Core Viewpoint - The completion of Capital One's $35 billion acquisition of Discover Financial Services significantly alters the credit card industry landscape, creating a major player in terms of loan volume [1]. Group 1: Acquisition Details - The acquisition allows Capital One to capture a larger share of card spending and compete more effectively with Visa and Mastercard [2]. - Discover's payments network, now under Capital One's control, is one of only four in the U.S., enabling increased revenue from interchange fees and reducing reliance on Visa and Mastercard [2]. - The merger faced regulatory scrutiny but received final approval from the Federal Reserve and the Office of the Comptroller of the Currency, with no challenge from the U.S. Department of Justice [3]. Group 2: Conditions and Synergies - The approval came with conditions requiring Capital One to address enforcement issues related to Discover's past overcharging of merchants [4]. - The merger is expected to generate $1.5 billion in expense synergies and $1.2 billion in network synergies by 2027, leading to over 15% accretion to adjusted non-GAAP EPS by that year [6]. - The combined entity will have a pro forma CET1 ratio of approximately 14% at closing, strengthening Capital One's balance sheet [7]. Group 3: Customer Impact and Future Strategy - There will be no immediate changes to customer accounts or banking relationships, with customers receiving comprehensive information ahead of any changes [8]. - Capital One plans to continue offering Discover-branded credit card products alongside its existing consumer cards [8]. - The merger enhances Capital One's "Digital First" banking model, leveraging Discover's national direct savings bank to improve competitiveness against larger banks [9]. Group 4: Strategic Growth - Capital One has a history of strategic acquisitions aimed at diversifying its offerings and expanding market presence, transforming from a monoline credit card issuer to a diversified financial services firm [10]. - Over the past year, Capital One's shares have increased by 40.3%, outperforming the industry growth of 39% [11].

Core Insights - Coinbase Global (COIN) will enter the S&P 500 Index on May 19, replacing Discover Financial Services, leading to a 24% increase in its stock price, the largest rally since the day after President Trump's election victory [1] - Coinbase is the first digital asset company included in the S&P 500, indicating a growing acceptance of cryptocurrency firms in mainstream finance [2][3] - Analysts predict that Coinbase could attract up to $16 billion in capital inflows due to its S&P 500 inclusion, with Oppenheimer raising its price target for Coinbase to $293 from $269 [4] Company Performance - Coinbase reported earnings per share of $1.94 for Q1 2025, exceeding estimates by 4.9% and showing a year-over-year increase of 7.6%, while revenues grew 24% year-over-year to $2.0 billion but missed estimates by 4.1% [6] - The potential acquisition of Deribit for $2.9 billion is expected to enhance Coinbase's growth and profitability, positioning it as a leader in crypto derivatives [7] Investment Opportunities - Several ETFs provide exposure to Coinbase, including: - First Trust SkyBridge Crypto Industry & Digital Economy ETF (CRPT), with Coinbase holding a 17.8% share [8] - Global X Blockchain ETF (BKCH), where Coinbase accounts for 12.5% of the assets [11] - Fidelity Crypto Industry and Digital Payments ETF (FDIG), with Coinbase at 13.7% [12] - iShares Blockchain and Tech ETF (IBLC), which includes Coinbase among its 36 stocks [14] - Bitwise Crypto Industry Innovators ETF (BITQ), where Coinbase holds a 10.2% share [16]

