8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 19, 2009

DISCOVER FINANCIAL SERVICES

(Exact name of registrant as specified in its charter)

Commission File Number: 001-33378

Delaware	36-2517428
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

2500 Lake Cook Road, Riverwoods, Illinois 60015

(Address of principal executive offices, including zip code)

(224) 405-0900

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.                      Results of Operations and Financial Condition.

On March 19, 2009, Discover Financial Services (the “Company”) released financial information with respect to the quarter ended February 28, 2009. A copy of the press release containing this information is attached hereto as Exhibit 99.1 and incorporated herein by reference. In addition, a copy of the Company's Financial Data Supplement for the quarter ended February 28, 2009 is attached hereto as Exhibit 99.2 and incorporated herein by reference.

The information contained in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.

Item 9.01.                      Financial Statements and Exhibits.

(d) Exhibits  

Exhibit No.	Description
99.1	Press Release of the Company dated March 19, 2009 containing financial information for the quarter ended February 28, 2009
99.2	Financial Data Supplement of the Company for the quarter ended February 28, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DISCOVER FINANCIAL SERVICES
Dated: March 19, 2009	By:	/s/ Christopher Greene
		Name:  Christopher Greene
		Title:  Assistant Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of the Company dated March 19, 2009 containing financial information for the quarter ended February 28, 2009
99.2	Financial Data Supplement of the Company for the quarter ended February 28, 2009

EX-99.1

Exhibit 99.1

DISCOVER FINANCIAL SERVICES REPORTS FIRST QUARTER RESULTS:

NET INCOME OF $120 MILLION AND EARNINGS PER SHARE OF $0.25

Riverwoods, IL, March 19, 2009 - - Discover Financial Services (NYSE: DFS) today reported results for the quarter ended Feb. 28, 2009, as follows:

	Continuing Operations		Discontinued Operations	Net Income
	Earnings	Diluted EPS	Earnings	Earnings	Diluted EPS
	(millions)		(millions)	(millions)
1Q09	$120	$0.25	-	$120	$0.25
1Q08	$239	$0.50	($158)	$81	$0.17

Net income for the first quarter of 2009 was $120 million, up from $81 million in the first quarter of 2008.  Net income for the first quarter of 2009 includes approximately $297 million (after-tax) related to the Visa/MasterCard antitrust litigation settlement.  Discontinued operations relates to the sale of the Goldfish business in March 2008.

The company also announced it reduced its quarterly dividend to $.02 per share.

Highlights

·   Managed loans of $51 billion were essentially unchanged from the prior quarter and up 7% from the prior year; Discover Card sales volume declined 8% from the prior year to $21 billion.

·   Managed net yield on loan receivables rose to 9.11%, an increase of 55 basis points from the prior quarter and 101 basis points from the prior year.

·   The first-quarter managed net charge-off rate was 6.48%.

·   The company added $504 million to reserves in excess of charge-offs as the managed over 30 days delinquency rate rose to 5.25% and $3 billion of loans related to maturing securitizations were refinanced on-balance sheet.

·   Total deposits grew 14% from the prior year to $28 billion, including $7 billion of deposit balances originated through direct-to-consumer and affinity relationships.

·   Third-Party Payments segment volume grew 33% from the prior year to $35 billion, including $6 billion of Diners Club International volume.

·   Total company expenses were down 7% from the prior year.

“Given the unprecedented economic downturn, we continue to take steps to strengthen our balance sheet, including increasing our reserves,” said David Nelms, chairman and chief executive officer of Discover Financial Services. “Out of an abundance of caution, we are also reducing our quarterly dividend to enhance our already strong capital position.”

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Segment Results (Managed Basis):

U.S. Card

Managed loans ended the quarter at $51 billion, essentially unchanged from the prior quarter and up 7% from the prior year, reflecting lower cardmember payments and growth in both personal and student loans, partially offset by decreased consumer spending and a 17% reduction in balance transfer activity.  Sales volume decreased 8% versus the first quarter of 2008 reflecting lower gas prices and a decrease in overall consumer spending.

Pretax income was $167 million in the first quarter of 2009 as compared to $375 million for the first quarter of 2008.

Net yield on loan receivables rose to 9.11%, an increase of 56 basis points from the prior quarter, and 102 basis points from the prior year benefiting from lower cost of funds, accretion of balance transfer fees and a reduction in promotional rate balances, partially offset by higher interest charge-offs and lower yields on variable rate assets.

Managed net interest income increased $182 million, or 19%, from the first quarter of 2008 due to the increase in the net yield on loan receivables and growth in loan balances.

Delinquencies and charge-offs rose as the deteriorating economic environment and higher unemployment rate continued to put pressure on cardmembers.  The over 30 days delinquency rate on managed loans was 5.25%, up 69 basis points from the fourth quarter of 2008 and 135 basis points from the prior year.  The managed net charge-off rate increased to 6.48% for the first quarter of 2009, up 100 basis points and 215 basis points from the prior quarter and the prior year, respectively.

Provision for loan losses increased $707 million, or 113% from the prior year, due to higher net charge-offs and the addition of loan loss reserves in excess of charge-offs in the quarter.  The reserve increase in excess of charge-offs of $504 million resulted from a higher reserve rate as well as higher on-balance sheet loans due to maturing securitizations.

Other income increased $261 million, or 43% from the prior year, including $475 million related to the Visa/MasterCard antitrust litigation settlement, partially offset by a $173 million year-over-year decrease related to the valuation of the interest-only strip receivable.  In the first quarter of 2009, the company recorded a $98 million reduction in the fair value of the interest-only strip receivable due to higher anticipated charge-offs and a lower level of securitized receivables outstanding, as compared to a $75 million increase in the fair value in first quarter 2008.

Expenses decreased $56 million, or 10% from the prior year, principally due to lower marketing spending and a decrease in legal fees and fraud costs.

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Third-Party Payments

The Third-Party Payments segment transaction volume was $35 billion, up 33% from the prior year, reflecting the addition of Diners Club International volume of $6 billion, as well as an 11% increase in volume on the PULSE network.

Pretax income of $29 million was up $13 million from the first quarter of 2008.  Revenues increased $26 million reflecting the acquisition of Diners Club International in June 2008, as well as increased transaction volume and fees.  Expenses increased $12 million reflecting the Diners Club acquisition, as well as costs related to integrating the Diners Club network.

