Discover Financial Services (DFS) 8-K Discover Financial Services Reports Fourth Quarter Net Income of $687 Million

DISCOVER FINANCIAL SERVICES																											Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
	Quarter Ended																				Twelve Months Ended
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017					Dec 31, 2018			Dec 31, 2017			2018 vs. 2017
EARNINGS SUMMARY
Interest Income		$2,907			$2,781			$2,636			$2,569			$2,556			$351		14	%		$10,893			$9,648			$1,245		13	%
Interest Expense	605			558			507			469			436			169			39	%	2,139			1,648			491			30	%
Net Interest Income	2,302			2,223			2,129			2,100			2,120			182			9	%	8,754			8,000			754			9	%
Discount/Interchange Revenue	752			753			724			646			717			35			5	%	2,875			2,654			221			8	%
Rewards Cost	475			473			461			392			434			41			9	%	1,801			1,602			199			12	%
Discount and Interchange Revenue, net	277			280			263			254			283			(6		)	(2	%)	1,074			1,052			22			2	%
Protection Products Revenue	50			51			50			53			54			(4		)	(7	%)	204			223			(19		)	(9	%)
Loan Fee Income	108			103			95			96			96			12			13	%	402			363			39			11	%
Transaction Processing Revenue	46			47			42			43			43			3			7	%	178			167			11			7	%
Other Income	24			20			24			29			18			6			33	%	97			92			5			5	%
Total Other Income	505			501			474			475			494			11			2	%	1,955			1,897			58			3	%
Revenue Net of Interest Expense	2,807			2,724			2,603			2,575			2,614			193			7	%	10,709			9,897			812			8	%
Provision for Loan Losses	800			742			742			751			679			121			18	%	3,035			2,579			456			18	%
Employee Compensation and Benefits	414			408			400			405			411			3			1	%	1,627			1,512			115			8	%
Marketing and Business Development	230			218			224			185			213			17			8	%	857			776			81			10	%
Information Processing & Communications	93			89			86			82			80			13			16	%	350			315			35			11	%
Professional Fees	190			166			161			155			189			1			1	%	672			655			17			3	%
Premises and Equipment	26			26			24			26			26			—			—	%	102			99			3			3	%
Other Expense	157			108			89			115			117			40			34	%	469			424			45			11	%
Total Other Expense	1,110			1,015			984			968			1,036			74			7	%	4,077			3,781			296			8	%
Income Before Income Taxes	897			967			877			856			899			(2		)	—	%	3,597			3,537			60			2	%
Tax Expense	210			247			208			190			512			(302		)	(59	%)	855			1,438			(583		)	(41	%)
Net Income		$687			$720			$669			$666			$387			$300		78	%		$2,742			$2,099			$643		31	%
Net Income Allocated to Common Stockholders		$681			$699			$663			$646			$359			$322		90	%		$2,689			$2,031			$658		32	%
Effective Tax Rate	23.5		%	25.5		%	23.7		%	22.2		%	57.0		%						23.8		%	40.7		%
Net Interest Margin	10.35		%	10.28		%	10.21		%	10.23		%	10.28		%	7			bps		10.27		%	10.19		%	8			bps
Operating Efficiency	39.6		%	37.2		%	37.8		%	37.6		%	39.7		%	(10		)	bps		38.1		%	38.2		%	(10		)	bps
ROE	25		%	26		%	25		%	25		%	14		%						25		%	18.6		%
Capital Returned to Common Stockholders		$578			$580			$656			$684			$657			($79	)	(12	%)		$2,498			$2,491			$7		—	%
Payout Ratio	85		%	83		%	99		%	106		%	183		%						93		%	123		%	(3,000		)	bps
Ending Common Shares Outstanding	331			338			344			351			358			(27		)	(8	%)	331			358			(27		)	(8	%)
