Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 62: 
Average Balance Sheet Analysis


(dollars in millions)
|    |                                               |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
|---:|:----------------------------------------------|:---------------------------------|:--------|:-----------|:------|:---------|:-------|:----------------|:--------|:-----------|:--------|:---------|:---|:----------------|:-------|:-----------|:-------|:---------|:--------|:--------|:----|:---|:------|:---|:-------|:-------|:-----|:---|:---|:----|
|  1 |                                               | For the Years Ended December 31, |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
|  2 |                                               | 2023                             |         | 2022       |       | 2021     |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
|  3 |                                               | Average Balance                  |         | Yield/Rate |       | Interest |        | Average Balance |         | Yield/Rate |         | Interest |    | Average Balance |        | Yield/Rate |        | Interest |         |         |     |    |       |    |        |        |      |    |    |     |
|  4 | Assets                                        |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
|  5 | Interest-earning assets                       |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
|  6 | Cash and cash equivalents                     | $                                | 8,192   |            |       | 5.17     | %      |                 | $       | 423        |         |          | $  | 9,279           |        |            | 1.89   | %        |         | $       | 175 |    |       | $  | 14,236 |        | 0.13 | %  | $  | 18  |
|  7 | Restricted cash                               | 250                              |         |            | 7.80  | %        |        | 20              |         |            | 515     |          |    | 1.48            | %      |            | 8      |          |         | 695     |     |    | 0.03  | %  |        | NM     |      |    |    |     |
|  8 | Other short-term investments                  | -                                |         |            | -     |          |        | -               |         |            | -       |          |    | -               |        |            | -      |          |         | 176     |     |    | 0.12  | %  |        | NM     |      |    |    |     |
|  9 | Investment securities                         | 12,938                           |         |            | 3.47  | %        |        | 449             |         |            | 6,988   |          |    | 2.57            | %      |            | 179    |          |         | 8,713   |     |    | 2.09  | %  |        | 182    |      |    |    |     |
| 10 | Loan receivables(1)                           |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 11 | Credit card loans(2)(3)                       | 94,205                           |         |            | 15.33 | %        |        | 14,438          |         |            | 79,243  |          |    | 13.42           | %      |            | 10,632 |          |         | 69,365  |     |    | 12.57 | %  |        | 8,717  |      |    |    |     |
| 12 | Private student loans                         | 10,382                           |         |            | 9.95  | %        |        | 1,033           |         |            | 10,240  |          |    | 8.11            | %      |            | 831    |          |         | 10,057  |     |    | 7.38  | %  |        | 742    |      |    |    |     |
| 13 | Personal loans                                | 9,011                            |         |            | 12.83 | %        |        | 1,156           |         |            | 7,295   |          |    | 11.95           | %      |            | 872    |          |         | 6,945   |     |    | 12.64 | %  |        | 878    |      |    |    |     |
| 14 | Other                                         | 4,713                            |         |            | 6.92  | %        |        | 326             |         |            | 2,895   |          |    | 5.77            | %      |            | 167    |          |         | 2,054   |     |    | 5.57  | %  |        | 114    |      |    |    |     |
| 15 | Total loan receivables                        | 118,311                          |         |            | 14.33 | %        |        | 16,953          |         |            | 99,673  |          |    | 12.54           | %      |            | 12,502 |          |         | 88,421  |     |    | 11.82 | %  |        | 10,451 |      |    |    |     |
| 16 | Total interest-earning assets                 | 139,691                          |         |            | 12.77 | %        |        | 17,845          |         |            | 116,455 |          |    | 11.05           | %      |            | 12,864 |          |         | 112,241 |     |    | 9.49  | %  |        | 10,651 |      |    |    |     |
| 17 | Allowance for credit losses                   | (7,936)                          |         |            |       |          |        |                 | (6,820) |            |         |          |    |                 |        | (7,351)    |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 18 | Other assets                                  | 6,938                            |         |            |       |          |        |                 | 6,070   |            |         |          |    |                 |        | 6,237      |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 19 | Total assets(4)                               | $                                | 138,693 |            |       |          |        |                 |         | $          | 115,705 |          |    |                 |        |            |        | $        | 111,127 |         |     |    |       |    |        |        |      |    |    |     |