Participation in the U.S. Treasury Capital Purchase Program/Registration as a Bank Holding Company

On March 13, 2009, the company issued preferred stock and a warrant to the U.S. Treasury as part of the Capital Purchase Program for $1.2 billion.  The company also became a bank holding company subject to regulation by the Federal Reserve.  On a pro forma basis, assuming the Capital Purchase Program funding was received at Feb. 28, 2009, the company estimates that the Tier 1 Capital ratio would have been 17.1%.  At Feb. 28, 2009, the company’s tangible common equity was 8.8% of managed assets.

Dividends

 The company’s board declared a cash dividend of $.02 per share, payable on April 22, 2009, to stockholders of record at the close of business on April 1, 2009.  The reduction in dividend would strengthen our capital base by approximately $80 million on an annualized basis.

Conference Call and Webcast Information

The company will host a conference call to discuss its first quarter results on Thursday, March 19, 2009, at 10 a.m. Central time.  Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.com.

About Discover Financial Services

Discover Financial Services (NYSE: DFS) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover Card, America's cash rewards pioneer, and offers student and personal loans, as well as savings products such as certificates of deposit and money market accounts. Its payments businesses consist of the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in 185 countries and territories. For more information, visit www.discoverfinancial.com.

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Contacts:

Investors:

Craig Streem, 224-405-3575

craigstreem@discover.com

Media:

Jon Drummond, 224-405-1888

jondrummond@discover.com

A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the Financial Supplement. Both the earnings release and the Financial Supplement are available online in the Investor Relations section at www.discoverfinancial.com.

Financial information presented on a managed basis assumes that loans that have been securitized were not sold and presents financial information regarding these loans in a manner similar to the presentation of financial information regarding loans that have not been sold. Management believes it is useful for investors to consider the credit performance of the entire managed loan portfolio to understand the quality of loan originations and the related credit risks inherent in the owned portfolio and retained interests in securitization.  For more information, and a detailed reconciliation, please refer to the schedule titled “Reconciliation of GAAP to Managed Data” attached to this press release.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Discover Financial Services' management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available.  The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the actions and initiatives of current and potential competitors; our ability to manage credit risks and securitize our receivables at acceptable rates and under sale accounting treatment; changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment and the levels of consumer confidence and consumer debt; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; the availability and cost of funding and capital; access to U.S. debt and deposit markets; the ability to manage our liquidity risk; losses in our investment portfolio; the ability to increase or sustain Discover Card usage or attract new cardmembers and introduce new products or services; our ability to attract new merchants and maintain relationships with current merchants; our ability to successfully achieve interoperability among our networks and maintain relationships with network participants; material security breaches of key systems; unforeseen and catastrophic events; our reputation; the potential effects of technological changes; the effect of political, economic and market conditions and geopolitical events; unanticipated developments relating to lawsuits, investigations or similar matters; the impact of current, pending and future legislation, regulation and regulatory and legal actions, including the Federal Reserve Board’s new rules limiting or modifying certain credit card practices and legislation related to government programs to stabilize the financial markets; our ability to attract and retain employees; the ability to protect our intellectual property; the impact of any potential future acquisitions; investor sentiment; resolution of our dispute with Morgan Stanley; and the restrictions on our operations resulting from financing transactions.

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Additional factors that could cause Discover Financial Services' results to differ materially from those described in the forward-looking statements can be found under “Part I. Item 1A. Risk Factors” in the Company's Annual Report on Form 10-K for the year ended November 30, 2008 filed with the SEC and available at the SEC's internet site (http://www.sec.gov).

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Discover Financial Services
GAAP Basis
(unaudited, dollars in thousands, except per
share statistics)	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Feb 29, 2008
Earnings Summary
Interest Income	$	815,793		$	736,006		$	662,802
Interest Expense		312,720			329,672			339,441
Net Interest Income		503,073			406,334			323,361
Other Income  1		1,189,956			1,568,901			975,544
Revenue Net of Interest Expense		1,693,029			1,975,235			1,298,905
Provision for Loan Losses		937,813			714,176			305,632
Employee Compensation and Benefits		219,488			187,306			217,370
Marketing and Business Development		111,433			119,382			141,553
Information Processing & Communications		74,897			81,543			78,276
Professional Fees		70,123			111,645			73,672
Premises and Equipment		18,072			20,676			19,641
Other Expense		65,110			73,530			71,831
Total Other Expense		559,123			594,082			602,343
Income (Loss) Before Income Taxes  1		196,093			666,977			390,930
Tax Expense		75,699			223,336			152,101
Income From Continuing Operations  1		120,394			443,641			238,829
Discontinued Operations, Net of Tax 2		0			(11,306	)		(157,615	)
Net Income (Loss)  1, 2	$	120,394		$	432,335		$	81,214
Effective Tax Rate From Continuing Operations		38.6	%		33.5	%		38.9	%
Balance Sheet Statistics  3
Total Assets	$	40,605,873		$	39,892,382		$	34,222,732
Total Equity	$	5,998,706		$	5,915,823		$	5,654,341
Total Tangible Common Equity	$	5,541,887		$	5,457,083		$	5,341,020
Tangible Common Equity/Total Owned Assets 4		13.8	%		13.8	%		15.8	%
ROE  1, 2		8	%		29	%		6	%
ROE from Continuing Operations  1		8	%		30	%		17	%
Allowance for Loan Loss (period end)	$	1,878,942		$	1,374,585		$	860,378
Change in Loan Loss Reserves	$	504,357		$	414,816		$	100,453
Reserve Rate		6.70	%		5.45	%		4.16	%
Interest-only Strip Receivable (period end)	$	198,536		$	300,120		$	468,059
Net Revaluation of Retained Interests	$	(98,242	)	$	(116,335	)	$	74,997
Per Share Statistics
Basic EPS  1, 2	$	0.25		$	0.90		$	0.17
Basic EPS from Continuing Operations 1	$	0.25		$	0.92		$	0.50
Diluted EPS  1, 2	$	0.25		$	0.89		$	0.17
Diluted EPS from Continuing Operations  1	$	0.25		$	0.92		$	0.50
Stock Price (period end)	$	5.73		$	10.23		$	15.09
Tangible Common Equity	$	11.51		$	11.37		$	11.15
Book Value	$	12.46		$	12.32		$	11.80
Ending Shares Outstanding (000's)		481,459			479,987			479,127
Weighted Average Shares Outstanding (000's)		480,497			479,931			478,518
Weighted Average Shares Outstanding (fully diluted) (000's)		485,043			484,558			481,744
Loan Receivables  3
Total Loans - Owned	$	28,034,208		$	25,216,611		$	21,042,681
Average Total Loans - Owned	$	27,733,143		$	22,945,494		$	21,523,606
Interest Yield		11.24	%		11.36	%		10.34	%
Net Principal Charge-off Rate		6.34	%		5.25	%		3.83	%
Delinquency Rate (over 30 days)		5.04	%		4.35	%		3.63	%
Delinquency Rate (over 90 days)		2.57	%		2.06	%		1.82	%
Transactions Processed on Networks (000's)
Discover Network		369,647			377,356			378,912
PULSE Network		686,527			644,045			621,072
Total		1,056,174			1,021,401			999,984
Volume
PULSE Network	$	27,454,173		$	25,033,235		$	24,783,895
Third-Party Issuers		1,362,446			1,538,013			1,545,943
Diners Club International  5		6,293,574			7,457,893			-
Total Third-Party Payments		35,110,193			34,029,141			26,329,838
Discover Network - Proprietary 6		22,424,367			22,875,272			24,074,331
Total	$	57,534,560		$	56,904,413		$	50,404,169
1 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
2 The quarter ended February 29, 2008 includes a loss from discontinued opertaions, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations.
3 Based on Continuing Operations except equity and ROE. Equity is based on company's equity.
4 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.
5 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.
6 Gross proprietary sales volume on the Discover Network.

