Discover Financial Services (DFS) 8-K Discover Financial Services Reports Second Quarter Net Income of $616 Million

DISCOVER FINANCIAL SERVICES																											Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
	Quarter Ended																				Six Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015					Jun 30, 2016			Jun 30, 2015			2016 vs. 2015
EARNINGS SUMMARY
Interest Income		$2,090			$2,084			$2,061			$2,008			$1,947			$143		7	%		$4,174			$3,876			$298		8	%
Interest Expense	339			334			329			323			311			28			9	%	673			611			62			10	%
Net Interest Income	1,751			1,750			1,732			1,685			1,636			115			7	%	3,501			3,265			236			7	%
Discount/Interchange Revenue	636			565			635			614			612			24			4	%	1,201			1,148			53			5	%
Rewards Cost	371			292			372			326			314			57			18	%	663			582			81			14	%
Discount and Interchange Revenue, net	265			273			263			288			298			(33		)	(11	%)	538			566			(28		)	(5	%)
Protection Products Revenue	59			61			60			62			68			(9		)	(13	%)	120			139			(19		)	(14	%)
Loan Fee Income	79			80			87			87			80			(1		)	(1	%)	159			161			(2		)	(1	%)
Transaction Processing Revenue	39			36			38			39			40			(1		)	(3	%)	75			82			(7		)	(9	%)
Other Income	23			24			25			27			53			(30		)	(57	%)	47			133			(86		)	(65	%)
Total Other Income	465			474			473			503			539			(74		)	(14	%)	939			1,081			(142		)	(13	%)
Revenue Net of Interest Expense	2,216			2,224			2,205			2,188			2,175			41			2	%	4,440			4,346			94			2	%
Provision for Loan Losses	412			424			484			332			306			106			35	%	836			696			140			20	%
Employee Compensation and Benefits	340			345			333			337			326			14			4	%	685			657			28			4	%
Marketing and Business Development	198			162			196			168			199			(1		)	(1	%)	360			381			(21		)	(6	%)
Information Processing & Communications	89			88			87			84			90			(1		)	(1	%)	177			178			(1		)	(1	%)
Professional Fees	150			160			170			160			153			(3		)	(2	%)	310			280			30			11	%
Premises and Equipment	23			24			24			24			23			—			—	%	47			47			—			—	%
Other Expense	106			107			123			109			136			(30		)	(22	%)	213			257			(44		)	(17	%)
Total Other Expense	906			886			933			882			927			(21		)	(2	%)	1,792			1,800			(8		)	—	%
Income Before Income Taxes	898			914			788			974			942			(44		)	(5	%)	1,812			1,850			(38		)	(2	%)
Tax Expense	282			339			288			362			343			(61		)	(18	%)	621			665			(44		)	(7	%)
Net Income		$616			$575			$500			$612			$599			$17		3	%		$1,191			$1,185			$6		1	%
Net Income Allocated to Common Stockholders		$602			$562			$488			$599			$586			$16		3	%		$1,164			$1,159			$5		—	%
Effective Tax Rate	31.4		%	37.1		%	36.5		%	37.2		%	36.4		%						34.3		%	35.9		%
Net Interest Margin	9.94		%	9.94		%	9.75		%	9.62		%	9.63		%	31			bps		9.94		%	9.66		%	28			bps
Operating Efficiency	40.9		%	39.8		%	42.3		%	40.3		%	42.6		%	(170		)	bps		40.4		%	41.4		%	(100		)	bps
ROE	22		%	21		%	18		%	22		%	21		%						21		%	21		%
Ending Common Shares Outstanding	407			414			422			430			437			(30		)	(7	%)	407			437			(30		)	(7	%)
Weighted Average Common Shares Outstanding	410			417			426			433			441			(31		)	(7	%)	414			444			(30		)	(7	%)
Weighted Average Common Shares Outstanding (fully diluted)	411			417			426			434			442			(31		)	(7	%)	414			445			(31		)	(7	%)
PER SHARE STATISTICS
Basic EPS		$1.47			$1.35			$1.15			$1.38			$1.33			$0.14		11	%		$2.81			$2.61			$0.20		8	%