Weighted Average Common Shares Outstanding	335			341			348			355			362			(27		)	(7	%)	344			374			(30		)	(8	%)
Weighted Average Common Shares Outstanding (fully diluted)	335			342			348			355			362			(27		)	(7	%)	345			374			(29		)	(8	%)
PER SHARE STATISTICS
Basic EPS		$2.04			$2.05			$1.91			$1.82			$0.99			$1.05		106	%		$7.81			$5.43			$2.38		44	%
Diluted EPS		$2.03			$2.05			$1.91			$1.82			$0.99			$1.04		105	%		$7.79			$5.42			$2.37		44	%
Common Stock Price (period end)		$58.98			$76.45			$70.41			$71.93			$76.92			($17.94	)	(23	%)		$58.98			$76.92			($17.94	)	(23	%)
Book Value per share		$33.58			$32.60			$31.66			$30.93			$30.43			$3.15		10	%		$33.58			$30.43			$3.15		10	%
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
EARNINGS SUMMARY
(unaudited, in millions)
	Quarter Ended															Twelve Months Ended
	Dec 31, 2018		Sep 30, 2018		Jun 30, 2018		Mar 31, 2018		Dec 31, 2017		Dec 31, 2018 vs. Dec 31, 2017					Dec 31, 2018		Dec 31, 2017		2018 vs. 2017
SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking		$874		$923		$837		$811		$870		$4		—	%		$3,445		$3,392		$53	2	%
Payment Services	23		44		40		45		29		(6		)	(21	%)	152		145		7		5	%
Total		$897		$967		$877		$856		$899		($2	)	0	%		$3,597		$3,537		$60	2	%
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network	663		642		614		550		607		56			9	%	2,469		2,240		229		10	%
PULSE Network	1,169		1,151		1,055		989		1,029		140			14	%	4,364		3,856		508		13	%
Total	1,832		1,793		1,669		1,539		1,636		196			12	%	6,833		6,096		737		12	%
NETWORK VOLUME
PULSE Network		$47,082		$45,244		$44,308		$43,158		$42,386		$4,696		11	%		$179,792		$157,128		$22,664	14	%
Network Partners	4,680		5,113		4,602		4,553		3,280		1,400			43	%	18,948		14,213		4,735		33	%
Diners Club International 1	8,700		8,370		8,417		8,390		8,373		327			4	%	33,877		31,544		2,333		7	%
Total Payment Services	60,462		58,727		57,327		56,101		54,039		6,423			12	%	232,617		202,885		29,732		15	%
Discover Network - Proprietary	38,502		36,642		36,339		32,382		36,267		2,235			6	%	143,865		133,044		10,821		8	%
Total		$98,964		$95,369		$93,666		$88,483		$90,306		$8,658		10	%		$376,482		$335,929		$40,553	12	%
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
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017
BALANCE SHEET SUMMARY
Assets
Cash and Investment Securities		$18,515			$18,410			$17,441			$18,641			$14,955			$3,560		24	%
Total Loan Receivables	90,512			86,894			84,789			82,744			84,248			6,264			7	%
Allowance for Loan Losses	(3,041		)	(2,927		)	(2,828		)	(2,736		)	(2,621		)	(420		)	(16	%)
Net Loan Receivables	87,471			83,967			81,961			80,008			81,627			5,844			7	%
Premises and Equipment, net	936			896			874			848			825			111			13	%
Goodwill and Intangible Assets, net	416			417			417			417			418			(2		)	—	%
Other Assets	2,215			2,152			2,058			2,053			2,262			(47		)	(2	%)
Total Assets		$109,553			$105,842			$102,751			$101,967			$100,087			$9,466		9	%
Liabilities & Stockholders' Equity
Direct to Consumer and Affinity Deposits		$44,669			$43,411			$42,256			$41,321			$39,367			$5,302		13	%