Discover Financial Services
Managed Basis 1
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Feb 29, 2008
Earnings Summary
Interest Income	$	1,603,849		$	1,682,267		$	1,652,615
Interest Expense		438,417			602,450			668,953
Net Interest Income		1,165,432			1,079,817			983,662
Other Income  2		923,457			1,287,213			636,679
Revenue Net of Interest Expense		2,088,889			2,367,030			1,620,341
Provision for Loan Losses		1,333,673			1,105,971			627,068
Employee Compensation and Benefits		219,488			187,306			217,370
Marketing and Business Development		111,433			119,382			141,553
Information Processing & Communications		74,897			81,543			78,276
Professional Fees		70,123			111,645			73,672
Premises and Equipment		18,072			20,676			19,641
Other Expense		65,110			73,530			71,831
Total Other Expense		559,123			594,082			602,343
Income (Loss) Before Income Taxes  2		196,093			666,977			390,930
Tax Expense		75,699			223,336			152,101
Income From Continuing Operations  2		120,394			443,641			238,829
Discontinued Operations, Net of Tax  2, 3		0			(11,306	)		(157,615	)
Net Income (Loss)  2, 3	$	120,394		$	432,335		$	81,214
Balance Sheet Statistics 4
Total Assets	$	63,231,013		$	65,620,476		$	61,937,501
Total Equity  5	$	5,998,706		$	5,915,823		$	5,654,341
Total Tangible Common Equity 5	$	5,541,887		$	5,457,083		$	5,341,020
Tangible Common Equity/Net Managed Receivables		11.3	%		11.0	%		11.5	%
Tangible Common Equity/Total Managed Assets 6		8.8	%		8.4	%		8.7	%
Net Yield on Loan Receivables		9.11	%		8.56	%		8.10	%
Return on Loan Receivables 2		0.94	%		3.52	%		1.97	%
Loan Receivables 4
Total Loans - Managed	$	50,888,704		$	51,095,278		$	47,500,410
Average Total Loans - Managed	$	51,877,845		$	50,707,090		$	48,863,166
Managed Interest Yield		12.17	%		12.65	%		12.70	%
Managed Net Principal Charge-off Rate		6.48	%		5.48	%		4.33	%
Managed Delinquency Rate (over 30 days)		5.25	%		4.56	%		3.90	%
Managed Delinquency Rate (over 90 days)		2.69	%		2.17	%		1.96	%
Total Discover Card Volume	$	23,964,577		$	25,318,553		$	26,207,028
Discover Card Sales Volume	$	21,293,757		$	22,025,264		$	23,155,253
Segment - Income Before Income Taxes
U.S. Card	$	167,167		$	646,427		$	375,403
Third-Party Payments		28,926			20,550			15,527
Total	$	196,093		$	666,977		$	390,930
1 Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule.
2 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
3 The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations.
4 Based on Continuing Operations. Equity is based on company's equity.
5 Balance on a GAAP and Managed basis is the same.
6 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.

Discover Financial Services
U.S. Card Segment
Managed Basis1
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Feb 29, 2008
Earnings Summary
Interest Income	$	1,603,362		$	1,680,925		$	1,651,987
Interest Expense		438,338			602,386			668,951
Net Interest Income		1,165,024			1,078,539			983,036
Other Income 2		863,223			1,234,100			602,411
Revenue Net of Interest Expense		2,028,247			2,312,639			1,585,447
Provision for Loan Losses		1,333,673			1,105,971			627,068
Total Other Expense		527,407			560,241			582,976
Income (Loss) Before Income Taxes  2	$	167,167		$	646,427		$	375,403
Net Yield on Loan Receivables		9.11	%		8.55	%		8.09	%
Pretax Return on Loan Receivables  2		1.31	%		5.13	%		3.09	%
Loan Receivables
Total Loans	$	50,888,704		$	51,095,278		$	47,500,410
Average Total Loans	$	51,877,845		$	50,707,090		$	48,863,166
Managed Interest Yield		12.17	%		12.65	%		12.70	%
Managed Net Principal Charge-off Rate		6.48	%		5.48	%		4.33	%
Managed Delinquency Rate (over 30 days)		5.25	%		4.56	%		3.90	%
Managed Delinquency Rate (over 90 days)		2.69	%		2.17	%		1.96	%
Credit Card Loans
Credit Card Loans - Managed	$	49,011,177		$	49,692,974		$	47,014,539
Average Credit Card Loans - Managed	$	50,254,235		$	49,420,412		$	48,487,812
Managed Interest Yield		12.28	%		12.72	%		12.72	%
Managed Net Principal Charge-off Rate		6.61	%		5.59	%		4.37	%
Managed Delinquency Rate (over 30 days)		5.41	%		4.66	%		3.93	%
Managed Delinquency Rate (over 90 days)		2.78	%		2.22	%		1.98	%
Total Discover Card Volume	$	23,964,577		$	25,318,553		$	26,207,028
Discover Card Sales Volume	$	21,293,757		$	22,025,264		$	23,155,253
1 Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule.
2 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.