Group 1: Coinbase Stock Performance - Coinbase shares surged 24% on May 13, 2025, marking the largest one-day gain since the day after Donald Trump's election victory, following the announcement of its inclusion in the S&P 500 Index [1] - The stock experienced a rough year with drops of 26% in February and 20% in March, but the recent rally has brought the stock down only 0.1% year-to-date [6] - The stock soared 31% on November 6, 2024, after the election, due to expectations of a favorable stance toward cryptocurrency from the new administration [5] Group 2: S&P 500 Inclusion and Financial Performance - Coinbase was added to the S&P 500 Index, replacing Discover Financial Services, which is being acquired by Capital One Financial [1] - To qualify for the S&P 500, a company must be profitable in its latest quarter and cumulatively over the previous four quarters; Coinbase met these requirements with a net income of $65.6 million, down from $1.18 billion a year ago, while revenues rose 24% year-over-year to $2.03 billion [3][4] Group 3: ETF Exposure and Market Sentiment - Coinbase has significant exposure to ETFs, with several ETFs investing over 10% of their portfolios in COIN shares, leading to notable gains in these ETFs on May 13 [2] - The broader crypto market is experiencing a boom, with Bitcoin surpassing $100,000, which has positively impacted sentiment around Coinbase and other crypto-linked assets [8] Group 4: Strategic Moves and Future Outlook - Coinbase announced a $2.9 billion acquisition of Deribit, a major crypto derivatives exchange, which is expected to enhance its global presence and diversify revenue streams [9] - Analysts have cut their earnings estimates for COIN shares significantly over the past week, indicating potential concerns about the stock's future performance [10] - COIN shares are trading at a P/E ratio of 29.52X, significantly higher than the underlying industry average of negative 8.75X, raising concerns about overvaluation [11]

Core Viewpoint - Coinbase Global Inc. has seen a significant increase in its stock price following its inclusion in the S&P 500, marking a notable rally for the company [1][2]. Group 1: Stock Performance - Coinbase shares surged over 20% on a recent Tuesday, marking the sharpest rally since the day after President Trump's election victory [1]. - The stock price increased by 31% on November 6, 2023, due to optimism regarding potential crypto-friendly policies from the incoming administration [3]. Group 2: S&P 500 Inclusion - S&P Global announced that Coinbase is replacing Discover Financial Services in the S&P 500, effective before trading on the following Monday [2]. - Stocks added to the S&P 500 typically experience a rise in value as funds tracking the benchmark include them in their portfolios [2]. Group 3: Political Contributions - Coinbase and CEO Brian Armstrong have been significant financial supporters in the 2024 campaign, contributing over $75 million to a PAC named Fairshake and its affiliates [4]. - Armstrong personally donated more than $1.3 million to various candidates [4].

Core Viewpoint - The inclusion of Coinbase in the S&P 500 index marks a significant milestone for the cryptocurrency industry, indicating mainstream acceptance of digital assets and potentially driving more institutional capital into related stocks and the crypto market [1][2]. Group 1: Coinbase's Inclusion in S&P 500 - Coinbase Global will replace Discover Financial Services in the S&P 500 index, effective before trading on May 19, which has led to a 10% surge in Coinbase's stock price in after-hours trading [2]. - Analysts view this move as a strong signal that cryptocurrency stocks are becoming mainstream, reflecting a broader acceptance of digital assets in traditional finance [2][4]. Group 2: Coinbase's Financial Performance - Despite the cryptocurrency industry's challenges, including the collapse of FTX, Coinbase's stock has increased approximately 260% over the past two years [4]. - However, Coinbase's stock has declined about 17% this year, contrasting with Bitcoin's nearly 10% increase [4]. - In Q1, Coinbase reported a year-over-year revenue growth of approximately 24%, but a quarter-over-quarter decline of about 10%, with net income dropping 94% to $66 million due to market price adjustments of its cryptocurrency holdings [4]. Group 3: Industry Trends and Future Outlook - Coinbase announced plans to acquire Deribit, the largest Bitcoin and Ethereum options exchange, for $2.9 billion, marking a significant acquisition in the cryptocurrency sector [4]. - The environment for cryptocurrency appears favorable, with ongoing cases against crypto-related entities being rapidly dismissed, suggesting a lack of urgency for excessive regulation [5]. - The recent surge in Bitcoin prices, alongside the approval of spot Bitcoin ETFs by large institutions, indicates that cryptocurrencies are increasingly becoming part of the U.S. financial system [6].