Brokered Deposits and Other Deposits	23,090			20,263			19,427			19,809			19,397			3,693			19	%
Deposits	67,759			63,674			61,683			61,130			58,764			8,995			15	%
Borrowings	27,228			26,998			26,252			26,244			26,326			902			3	%
Accrued Expenses and Other Liabilities	3,436			4,154			3,927			3,722			4,105			(669		)	(16	%)
Total Liabilities	98,423			94,826			91,862			91,096			89,195			9,228			10	%
Total Equity	11,130			11,016			10,889			10,871			10,892			238			2	%
Total Liabilities and Stockholders' Equity		$109,553			$105,842			$102,751			$101,967			$100,087			$9,466		9	%
LIQUIDITY
Liquidity Portfolio		$15,923			$16,370			$15,703			$17,550			$13,560		2,363			17	%
Undrawn Credit Facilities 1	36,986			36,257			36,422			35,099			35,153			1,833			5	%
Total Liquidity		$52,909			$52,627			$52,125			$52,649			$48,713			$4,196		9	%
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
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017
BALANCE SHEET STATISTICS
Total Common Equity		$10,567			$10,453			$10,326			$10,308			$10,329			$238	2	%
Total Common Equity/Total Assets	9.6		%	9.9		%	10.1		%	10.1		%	10.3		%
Total Common Equity/Net Loans	12.1		%	12.4		%	12.6		%	12.9		%	12.7		%
Tangible Assets		$109,137			$105,425			$102,334			$101,550			$99,669			$9,468	9	%
Tangible Common Equity 1		$10,151			$10,036			$9,909			$9,891			$9,911			$240	2	%
Tangible Common Equity/Tangible Assets 1	9.3		%	9.5		%	9.7		%	9.7		%	9.9		%
Tangible Common Equity/Net Loans 1	11.6		%	12.0		%	12.1		%	12.4		%	12.1		%
Tangible Common Equity per share  1		$30.63			$29.70			$28.82			$28.15			$27.69			$2.94	11	%
REGULATORY CAPITAL RATIOS	Basel III Transition
Total Risk Based Capital Ratio	13.5		%	13.9		%	13.6		%	14.0		%	13.8		%
Tier 1 Risk Based Capital Ratio	11.7		%	12.1		%	12.3		%	12.5		%	12.3		%
Tier 1 Leverage Ratio	10.1		%	10.4		%	10.5		%	10.6		%	10.8		%
Common Equity Tier 1 Capital Ratio 2	11.1		%	11.4		%	11.6		%	11.9		%	11.6		%
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  At December 31, 2018, there was no difference between the Company's CET1 capital ratio calculated under Basel III transition rules and the Company's CET1 capital ratio calculated under Basel III fully phased-in rules
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
	Quarter Ended
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017
AVERAGE BALANCES
Assets
Cash and Investment Securities		$17,660			$16,474			$16,395			$15,058			$15,290			$2,370		16	%
Restricted Cash	609			638			466			821			276			333			121	%
Credit Card Loans	70,563			68,613			66,594			65,983			64,791			5,772			9	%
Private Student Loans	9,344			9,158			9,219			9,432			9,158			186			2	%
Personal Loans	7,540			7,460			7,304			7,387			7,455			85			1	%
Other Loans	760			624			531			452			398			362			91	%
Total Loans	88,207			85,855			83,648			83,254			81,802			6,405			8	%
Total Interest Earning Assets	106,476			102,967			100,509			99,133			97,368			9,108			9	%
Allowance for Loan Losses	(2,924		)	(2,827		)	(2,731		)	(2,615		)	(2,530		)	(394		)	(16	%)
Other Assets	4,520			4,377			4,170			4,221			4,252			268			6	%
Total Assets		$108,072			$104,517			$101,948			$100,739			$99,090			$8,982		9	%
Liabilities and Stockholders' Equity
