Capital One received regulatory approval for the merger, indicating progress towards completing the transaction. The closing is expected around May 18, 2025, subject to remaining conditions.

Direct-to-consumer deposits increased to $92.4 billion, reflecting a successful strategy in attracting and retaining consumer deposits. This provides a stable and cost-effective funding source.

Payment Services transaction volume decreased to $96.4 billion, suggesting competitive pressures or shifts in market demand for these services. This may require strategic adjustments to maintain growth in this segment.

Discover Bank is working diligently to complete items required by the 2023 Order. This includes having retained third party consultants to conduct independent reviews and the submission of action plans to the FDIC by the required deadlines for review and feedback.

Discover Bank entered into an amended and restated consent order with the FDIC, which amends and restates the 2023 Order in order to reflect progress made to-date and remaining work with respect to items required by the 2023 Order and also to reflect the FDIC's investigation into the card product misclassification.

We have taken actions to bring our net interest income sensitivity closer to neutral as the Federal Reserve has slowed its pace of monetary policy tightening and the outlook for near-term U.S. economic growth may be weakening.

DFS and Discover Bank are subject to regulatory capital rules issued by the Federal Reserve and FDIC, respectively, under the Basel Committee's December 2010 framework (“Basel III rules”). Under the Basel III rules, DFS and Discover Bank are classified as “standardized approach” entities.

Federal Reserve rules impose limitations on DFS' capital distributions if we do not maintain our risk-based capital ratios above stated regulatory minimum ratios based on the results of supervisory stress tests. We are required to assess whether DFS’ planned capital actions are consistent with the effective capital distribution limitations that will apply on a pro-forma basis throughout the planning horizon.

In addition, the Company and its subsidiaries have been named as defendants in various lawsuits, including a putative class action on behalf of shareholders and a shareholder derivative action. On March 31, 2025, the court dismissed the putative shareholder class action without prejudice. The Company is also cooperating with an SEC investigation into the card product misclassification matter.

Transactions Processed on Networks: Discover Network increased by 1.8% year-over-year, suggesting a stable competitive position in the payment processing market.

Network Transaction Volume: Diners Club increased by 18.3% year-over-year, indicating a strong competitive position in the global payments network.

Transactions Processed on Networks: PULSE Network increased by 2.6% year-over-year, indicating a stable competitive position in the ATM, debit and electronic funds transfer network.

Other Expense: Total other expense increased for the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in employee compensation and benefits.

Other Expense: Employee compensation and benefits increased for the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to an increase in employee compensation and benefits.

Other Expense: Marketing and business development decreased for the three months ended March 31, 2025, as compared to the same period in 2024, primarily due to a decrease in employee compensation and benefits.

We have the ability to maintain current technology and integrate new and acquired systems and technology; our ability to collect amounts for disputed transactions from merchants and merchant acquirers; our ability to attract and retain employees.

Discover Bank agreed to improve its consumer compliance management system and enhance related corporate governance and enterprise risk management practices, and increase the level of Board oversight of such matters.

We have the ability to introduce new products and services; our ability to manage our relationships with third-party vendors, as well as those with which we have no direct relationship such as our employees' internet service providers.

In accordance with the Merger Agreement with Capital One, share repurchases have been paused through the completion of the merger. For more information on the pending merger, see Note 1: Background and Basis of Presentation – Pending Merger with Capital One Financial Corporation to our condensed consolidated financial statements.

Our primary uses of funds include the extensions of loans and credit to customers, primarily through Discover Bank; the maintenance of sufficient working capital for routine operations; the service of our debt and capital obligations, including interest, principal and dividend payments; and the purchase of investment securities for our liquidity portfolio.

Through our wholly-owned indirect subsidiary, Discover Funding LLC, we are required to maintain an interest in a contractual minimum level of receivables in DCMT in excess of the face value of outstanding investors’ interests. This minimum interest is referred to as the minimum seller’s interest.

Environmental, social and governance (“ESG”) issues, including climate change, human capital and governance practices, have been a significant area of focus by U.S. federal, state and international lawmakers and regulatory agencies, as well as shareholders and other stakeholders.

We have the ability to comply with regulatory requirements, including existing consent orders; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters.

Policymakers at the federal and state levels remain focused on enhancing data security and data breach incident response requirements. These policymakers have proposed and enacted regulations and legislation to augment consumer data privacy standards and require companies to assess and/or disclose cybersecurity metrics, risks, opportunities, policies and practices.

We are exposed to market risk primarily from changes in interest rates. We borrow money from various depositors and institutions to provide loans to our customers and invest in other assets and our business.

We have the ability to comply with regulatory requirements, including existing consent orders; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters.

Risks related to the proposed merger with Capital One including, among others, (i) failure to complete the merger with Capital One, (ii) diversion of management’s attention from ongoing business operations and opportunities, (iii) cost and revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (iv) the integration of each party’s management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (v) deposit attrition, customer or employee loss and/or revenue loss as a result of the announcement of the proposed merger, and (vi) expenses related to the proposed merger being greater than expected