Brian Armstrong, CEO of Coinbase, speaking on CNBC's Squawk Box outside the World Economic Forum in Davos, Switzerland on Jan. 21st, 2025.Coinbase is joining the S&P 500, replacing Discover Financial Services in the benchmark index, according to a release on Monday. Shares of the crypto exchange jumped 8% in extended trading. The change will take effect before trading on May 19. Discover is in the process of being acquired by Capital One Financial.Since going public through a direct listing in 2021, Coinbas ...

[Part I FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q1 2025 financial statements report net income of $1.1 billion and diluted EPS of $4.25, with total assets at $147.9 billion Condensed Consolidated Statements of Financial Condition (Balance Sheet) | (dollars in millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$147,914** | **$147,640** | | Net loan receivables | $109,295 | $112,795 | | Total deposits | $108,220 | $107,009 | | Long-term borrowings | $14,538 | $16,253 | | **Total Liabilities** | **$128,951** | **$129,714** | | **Total Stockholders' Equity** | **$18,963** | **$17,926** | Condensed Consolidated Statements of Income | (dollars in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net interest income | $3,558 | $3,487 | | Provision for credit losses | $1,244 | $1,497 | | Total other income | $693 | $673 | | Total other expense | $1,563 | $1,544 | | **Net income** | **$1,104** | **$851** | | **Diluted EPS** | **$4.25** | **$3.25** | Condensed Consolidated Statements of Cash Flows | (dollars in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,132 | $1,843 | | Net cash provided by investing activities | $3,006 | $358 | | Net cash (used for) provided by financing activities | ($802) | $514 | | **Net increase in cash, cash equivalents and restricted cash** | **$4,336** | **$2,715** | [Note 1: Background and Basis of Presentation](index=9&type=section&id=1.%20Background%20and%20Basis%20of%20Presentation) Discover, a digital banking and payment company, is proceeding with a $35.3 billion merger with Capital One, expected to close by May 2025 - On February 19, 2024, Discover entered into a merger agreement with Capital One Financial Corporation in an all-stock transaction valued at **$35.3 billion**[28](index=28&type=chunk) - The merger with Capital One received all required regulatory approvals as of April 18, 2025, and is expected to close on or around May 18, 2025[29](index=29&type=chunk) - The company completed the sale of its private student loan portfolio during the fourth quarter of 2024[27](index=27&type=chunk) [Note 3: Loan Receivables](index=13&type=section&id=3.%20Loan%20Receivables) Total loan receivables decreased to $117.4 billion, with a $215 million allowance release due to improved credit quality and seasonal declines Loan Receivables Composition (in millions) | Loan Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Credit card loans | $99,027 | $102,786 | | Personal loans | $10,096 | $10,314 | | Home loans | $8,223 | $7,963 | | **Total loan receivables** | **$117,403** | **$121,118** | | Allowance for credit losses | ($8,108) | ($8,323) | | **Net loan receivables** | **$109,295** | **$112,795** | Allowance for Credit Losses Roll-Forward (Q1 2025, in millions) | Description | Amount | | :--- | :--- | | Balance at Dec 31, 2024 | $8,323 | | Provision for credit losses | $1,244 | | Net charge-offs | ($1,459) | | **Balance at Mar 31, 2025** | **$8,108** | - The **$215 million** release in the allowance for credit losses was primarily driven by a seasonal decline in receivables and improved credit quality in the credit card portfolio, partially offset by changes in macroeconomic forecasts[52](index=52&type=chunk) Delinquency Rates (30+ Days Past Due) | Loan Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Credit card loans | 3.66% | 3.84% | | Personal loans | 1.68% | 1.69% | | Home loans | 1.22% | 1.23% | [Note 11: Capital Adequacy](index=25&type=section&id=11.%20Capital%20Adequacy) DFS and Discover Bank met all Basel III capital requirements as of March 31, 2025, with DFS reporting a 14.7% CET1 ratio Capital Ratios as of March 31, 2025 | Ratio | Entity | Actual | Minimum Requirement | Well-Capitalized Requirement | | :--- | :--- | :--- | :--- | :--- | | **CET1 Capital Ratio** | DFS | 14.7% | ≥4.5% | N/A | | | Discover Bank | 11.9% | ≥4.5% | ≥6.5% | | **Total Capital Ratio** | DFS | 17.1% | ≥8.0% | ≥10.0% | | | Discover Bank | 14.1% | ≥8.0% | ≥10.0% | | **Tier 1 Leverage Ratio** | DFS | 12.8% | ≥4.0% | N/A | | | Discover Bank | 9.7% | ≥4.0% | ≥5.0% | - The company's three-year phase-in for the regulatory capital impact of the Current Expected Credit Losses (CECL) methodology ended on December 31, 2024[105](index=105&type=chunk) [Note 13: Litigation and Regulatory Matters](index=29&type=section&id=13.