Discover Financial Services
Third-Party Payments Segment
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009		Nov 30, 2008		Feb 29, 2008
Earnings Summary
Interest Income	$	487	$	1,342	$	628
Interest Expense		79		64		2
Net Interest Income		408		1,278		626
Other Income		60,234		53,113		34,268
Revenue Net of Interest Expense		60,642		54,391		34,894
Provision for Loan Losses		-		-		-
Total Other Expense		31,716		33,841		19,367
Income (Loss) Before Income Taxes	$	28,926	$	20,550	$	15,527
Volume
PULSE Network	$	27,454,173	$	25,033,235	$	24,783,895
Third-Party Issuers		1,362,446		1,538,013		1,545,943
Diners Club International 1		6,293,574		7,457,893		-
Total Third-Party Payments	$	35,110,193	$	34,029,141	$	26,329,838
Transactions Processed on PULSE Network (000's)		686,527		644,045		621,072
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.

Discover Financial Services
Reconciliation of GAAP to Managed Data 1
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Feb 29, 2008
Interest Income
GAAP Basis	$	815,793		$	736,006		$	662,802
Securitization Adjustments 1		788,056			946,261			989,813
Managed Basis	$	1,603,849		$	1,682,267		$	1,652,615
Interest Expense
GAAP Basis	$	312,720		$	329,672		$	339,441
Securitization Adjustments		125,697			272,778			329,512
Managed Basis	$	438,417		$	602,450		$	668,953
Net Interest Income
GAAP Basis	$	503,073		$	406,334		$	323,361
Securitization Adjustments		662,359			673,483			660,301
Managed Basis	$	1,165,432		$	1,079,817		$	983,662
Other Income
GAAP Basis	$	1,189,956		$	1,568,901		$	975,544
Securitization Adjustments		(266,499	)		(281,688	)		(338,865	)
Managed Basis	$	923,457		$	1,287,213		$	636,679
Revenue Net of Interest Expense
GAAP Basis	$	1,693,029		$	1,975,235		$	1,298,905
Securitization Adjustments		395,860			391,795			321,436
Managed Basis	$	2,088,889		$	2,367,030		$	1,620,341
Provision for Loan Losses
GAAP Basis	$	937,813		$	714,176		$	305,632
Securitization Adjustments		395,860			391,795			321,436
Managed Basis	$	1,333,673		$	1,105,971		$	627,068
Total Assets
GAAP Basis	$	40,605,873		$	39,892,382		$	34,222,732
Securitization Adjustments		22,625,140			25,728,094			27,714,769
Managed Basis	$	63,231,013		$	65,620,476		$	61,937,501
Tangible Common Equity/Total Assets
GAAP Basis		13.8	%		13.8	%		15.8	%
Securitization Adjustments		24.5	%		21.2	%		19.3	%
Managed Basis		8.8	%		8.4	%		8.7	%
Loan Receivables
Total Loans
GAAP Basis	$	28,034,208		$	25,216,611		$	21,042,681
Securitization Adjustments		22,854,496			25,878,667			26,457,729
Managed Basis	$	50,888,704		$	51,095,278		$	47,500,410
Average Total Loans
GAAP Basis	$	27,733,143		$	22,945,494		$	21,523,606
Securitization Adjustments		24,144,702			27,761,596			27,339,560
Managed Basis	$	51,877,845		$	50,707,090		$	48,863,166

Discover Financial Services
Reconciliation of GAAP to Managed Data 1
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Feb 29, 2008
Interest Yield
GAAP Basis		11.24	%		11.36	%		10.34	%
Securitization Adjustments		13.24	%		13.71	%		14.56	%
Managed Basis		12.17	%		12.65	%		12.70	%
Net Principal Charge-off Rate
GAAP Basis		6.34	%		5.25	%		3.83	%
Securitization Adjustments		6.65	%		5.68	%		4.73	%
Managed Basis		6.48	%		5.48	%		4.33	%
Delinquency Rate (over 30 days)
GAAP Basis		5.04	%		4.35	%		3.63	%
Securitization Adjustments		5.52	%		4.77	%		4.11	%
Managed Basis		5.25	%		4.56	%		3.90	%
Delinquency Rate (over 90 days)
GAAP Basis		2.57	%		2.06	%		1.82	%
Securitization Adjustments		2.83	%		2.27	%		2.08	%
Managed Basis		2.69	%		2.17	%		1.96	%
Credit Card Loans
Credit Card Loans
GAAP Basis	$	26,156,681		$	23,814,307		$	20,556,810
Securitization Adjustments		22,854,496			25,878,667			26,457,729
Managed Basis	$	49,011,177		$	49,692,974		$	47,014,539
Average Credit Card Loans
GAAP Basis	$	26,109,533		$	21,658,816		$	21,148,252
Securitization Adjustments		24,144,702			27,761,596			27,339,560
Managed Basis	$	50,254,235		$	49,420,412		$	48,487,812
Interest Yield
GAAP Basis		11.39	%		11.45	%		10.35	%
Securitization Adjustments		13.24	%		13.71	%		14.56	%
Managed Basis		12.28	%		12.72	%		12.72	%
Net Principal Charge-off Rate
GAAP Basis		6.58	%		5.47	%		3.90	%
Securitization Adjustments		6.65	%		5.68	%		4.73	%
Managed Basis		6.61	%		5.59	%		4.37	%
Delinquency Rate (over 30 days)
GAAP Basis		5.32	%		4.55	%		3.69	%
Securitization Adjustments		5.52	%		4.77	%		4.11	%
Managed Basis		5.41	%		4.66	%		3.93	%
Delinquency Rate (over 90 days)
GAAP Basis		2.73	%		2.16	%		1.86	%
Securitization Adjustments		2.83	%		2.27	%		2.08	%
Managed Basis		2.78	%		2.22	%		1.98	%
1 Securitization Adjustments present the effect of loan securitization by recharacterizing as securitization income the portions of the following items that relate to the securitized loans: interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues. Securitization income is reported in other income.

The data is presented on both a "managed" loan basis and as reported under generally accepted accounting principles ("owned" loan basis). Managed loan data assume that the company's securitized loan receivables have not been sold and presents the results of securitized loan receivables in the same manner as the company's owned loans. The company operates its business and analyzes its financial performance on a managed basis. Accordingly, underwriting and servicing standards are comparable for both owned and securitized loans. The company believes that managed loan information is useful to investors because it provides information regarding the quality of loan origination and credit performance of the entire managed portfolio and allows investors to understand the related credit risks inherent in owned loans and retained interests in securitizations. Managed loan data is also relevant because the company services the securitized and owned loans, and the related accounts, in the same manner without regard to ownership of the loans. In addition, investors often request information on a managed basis which provides a more meaningful comparison to industry competitors.

