservable Inputs Related to Level 3 Assets and Liabilities) (Details) - Mortgage Loans Held For Sale [Member] - USD ($) $ in Millions | 9 Months Ended | |||||
Sep. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Significant Unobservable Inputs Related to Level 3 Assets and Liabilties [Line Items] | ||||||
Significant unobservable inputs, fair value (in dollars) | $ 1 | $ 2 | $ 0 | $ 1 | $ 0 | $ 0 |
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | ||||||
Significant Unobservable Inputs Related to Level 3 Assets and Liabilties [Line Items] | ||||||
Significant unobservable inputs, valuation technique | Market comparables | |||||
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Loss Severity [Member] | ||||||
Significant Unobservable Inputs Related to Level 3 Assets and Liabilties [Line Items] | ||||||
Significant unobservable inputs, significant unobservable input | Loss severity | |||||
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Loss Severity [Member] | Low [Member] | ||||||
Significant Unobservable Inputs Related to Level 3 Assets and Liabilties [Line Items] | ||||||
Significant unobservable inputs, ranges of inputs | 17.00% | |||||
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Loss Severity [Member] | High [Member] | ||||||
Significant Unobservable Inputs Related to Level 3 Assets and Liabilties [Line Items] | ||||||
Significant unobservable inputs, ranges of inputs | 29.00% | |||||
Fair Value, Inputs, Level 3 [Member] | Market Approach Valuation Technique [Member] | Loss Severity [Member] | Weighted Average [Member] | ||||||
Significant Unobservable Inputs Related to Level 3 Assets and Liabilties [Line Items] | ||||||
Significant unobservable inputs, ranges of inputs | 23.00% |
Fair Value Measurements and D87
Fair Value Measurements and Disclosures (Schedule of Financial Instruments Measured at Other Than Fair Value) (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | [1] | $ 126 | $ 104 |
Fair Value, Measurements, Nonrecurring [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 126 | 104 | |
Cash and cash equivalents | 10,250 | 7,284 | |
Restricted cash | 98 | 106 | |
Net loan receivables | [2] | 69,204 | 69,316 |
Accrued interest receivables | 656 | 618 | |
Deposits | 46,759 | 46,242 | |
Short-term borrowings | 0 | 113 | |
Accrued interest payables | 155 | 132 | |
Fair Value, Measurements, Nonrecurring [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 16,069 | 17,628 | |
Fair Value, Measurements, Nonrecurring [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 8,376 | 5,722 | |
Fair Value, Measurements, Nonrecurring [Member] | U.S. Treasury Securities [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 1 | 1 | |
Fair Value, Measurements, Nonrecurring [Member] | States and Political Subdivisions of States [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 7 | 10 | |
Fair Value, Measurements, Nonrecurring [Member] | Residential Mortgage-Backed Securities - Agency [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 118 | 93 | |
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 124 | 102 | |
Cash and cash equivalents | 10,250 | 7,284 | |
Restricted cash | 98 | 106 | |
Net loan receivables | [2] | 68,334 | 68,101 |
Accrued interest receivables | 656 | 618 | |
Deposits | 46,605 | 46,089 | |
Short-term borrowings | 0 | 113 | |
Accrued interest payables | 155 | 132 | |
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 15,866 | 17,395 | |
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 7,934 | 5,149 | |
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | U.S. Treasury Securities [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 1 | 1 | |
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | States and Political Subdivisions of States [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 7 | 10 | |
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | Residential Mortgage-Backed Securities - Agency [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 116 | 91 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 1 | 1 | |
Cash and cash equivalents | 10,250 | 7,284 | |
Restricted cash | 98 | 106 | |
Net loan receivables | [2] | 0 | 0 |
Accrued interest receivables | 0 | 0 | |
Deposits | 0 | 0 | |
Short-term borrowings | 0 | 0 | |
Accrued interest payables | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | U.S. Treasury Securities [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 1 | 1 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | States and Political Subdivisions of States [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | Residential Mortgage-Backed Securities - Agency [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 125 | 103 | |