%20Litigation%20and%20Regulatory%20Matters) The company addresses a $1.246 billion card product misclassification liability, with $250 million in regulatory penalties and ongoing SEC investigation - The counterparty restitution liability for the card product misclassification was **$1.246 billion** as of March 31, 2025[135](index=135&type=chunk)[136](index=136&type=chunk) - In April 2025, the FDIC and Federal Reserve assessed combined civil money penalties of **$250 million** related to the card product misclassification, fully accrued as of September 30, 2024[136](index=136&type=chunk) - The company is cooperating with an SEC investigation into the card product misclassification matter and believes additional losses are probable but cannot be reasonably estimated at this time[137](index=137&type=chunk) - The estimated range of reasonably possible losses for all legal and regulatory proceedings, in excess of accrued amounts, is up to **$60 million** as of March 31, 2025[128](index=128&type=chunk) [Note 16: Segment Disclosures](index=38&type=section&id=16.%20Segment%20Disclosures) The Digital Banking segment reported $1.35 billion in Q1 2025 pre-tax income, while Payment Services generated $91 million Segment Income Before Income Taxes (in millions) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Digital Banking | $1,353 | $1,037 | | Payment Services | $91 | $82 | | **Total** | **$1,444** | **$1,119** | - The Digital Banking segment includes Discover-branded credit cards, personal loans, home loans, and deposit products[170](index=170&type=chunk) - The Payment Services segment includes the PULSE network, Diners Club, and the Network Partners business[170](index=170&type=chunk) [Note 18: Subsequent Events](index=40&type=section&id=18.%20Subsequent%20Events) Subsequent events include $250 million in regulatory penalties assessed in April 2025 and the Capital One merger receiving final regulatory approval - On April 16, 2025, the FDIC assessed a **$150 million** penalty, and on April 18, 2025, the Federal Reserve assessed a **$100 million** penalty, both fully accrued as of September 30, 2024[175](index=175&type=chunk) - On April 18, 2025, the Federal Reserve and the OCC approved the pending merger with Capital One[176](index=176&type=chunk) [Management's Discussion and Analysis (MD&A)](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A highlights a 30% net income increase to $1.1 billion, driven by lower credit loss provisions, improved loan quality, and strong liquidity Q1 2025 vs Q1 2024 Performance Summary | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $1.1B | $851M | +30% | | Diluted EPS | $4.25 | $3.25 | +31% | | Provision for Credit Losses | $1.24B | $1.50B | -17% | | Net Interest Income | $3.56B | $3.49B | +2% | - The increase in net income was primarily driven by a lower provision for credit losses and decreased interest expense, partially offset by lower interest income from a smaller average loan portfolio[214](index=214&type=chunk)[217](index=217&type=chunk) - The company has paused share repurchases through the completion of the merger with Capital One, in accordance with the merger agreement[289](index=289&type=chunk)[306](index=306&type=chunk) [Regulatory Environment and Developments](index=42&type=section&id=Regulatory%20Environment%20and%20Developments) The company navigates evolving regulatory changes, including Basel III and long-term debt requirements, with capital plan adjustments due to the Capital One merger - Proposed amendments to Basel III rules could significantly revise risk-based capital requirements for banks with assets over **$100 billion**, including DFS[186](index=186&type=chunk) - A separate proposal would require DFS to maintain minimum levels of outstanding long-term debt[187](index=187&type=chunk) - Due to the pending merger with Capital One, the company resubmitted its capital plan and must receive prior approval from the Federal Reserve for capital distributions[190](index=190&type=chunk)[282](index=282&type=chunk) [Critical Accounting