Direct to Consumer and Affinity Deposits		$43,514			$42,498			$41,459			$39,825			$38,807			$4,707		12	%
Brokered Deposits and Other Deposits	21,574			19,939			19,166			19,638			18,244			3,330			18	%
Total Interest-bearing Deposits	65,088			62,437			60,625			59,463			57,051			8,037			14	%
Short-term Borrowings	2			3			1			1			2			—			—	%
Securitized Borrowings	16,427			16,141			16,121			16,180			16,676			(249		)	(1	%)
Other Long-term Borrowings	10,756			10,351			9,866			9,945			9,768			988			10	%
Total Interest-bearing Liabilities	92,273			88,932			86,613			85,589			83,497			8,776			11	%
Other Liabilities & Stockholders' Equity	15,799			15,585			15,335			15,150			15,593			206			1	%
Total Liabilities and Stockholders' Equity		$108,072			$104,517			$101,948			$100,739			$99,090			$8,982		9	%
AVERAGE RATES
Assets
Cash and Investment Securities	2.35		%	2.01		%	1.82		%	1.57		%	1.34		%	101			bps
Restricted Cash	2.28		%	1.92		%	1.85		%	1.68		%	1.34		%	94			bps
Credit Card Loans	13.20		%	13.06		%	12.88		%	12.85		%	12.79		%	41			bps
Private Student Loans	8.31		%	8.19		%	8.05		%	7.89		%	7.69		%	62			bps
Personal Loans	12.76		%	12.66		%	12.55		%	12.43		%	12.27		%	49			bps
Other Loans	6.57		%	6.38		%	6.02		%	5.98		%	5.66		%	91			bps
Total Loans	12.59		%	12.45		%	12.28		%	12.21		%	12.14		%	45			bps
Total Interest Earning Assets	10.83		%	10.72		%	10.52		%	10.51		%	10.41		%	42			bps
Liabilities and Stockholders' Equity
Direct to Consumer and Affinity Deposits	2.00		%	1.88		%	1.71		%	1.59		%	1.44		%	56			bps
Brokered Deposits and Other Deposits	2.58		%	2.51		%	2.33		%	2.19		%	2.12		%	46			bps
Total Interest-bearing Deposits	2.20		%	2.08		%	1.90		%	1.79		%	1.65		%	55			bps
Short-term Borrowings	2.42		%	2.09		%	1.89		%	1.75		%	1.31		%	111			bps
Securitized Borrowings	2.87		%	2.71		%	2.67		%	2.43		%	2.19		%	68			bps
Other Long-term Borrowings	4.65		%	4.56		%	4.57		%	4.49		%	4.30		%	35			bps
Total Interest-bearing Liabilities	2.60		%	2.49		%	2.35		%	2.22		%	2.07		%	53			bps
Net Interest Margin	10.35		%	10.28		%	10.21		%	10.23		%	10.28		%	7			bps
Net Yield on Interest-earning Assets	8.57		%	8.57		%	8.50		%	8.59		%	8.64		%	(7		)	bps
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended																			Twelve Months Ended
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017				Dec 31, 2018			Dec 31, 2017			2018 vs. 2017
TOTAL LOAN RECEIVABLES
Ending Loans 1, 2		$90,512			$86,894			$84,789			$82,744			$84,248			$6,264	7	%		$90,512			$84,248			$6,264		7	%
Average Loans 1, 2		$88,207			$85,855			$83,648			$83,254			$81,802			$6,405	8	%		$85,256			$78,525			$6,731		9	%
Interest Yield	12.59		%	12.45		%	12.28		%	12.21		%	12.14		%	45		bps		12.39		%	12.06		%	33			bps
Gross Principal Charge-off Rate	3.77		%	3.63		%	3.78		%	3.74		%	3.45		%	32		bps		3.73		%	3.33		%	40			bps
Gross Principal Charge-off Rate excluding PCI Loans 3	3.85		%	3.71		%	3.87		%	3.84		%	3.54		%	31		bps		3.81		%	3.43		%	38			bps
Net Principal Charge-off Rate	3.08		%	2.97		%	3.11		%	3.09		%	2.85		%	23		bps		3.06		%	2.70		%	36			bps
Net Principal Charge-off Rate excluding PCI Loans 3	3.14		%	3.03		%	3.18		%	3.17		%	2.92		%	22		bps		3.13		%	2.78		%	35			bps