Cash and cash equivalents | 0 | 0 | |
Restricted cash | 0 | 0 | |
Net loan receivables | [2] | 0 | 0 |
Accrued interest receivables | 656 | 618 | |
Deposits | 46,759 | 46,242 | |
Short-term borrowings | 0 | 113 | |
Accrued interest payables | 155 | 132 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 14,769 | 16,067 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 8,376 | 5,721 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | U.S. Treasury Securities [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | States and Political Subdivisions of States [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 7 | 10 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | Residential Mortgage-Backed Securities - Agency [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 118 | 93 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 0 | 0 | |
Cash and cash equivalents | 0 | 0 | |
Restricted cash | 0 | 0 | |
Net loan receivables | [2] | 69,204 | 69,316 |
Accrued interest receivables | 0 | 0 | |
Deposits | 0 | 0 | |
Short-term borrowings | 0 | 0 | |
Accrued interest payables | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Variable Interest Entity, Primary Beneficiary [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 1,300 | 1,561 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Long-term borrowings | 0 | 1 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | U.S. Treasury Securities [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | States and Political Subdivisions of States [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | 0 | 0 | |
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Residential Mortgage-Backed Securities - Agency [Member] | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Held-to-maturity investment securities | $ 0 | $ 0 | |
[1] | Held-to-maturity investment securities are reported at amortized cost. | ||
[2] | Net loan receivables exclude mortgage loans held for sale that are measured at fair value on a recurring basis. |
Derivatives and Hedging Activ88
Derivatives and Hedging Activities (Narrative) (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Derivative [Line Items] | |
Additional collateral | $ 74 |
Credit Rating Did Not Meet Specified Threshold [Member] | |
Derivative [Line Items] | |
Cash collateral posted | 4 |
Interest Expense [Member] | |
Derivative [Line Items] | |
Cash flow hedge loss to be reclassified to earnings within twelve months | $ (38) |
Securitized Debt [Member] | |
Derivative [Line Items] | |
Initial maximum period for cash flow hedges (in years) | 5 years |
Deposits [Member] | |
Derivative [Line Items] | |
Initial maximum period for cash flow hedges (in years) | 7 years |
Derivatives and Hedging Activ89
Derivatives and Hedging Activities (Schedule of Fair Value and Outstanding Notional Amounts of Derivative Instruments and Related Collateral Balances) (Details) € in Millions, £ in Millions, SGD in Millions, SFr in Millions, $ in Millions | Sep. 30, 2015USD ($)transactions | Sep. 30, 2015SGDtransactions | Sep. 30, 2015EUR (€)transactions | Sep. 30, 2015GBP (£)transactions | Dec. 31, 2014USD ($)transactions | Dec. 31, 2014SGDtransactions | Dec. 31, 2014CHF (SFr)transactions | Dec. 31, 2014EUR (€)transactions | Dec. 31, 2014GBP (£)transactions | |||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative assets | [1] | $ 46 | $ 43 | |||||||||
Collateral held, derivative assets | [2] | (21) | (20) | |||||||||
Total net derivative assets | 25 | 23 | ||||||||||
Derivative liabilities | [1] | 69 | 23 | |||||||||
Collateral posted, derivative liabilities | [2] | (51) | (23) | |||||||||
Total net derivative liabilities | 18 | 0 | ||||||||||
Designated as Hedges [Member] | Cash Flow Hedge [Member] | Interest Rate Swaps [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | $ 4,100 | 4,100 | ||||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | 8 | 8 | 8 | 8 | ||||||||
Derivative assets | $ 0 | 4 | ||||||||||
Derivative liabilities | 69 | 18 | ||||||||||
Designated as Hedges [Member] | Fair Value Hedge [Member] | Interest Rate Swaps [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | $ 3,645 | 5,507 | ||||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | 123 | 123 | 123 | 123 | ||||||||
Derivative assets | $ 46 | 31 | ||||||||||