Estimates](index=47&type=section&id=Critical%20Accounting%20Estimates) Allowance for credit losses is a critical estimate, with sensitivity analysis showing a $487 million increase under the most adverse economic scenario - The allowance for credit losses is a critical accounting estimate due to the significant judgment involved, particularly in selecting macroeconomic forecasts[207](index=207&type=chunk)[209](index=209&type=chunk) - The Q1 2025 allowance was based on a macroeconomic forecast projecting a weighted average unemployment rate peaking at **4.88%** in Q2 2026 and real GDP growth of **1.69%** in 2025[230](index=230&type=chunk) - Sensitivity analysis indicates that using the most adverse economic scenario would increase the allowance for credit losses by approximately **$487 million**[211](index=211&type=chunk) [Loan Quality](index=51&type=section&id=Loan%20Quality) Loan quality improved in Q1 2025, with credit card net charge-off rates decreasing to 5.47% and delinquency rates falling to 3.66% Net Charge-off Rates (Annualized) | Loan Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Credit card loans | 5.47% | 5.66% | | Personal loans | 4.21% | 4.02% | Delinquency Rates (30+ Days) | Loan Type | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Credit card loans | 3.66% | 3.84% | | Personal loans | 1.68% | 1.69% | - The provision for credit losses decreased to **$1.24 billion** in Q1 2025 from **$1.53 billion** in Q1 2024 (excluding unfunded commitments adjustment), driven by improved credit quality in the credit card portfolio[228](index=228&type=chunk)[233](index=233&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $84.6 billion in total sources and a 14.7% CET1 ratio, pausing share repurchases due to the merger Liquidity Sources (in billions) | Source | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Liquidity portfolio (Cash, Investments) | $30.2 | $27.3 | | Private asset-backed securitizations (undrawn) | $3.5 | $3.5 | | FHLB of Chicago (undrawn) | $4.9 | $4.7 | | Federal Reserve discount window (undrawn) | $46.0 | $46.5 | | **Total Liquidity Sources** | **$84.6** | **$82.0** | - Primary funding sources include **$92.4 billion** in direct-to-consumer deposits and **$15.8 billion** in brokered deposits[243](index=243&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.70 per common share**, but Discover common stockholders are expected to receive the Capital One dividend instead due to the expected merger closing date[286](index=286&type=chunk) - Share repurchases have been paused through the completion of the merger with Capital One[289](index=289&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, with a 100 basis point rate increase estimated to raise net interest income by $52 million Estimated 12-Month Impact on Net Interest Income from a Parallel Rate Shift | Basis Point Change | At March 31, 2025 ($M) | At Dec 31, 2024 ($M) | | :--- | :--- | :--- | | +100 | $52 | $52 | | -100 | ($50) | ($25) | - The company's primary market risk exposure is from changes in interest rates, which affect net interest income[291](index=291&type=chunk) - The company uses interest rate swaps to manage the repricing characteristics of its assets and liabilities[293](index=293&type=chunk) [Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[300](index=300&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[301](index=301&type=chunk) [Part II OTHER INFORMATION](index=67&type=section&id=Part%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings are detailed in Note 13 of the condensed consolidated financial statements - For a description of legal proceedings, see Note 13: Litigation and Regulatory Matters to the condensed consolidated financial statements[304](index=304&type=chunk) [Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the prior Annual Report on Form 10-K - No material changes to risk factors were reported for the period[305](index=305&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Share repurchases are paused due to the Capital One merger, with 144,509 shares withheld for employee tax obligations - Share repurchases have been paused through the completion of the merger with Capital One[306](index=306&type=chunk) Employee Transactions (Q1 2025) | Description | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Employee transactions (tax withholding) | 144,509 | $200.78 | [Other Information](index=67&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[312](index=312&type=chunk)