Delinquency Rate (30 or more days) excluding PCI Loans 3	2.31		%	2.22		%	2.08		%	2.23		%	2.20		%	11		bps		2.31		%	2.20		%	11			bps
Delinquency Rate (90 or more days) excluding PCI Loans 3	1.08		%	1.00		%	0.99		%	1.06		%	0.99		%	9		bps		1.08		%	0.99		%	9			bps
Gross Principal Charge-off Dollars		$839			$785			$789			$769			$711			$128	18	%		$3,182			$2,618			$564		22	%
Net Principal Charge-off Dollars		$686			$642			$649			$635			$583			$103	18	%		$2,612			$2,119			$493		23	%
Net Interest and Fee Charge-off Dollars		$142			$135			$138			$136			$119			$23	19	%		$551			$442			$109		25	%
Loans Delinquent 30 or more days 3		$2,049			$1,894			$1,725			$1,800			$1,806			$243	13	%		$2,049			$1,806			$243		13	%
Loans Delinquent 90 or more days 3		$961			$854			$821			$855			$815			$146	18	%		$961			$815			$146		18	%
Allowance for Loan Loss (period end)		$3,041			$2,927			$2,828			$2,736			$2,621			$420	16	%		$3,041			$2,621			$420		16	%
Reserve Change Build/ (Release) 4		$114			$100			$93			$116			$96			$18				$423			$460			($37	)
Reserve Rate	3.36		%	3.37		%	3.34		%	3.31		%	3.11		%	25		bps		3.36		%	3.11		%	25			bps
Reserve Rate Excluding PCI Loans 3	3.39		%	3.41		%	3.38		%	3.35		%	3.15		%	24		bps		3.39		%	3.15		%	24			bps
CREDIT CARD LOANS
Ending Loans		$72,876			$69,253			$67,812			$65,577			$67,291			$5,585	8	%		$72,876			$67,291			$5,585		8	%
Average Loans		$70,563			$68,613			$66,594			$65,983			$64,791			$5,772	9	%		$67,953			$62,079			$5,874		9	%
Interest Yield	13.20		%	13.06		%	12.88		%	12.85		%	12.79		%	41		bps		13.00		%	12.74		%	26			bps
Gross Principal Charge-off Rate	4.01		%	3.90		%	4.12		%	4.08		%	3.73		%	28		bps		4.02		%	3.65		%	37			bps
Net Principal Charge-off Rate	3.23		%	3.14		%	3.34		%	3.32		%	3.03		%	20		bps		3.26		%	2.91		%	35			bps
Delinquency Rate (30 or more days)	2.43		%	2.32		%	2.16		%	2.33		%	2.28		%	15		bps		2.43		%	2.28		%	15			bps
Delinquency Rate (90 or more days)	1.22		%	1.12		%	1.09		%	1.18		%	1.12		%	10		bps		1.22		%	1.12		%	10			bps
Gross Principal Charge-off Dollars		$713			$674			$684			$663			$612			$101	17	%		$2,734			$2,263			$471		21	%
Net Principal Charge-off Dollars		$575			$543			$555			$540			$496			$79	16	%		$2,213			$1,802			$411		23	%
Loans Delinquent 30 or more days		$1,772			$1,608			$1,466			$1,529			$1,532			$240	16	%		$1,772			$1,532			$240		16	%
Loans Delinquent 90 or more days		$887			$777			$743			$777			$751			$136	18	%		$887			$751			$136		18	%
Allowance for Loan Loss (period end)		$2,528			$2,424			$2,334			$2,252			$2,147			$381	18	%		$2,528			$2,147			$381		18	%
Reserve Change Build/ (Release)		$104			$90			$82			$105			$56			$48				$381			$357			$24
Reserve Rate	3.47		%	3.50		%	3.44		%	3.43		%	3.19		%	28		bps		3.47		%	3.19		%	28			bps
Total Discover Card Volume		$40,655			$39,414			$38,430			$34,327			$38,574			$2,081	5	%		$152,826			$141,858			$10,968		8	%
Discover Card Sales Volume		$37,208			$35,896			$35,077			$30,850			$35,339			$1,869	5	%		$139,031			$128,806			$10,225		8	%
Rewards Rate	1.28		%	1.31		%	1.31		%	1.27		%	1.23		%	5		bps		1.29		%	1.24		%	5			bps
1  Total Loans includes Home Equity 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