EX-99.2

Exhibit 99.2

Discover Financial Services
GAAP Basis
(unaudited, dollars in thousands, except per
share statistics)	Quarter Ended															Feb 28, 2009
	Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			Feb 29, 2008			vs Feb 29, 2008
Earnings Summary
Interest Income	$	815,793		$	736,006		$	681,692		$	612,063		$	662,802		$	152,991			23	%
Interest Expense		312,720			329,672			305,643			313,248			339,441			(26,721	)		(8	%)
Net Interest Income		503,073			406,334			376,049			298,815			323,361			179,712			56	%
Other Income  1		1,189,956			1,568,901			875,121			844,892			975,544			214,412			22	%
Revenue Net of Interest Expense		1,693,029			1,975,235			1,251,170			1,143,707			1,298,905			394,124			30	%
Provision for Loan Losses		937,813			714,176			364,838			210,969			305,632			632,181		NM
Employee Compensation and Benefits		219,488			187,306			222,426			218,290			217,370			2,118			1	%
Marketing and Business Development		111,433			119,382			137,928			132,038			141,553			(30,120	)		(21	%)
Information Processing & Communications		74,897			81,543			76,675			79,449			78,276			(3,379	)		(4	%)
Professional Fees		70,123			111,645			82,775			81,392			73,672			(3,549	)		(5	%)
Premises and Equipment		18,072			20,676			20,274			19,803			19,641			(1,569	)		(8	%)
Other Expense		65,110			73,530			72,469			75,853			71,831			(6,721	)		(9	%)
Total Other Expense		559,123			594,082			612,547			606,825			602,343			(43,220	)		(7	%)
Income (Loss) Before Income Taxes  1		196,093			666,977			273,785			325,913			390,930			(194,837	)		(50	%)
Tax Expense		75,699			223,336			94,885			124,370			152,101			(76,402	)		(50	%)
Income From Continuing Operations  1		120,394			443,641			178,900			201,543			238,829			(118,435	)		(50	%)
Discontinued Operations, Net of Tax  2		0			(11,306	)		1,153			32,605			(157,615	)		157,615			100	%
Net Income (Loss)  1, 2	$	120,394		$	432,335		$	180,053		$	234,148		$	81,214		$	39,180			48	%
Effective Tax Rate From Continuing Operations		38.6	%		33.5	%		34.7	%		38.2	%		38.9	%
Balance Sheet Statistics  3
Total Assets	$	40,605,873		$	39,892,382		$	37,283,548		$	34,020,245		$	34,222,732		$	6,383,141			19	%
Total Equity	$	5,998,706		$	5,915,823		$	6,000,393		$	5,849,691		$	5,654,341		$	344,365			6	%
Total Tangible Common Equity	$	5,541,887		$	5,457,083		$	5,539,274		$	5,538,240		$	5,341,020		$	200,867			4	%
Tangible Common Equity/Total Owned Assets 4		13.8	%		13.8	%		15.0	%		16.4	%		15.8	%
ROE  1, 2		8	%		29	%		12	%		16	%		6	%
ROE from Continuing Operations  1		8	%		30	%		12	%		14	%		17	%
Allowance for Loan Loss (period end)	$	1,878,942		$	1,374,585		$	959,769		$	846,775		$	860,378		$	1,018,564			118	%
Change in Loan Loss Reserves	$	504,357		$	414,816		$	112,994		$	(13,603	)	$	100,453		$	403,904		NM
Reserve Rate		6.70	%		5.45	%		4.41	%		4.28	%		4.16	%		254		bps
Interest-only Strip Receivable (period end)	$	198,536		$	300,120		$	408,649		$	447,994		$	468,059		$	(269,523	)		(58	%)
Net Revaluation of Retained Interests	$	(98,242	)	$	(116,335	)	$	(33,513	)	$	(44,473	)	$	74,997		$	(173,239	)	NM
Per Share Statistics
Basic EPS  1, 2	$	0.25		$	0.90		$	0.38		$	0.49		$	0.17		$	0.08			47	%
Basic EPS from Continuing Operations 1	$	0.25		$	0.92		$	0.38		$	0.42		$	0.50		$	(0.25	)		(50	%)
Diluted EPS  1, 2	$	0.25		$	0.89		$	0.37		$	0.48		$	0.17		$	0.08			47	%
Diluted EPS from Continuing Operations  1	$	0.25		$	0.92		$	0.37		$	0.42		$	0.50		$	(0.25	)		(50	%)
Stock Price (period end)	$	5.73		$	10.23		$	16.45		$	17.15		$	15.09		$	(9.36	)		(62	%)
Tangible Common Equity	$	11.51		$	11.37		$	11.55		$	11.55		$	11.15		$	0.36			3	%
Book Value	$	12.46		$	12.32		$	12.51		$	12.20		$	11.80		$	0.66			6	%
Ending Shares Outstanding (000's)		481,459			479,987			479,764			479,346			479,127			2,332			0	%
Weighted Average Shares Outstanding (000's)		480,497			479,931			479,618			479,270			478,518			1,979			0	%
Weighted Average Shares Outstanding (fully diluted) (000's)		485,043			484,558			484,128			483,753			481,744			3,299			1	%
Loan Receivables  3
Total Loans - Owned	$	28,034,208		$	25,216,611		$	21,767,483		$	20,502,063		$	21,042,681		$	6,991,527			33	%
Average Total Loans - Owned	$	27,733,143		$	22,945,494		$	21,053,804		$	19,890,330		$	21,523,606		$	6,209,537			29	%
Interest Yield		11.24	%		11.36	%		11.41	%		10.40	%		10.34	%		90		bps
Net Principal Charge-off Rate		6.34	%		5.25	%		4.76	%		4.49	%		3.83	%		251		bps
Delinquency Rate (over 30 days)		5.04	%		4.35	%		3.58	%		3.54	%		3.63	%		141		bps
Delinquency Rate (over 90 days)		2.57	%		2.06	%		1.73	%		1.81	%		1.82	%		75		bps
Transactions Processed on Networks (000's)
Discover Network		369,647			377,356			388,504			370,596			378,912			(9,265	)		(2	%)
PULSE Network		686,527			644,045			713,791			703,404			621,072			65,455			11	%
Total		1,056,174			1,021,401			1,102,295			1,074,000			999,984			56,190			6	%
Volume
PULSE Network	$	27,454,173		$	25,033,235		$	28,364,575		$	27,830,403		$	24,783,895		$	2,670,278			11	%
Third-Party Issuers		1,362,446			1,538,013			1,711,617			1,603,006			1,545,943			(183,497	)		(12	%)
Diners Club International  5		6,293,574			7,457,893			5,227,795			-			-			6,293,574		NM
Total Third-Party Payments		35,110,193			34,029,141			35,303,987			29,433,409			26,329,838			8,780,355			33	%
Discover Network - Proprietary 6		22,424,367			22,875,272			25,117,321			23,621,519			24,074,331			(1,649,964	)		(7	%)
Total	$	57,534,560		$	56,904,413		$	60,421,308		$	53,054,928		$	50,404,169		$	7,130,391			14	%
1 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
2 The quarter ended May 31, 2008 includes income from discontinued operations, net of tax of $32.6 million consisting of a $21 million gain related to disposition of the Goldfish business and income of $12 million related to the Goldfish business operations. The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations.
3 Based on Continuing Operations except equity and ROE. Equity is based on company's equity.
4 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.
5 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.
6 Gross proprietary sales volume on the Discover Network.