Diluted EPS		$1.47			$1.35			$1.14			$1.38			$1.33			$0.14		11	%		$2.81			$2.61			$0.20		8	%
Common Stock Price (period end)		$53.59			$50.92			$53.62			$51.99			$57.62			($4.03	)	(7	%)		$53.59			$57.62			($4.03	)	(7	%)
Book Value per share		$28.03			$27.32			$26.74			$26.32			$25.75			$2.28		9	%		$28.03			$25.75			$2.28		9	%
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
EARNINGS SUMMARY
(unaudited, in millions)
	Quarter Ended															Six Months Ended
	Jun 30, 2016		Mar 31, 2016		Dec 31, 2015		Sep 30, 2015		Jun 30, 2015		Jun 30, 2016 vs. Jun 30, 2015					Jun 30, 2016		Jun 30, 2015		2016 vs. 2015
SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking		$868		$882		$767		$950		$914		($46	)	(5	%)		$1,750		$1,795		($45	)	(3	%)
Payment Services	30		32		21		24		28		2			7	%	62		55		7			13	%
Total		$898		$914		$788		$974		$942		($44	)	(5	%)		$1,812		$1,850		($38	)	(2	%)
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network	538		486		546		519		512		26			5	%	1,024		968		56			6	%
PULSE Network	853		841		905		972		989		(136		)	(14	%)	1,694		2,013		(319		)	(16	%)
Total	1,391		1,327		1,451		1,491		1,501		(110		)	(7	%)	2,718		2,981		(263		)	(9	%)
NETWORK VOLUME
PULSE Network		$33,856		$34,680		$35,902		$36,267		$37,162		($3,306	)	(9	%)		$68,536		$77,976		($9,440	)	(12	%)
Network Partners	3,713		3,572		3,274		3,206		3,536		177			5	%	7,285		6,485		800			12	%
Diners Club International 1	7,198		6,738		6,760		6,560		6,773		425			6	%	13,936		13,247		689			5	%
Total Payment Services	44,767		44,990		45,936		46,033		47,471		(2,704		)	(6	%)	89,757		97,708		(7,951		)	(8	%)
Discover Network - Proprietary	31,780		28,576		32,910		31,408		31,084		696			2	%	60,356		58,408		1,948			3	%
Total		$76,547		$73,566		$78,846		$77,441		$78,555		($2,008	)	(3	%)		$150,113		$156,116		($6,003	)	(4	%)
1 Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
	Quarter Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015
BALANCE SHEET SUMMARY
Assets
Cash and Investment Securities		$14,236			$16,101			$12,755			$13,650			$14,050			$186		1	%
Total Loan Receivables	71,924			70,320			72,385			70,078			69,028			2,896			4	%
Allowance for Loan Losses	(1,949		)	(1,921		)	(1,869		)	(1,743		)	(1,735		)	(214		)	(12	%)
Net Loan Receivables	69,975			68,399			70,516			68,335			67,293			2,682			4	%
Premises and Equipment, net	708			706			693			684			688			20			3	%
Goodwill and Intangible Assets, net	422			422			423			424			425			(3		)	(1	%)
Other Assets	2,170			2,465			2,412			2,378			2,317			(147		)	(6	%)
Total Assets		$87,511			$88,093			$86,799			$85,471			$84,773			$2,738		3	%
Liabilities & Stockholders' Equity
Direct to Consumer and Affinity Deposits		$34,101			$32,818			$30,866			$29,801			$29,498			$4,603		16	%
Brokered Deposits and Other Deposits	14,426			15,647			16,665			16,738			16,755			(2,329		)	(14	%)
Deposits	48,527			48,465			47,531			46,539			46,253			2,274			5	%
Borrowings	24,681			24,752			24,650			23,726			24,168			513			2	%
Accrued Expenses and Other Liabilities	2,906			3,560			3,343			3,903			3,089			(183		)	(6	%)
Total Liabilities	76,114			76,777			75,524			74,168			73,510			2,604			4	%
Total Equity	11,397			11,316			11,275			11,303			11,263			134			1	%
Total Liabilities and Stockholders' Equity		$87,511			$88,093			$86,799			$85,471			$84,773			$2,738		3	%
LIQUIDITY
Liquidity Portfolio		$13,455			$14,556			$12,077			$12,354			$12,781			$674		5	%
