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): June 18, 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 June 18, 2009, Discover Financial Services (the “Company”) released financial information with respect to the quarter ended May 31, 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 May 31, 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 June 18, 2009 containing financial information for the quarter ended May 31, 2009
99.2	Financial Data Supplement of the Company for the quarter ended May 31, 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: June 18, 2009	By:	/s/ D. Christopher Greene
		Name:  D. Christopher Greene
		Title:  Vice President, Assistant General Counsel and Assistant Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of the Company dated June 18, 2009 containing financial information for the quarter ended May 31, 2009
99.2	Financial Data Supplement of the Company for the quarter ended May 31, 2009

EX-99.1

Exhibit 99.1

DISCOVER FINANCIAL SERVICES REPORTS SECOND QUARTER RESULTS:

NET INCOME OF $226 MILLION AND EARNINGS PER SHARE OF $0.43

Riverwoods, IL, June 18, 2009 - - Discover Financial Services (NYSE: DFS) today reported results for the quarter ended May 31, 2009, as follows:

	Continuing Operations		Discontinued Operations	Net Income
	Earnings	Diluted EPS	Earnings	Earnings	Diluted EPS
	(millions)		(millions)	(millions)
2Q09	$226	$0.43	-	$226	$0.43
2Q08	$202	$0.42	$33	$234	$0.48

Net income for the second quarter of 2009 was $226 million, up $24 million from the second quarter of 2008.  Net income for the second quarter of 2009 includes approximately $295 million (after-tax) related to the Visa/MasterCard antitrust litigation settlement.

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 4% from the prior year to $21 billion.

·        Managed net yield on loan receivables rose to 9.26%, an increase of 15 basis points from the prior quarter and 69 basis points from the prior year.

·        The second-quarter managed net charge-off rate was 7.79% and the managed over 30 days delinquency rate was 5.08%.  The company added $108 million to reserves in excess of charge-offs.

·        Total deposits grew 18% from the prior year to $29 billion, including $8 billion of deposit balances originated through direct-to-consumer and affinity relationships.

·        Third-Party Payments segment volume grew 25% from the prior year to $37 billion, including $6 billion of Diners Club International volume.

·        Expenses, which included a $20 million charge related to reduction in workforce, were down 8% from the prior year.

·        Tangible common equity as a percentage of managed assets was 9.0%.

“While the rise in unemployment continued to have a significant impact on our financial results, I am pleased with our strong relative performance in both credit management and sales volumes,” said David Nelms, chairman and chief executive officer of Discover Financial Services. “We continue to focus on reducing expenses and maintaining a strong capital position as we manage through these challenging times.”

1

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.  Sales volume decreased 4% versus the second quarter of 2008, reflecting lower gas prices and a general decline in consumer spending.

Pretax income was $388 million in the second quarter of 2009 as compared to $309 million for the second quarter of 2008.

Net yield on loan receivables rose to 9.26%, an increase of 15 basis points from the prior quarter, and 70 basis points from the prior year.  The increase from the prior year reflects lower cost of funds, accretion of balance transfer fees and an increase in revolving balances, partially offset by higher interest charge-offs and lower yields on variable rate assets.  The second quarter of 2009 includes a $16 million charge related to an industry-wide FDIC special assessment which had the effect of reducing net yield by 12 basis points.

The over 30 days delinquency rate on managed loans was 5.08%, down 17 basis points from the first quarter of 2009, reflecting seasonal trends and up 127 basis points from the prior year due primarily to higher levels of unemployment and the economic downturn.  The managed net charge-off rate increased to 7.79% for the second quarter of 2009, up 131 basis points and 280 basis points from the prior quarter and the prior year, respectively.  The managed net charge-off rate for the third quarter of 2009 is expected to be between 8.5% and 9%.

Provision for loan losses increased $530 million, or 91%, from the prior year due to higher net charge-offs and the addition of $108 million in loan loss reserves in excess of charge-offs in the quarter.  The addition in excess of charge-offs was due to an increase in reserve rate to 7.24%, reflecting higher anticipated charge-offs, partially offset by lower on-balance sheet loans.

Other income increased $380 million, or 83%, from the prior year, including $473 million related to the Visa/MasterCard antitrust litigation settlement.  This was partially offset by a $93 million charge related to the estimated fair value of the interest only strip receivable, $49 million higher than a year ago.  Other income also reflected lower fee revenues and a decline in merchant revenue reflecting lower sales volumes.  As previously disclosed, the second quarter of 2008 also included a $31 million impairment charge related to an investment.

Expenses decreased $57 million, or 10%, from the prior year, principally due to lower marketing spending and a decrease in compensation and other costs.  The second quarter of 2009 includes a $20 million charge related to a reduction in force.

2

Third-Party Payments

The Third-Party Payments segment transaction volume was $37 billion, up 25% from the prior year, reflecting the addition of Diners Club International volume of $6 billion, as well as a 5% increase in volume on the PULSE network.

Pretax income of $27 million was up $10 million from the second quarter of 2008.  Revenues increased $21 million, reflecting the acquisition of Diners Club International in June 2008, as well as increased transaction volume and fees.  Expenses increased $11 million, reflecting the Diners Club acquisition and integration.