| 20 | Liabilities and Stockholders' Equity          |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 21 | Interest-bearing liabilities                  |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 22 | Interest-bearing deposits                     |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 23 | Time deposits                                 | $                                | 38,220  |            |       | 3.89     | %      |                 | $       | 1,485      |         |          | $  | 23,988          |        |            | 2.02   | %        |         | $       | 484 |    |       | $  | 23,928 |        | 1.84 | %  | $  | 440 |
| 24 | Money market deposits                         | 8,143                            |         |            | 4.16  | %        |        | 339             |         |            | 8,453   |          |    | 1.67            | %      |            | 141    |          |         | 8,142   |     |    | 0.53  | %  |        | 43     |      |    |    |     |
| 25 | Other interest-bearing savings deposits       | 51,366                           |         |            | 4.01  | %        |        | 2,062           |         |            | 44,276  |          |    | 1.43            | %      |            | 632    |          |         | 40,912  |     |    | 0.43  | %  |        | 178    |      |    |    |     |
| 26 | Total interest-bearing deposits               | 97,729                           |         |            | 3.98  | %        |        | 3,886           |         |            | 76,717  |          |    | 1.64            | %      |            | 1,257  |          |         | 72,982  |     |    | 0.91  | %  |        | 661    |      |    |    |     |
| 27 | Borrowings                                    |                                  |         |            |       |          |        |                 |         |            |         |          |    |                 |        |            |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 28 | Short-term borrowings                         | 44                               |         |            | 10.21 | %        |        | 5               |         |            | 225     |          |    | 0.70            | %      |            | 2      |          |         | 72      |     |    | 0.18  | %  |        | NM     |      |    |    |     |
| 29 | Securitized borrowings(5)(6)(7)               | 10,528                           |         |            | 4.30  | %        |        | 453             |         |            | 9,060   |          |    | 2.41            | %      |            | 219    |          |         | 9,627   |     |    | 1.06  | %  |        | 102    |      |    |    |     |
| 30 | Other long-term borrowings(6)(7)(8)           | 9,090                            |         |            | 4.43  | %        |        | 402             |         |            | 9,334   |          |    | 4.15            | %      |            | 387    |          |         | 9,888   |     |    | 3.75  | %  |        | 371    |      |    |    |     |
| 31 | Total borrowings                              | 19,662                           |         |            | 4.37  | %        |        | 860             |         |            | 18,619  |          |    | 3.26            | %      |            | 608    |          |         | 19,587  |     |    | 2.42  | %  |        | 473    |      |    |    |     |
| 32 | Total interest-bearing liabilities            | 117,391                          |         |            | 4.04  | %        |        | 4,746           |         |            | 95,336  |          |    | 1.96            | %      |            | 1,865  |          |         | 92,569  |     |    | 1.23  | %  |        | 1,134  |      |    |    |     |
| 33 | Other liabilities and stockholders' equity(9) | 21,302                           |         |            |       |          |        |                 | 20,369  |            |         |          |    |                 |        | 18,558     |        |          |         |         |     |    |       |    |        |        |      |    |    |     |
| 34 | Total liabilities and stockholders' equity    | $                                | 138,693 |            |       |          |        |                 |         | $          | 115,705 |          |    |                 |        |            |        | $        | 111,127 |         |     |    |       |    |        |        |      |    |    |     |
| 35 | Net interest income                           |                                  |         |            |       | $        | 13,099 |                 |         |            |         |          |    | $               | 10,999 |            |        |          |         |         |     | $  | 9,517 |    |        |        |      |    |    |     |
| 36 | Net interest margin(10)                       |                                  |         | 11.07      | %     |          |        |                 |         |            | 11.04   | %        |    |                 |        |            |        | 10.76    | %       |         |     |    |       |    |        |        |      |    |    |     |
| 37 | Net yield on interest-earning assets(11)      |                                  |         | 9.38       | %     |          |        |                 |         |            | 9.45    | %        |    |                 |        |            |        | 8.48     | %       |         |     |    |       |    |        |        |      |    |    |     |
| 38 | Interest rate spread(12)                      |                                  |         | 8.73       | %     |          |        |                 |         |            | 9.09    | %        |    |                 |        |            |        | 8.26     | %       |         |     |    |       |    |        |        |      |    |    |     |
(1)Average balances of loan receivables and yield calculations include non-accruing loans. If the non-accruing loan balances were excluded, there would not be a material impact on the amounts reported above. 