Undrawn Credit Facilities 1	30,777			30,077			30,682			31,008			25,029			5,748			23	%
Total Liquidity		$44,232			$44,633			$42,759			$43,362			$37,810			$6,422		17	%
1  Excludes investments pledged to the Federal Reserve, which is included within the liquidity portfolio
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
BALANCE SHEET STATISTICS
(unaudited, in millions)
	Quarter Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015
BALANCE SHEET STATISTICS
Total Common Equity		$10,837			$10,756			$10,715			$10,743			$10,703			$134	1	%
Total Common Equity/Total Assets	12.4		%	12.2		%	12.3		%	12.6		%	12.6		%
Total Common Equity/Net Loans	15.5		%	15.7		%	15.2		%	15.7		%	15.9		%
Tangible Assets		$87,089			$87,671			$86,376			$85,047			$84,348			$2,741	3	%
Tangible Common Equity 1		$10,415			$10,334			$10,292			$10,319			$10,278			$137	1	%
Tangible Common Equity/Tangible Assets 1	12.0		%	11.8		%	11.9		%	12.1		%	12.2		%
Tangible Common Equity/Net Loans 1	14.9		%	15.1		%	14.6		%	15.1		%	15.3		%
Tangible Common Equity per share  1		$25.62			$24.95			$24.41			$24.02			$23.50			$2.12	9	%
REGULATORY CAPITAL RATIOS	Basel III Transition
Total Risk Based Capital Ratio	16.7		%	16.8		%	16.5		%	17.1		%	17.2		%
Tier 1 Risk Based Capital Ratio	15.0		%	15.0		%	14.7		%	15.2		%	15.3		%
Tier 1 Leverage Ratio	12.8		%	12.8		%	12.9		%	13.1		%	13.2		%
Common Equity Tier 1 Capital Ratio	14.3		%	14.3		%	13.9		%	14.4		%	14.5		%
	Basel III Fully Phased-in
Common Equity Tier 1 Capital Ratio 2	14.2		%	14.2		%	13.9		%	14.3		%	14.4		%
RATIO OF EARNINGS TO FIXED CHARGES
Ratio of Earnings to Fixed Charges 3, 4	3.7			3.8			3.9			4.0			4.0
1   Tangible Common Equity ("TCE") is a non-GAAP measure. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure see Reconciliation of GAAP to non-GAAP Data schedule
2 Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) is calculated using Basel III fully phased-in Common Equity Tier 1 Capital, a non-GAAP measure. The Company believes that the Common Equity Tier 1 Capital Ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of Common Equity Tier 1 Capital and risk weighted assets calculated under fully phased-in Basel III rules to common equity tier 1 capital and risk weighted assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-GAAP data schedule
3 Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense
4 The Ratio of Earnings to Fixed Charges is a year-to-date statistic. The periods reported reflect the six months ended June 30, 2016, the three months ended March 31, 2016, the twelve months ended December 31, 2015, the nine months ended September 30, 2015 and the six months ended June 30, 2015
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
	Quarter Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015
AVERAGE BALANCES
Assets
Cash and Investment Securities		$14,299			$13,452			$12,881			$12,609			$13,219			$1,080		8	%
Restricted Cash	263			801			529			703			686			(423		)	(62	%)
Credit Card Loans	56,124			56,124			56,050			55,281			53,987			2,137			4	%
Private Student Loans	8,816			8,967			8,732			8,580			8,597			219			3	%
Personal Loans	5,608			5,503			5,488			5,307			5,131			477			9	%
Other Loans	262			243			233			294			385			(123		)	(32	%)
Total Loans	70,810			70,837			70,503			69,462			68,100			2,710			4	%
Total Interest Earning Assets	85,372			85,090			83,913			82,774			82,005			3,367			4	%