Discover Financial Services
Managed Basis 1
(unaudited, dollars in thousands)
	Quarter Ended															Feb 28, 2009
	Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			Feb 29, 2008			vs Feb 29, 2008
Earnings Summary
Interest Income	$	1,603,849		$	1,682,267		$	1,638,250		$	1,572,697		$	1,652,615		$	(48,766	)		(3	%)
Interest Expense		438,417			602,450			534,887			550,629			668,953			(230,536	)		(34	%)
Net Interest Income		1,165,432			1,079,817			1,103,363			1,022,068			983,662			181,770			18	%
Other Income  2		923,457			1,287,213			536,997			492,207			636,679			286,778			45	%
Revenue Net of Interest Expense		2,088,889			2,367,030			1,640,360			1,514,275			1,620,341			468,548			29	%
Provision for Loan Losses		1,333,673			1,105,971			754,028			581,537			627,068			706,605			113	%
Employee Compensation and Benefits		219,488			187,306			222,426			218,290			217,370			2,118			1	%
Marketing and Business Development		111,433			119,382			137,928			132,038			141,553			(30,120	)		(21	%)
Information Processing & Communications		74,897			81,543			76,675			79,449			78,276			(3,379	)		(4	%)
Professional Fees		70,123			111,645			82,775			81,392			73,672			(3,549	)		(5	%)
Premises and Equipment		18,072			20,676			20,274			19,803			19,641			(1,569	)		(8	%)
Other Expense		65,110			73,530			72,469			75,853			71,831			(6,721	)		(9	%)
Total Other Expense		559,123			594,082			612,547			606,825			602,343			(43,220	)		(7	%)
Income (Loss) Before Income Taxes  2		196,093			666,977			273,785			325,913			390,930			(194,837	)		(50	%)
Tax Expense		75,699			223,336			94,885			124,370			152,101			(76,402	)		(50	%)
Income From Continuing Operations  2		120,394			443,641			178,900			201,543			238,829			(118,435	)		(50	%)
Discontinued Operations, Net of Tax   2, 3		0			(11,306	)		1,153			32,605			(157,615	)		157,615			100	%
Net Income (Loss)  2, 3	$	120,394		$	432,335		$	180,053		$	234,148		$	81,214		$	39,180			48	%
Balance Sheet Statistics 4
Total Assets	$	63,231,013		$	65,620,476		$	65,632,825		$	62,148,577		$	61,937,501		$	1,293,512			2	%
Total Equity  5	$	5,998,706		$	5,915,823		$	6,000,393		$	5,849,691		$	5,654,341		$	344,365			6	%
Total Tangible Common Equity  5	$	5,541,887		$	5,457,083		$	5,539,274		$	5,538,240		$	5,341,020		$	200,867			4	%
Tangible Common Equity/Net Managed Receivables		11.3	%		11.0	%		11.2	%		11.8	%		11.5	%
Tangible Common Equity/Total Managed Assets 6		8.8	%		8.4	%		8.5	%		9.0	%		8.7	%
Net Yield on Loan Receivables		9.11	%		8.56	%		8.95	%		8.57	%		8.10	%		101		bps
Return on Loan Receivables 2		0.94	%		3.52	%		1.45	%		1.69	%		1.97	%		(103	)	bps
Loan Receivables 4
Total Loans - Managed	$	50,888,704		$	51,095,278		$	50,427,305		$	47,841,491		$	47,500,410		$	3,388,294			7	%
Average Total Loans - Managed	$	51,877,845		$	50,707,090		$	49,019,083		$	47,472,077		$	48,863,166		$	3,014,679			6	%
Managed Interest Yield		12.17	%		12.65	%		12.67	%		12.41	%		12.70	%		(53	)	bps
Managed Net Principal Charge-off Rate		6.48	%		5.48	%		5.20	%		4.99	%		4.33	%		215		bps
Managed Delinquency Rate (over 30 days)		5.25	%		4.56	%		3.85	%		3.81	%		3.90	%		135		bps
Managed Delinquency Rate (over 90 days)		2.69	%		2.17	%		1.88	%		1.96	%		1.96	%		73		bps
Total Discover Card Volume	$	23,964,577		$	25,318,553		$	28,611,680		$	25,596,794		$	26,207,028		$	(2,242,451	)		(9	%)
Discover Card Sales Volume	$	21,293,757		$	22,025,264		$	24,601,611		$	22,457,651		$	23,155,253		$	(1,861,496	)		(8	%)
Segment - Income Before Income Taxes
U.S. Card	$	167,167		$	646,427		$	245,241		$	309,123		$	375,403		$	(208,236	)		(55	%)
Third-Party Payments		28,926			20,550			28,544			16,790			15,527			13,399			86	%
Total	$	196,093		$	666,977		$	273,785		$	325,913		$	390,930		$	(194,837	)		(50	%)
1 Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule.
2 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.
3 The quarter ended May 31, 2008 includes income from discontinued operations, net of tax of $32.6 million consisting of a $21 million gain related to disposition of the Goldfish business and income of $12 million related to the Goldfish business operations. The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations.
4 Based on Continuing Operations. Equity is based on company's equity.
5 Balance on a GAAP and Managed basis is the same.
6 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.