(2)Interest income on credit card loans includes $468 million, $365 million and $295 million of amortization of balance transfer fees for the years ended December 31, 2023, 2022 and 2021, respectively.
(3)Includes the impact of interest rate swap agreements used to change a portion of floating-rate assets to fixed-rate assets for the years ended December 31, 2023, 2022 and 2021.
(4)The return on average assets, based on net income, was 2.12%, 3.80% and 4.90% for the years ended December 31, 2023, 2022 and 2021, respectively.
(5)Includes the impact of one terminated derivative formerly designated as a cash flow hedge for the years ended December 31, 2023, 2022 and 2021.
(6)Includes the impact of interest rate swap agreements used to change a portion of fixed-rate funding to floating-rate funding for the years ended December 31, 2023, 2022 and 2021.
(7)Includes the impact of terminated derivatives formerly designated as fair value hedges for the years ended December 31, 2023, 2022 and 2021.
(8)Includes the impact of interest rate swap agreements used to change a portion of floating-rate funding to fixed-rate funding for the years ended December 31, 2023 and 2022.
(9)The return on average stockholders' equity, based on net income, was 21.00%, 32.00% and 43.12% for the years ended December 31, 2023, 2022 and 2021, respectively.
(10)Net interest margin represents net interest income as a percentage of average total loan receivables.
(11)Net yield on interest-earning assets represents net interest income as a percentage of average total interest-earning assets.
(12)Interest rate spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities.
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, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 65: The following tables provide changes in our allowance for credit losses (dollars in millions):
|    |                                                  |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
|---:|:-------------------------------------------------|:-------------------------------------|:------|:---------------------|:------|:---------------|:----|:------------|:------------|:----|:--------|:---|:---|:------|
|  1 |                                                  | For the Year Ended December 31, 2023 |       |                      |       |                |     |             |             |     |         |    |    |       |
|  2 |                                                  | Credit Card Loans                    |       | Private StudentLoans |       | Personal Loans |     | Other Loans | Total Loans |     |         |    |    |       |
|  3 | Balance at December 31, 2022                     | $                                    | 5,883 |                      |       | $              | 839 |             | $           | 595 | $       | 57 | $  | 7,374 |
|  4 | Cumulative effect of ASU No. 2022-02 adoption(1) | (66)                                 |       |                      | -     |                |     | (2)         |             | -   | (68)    |    |    |       |
|  5 | Balance at January 1, 2023                       | 5,817                                |       |                      | 839   |                |     | 593         |             | 57  | 7,306   |    |    |       |
|  6 | Additions                                        |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
|  7 | Provision for credit losses(2)                   | 5,476                                |       |                      | 152   |                |     | 363         |             | 28  | 6,019   |    |    |       |
|  8 | Deductions                                       |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
|  9 | Charge-offs                                      | (4,481)                              |       |                      | (155) |                |     | (290)       |             | (1) | (4,927) |    |    |       |
| 10 | Recoveries                                       | 807                                  |       |                      | 22    |                |     | 56          |             | -   | 885     |    |    |       |
| 11 | Net charge-offs                                  | (3,674)                              |       |                      | (133) |                |     | (234)       |             | (1) | (4,042) |    |    |       |
| 13 | Balance at December 31, 2023                     | $                                    | 7,619 |                      |       | $              | 858 |             | $           | 722 | $       | 84 | $  | 9,283 |
| 15 |                                                  | For the Year Ended December 31, 2022 |       |                      |       |                |     |             |             |     |         |    |    |       |