4  Allowance for loan loss includes the net change in reserves on PCI pools having no remaining non-accretable difference which does not impact the reserve change build/(release) in provision for loan losses
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended																				Twelve Months Ended
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017					Dec 31, 2018			Dec 31, 2017			2018 vs. 2017
PRIVATE STUDENT LOANS
Ending Loans (excluding PCI)		$7,728			$7,668			$7,260			$7,416			$7,076			$652		9	%		$7,728			$7,076			$652		9	%
Ending PCI Loans 1	1,637			1,735			1,842			1,956			2,084			(447		)	(21	%)	1,637			2,084			(447		)	(21	%)
Ending Loans		$9,365			$9,403			$9,102			$9,372			$9,160			$205		2	%		$9,365			$9,160			$205		2	%
Interest Yield	8.31		%	8.19		%	8.05		%	7.89		%	7.69		%	62			bps		8.11		%	7.50		%	61			bps
Net Principal Charge-off Rate	0.86		%	0.96		%	0.92		%	0.92		%	1.03		%	(17		)	bps		0.91		%	0.90		%	1			bps
Net Principal Charge-off Rate excluding PCI Loans 2	1.05		%	1.19		%	1.16		%	1.17		%	1.34		%	(29		)	bps		1.14		%	1.21		%	(7		)	bps
Delinquency Rate (30 or more days) excluding PCI Loans 2	2.00		%	2.13		%	2.10		%	2.25		%	2.35		%	(35		)	bps		2.00		%	2.35		%	(35		)	bps
Reserve Rate	1.80		%	1.80		%	1.87		%	1.82		%	1.77		%	3			bps		1.80		%	1.77		%	3			bps
Reserve Rate excluding PCI Loans 2	1.85		%	1.87		%	1.97		%	1.93		%	1.89		%	(4		)	bps		1.85		%	1.89		%	(4		)	bps
PERSONAL LOANS
Ending Loans		$7,454			$7,545			$7,304			$7,307			$7,374			$80		1	%		$7,454			$7,374			$80		1	%
Interest Yield	12.76		%	12.66		%	12.55		%	12.43		%	12.27		%	49			bps		12.60		%	12.25		%	35			bps
Net Principal Charge-off Rate	4.49		%	4.09		%	3.97		%	4.03		%	3.62		%	87			bps		4.15		%	3.30		%	85			bps
Delinquency Rate (30 or more days)	1.60		%	1.57		%	1.42		%	1.37		%	1.40		%	20			bps		1.60		%	1.40		%	20			bps
Reserve Rate	4.53		%	4.28		%	4.29		%	4.12		%	4.08		%	45			bps		4.53		%	4.08		%	45			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																				Twelve Months Ended
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017			Dec 31, 2018 vs. Dec 31, 2017					Dec 31, 2018			Dec 31, 2017			2018 vs. 2017
DIRECT BANKING
Interest Income		$2,906			$2,781			$2,636			$2,569			$2,556			$350		14	%		$10,892			$9,648			$1,244		13	%
Interest Expense	605			558			507			469			436			169			39	%	2,139			1,648			491			30	%
Net Interest Income	2,301			2,223			2,129			2,100			2,120			181			9	%	8,753			8,000			753			9	%
Other Income	432			421			398			394			423			9			2	%	1,645			1,607			38			2	%
Revenue Net of Interest Expense	2,733			2,644			2,527			2,494			2,543			190			7	%	10,398			9,607			791			8	%
Provision for Loan Losses	800			742			742			751			678			122			18	%	3,035			2,586			449			17	%
Total Other Expense	1,059			979			948			932			995			64			6	%	3,918			3,629			289			8	%
Income Before Income Taxes		$874			$923			$837			$811			$870			$4		—	%		$3,445			$3,392			$53		2	%
Net Interest Margin	10.35		%	10.28		%	10.21		%	10.23		%	10.28		%	7			bps		10.27		%	10.19		%	8			bps
Pretax Return on Loan Receivables	3.93		%	4.27		%	4.01		%	3.95		%	4.22		%	(29		)	bps		4.04		%	4.32		%	(28		)	bps