Discover Financial Services
U.S. Card Segment
Managed Basis1
(unaudited, dollars in thousands)
	Quarter Ended															Feb 28, 2009
	Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			Feb 29, 2008			vs Feb 29, 2008
Earnings Summary
Interest Income	$	1,603,362		$	1,680,925		$	1,637,588		$	1,572,164		$	1,651,987		$	(48,625	)		(3	%)
Interest Expense		438,338			602,386			534,870			550,629			668,951			(230,613	)		(34	%)
Net Interest Income		1,165,024			1,078,539			1,102,718			1,021,535			983,036			181,988			19	%
Other Income 2		863,223			1,234,100			482,311			455,074			602,411			260,812			43	%
Revenue Net of Interest Expense		2,028,247			2,312,639			1,585,029			1,476,609			1,585,447			442,800			28	%
Provision for Loan Losses		1,333,673			1,105,971			754,028			581,537			627,068			706,605			113	%
Total Other Expense		527,407			560,241			585,760			585,949			582,976			(55,569	)		(10	%)
Income (Loss) Before Income Taxes  2	$	167,167		$	646,427		$	245,241		$	309,123		$	375,403		$	(208,236	)		(55	%)
Net Yield on Loan Receivables		9.11	%		8.55	%		8.95	%		8.56	%		8.09	%		102		bps
Pretax Return on Loan Receivables  2		1.31	%		5.13	%		1.99	%		2.59	%		3.09	%		(178	)	bps
Loan Receivables
Total Loans	$	50,888,704		$	51,095,278		$	50,427,305		$	47,841,491		$	47,500,410		$	3,388,294			7	%
Average Total Loans	$	51,877,845		$	50,707,090		$	49,019,083		$	47,472,077		$	48,863,166		$	3,014,679			6	%
Managed Interest Yield		12.17	%		12.65	%		12.67	%		12.41	%		12.70	%		(53	)	bps
Managed Net Principal Charge-off Rate		6.48	%		5.48	%		5.20	%		4.99	%		4.33	%		215		bps
Managed Delinquency Rate (over 30 days)		5.25	%		4.56	%		3.85	%		3.81	%		3.90	%		135		bps
Managed Delinquency Rate (over 90 days)		2.69	%		2.17	%		1.88	%		1.96	%		1.96	%		73		bps
Credit Card Loans
Credit Card Loans - Managed	$	49,011,177		$	49,692,974		$	49,348,507		$	47,124,842		$	47,014,539		$	1,996,638			4	%
Average Credit Card Loans - Managed	$	50,254,235		$	49,420,412		$	48,168,124		$	46,857,480		$	48,487,812		$	1,766,423			4	%
Managed Interest Yield		12.28	%		12.72	%		12.70	%		12.43	%		12.72	%		(44	)	bps
Managed Net Principal Charge-off Rate		6.61	%		5.59	%		5.28	%		5.05	%		4.37	%		224		bps
Managed Delinquency Rate (over 30 days)		5.41	%		4.66	%		3.92	%		3.85	%		3.93	%		148		bps
Managed Delinquency Rate (over 90 days)		2.78	%		2.22	%		1.92	%		1.99	%		1.98	%		80		bps
Total Discover Card Volume	$	23,964,577		$	25,318,553		$	28,611,680		$	25,596,794		$	26,207,028		$	(2,242,451	)		(9	%)
Discover Card Sales Volume	$	21,293,757		$	22,025,264		$	24,601,611		$	22,457,651		$	23,155,253		$	(1,861,496	)		(8	%)
1 Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule.
2 The quarter ended November 30, 2008 and February 28, 2009 include $863 million pre-tax (estimated $535 million after-tax) and $475 million pre-tax (estimated $297 million after-tax), respectively related to the antitrust settlement.

Discover Financial Services
Third-Party Payments Segment
(unaudited, dollars in thousands)
	Quarter Ended										Feb 28, 2009
	Feb 28, 2009		Nov 30, 2008		Aug 31, 2008		May 31, 2008		Feb 29, 2008		vs Feb 29, 2008
Earnings Summary
Interest Income	$	487	$	1,342	$	662	$	533	$	628	$	(141	)		(22	%)
Interest Expense		79		64		17		-		2		77			100	%
Net Interest Income		408		1,278		645		533		626		(218	)		(35	%)
Other Income		60,234		53,113		54,686		37,133		34,268		25,966			76	%
Revenue Net of Interest Expense		60,642		54,391		55,331		37,666		34,894		25,748			74	%
Provision for Loan Losses		-		-		-		-		-		-			0	%
Total Other Expense		31,716		33,841		26,787		20,876		19,367		12,349			64	%
Income (Loss) Before Income Taxes	$	28,926	$	20,550	$	28,544	$	16,790	$	15,527	$	13,399			86	%
Volume
PULSE Network	$	27,454,173	$	25,033,235	$	28,364,575	$	27,830,403	$	24,783,895	$	2,670,278			11	%
Third-Party Issuers		1,362,446		1,538,013		1,711,617		1,603,006		1,545,943		(183,497	)		(12	%)
Diners Club International 1		6,293,574		7,457,893		5,227,795		-		-		6,293,574		NM
Total Third-Party Payments	$	35,110,193	$	34,029,141	$	35,303,987	$	29,433,409	$	26,329,838	$	8,780,355			33	%
Transactions Processed on PULSE Network (000's)		686,527		644,045		713,791		703,404		621,072		65,455			11	%
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.

DISCOVER FINANCIAL SERVICES

RECONCILIATION OF GAAP TO MANAGED DATA

The following pages present a reconciliation for certain information disclosed in the financial data supplement.

The data is presented on both a "managed" loan basis and as reported under generally accepted accounting principles ("owned" loan basis). Managed

loan data assume that the company's securitized loan receivables have not been sold and presents the results of securitized loan receivables in the same

manner as the company's owned loans. The company operates its business and analyzes its financial performance on a managed basis. Accordingly,

underwriting and servicing standards are comparable for both owned and securitized loans. The company believes that managed loan information is

useful to investors because it provides information regarding the quality of loan origination and credit performance of the entire managed portfolio and

allows investors to understand the related credit risks inherent in owned loans and retained interests in securitizations. Managed loan data is also

relevant because the company services the securitized and owned loans, and the related accounts, in the same manner without regard to ownership of the

loans. In addition, investors often request information on a managed basis which provides a more meaningful comparison to industry competitors.