Allowance for Loan Losses	(1,918		)	(1,866		)	(1,794		)	(1,776		)	(1,807		)	(111		)	(6	%)
Other Assets	4,502			4,453			4,357			4,333			4,331			171			4	%
Total Assets		$87,956			$87,677			$86,476			$85,331			$84,529			$3,427		4	%
Liabilities and Stockholders' Equity
Direct to Consumer and Affinity Deposits		$33,215			$31,529			$30,126			$29,477			$29,194			$4,021		14	%
Brokered Deposits and Other Deposits	14,740			15,982			16,504			16,857			16,840			(2,100		)	(12	%)
Total Interest-bearing Deposits	47,955			47,511			46,630			46,334			46,034			1,921			4	%
Short-term Borrowings	2			2			—			60			153			(151		)	(99	%)
Securitized Borrowings	16,635			16,950			16,628			16,449			17,319			(684		)	(4	%)
Other Long-term Borrowings	7,984			7,934			7,900			7,401			5,989			1,995			33	%
Total Interest-bearing Liabilities	72,576			72,397			71,158			70,244			69,495			3,081			4	%
Other Liabilities & Stockholders' Equity	15,380			15,280			15,318			15,087			15,034			346			2	%
Total Liabilities and Stockholders' Equity		$87,956			$87,677			$86,476			$85,331			$84,529			$3,427		4	%
AVERAGE RATES
Assets
Cash and Investment Securities	0.71		%	0.72		%	0.61		%	0.55		%	0.59		%	12			bps
Restricted Cash	0.41		%	0.40		%	0.16		%	0.15		%	0.13		%	28			bps
Credit Card Loans	12.42		%	12.42		%	12.20		%	12.03		%	12.04		%	38			bps
Private Student Loans	7.13		%	7.02		%	6.88		%	6.88		%	6.91		%	22			bps
Personal Loans	12.25		%	12.20		%	11.79		%	12.08		%	12.12		%	13			bps
Other Loans	5.04		%	5.18		%	4.88		%	4.44		%	4.62		%	42			bps
Total Loans	11.72		%	11.69		%	11.49		%	11.37		%	11.35		%	37			bps
Total Interest Earning Assets	9.84		%	9.85		%	9.75		%	9.62		%	9.52		%	32			bps
Liabilities and Stockholders' Equity
Direct to Consumer and Affinity Deposits	1.22		%	1.22		%	1.21		%	1.23		%	1.23		%	(1		)	bps
Brokered Deposits and Other Deposits	1.78		%	1.68		%	1.60		%	1.55		%	1.55		%	23			bps
Total Interest-bearing Deposits	1.39		%	1.37		%	1.35		%	1.35		%	1.35		%	4			bps
Short-term Borrowings	0.64		%	0.64		%	—		%	1.49		%	1.37		%	(73		)	bps
Securitized Borrowings	2.06		%	2.04		%	1.99		%	1.98		%	1.92		%	14			bps
Other Long-term Borrowings	4.40		%	4.38		%	4.33		%	4.44		%	4.93		%	(53		)	bps
Total Interest-bearing Liabilities	1.88		%	1.86		%	1.83		%	1.82		%	1.80		%	8			bps
Net Interest Margin	9.94		%	9.94		%	9.75		%	9.62		%	9.63		%	31			bps
Net Yield on Interest-earning Assets	8.25		%	8.27		%	8.19		%	8.08		%	8.00		%	25			bps
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended																				Six Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015					Jun 30, 2016			Jun 30, 2015			2016 vs. 2015
TOTAL LOAN RECEIVABLES
Ending Loans 1, 2		$71,924			$70,320			$72,385			$70,078			$69,028			$2,896		4	%		$71,924			$69,028			$2,896		4	%
Average Loans 1, 2		$70,810			$70,837			$70,503			$69,462			$68,100			$2,710		4	%		$70,823			$68,124			$2,699		4	%
Interest Yield	11.72		%	11.69		%	11.49		%	11.37		%	11.35		%	37			bps		11.71		%	11.36		%	35			bps
Gross Principal Charge-off Rate	2.87		%	2.80		%	2.65		%	2.51		%	2.76		%	11			bps		2.83		%	2.79		%	4			bps
Gross Principal Charge-off Rate excluding PCI Loans 3	2.99		%	2.92		%	2.78		%	2.64		%	2.91		%	8			bps		2.96		%	2.95		%	1			bps
Net Principal Charge-off Rate	2.18		%	2.11		%	2.02		%	1.85		%	2.05		%	13			bps		2.15		%	2.10		%	5			bps
