Parent Company Condensed Financial Information

12 Months Ended

Dec. 31, 2020

Condensed Financial Information Disclosure [Abstract]

Parent Company Condensed Financial Information

The following Parent Company financial statements are provided in accordance with SEC rules, which require such disclosure when the restricted net assets of consolidated subsidiaries exceed 25% of consolidated net assets.

Discover Financial Services

(Parent Company Only)

Condensed Statements of Financial Condition


	December 31,
	2020		2019
	(dollars in millions)
Assets
Cash and cash equivalents(1)	$	2,802	$	2,511
Restricted cash	20		20
Notes receivable from subsidiaries(2)	891		877
Investments in bank subsidiaries	10,188		11,319
Investments in non-bank subsidiaries	727		820
Other assets	567		600
Total assets	$	15,195	$	16,147

Liabilities and Stockholders’ Equity
Non-interest bearing deposit accounts	$	2	$	2


Short-term borrowings from subsidiaries	283		283
Long-term borrowings	3,673		3,636
Accrued expenses and other liabilities	353		367
Total liabilities	4,311		4,288
Stockholders’ equity	10,884		11,859
Total liabilities and stockholders’ equity	$	15,195	$	16,147

(1)The Parent Company had $2.7 billion and $2.4 billion in a money market deposit account at Discover Bank as of December 31, 2020 and 2019, respectively, which is included in cash and cash equivalents. These funds are available to the Parent for liquidity purposes.

(2)The Parent Company advanced $500 million to Discover Bank as of December 31, 2020 and 2019, which is included in notes receivable from subsidiaries. These funds are available to the Parent for liquidity purposes.

Discover Financial Services

(Parent Company Only)

Condensed Statements of Income


	For the Years Ended December 31,
	2020		2019		2018
	(dollars in millions)
Interest income	$	44	$	82	$	67
Interest expense	205		212		189
Net interest expense	(161)		(130)		(122)
Dividends from bank subsidiaries	555		2,530		2,375
Dividends from non-bank subsidiaries	200		100		450
Total income	594		2,500		2,703
Other expense	(16)		1		—
Income before income tax benefit and equity in undistributed net income of subsidiaries	610		2,499		2,703
Income tax benefit	30		25		33
Equity in undistributed net income of subsidiaries	501		433		6
Net income	1,141		2,957		2,742
Other comprehensive income, net	164		37		25
Comprehensive income	$	1,305	$	2,994	$	2,767

Discover Financial Services

(Parent Company Only)

Condensed Statements of Cash Flows


	For the Years Ended December 31,
	2020		2019		2018
	(dollars in millions)
Cash flows provided by operating activities
Net income	$	1,141	$	2,957	$	2,742
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries	(501)		(433)		(6)
Stock-based compensation expense	42		69		81
Deferred income taxes	(5)		(8)		(5)
Depreciation and amortization	41		38		34
Changes in assets and liabilities:
Decrease (increase) in other assets	42		92		(416)
(Decrease) increase in other liabilities and accrued expenses	(30)		50		(129)
Net cash provided by operating activities	730		2,765		2,301

Cash flows used for investing activities
Decrease (increase) in investment in subsidiaries	—		—		(3)
Increase in loans to subsidiaries	(15)		(55)		(62)
Net cash used for investing activities	(15)		(55)		(65)

Cash flows used for financing activities
Net increase (decrease) in short-term borrowings from subsidiaries	—		42		(110)
Proceeds from issuance of common stock	10		7		6
Proceeds from issuance of long-term borrowings	—		595		49
Maturities and repayment of long-term borrowings	(3)		(86)		(6)
Purchases of treasury stock	(348)		(1,768)		(2,065)
Net increase (decrease) in deposits	—		(2)		1
Proceeds from issuance of preferred stock	493		—		—

Dividends paid on common and preferred stock	(576)		(573)		(552)
Net cash used for financing activities	(424)		(1,785)		(2,677)
Increase (decrease) in cash, cash equivalents and restricted cash	291		925		(441)
Cash, cash equivalents and restricted cash, at beginning of period	2,531		1,606		2,047
Cash, cash equivalents and restricted cash, at end of period	$	2,822	$	2,531	$	1,606

Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	2,802	$	2,511	$	1,586
Restricted cash	20		20		20
Cash, cash equivalents and restricted cash, at end of period	$	2,822	$	2,531	$	1,606

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest expense	$	168	$	170	$	156
Income taxes, net of income tax refunds	$	(31)	$	20	$	(22)