| 16 |                                                  | Credit Card Loans                    |       | Private StudentLoans |       | Personal Loans |     | Other Loans | Total Loans |     |         |    |    |       |
| 17 | Balance at December 31, 2021                     | $                                    | 5,273 |                      |       | $              | 843 |             | $           | 662 | $       | 44 | $  | 6,822 |
| 18 | Additions                                        |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
| 19 | Provision for credit losses(2)                   | 2,233                                |       |                      | 99    |                |     | 24          |             | 13  | 2,369   |    |    |       |
| 20 | Deductions                                       |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
| 21 | Charge-offs                                      | (2,417)                              |       |                      | (126) |                |     | (159)       |             | -   | (2,702) |    |    |       |
| 22 | Recoveries                                       | 794                                  |       |                      | 23    |                |     | 68          |             | -   | 885     |    |    |       |
| 23 | Net charge-offs                                  | (1,623)                              |       |                      | (103) |                |     | (91)        |             | -   | (1,817) |    |    |       |
| 25 | Balance at December 31, 2022                     | $                                    | 5,883 |                      |       | $              | 839 |             | $           | 595 | $       | 57 | $  | 7,374 |
| 27 |                                                  | For the Year Ended December 31, 2021 |       |                      |       |                |     |             |             |     |         |    |    |       |
| 28 |                                                  | Credit Card Loans                    |       | Private StudentLoans |       | Personal Loans |     | Other Loans | Total Loans |     |         |    |    |       |
| 29 | Balance at December 31, 2020                     | $                                    | 6,491 |                      |       | $              | 840 |             | $           | 857 | $       | 38 | $  | 8,226 |
| 32 | Additions                                        |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
| 33 | Provision for credit losses(2)                   | 229                                  |       |                      | 67    |                |     | (75)        |             | 6   | 227     |    |    |       |
| 34 | Deductions                                       |                                      |       |                      |       |                |     |             |             |     |         |    |    |       |
| 35 | Charge-offs                                      | (2,255)                              |       |                      | (89)  |                |     | (190)       |             | -   | (2,534) |    |    |       |
| 36 | Recoveries                                       | 808                                  |       |                      | 25    |                |     | 70          |             | -   | 903     |    |    |       |
| 37 | Net charge-offs                                  | (1,447)                              |       |                      | (64)  |                |     | (120)       |             | -   | (1,631) |    |    |       |
| 39 | Balance at December 31, 2021                     | $                                    | 5,273 |                      |       | $              | 843 |             | $           | 662 | $       | 44 | $  | 6,822 |


(1)Represents the adjustment to the allowance for credit losses as a result of the adoption of Accounting Standards Update ("ASU") No. 2022-02 on January 1, 2023.

(2)Excludes a $1 million, $10 million and $9 million adjustment to the liability for expected credit losses on unfunded commitments for the years ended December 31, 2023, 2022 and 2021, respectively, as the liability is recorded in accrued expenses and other liabilities in our consolidated statements of financial condition.
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Question: What does the change in Discover’s Charge-Off Ratio in 2023 compared to previous years imply?
Answer: In 2023, Discover Financial Services’ Charge-Off Ratio increased to approximately 3.41%, up from 1.82% in 2022 and 1.84% in 2021. This significant increase indicates a notable rise in the proportion of loan receivables deemed uncollectible. The rise in the Charge-Off Ratio reflects a deterioration in the company’s credit quality over the past year, suggesting that a larger percentage of its loan portfolio is facing defaults or delinquencies.