Net Principal Charge-off Rate excluding PCI Loans 3	2.27		%	2.21		%	2.11		%	1.94		%	2.16		%	11			bps		2.24		%	2.21		%	3			bps
Delinquency Rate (over 30 days) excluding PCI Loans 3	1.60		%	1.64		%	1.67		%	1.60		%	1.49		%	11			bps		1.60		%	1.49		%	11			bps
Delinquency Rate (over 90 days) excluding PCI Loans 3	0.71		%	0.79		%	0.76		%	0.72		%	0.69		%	2			bps		0.71		%	0.69		%	2			bps
Gross Principal Charge-off Dollars		$505			$493			$472			$440			$469			$36		8	%		$998			$944			$54		6	%
Net Principal Charge-off Dollars		$384			$372			$358			$324			$347			$37		11	%		$756			$707			$49		7	%
Net Interest and Fee Charge-off Dollars		$84			$86			$86			$81			$87			($3	)	(3	%)		$170			$182			($12	)	(7	%)
Loans Delinquent Over 30 Days 3		$1,104			$1,105			$1,153			$1,070			$980			$124		13	%		$1,104			$980			$124		13	%
Loans Delinquent Over 90 Days 3		$491			$531			$530			$481			$450			$41		9	%		$491			$450			$41		9	%
Allowance for Loan Loss (period end)		$1,949			$1,921			$1,869			$1,743			$1,735			$214		12	%		$1,949			$1,735			$214		12	%
Change in Loan Loss Reserves		$28			$52			$126			$8			($41	)		$69					$80			($11	)		$91
Reserve Rate	2.71		%	2.73		%	2.58		%	2.49		%	2.51		%	20			bps		2.71		%	2.51		%	20			bps
Reserve Rate Excluding PCI Loans 3	2.77		%	2.80		%	2.65		%	2.57		%	2.60		%	17			bps		2.77		%	2.60		%	17			bps
CREDIT CARD LOANS
Ending Loans		$57,219			$55,620			$57,896			$55,655			$54,949			$2,270		4	%		$57,219			$54,949			$2,270		4	%
Average Loans		$56,124			$56,124			$56,050			$55,281			$53,987			$2,137		4	%		$56,124			$54,013			$2,111		4	%
Interest Yield	12.42		%	12.42		%	12.20		%	12.03		%	12.04		%	38			bps		12.42		%	12.04		%	38			bps
Gross Principal Charge-off Rate	3.21		%	3.15		%	2.94		%	2.83		%	3.14		%	7			bps		3.18		%	3.18		%	—			bps
Net Principal Charge-off Rate	2.39		%	2.34		%	2.18		%	2.04		%	2.28		%	11			bps		2.37		%	2.34		%	3			bps
Delinquency Rate (over 30 days)	1.63		%	1.68		%	1.72		%	1.65		%	1.55		%	8			bps		1.63		%	1.55		%	8			bps
Delinquency Rate (over 90 days)	0.78		%	0.86		%	0.85		%	0.78		%	0.75		%	3			bps		0.78		%	0.75		%	3			bps
Gross Principal Charge-off Dollars		$448			$439			$415			$394			$423			$25		6	%		$887			$851			$36		4	%
Net Principal Charge-off Dollars		$334			$326			$309			$285			$307			$27		9	%		$660			$626			$34		5	%
Loans Delinquent Over 30 Days		$933			$934			$995			$919			$850			$83		10	%		$933			$850			$83		10	%
Loans Delinquent Over 90 Days		$444			$480			$490			$437			$414			$30		7	%		$444			$414			$30		7	%
Allowance for Loan Loss (period end)		$1,603			$1,590			$1,554			$1,459			$1,441			$162		11	%		$1,603			$1,441			$162		11	%
Change in Loan Loss Reserves		$13			$36			$95			$18			($51	)		$64					$49			($33	)		$82
Reserve Rate	2.80		%	2.86		%	2.68		%	2.62		%	2.62		%	18			bps		2.80		%	2.62		%	18			bps
Total Discover Card Volume		$33,409			$30,004			$33,830			$32,971			$32,299			$1,110		3	%		$63,413			$61,024			$2,389		4	%
Discover Card Sales Volume		$30,702			$27,552			$31,672			$30,374			$30,017			$685		2	%		$58,254			$56,396			$1,858		3	%
Rewards Rate	1.21		%	1.06		%	1.18		%	1.07		%	1.05		%	16			bps		1.14		%	1.03		%	11			bps
1 Total Loans includes mortgages and other loans
2 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables
3 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended																				Six Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015					Jun 30, 2016			Jun 30, 2015			2016 vs. 2015
