The pending merger with Capital One, valued at $35.3 billion, introduces risks related to regulatory approvals, integration challenges, and potential adverse effects on the company's stock price and business relationships.

The company completed the sale of its private student loan portfolio, signaling a strategic decision to focus on core digital banking and payment services, impacting future revenue streams and asset allocation.

Direct-to-consumer deposits grew by $6.6 billion, or 8%, to $90.6 billion, demonstrating the company's ability to attract and retain customer deposits through its digital banking channels.

The company is addressing consent orders from the CFPB and FDIC, requiring improvements in compliance management systems and corporate governance, indicating a focus on regulatory compliance and risk management.

Management is focused on strengthening risk management and internal controls, as evidenced by the remediation of previously disclosed material weaknesses and ongoing efforts to enhance the ERM framework.

Recent executive appointments, including a new CEO, Chief Human Resources Officer, and Chief Information Officer, reflect ongoing adjustments to management structure.

The most prominent risk factor is the pending merger with Capital One, including the risk of failure to complete the merger, regulatory hurdles, and integration challenges.

The company faces risks stemming from economic conditions, regulatory changes, enforcement actions, and litigation, impacting its financial performance and strategic direction.

The company faces operational and reputational risks, including fraud and cybersecurity threats, requiring continuous monitoring and effective response mechanisms.

Discover faces strong competition from larger, more diversified financial institutions and emerging fintech companies, impacting its ability to attract and retain customers and maintain profitability.

Despite reaching near parity in merchant acceptance in the U.S., the legacy perception of lower acceptance presents limitations in attracting new cardholders and debit card issuers.

The company employs 100% of its customer service agents within the U.S., which it believes offers a distinct competitive advantage.

Total other expense increased, driven by higher employee compensation, professional fees, and information processing costs, indicating potential challenges in maintaining operational efficiency.

Ongoing investments in infrastructure, including technology such as generative artificial intelligence (AI), aim to maintain a competitive business and establish scalable operations.

The company has optimized its physical space to ensure they are fit for purpose and as a result, call centers are being utilized to a reasonable capacity.

Ongoing investments in infrastructure, including technology such as generative artificial intelligence (AI), aim to maintain a competitive business and establish scalable operations.

One of the company's key operational risks is information security, which includes cybersecurity. The program is led by the Chief Information Security Officer (“CISO”) and overseen by our Technology and Information Risk Committee (“TIRC”).

The company's approach to technology development and management involves both third-party and in-house resources. They use third-party vendors for technology services (e.g., cloud, telecommunications, hardware and operating systems) as well as for processing and other services for our digital banking and payment services businesses.

Due to provisions in the Merger Agreement with Capital One, the company is required to keep its quarterly common stock dividend consistent in 2024 at $0.70 per share and to refrain from the repurchasing of outstanding common stock.

DFS and Discover Bank are subject to capital rules adopted by federal banking regulators, which include maintaining minimum capital and leverage ratios for capital adequacy and higher ratios to be deemed 'well-capitalized' for other regulatory purposes.

Our new SCB requirement increased to 3.1% and is effective from October 1, 2024, through September 30, 2025, subject to potential recalculation.

The company's success is highly dependent on attracting, retaining and developing employees with the necessary skills and experience to support our customers, our business and our strategy.

The company believes that an all-inclusive range of backgrounds, identities, perspectives and experiences make Discover stronger and better able to support our customers, employees and communities to achieve brighter financial futures.

Discover continues to be an award-winning workplace, recognized for our inclusive and collaborative culture.

Economic conditions could have a material adverse effect on our business, results of operations and financial condition.

Financial regulatory developments have had an impact and will continue to significantly impact the environment for the financial services industry, which could adversely impact our business, results of operations and financial condition.

We face competition in the credit card market from other consumer financial services providers and we may not be able to compete effectively, which could result in fewer customers and lower account balances and could materially adversely affect our financial condition, cash flows and results of operations.