Core Insights - Discover Financial Services has received regulatory approval for its acquisition by Capital One Financial and reported strong quarterly financial results [1][2] - Discover's stock price increased by over 13% week to date following these developments [1] Financial Performance - For the first quarter of 2025, Discover reported total net revenue of $4.25 billion, a 2% increase year-over-year [3] - GAAP net income rose by 30% to slightly over $1.1 billion, translating to earnings of $4.25 per share [3] - Both revenue and net income figures exceeded consensus analyst estimates, with net revenue expected at $4.23 billion and GAAP net income at $3.35 per share [4] Management Commentary - Interim CEO Michael Shepherd attributed the strong performance to a robust net interest margin and positive credit trends [4] Future Outlook - Following the acquisition approval, significant movement in Discover's shares is not anticipated until the deal closes on May 18, with the focus shifting to how Capital One integrates Discover into its operations [4]

Core Insights - Discover reported stable consumer financial habits and improving credit metrics in Q1, including lower 30+ day delinquency rates [1][4] - The acquisition by Capital One is expected to enhance competition in payment networks and expand product offerings [2][3] Financial Performance - Discover's first-quarter earnings showed improving credit metrics, increased debit spending, and higher deposits ahead of the Capital One acquisition [2] - PULSE network volumes increased by 3% to $81.3 billion, driven by growth in debit spending [3] - Card sales were down 2% year over year, with sales volume at $49.3 billion [6][7] - Ending loan balances in the card business were $99 billion, down from $102.8 billion in the previous quarter [6] Consumer Behavior - Discover's customer behavior was stable, evidenced by spending, payment, and credit trends [4] - The 30+ day delinquency rate decreased by 0.18% compared to the previous quarter [4] Provision and Charge-offs - Discover's provision expense declined by $253 million, indicating a stable credit performance [5] - Personal loan balances remained flat at $10.1 billion, with net charge-offs at 4.21% [7] Deposits and Funding - Average consumer deposits increased by 6% year over year and 1% sequentially, with direct-to-consumer deposits growing by $2 billion [8] - Direct-to-consumer deposits now account for 74% of total funding [8] Segment Performance - The Diners Club segment showed robust growth, with volumes at $12 billion, up 18% year over year, driven by expansion in India and Israel [8]

Financial Performance - Discover Financial Services reported a 31% year-over-year increase in earnings per share for Q1 2025 [4][12] - Net income reached $1.1 billion, reflecting a 30% increase from the previous year [4][12] - The net interest margin improved to 12.18%, up 115 basis points year-over-year and 22 basis points sequentially [4][12] Credit and Loan Metrics - Card receivables decreased by 0.5% year-over-year, while Discover Card sales fell by 2% compared to the prior year [4][12] - Total net charge-offs were 4.99%, which is 7 basis points higher than the previous year and up 35 basis points from the prior quarter [4][12] - The thirty-plus day delinquency rate improved compared to the previous quarter, indicating stable credit performance [5][12] Deposits and Funding - Average consumer deposits increased by 6% year-over-year and 1% sequentially, with direct-to-consumer deposit balances growing by $2 billion [4][12] - Direct-to-consumer deposits now account for 74% of total funding, while average deposit rates were reduced by 22 basis points [12] Merger with Capital One - The merger with Capital One is expected to close on May 18, 2025, following approvals from regulatory bodies and shareholders [10][12] - Due to the merger timing, Discover shareholders will receive dividends declared on Capital One shares instead of Discover's own dividends [6][12] Operational Expenses - Total operating expenses increased by 1% year-over-year, with compensation costs rising by 10% due to higher wages and benefits [12] - Information processing expenses also increased by 10% due to technology investments [12] Capital Ratios - The Common Equity Tier 1 Ratio stood at 14.7%, up 60 basis points compared to the prior quarter, indicating strong capital levels [12]