PRIVATE STUDENT LOANS
Ending Loans		$8,725			$8,914			$8,763			$8,769			$8,520			$205		2	%		$8,725			$8,520			$205		2	%
Ending PCI Loans 1		$2,834			$2,965			$3,116			$3,249			$3,381			($547	)	(16	%)		$2,834			$3,381			($547	)	(16	%)
Interest Yield	7.13		%	7.02		%	6.88		%	6.88		%	6.91		%	22			bps		7.08		%	6.93		%	15			bps
Net Principal Charge-off Rate	0.74		%	0.56		%	0.82		%	0.57		%	0.61		%	13			bps		0.65		%	0.61		%	4			bps
Net Principal Charge-off Rate excluding PCI Loans 2	1.10		%	0.85		%	1.30		%	0.94		%	1.02		%	8			bps		0.98		%	1.02		%	(4		)	bps
Delinquency Rate (over 30 days) excluding PCI Loans 2	1.88		%	1.92		%	1.91		%	1.88		%	1.78		%	10			bps		1.88		%	1.78		%	10			bps
Reserve Rate	1.73		%	1.65		%	1.63		%	1.48		%	1.68		%	5			bps		1.73		%	1.68		%	5			bps
Reserve Rate excluding PCI Loans 2	1.95		%	1.86		%	1.88		%	1.84		%	2.23		%	(28		)	bps		1.95		%	2.23		%	(28		)	bps
PERSONAL LOANS
Ending Loans		$5,708			$5,534			$5,490			$5,425			$5,183			$525		10	%		$5,708			$5,183			$525		10	%
Interest Yield	12.25		%	12.20		%	11.79		%	12.08		%	12.12		%	13			bps		12.23		%	12.16		%	7			bps
Net Principal Charge-off Rate	2.38		%	2.45		%	2.28		%	1.99		%	2.10		%	28			bps		2.41		%	2.16		%	25			bps
Delinquency Rate (over 30 days)	1.02		%	0.97		%	0.89		%	0.80		%	0.71		%	31			bps		1.02		%	0.71		%	31			bps
Reserve Rate	3.07		%	2.99		%	2.82		%	2.49		%	2.54		%	53			bps		3.07		%	2.54		%	53			bps
1 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables
2 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
SEGMENT RESULTS
(unaudited, in millions)
	Quarter Ended																				Six Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016 vs. Jun 30, 2015					Jun 30, 2016			Jun 30, 2015			2016 vs. 2015
DIRECT BANKING
Interest Income		$2,090			$2,084			$2,061			$2,008			$1,947			$143		7	%		$4,174			$3,876			$298		8	%
Interest Expense	339			334			329			323			311			28			9	%	673			611			62			10	%
Net Interest Income	1,751			1,750			1,732			1,685			1,636			115			7	%	3,501			3,265			236			7	%
Other Income	396			406			408			435			468			(72		)	(15	%)	802			936			(134		)	(14	%)
Revenue Net of Interest Expense	2,147			2,156			2,140			2,120			2,104			43			2	%	4,303			4,201			102			2	%
Provision for Loan Losses	411			423			486			332			306			105			34	%	834			694			140			20	%
Total Other Expense	868			851			887			838			884			(16		)	(2	%)	1,719			1,712			7			—	%
Income Before Income Taxes		$868			$882			$767			$950			$914			($46	)	(5	%)		$1,750			$1,795			($45	)	(3	%)
Net Interest Margin	9.95		%	9.94		%	9.75		%	9.63		%	9.63		%	32			bps		9.94		%	9.67		%	27			bps
Pretax Return on Loan Receivables	4.93		%	5.01		%	4.32		%	5.43		%	5.38		%	(45		)	bps		4.97		%	5.31		%	(34		)	bps
PAYMENT SERVICES
Interest Income		$—			$—			$—			$—			$—			$—		NM			$—			$—			$—		NM
Interest Expense	—			—			—			—			—			—			NM		—			—			—			NM
Net Interest Income	—			—			—			—			—			—			NM		—			—			—			NM
Other Income	69			68			65			68			71			(2		)	(3	%)	137			145			(8		)	(6	%)
Revenue Net of Interest Expense	69			68			65			68			71			(2		)	(3	%)	137			145			(8		)	(6	%)
Provision for Loan Losses	1			1			(2		)	—			—			1			NM		2			2			—			—	%
Total Other Expense	38			35			46			44			43			(5		)	(12	%)	73			88			(15		)	(17	%)
Income Before Income Taxes		$30			$32			$21			$24			$28			$2		7	%		$62			$55			$7		13	%
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES

GLOSSARY OF FINANCIAL TERMS

Book Value per share represents total equity divided by ending common shares outstanding

Common Equity Tier 1 Capital Ratio (Basel III transition) represents common equity tier 1 capital divided by risk weighted assets calculated under Basel III rules subject to transition provisions

Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) represents fully phased-in common equity tier 1 capital divided by risk weighted assets under fully phased-in Basel III rules. The Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) is calculated using Basel III fully phased-in common equity tier 1 capital, a non-GAAP measure. The Company believes that the common equity tier 1 capital ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of common equity tier 1 capital and risk weighted assets calculated under fully phased-in Basel III rules to common equity tier 1 capital and risk weighted assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-GAAP data schedule

Delinquency Rate (Over 30 Days) represents loans delinquent over thirty days divided by ending loans (total or respective loans, as appropriate)

Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided

Discover card sales volume represents Discover card activity related to net sales

Discover card volume represents Discover card activity related to net sales, balance transfers, cash advances and other activity

Discover Network proprietary volume represents gross proprietary sales volume on the Discover Network

Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided by ending loans (total or respective loans, as appropriate)

Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding

Effective Tax Rate represents tax expense divided by income before income taxes

Gross Principal Charge-off Rate represents gross principal charge-off dollars (annualized) divided by average loans for the reporting period

Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period

Liquidity Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments

Net Income Allocated to Common Stockholders represents net income less (i) dividends and accretion of discount on shares of preferred stock and (ii) income allocated to participating securities

Net Interest Margin represents net interest income (annualized) divided by average total loans for the period.

Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period

Operating Efficiency represents total other expense divided by revenue net of interest expense

Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by total average loans for the period

Proprietary Network Volume represents gross proprietary sales volume on the Discover Network

Ratio of Earnings to Fixed Charges is a year-to-date statistic and represents income before income tax expense and fixed charges divided by fixed charges for the reporting period. Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense for the reporting period

Regulatory Capital Ratios are regulatory measures used to evaluate capital adequacy. Under Basel III, to be considered "well-capitalized," total risk-based, tier 1 risk-based, tier 1 leverage, and common equity tier 1 ratios of 10%, 8%, 5%, and 6.5% respectively must be maintained. As of January 1, 2015 regulatory capital ratios are calculated under Basel III rules subject to transition provisions. Total Risk Based Capital Ratio represents total capital divided by risk-weighted assets. Tier 1 Capital Ratio represents tier 1 capital divided by risk-weighted assets. Tier 1 Leverage Ratio represents tier 1 capital divided by average total assets. The Tier 1 Common Capital Ratio has been replaced by the Common Equity Tier 1 Ratio under Basel III