Derivative liabilities | 0 | 2 | ||||||||||
Designated as Hedges [Member] | Net Investment Hedge [Member] | Foreign Exchange Forward Contracts [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | [3] | $ 0 | 7 | € 6 | ||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | 0 | 0 | 0 | 0 | ||||||||
Derivative assets | $ 0 | 0 | ||||||||||
Derivative liabilities | 0 | 0 | ||||||||||
Not Designated as Hedges [Member] | Interest Rate Swaps [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | [4] | $ 236 | 359 | |||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | [4] | 1 | 1 | 1 | 1 | |||||||
Derivative assets | [4] | $ 0 | 0 | |||||||||
Derivative liabilities | [4] | 0 | 0 | |||||||||
Not Designated as Hedges [Member] | Foreign Exchange Forward Contracts [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | $ 35 | [5] | SGD 1 | € 21 | £ 7 | 53 | [5] | SGD 1 | SFr 8 | € 27 | £ 8 | |
Derivative, number of outstanding derivative contracts (in transactions) | transactions | 7 | 7 | 7 | 7 | ||||||||
Derivative assets | $ 0 | 0 | ||||||||||
Derivative liabilities | 0 | 0 | ||||||||||
Not Designated as Hedges [Member] | Forward Delivery Contracts [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | $ 0 | 761 | ||||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | 0 | 0 | 0 | 0 | ||||||||
Derivative assets | $ 0 | 1 | ||||||||||
Derivative liabilities | 0 | 3 | ||||||||||
Not Designated as Hedges [Member] | Interest Rate Lock Commitments [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | [4] | $ 0 | 406 | |||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | [4] | 0 | 0 | 0 | 0 | |||||||
Derivative assets | [4] | $ 0 | 7 | |||||||||
Derivative liabilities | [4] | $ 0 | 0 | |||||||||
Not Designated as Hedges [Member] | When-Issued Mortgage-Backed Securities [Member] | ||||||||||||
Derivatives, Fair Value [Line Items] | ||||||||||||
Derivative, notional amount | $ 33 | |||||||||||
Derivative, number of outstanding derivative contracts (in transactions) | transactions | 1 | 1 | 1 | 1 | 1 | |||||||
[1] | In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At December 31, 2014, the Company had one outstanding contract with a notional amount of $33 million and immaterial fair value. | |||||||||||
[2] | Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged. | |||||||||||
[3] | The foreign exchange forward contract had a notional amount of EUR 6 million as of December 31, 2014. | |||||||||||
[4] | Interest rate swaps not designated as hedges and interest rate lock commitments do not have associated master netting arrangements. | |||||||||||
[5] | The foreign exchange forward contracts have notional amounts of EUR 21 million, GBP 7 million and SGD 1 million as of September 30, 2015, and notional amounts of EUR 27 million, GBP 8 million, SGD 1 million and CHF 8 million as of December 31, 2014. |
Derivatives and Hedging Activ90
Derivatives and Hedging Activities (Schedule of Impact of the Derivative Instruments on Income and Other Comprehensive Income) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Designated as Hedges [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
(Loss) gain on derivatives | $ (5) | $ (2) | $ (12) | $ 7 |
Designated as Hedges [Member] | Cash Flow and Net Investment Hedges [Member] | Interest Rate Swaps [Member] | Other Comprehensive Income [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total (loss) gain recognized in OCI after amounts reclassified into earnings, pre-tax | (37) | 23 | (54) | 0 |
Designated as Hedges [Member] | Cash Flow Hedges [Member] | Interest Rate Swaps [Member] | Interest Expense [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount reclassified from OCI into income | (12) | (11) | (35) | (26) |
Designated as Hedges [Member] | Fair Value Hedges [Member] | Interest Rate Swaps [Member] | Interest Expense [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Adjustments - ineffectiveness | 12 | (14) | 13 | (13) |
Adjustments - other | 8 | 9 | 23 | 29 |
Gain (loss) on interest rate swaps | 20 | (5) | 36 | 16 |
Designated as Hedges [Member] | Fair Value Hedges [Member] | Hedged Item [Member] | Interest Expense [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Adjustments - ineffectiveness | (11) | 16 | (8) | 18 |
Adjustments - other | (2) | (2) | (5) | (1) |
(Loss) gain on hedged item | (13) | 14 | (13) | 17 |
Not Designated as Hedges [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
(Loss) gain on derivatives | (2) | 25 | 74 | 60 |