Allowance for Loan Loss (period end)		$3,039			$2,920			$2,821			$2,728			$2,613			$426		16	%		$3,039			$2,613			$426		16	%
Reserve Change Build/ (Release) 1		$120			$100			$93			$116			$94			$26					$429			$468			($39	)
PAYMENT SERVICES
Interest Income		$1			$—			$—			$—			$—			$1		NM			$1			$—			$1		NM
Interest Expense	—			—			—			—			—			—			NM		—			—			—			NM
Net Interest Income	1			—			—			—			—			1			NM		1			—			1			NM
Other Income	73			80			76			81			71			2			3	%	310			290			20			7	%
Revenue Net of Interest Expense	74			80			76			81			71			3			4	%	311			290			21			7	%
Provision for Loan Losses	—			—			—			—			1			(1		)	(100	%)	—			(7		)	7			(100	%)
Total Other Expense	51			36			36			36			41			10			24	%	159			152			7			5	%
Income Before Income Taxes		$23			$44			$40			$45			$29			($6	)	(21	%)		$152			$145			$7		5	%
1  Allowance for loan loss includes the net change in reserves on PCI pools having no remaining non-accretable difference which does not impact the reserve change build/(release) in provision for loan losses
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

Capital Returned to Common Stockholders represents common stock dividends declared plus treasury share repurchases minus common stock issued under employee benefit plans and stock based compensation

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 (30 or more days) represents loans delinquent thirty days or more divided by ending loans (total or respective loans, as appropriate)

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

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

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

Payout Ratio represents capital returned to common stockholders divided by net income allocated to common stockholders

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

Regulatory Capital Ratios are regulatory measures used to evaluate capital adequacy. Under Basel III, for a Bank Holding Company to be considered "well-capitalized," total risk-based and tier 1 risk-based capital ratios of 10% and 6% respectively must be maintained. Under Basel III, to meet the regulatory minimum a Bank Holding Company must maintain total risk-based, tier 1 risk-based, tier 1 leverage, and common equity tier 1 ratios of 8%, 6%, 4%, and 4.5% respectively. 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
	Dec 31, 2018			Sep 30, 2018			Jun 30, 2018			Mar 31, 2018			Dec 31, 2017
GAAP Total Common Equity		$10,567			$10,453			$10,326			$10,308			$10,329
Less: Goodwill	(255		)	(255		)	(255		)	(255		)	(255		)
Less: Intangibles	(161		)	(162		)	(162		)	(162		)	(163		)
Tangible Common Equity 1		$10,151			$10,036			$9,909			$9,891			$9,911
GAAP Book Value Per Share		$33.58			$32.60			$31.66			$30.93			$30.43
Less: Goodwill	(0.77		)	(0.76		)	(0.73		)	(0.72		)	(0.72		)
Less: Intangibles	(0.48		)	(0.48		)	(0.47		)	(0.46		)	(0.45		)
Less: Preferred Stock	(1.70		)	(1.66		)	(1.64		)	(1.60		)	(1.57		)
Tangible Common Equity Per Share		$30.63			$29.70			$28.82			$28.15			$27.69
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
Note: See Glossary of Financial Terms for definitions of financial terms