Reserve Rate represents the allowance for loan losses divided by total loans

Return on Equity represents net income (annualized) divided by average total equity for the reporting period

Rewards Rate represents rewards cost divided by Discover Card sales volume

Tangible Assets represents total assets less goodwill and intangibles

Tangible Common Equity ("TCE"), a non-GAAP financial measure, represents total common equity less goodwill and intangibles. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of GAAP to Non-GAAP Data schedule

Tangible Common Equity/Net Loans,a non-GAAP measure,represents total common equity less goodwill and intangibles divided by total loans less the allowance for loan loss (period end)

Tangible Common Equity per Share,a non-GAAP measure,represents total common equity less goodwill and intangibles divided by ending common shares outstanding

Tangible Common Equity/Tangible Assets, a non-GAAP measure,represents total common equity less goodwill and intangibles divided by total assets less goodwill and intangibles

Total Volume represents the transaction dollar volume from the PULSE network, Network Partners, Diners Club and proprietary Discover Network

Undrawn Credit Facilities represents asset-backed conduit funding facilities and Federal Reserve discount window (excluding investments pledged to the Federal Reserve, which are included within the liquidity investment portfolio)

DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO NON-GAAP DATA
(unaudited, in millions)
	Quarter Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015
GAAP Total Common Equity		$10,837			$10,756			$10,715			$10,743			$10,703
Less: Goodwill	(255		)	(255		)	(255		)	(255		)	(255		)
Less: Intangibles	(167		)	(167		)	(168		)	(169		)	(170		)
Tangible Common Equity 1		$10,415			$10,334			$10,292			$10,319			$10,278
Common Equity Tier 1 Capital (Basel III Transition)		$10,677			$10,593			$10,566			$10,612			$10,552
Adjustments Related To Capital Components During Transition 2	(53		)	(54		)	(82		)	(82		)	(83		)
Common Equity Tier 1 Capital (Basel III Fully Phased-in)		$10,624			$10,539			$10,484			$10,530			$10,469
Risk Weighted Assets (Basel III Transition)		$74,892			$74,205			$75,787			$73,526			$72,658
Risk Weighted Assets (Basel III Fully Phased-in) 3		$74,824			$74,137			$75,685			$73,423			$72,555
Common Equity Tier 1 Capital Ratio (Basel III Transition)	14.3		%	14.3		%	13.9		%	14.4		%	14.5		%
Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) 4	14.2		%	14.2		%	13.9		%	14.3		%	14.4		%
GAAP Book Value Per Share		$28.03			$27.32			$26.74			$26.32			$25.75
Less: Goodwill	(0.62		)	(0.62		)	(0.60		)	(0.60		)	(0.58		)
Less: Intangibles	(0.41		)	(0.40		)	(0.40		)	(0.40		)	(0.39		)
Less: Preferred Stock	(1.38		)	(1.35		)	(1.33		)	(1.30		)	(1.28		)
Tangible Common Equity Per Share		$25.62			$24.95			$24.41			$24.02			$23.50
1 Tangible Common Equity ("TCE"), a non-GAAP financial measure, represents common equity less goodwill and intangibles. A reconciliation of TCE to common equity, a GAAP financial measure, is shown above. Other financial services companies may also use TCE and definitions may vary, so users of this information are advised to exercise caution in comparing TCE of different companies. TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful measure to investors of the true net asset value of the Company
2 Adjustments related to capital components for fully phased-in Basel III include the phase-in of the intangible asset exclusion
3 Key differences under fully phased-in Basel III rules in the calculation of risk weighted assets include higher risk weighting for past due loans and unfunded commitments
4 Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Common Equity Tier 1 Capital (Basel III Fully Phased-in), a non-GAAP measure, divided by Risk Weighted Assets (Basel III Fully Phased-in)
Note: See Glossary of Financial Terms for definitions of financial terms