Not Designated as Hedges [Member] | Interest Rate Swaps [Member] | Other Income [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
(Loss) gain on derivatives | (1) | 0 | (1) | (1) |
Not Designated as Hedges [Member] | Forward Contracts [Member] | Other Income [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
(Loss) gain on derivatives | 0 | 4 | 2 | 4 |
Not Designated as Hedges [Member] | Forward Delivery Contracts [Member] | Other Income [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
(Loss) gain on derivatives | (4) | 3 | 2 | (4) |
Not Designated as Hedges [Member] | Interest Rate Lock Commitments [Member] | Other Income [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
(Loss) gain on derivatives | $ 3 | $ 18 | $ 71 | $ 61 |
Segment Disclosures (Narrative)
Segment Disclosures (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2015segment | |
Segment Reporting [Abstract] | |
Number of reportable segments (in number of segments) | 2 |
Segment Disclosures (Schedule o
Segment Disclosures (Schedule of Segment Disclosures) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Segment Reporting Information [Line Items] | ||||
Interest income | $ 2,008 | $ 1,926 | $ 5,884 | $ 5,622 |
Interest expense | 323 | 288 | 934 | 832 |
Net interest income | 1,685 | 1,638 | 4,950 | 4,790 |
Provision for loan losses | 332 | 354 | 1,028 | 986 |
Other income | 503 | 552 | 1,584 | 1,650 |
Other expense | 882 | 827 | 2,682 | 2,408 |
Income before income tax expense | 974 | 1,009 | 2,824 | 3,046 |
Other [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 22 | 24 | 67 | 71 |
Credit Card Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 1,676 | 1,613 | 4,902 | 4,710 |
Provision for loan losses | 303 | 318 | 896 | 865 |
Total Other Loans [Member] | Private Student Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 95 | 80 | 277 | 228 |
Total Other Loans [Member] | Personal Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 161 | 145 | 468 | 415 |
Provision for loan losses | 30 | 22 | 96 | 62 |
PCI Student Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 54 | 64 | 170 | 198 |
Provision for loan losses | 0 | 0 | 0 | 0 |
Operating Segments [Member] | Direct Banking [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 2,008 | 1,926 | 5,884 | 5,622 |
Interest expense | 323 | 288 | 934 | 832 |
Net interest income | 1,685 | 1,638 | 4,950 | 4,790 |
Provision for loan losses | 332 | 356 | 1,026 | 986 |
Other income | 435 | 475 | 1,371 | 1,414 |
Other expense | 838 | 776 | 2,550 | 2,259 |
Income before income tax expense | 950 | 981 | 2,745 | 2,959 |
Operating Segments [Member] | Direct Banking [Member] | Other [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 22 | 24 | 67 | 71 |
Operating Segments [Member] | Direct Banking [Member] | Credit Card Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 1,676 | 1,613 | 4,902 | 4,710 |
Operating Segments [Member] | Direct Banking [Member] | Total Other Loans [Member] | Private Student Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 95 | 80 | 277 | 228 |
Operating Segments [Member] | Direct Banking [Member] | Total Other Loans [Member] | Personal Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 161 | 145 | 468 | 415 |
Operating Segments [Member] | Direct Banking [Member] | PCI Student Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 54 | 64 | 170 | 198 |
Operating Segments [Member] | Payment Services [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 0 | 0 | 0 | 0 |
Interest expense | 0 | 0 | 0 | 0 |
Net interest income | 0 | 0 | 0 | 0 |
Provision for loan losses | 0 | (2) | 2 | 0 |
Other income | 68 | 77 | 213 | 236 |
Other expense | 44 | 51 | 132 | 149 |
Income before income tax expense | 24 | 28 | 79 | 87 |
Operating Segments [Member] | Payment Services [Member] | Other [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 0 | 0 | 0 | 0 |
Operating Segments [Member] | Payment Services [Member] | Credit Card Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 0 | 0 | 0 | 0 |
Operating Segments [Member] | Payment Services [Member] | Total Other Loans [Member] | Private Student Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 0 | 0 | 0 | 0 |
Operating Segments [Member] | Payment Services [Member] | Total Other Loans [Member] | Personal Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | 0 | 0 | 0 | 0 |
Operating Segments [Member] | Payment Services [Member] | PCI Student Loans [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Interest income | $ 0 | $ 0 | $ 0 | $ 0 |