Effective Tax Rate

The company’s effective tax rate for the second quarter of 2009 includes $31 million of adjustments to tax expense mainly from the write-off of a deferred tax asset resulting from sale of the Goldfish business in the second quarter of 2008.

Dividends

The company’s board declared a cash dividend of $0.02 per share, payable on July 22, 2009, to stockholders of record at the close of business on July 1, 2009.

Preferred dividends of $13 million (an impact of approximately $.03 per share ) were accrued in the second quarter of 2009 related to shares of preferred stock issued in March 2009 under the U.S. Treasury Capital Purchase Program.  These preferred dividends are a component of net income available to common stockholders and earnings per share.

Conference Call and Webcast Information

The company will host a conference call to discuss its second quarter results on Thursday, June 18, 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.

3

Contacts:

Investors:

Craig Streem, 224-405-3575

craigstreem@discover.com

Media:

Leslie Sutton, 224-405-3965

lesliesutton@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. equity, 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 new laws 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.

4

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 and under “Part II. Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2009, which are filed with the SEC and available at the SEC's Internet site (http://www.sec.gov).

5

Discover Financial Services
GAAP Basis
(unaudited, dollars in thousands, except per
share statistics)	Quarter Ended
	May 31, 2009			Feb 28, 2009			May 31, 2008
Earnings Summary
Interest Income	$	857,984		$	815,793		$	612,063
Interest Expense		320,005			312,720			313,248
Net Interest Income		537,979			503,073			298,815
Other Income 1		1,081,120			1,189,956			844,892
Revenue Net of Interest Expense		1,619,099			1,693,029			1,143,707
Provision for Loan Losses		643,861			937,813			210,969
Employee Compensation and Benefits		208,151			219,488			218,290
Marketing and Business Development		102,922			111,433			132,038
Information Processing & Communications		74,441			74,897			79,449
Professional Fees		74,550			70,123			81,392
Premises and Equipment		18,223			18,072			19,803
Other Expense		82,341			65,110			75,853
Total Other Expense		560,628			559,123			606,825
Income (Loss) Before Income Taxes 1		414,610			196,093			325,913
Tax Expense		188,810			75,699			124,370
Income From Continuing Operations 1		225,800			120,394			201,543
Discontinued Operations, Net of Tax 2		0			0			32,605
Net Income (Loss) 1, 2	$	225,800		$	120,394		$	234,148
Net Income (Loss) Available to Common Stockholders 1, 2 , 3	$	209,246		$	120,394		$	234,148
Effective Tax Rate From Continuing Operations		45.5	%		38.6	%		38.2	%
Balance Sheet Statistics 4
Total Assets	$	41,518,288		$	40,606,518		$	34,020,245
Total Equity	$	7,415,640		$	5,999,351		$	5,849,691
Total Tangible Common Equity	$	5,808,764		$	5,542,532		$	5,538,240
Tangible Common Equity/Total Owned Assets 5		14.1	%		13.8	%		16.4	%
ROE 1, 2		12	%		8	%		16	%
ROE from Continuing Operations 1		12	%		8	%		14	%
Allowance for Loan Loss (period end)	$	1,986,473		$	1,878,942		$	846,775
Change in Loan Loss Reserves	$	107,531		$	504,357		$	(13,603	)
Reserve Rate		7.24	%		6.70	%		4.28	%
Interest-only Strip Receivable (period end)	$	94,670		$	198,536		$	447,994
Net Revaluation of Retained Interests	$	(92,954	)	$	(98,242	)	$	(44,473	)
Per Share Statistics
Basic EPS 1, 2, 6	$	0.43		$	0.25		$	0.49
Basic EPS from Continuing Operations 1, 6	$	0.43		$	0.25		$	0.42
Diluted EPS 1, 2, 6	$	0.43		$	0.25		$	0.48
Diluted EPS from Continuing Operations  1, 6	$	0.43		$	0.25		$	0.42
Common Stock Price (period end)	$	9.56		$	5.73		$	17.15
Tangible Common Equity	$	12.06		$	11.51		$	11.55
Book Value	$	15.40		$	12.46		$	12.20
Ending Common Shares Outstanding (000's)		481,676			481,459			479,346
Weighted Average Common Shares Outstanding (000's)		481,636			480,497			479,270
Weighted Average Common Shares Outstanding (fully diluted) (000's)		484,965			485,043			483,753
Loan Receivables  4
Total Loans - Owned	$	27,441,514		$	28,034,208		$	20,502,063
Average Total Loans - Owned	$	28,257,484		$	27,733,143		$	19,890,330
Interest Yield		11.54	%		11.24	%		10.40	%
Net Principal Charge-off Rate		7.53	%		6.34	%		4.49	%
Delinquency Rate (over 30 days)		4.87	%		5.04	%		3.54	%
Delinquency Rate (over 90 days)		2.60	%		2.57	%		1.81	%
Transactions Processed on Networks (000's)
Discover Network		366,315			369,647			370,596
PULSE Network		762,175			686,527			703,404
Total		1,128,490			1,056,174			1,074,000
Volume
PULSE Network	$	29,128,044		$	27,454,173		$	27,830,403
Third-Party Issuers		1,340,532			1,362,446			1,603,006
Diners Club International 7		6,240,604			6,293,574			-
Total Third-Party Payments		36,709,180			35,110,193			29,433,409
Discover Network - Proprietary 8		21,972,596			22,424,367			23,621,519
Total	$	58,681,776		$	57,534,560		$	53,054,928

1 The quarters ended February 28, 2009, and May 31, 2009 include $475 million pre-tax (estimated $297 million after-tax) and $473 million pre-tax (estimated $295 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.