Discover Financial Services
Reconciliation of GAAP to Managed Data 1
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			Feb 29, 2008
Interest Income
GAAP Basis	$	815,793		$	736,006		$	681,692		$	612,063		$	662,802
Securitization Adjustments 1		788,056			946,261			956,558			960,634			989,813
Managed Basis	$	1,603,849		$	1,682,267		$	1,638,250		$	1,572,697		$	1,652,615
Interest Expense
GAAP Basis	$	312,720		$	329,672		$	305,643		$	313,248		$	339,441
Securitization Adjustments		125,697			272,778			229,244			237,381			329,512
Managed Basis	$	438,417		$	602,450		$	534,887		$	550,629		$	668,953
Net Interest Income
GAAP Basis	$	503,073		$	406,334		$	376,049		$	298,815		$	323,361
Securitization Adjustments		662,359			673,483			727,314			723,253			660,301
Managed Basis	$	1,165,432		$	1,079,817		$	1,103,363		$	1,022,068		$	983,662
Other Income
GAAP Basis	$	1,189,956		$	1,568,901		$	875,121		$	844,892		$	975,544
Securitization Adjustments		(266,499	)		(281,688	)		(338,124	)		(352,685	)		(338,865	)
Managed Basis	$	923,457		$	1,287,213		$	536,997		$	492,207		$	636,679
Revenue Net of Interest Expense
GAAP Basis	$	1,693,029		$	1,975,235		$	1,251,170		$	1,143,707		$	1,298,905
Securitization Adjustments		395,860			391,795			389,190			370,568			321,436
Managed Basis	$	2,088,889		$	2,367,030		$	1,640,360		$	1,514,275		$	1,620,341
Provision for Loan Losses
GAAP Basis	$	937,813		$	714,176		$	364,838		$	210,969		$	305,632
Securitization Adjustments		395,860			391,795			389,190			370,568			321,436
Managed Basis	$	1,333,673		$	1,105,971		$	754,028		$	581,537		$	627,068
Total Assets
GAAP Basis	$	40,605,873		$	39,892,382		$	37,283,548		$	34,020,245		$	34,222,732
Securitization Adjustments		22,625,140			25,728,094			28,349,277			28,128,332			27,714,769
Managed Basis	$	63,231,013		$	65,620,476		$	65,632,825		$	62,148,577		$	61,937,501
Tangible Common Equity/Total Assets
GAAP Basis		13.8	%		13.8	%		15.0	%		16.4	%		15.8	%
Securitization Adjustments		24.5	%		21.2	%		19.5	%		19.7	%		19.3	%
Managed Basis		8.8	%		8.4	%		8.5	%		9.0	%		8.7	%
Loan Receivables
Total Loans
GAAP Basis	$	28,034,208		$	25,216,611		$	21,767,483		$	20,502,063		$	21,042,681
Securitization Adjustments		22,854,496			25,878,667			28,659,822			27,339,428			26,457,729
Managed Basis	$	50,888,704		$	51,095,278		$	50,427,305		$	47,841,491		$	47,500,410
Average Total Loans
GAAP Basis	$	27,733,143		$	22,945,494		$	21,053,804		$	19,890,330		$	21,523,606
Securitization Adjustments		24,144,702			27,761,596			27,965,279			27,581,747			27,339,560
Managed Basis	$	51,877,845		$	50,707,090		$	49,019,083		$	47,472,077		$	48,863,166

Discover Financial Services
Reconciliation of GAAP to Managed Data 1
(unaudited, dollars in thousands)
	Quarter Ended
	Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			Feb 29, 2008
Interest Yield
GAAP Basis		11.24	%		11.36	%		11.41	%		10.40	%		10.34	%
Securitization Adjustments		13.24	%		13.71	%		13.61	%		13.86	%		14.56	%
Managed Basis		12.17	%		12.65	%		12.67	%		12.41	%		12.70	%
Net Principal Charge-off Rate
GAAP Basis		6.34	%		5.25	%		4.76	%		4.49	%		3.83	%
Securitization Adjustments		6.65	%		5.68	%		5.54	%		5.34	%		4.73	%
Managed Basis		6.48	%		5.48	%		5.20	%		4.99	%		4.33	%
Delinquency Rate (over 30 days)
GAAP Basis		5.04	%		4.35	%		3.58	%		3.54	%		3.63	%
Securitization Adjustments		5.52	%		4.77	%		4.06	%		4.01	%		4.11	%
Managed Basis		5.25	%		4.56	%		3.85	%		3.81	%		3.90	%
Delinquency Rate (over 90 days)
GAAP Basis		2.57	%		2.06	%		1.73	%		1.81	%		1.82	%
Securitization Adjustments		2.83	%		2.27	%		2.00	%		2.07	%		2.08	%
Managed Basis		2.69	%		2.17	%		1.88	%		1.96	%		1.96	%
Credit Card Loans
Credit Card Loans
GAAP Basis	$	26,156,681		$	23,814,307		$	20,688,685		$	19,785,414		$	20,556,810
Securitization Adjustments		22,854,496			25,878,667			28,659,822			27,339,428			26,457,729
Managed Basis	$	49,011,177		$	49,692,974		$	49,348,507		$	47,124,842		$	47,014,539
Average Credit Card Loans
GAAP Basis	$	26,109,533		$	21,658,816		$	20,202,845		$	19,275,733		$	21,148,252
Securitization Adjustments		24,144,702			27,761,596			27,965,279			27,581,747			27,339,560
Managed Basis	$	50,254,235		$	49,420,412		$	48,168,124		$	46,857,480		$	48,487,812
Interest Yield
GAAP Basis		11.39	%		11.45	%		11.45	%		10.40	%		10.35	%
Securitization Adjustments		13.24	%		13.71	%		13.61	%		13.86	%		14.56	%
Managed Basis		12.28	%		12.72	%		12.70	%		12.43	%		12.72	%
Net Principal Charge-off Rate
GAAP Basis		6.58	%		5.47	%		4.92	%		4.63	%		3.90	%
Securitization Adjustments		6.65	%		5.68	%		5.54	%		5.34	%		4.73	%
Managed Basis		6.61	%		5.59	%		5.28	%		5.05	%		4.37	%
Delinquency Rate (over 30 days)
GAAP Basis		5.32	%		4.55	%		3.72	%		3.63	%		3.69	%
Securitization Adjustments		5.52	%		4.77	%		4.06	%		4.01	%		4.11	%
Managed Basis		5.41	%		4.66	%		3.92	%		3.85	%		3.93	%
Delinquency Rate (over 90 days)
GAAP Basis		2.73	%		2.16	%		1.81	%		1.87	%		1.86	%
Securitization Adjustments		2.83	%		2.27	%		2.00	%		2.07	%		2.08	%
Managed Basis		2.78	%		2.22	%		1.92	%		1.99	%		1.98	%
1 Securitization Adjustments present the effect of loan securitization by recharacterizing as securitization income the portions of the following items that relate to the securitized loans: interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues.  Securitization income is reported in other income.