3 Net Income (Loss) available to common stockholders equals net income (loss) less dividends and accretion of discount on preferred shares.

4 Based on Continuing Operations except equity and ROE.  Equity is based on company's equity.  Equity includes $1.2 billion of preferred stock and $6.2 billion of common equity as of May 31, 2009.

5 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.

6 Earnings per share is based on net income (loss) available to common shareholders.

7 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.

8 Gross proprietary sales volume on the Discover Network.

Discover Financial Services
Managed Basis 1
(unaudited, dollars in thousands)
	Quarter Ended
	May 31, 2009			Feb 28, 2009			May 31, 2008
Earnings Summary
Interest Income	$	1,607,452		$	1,603,849		$	1,572,697
Interest Expense		414,063			438,417			550,629
Net Interest Income		1,193,389			1,165,432			1,022,068
Other Income 2		893,081			923,457			492,207
Revenue Net of Interest Expense		2,086,470			2,088,889			1,514,275
Provision for Loan Losses		1,111,232			1,333,673			581,537
Employee Compensation and Benefits		208,151			219,488			218,290
Marketing and Business Development		102,922			111,433			132,038
Information Processing & Communications		74,441			74,897			79,449
Professional Fees		74,550			70,123			81,392
Premises and Equipment		18,223			18,072			19,803
Other Expense		82,341			65,110			75,853
Total Other Expense		560,628			559,123			606,825
Income (Loss) Before Income Taxes 2		414,610			196,093			325,913
Tax Expense		188,810			75,699			124,370
Income From Continuing Operations 2		225,800			120,394			201,543
Discontinued Operations, Net of Tax  2, 3		0			0			32,605
Net Income (Loss) 2, 3	$	225,800		$	120,394		$	234,148
Balance Sheet Statistics 4
Total Assets	$	64,846,824		$	63,231,657		$	62,148,577
Total Equity 5	$	7,415,640		$	5,999,351		$	5,849,691
Total Tangible Common Equity 5	$	5,808,764		$	5,542,532		$	5,538,240
Tangible Common Equity/Net Managed Receivables		11.8	%		11.3	%		11.8	%
Tangible Common Equity/Total Managed Assets 6		9.0	%		8.8	%		9.0	%
Net Yield on Loan Receivables		9.26	%		9.11	%		8.57	%
Return on Loan Receivables 2		1.75	%		0.94	%		1.69	%
Loan Receivables 4
Total Loans - Managed	$	51,032,382		$	50,888,704		$	47,841,491
Average Total Loans - Managed	$	51,132,761		$	51,877,845		$	47,472,077
Managed Interest Yield		12.19	%		12.17	%		12.41	%
Managed Net Principal Charge-off Rate		7.79	%		6.48	%		4.99	%
Managed Delinquency Rate (over 30 days)		5.08	%		5.25	%		3.81	%
Managed Delinquency Rate (over 90 days)		2.73	%		2.69	%		1.96	%
Total Discover Card Volume	$	24,336,751		$	23,964,577		$	25,596,794
Discover Card Sales Volume	$	21,494,174		$	21,293,757		$	22,457,651
Segment - Income Before Income Taxes
U.S. Card	$	387,902		$	167,167		$	309,123
Third-Party Payments		26,708			28,926			16,790
Total	$	414,610		$	196,093		$	325,913

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 quarters ended February 28, 2009, and May 31, 2009 include $475 million pre-tax (estimated $297 million after-tax) and $473 million pre-tax (estimated $295 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.

4 Based on Continuing Operations except equity and ROE.  Equity is based on company's equity.  Equity includes $1.2 billion of preferred stock and $6.2 billion of common equity as of May 31, 2009.

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 Basis 1
(unaudited, dollars in thousands)
	Quarter Ended
	May 31, 2009			Feb 28, 2009			May 31, 2008
Earnings Summary
Interest Income	$	1,607,114		$	1,603,362		$	1,572,164
Interest Expense		414,002			438,338			550,629
Net Interest Income		1,193,112			1,165,024			1,021,535
Other Income 2		834,630			863,223			455,074
Revenue Net of Interest Expense		2,027,742			2,028,247			1,476,609
Provision for Loan Losses		1,111,232			1,333,673			581,537
Total Other Expense		528,608			527,407			585,949
Income (Loss) Before Income Taxes 2	$	387,902		$	167,167		$	309,123
Net Yield on Loan Receivables		9.26	%		9.11	%		8.56	%
Pretax Return on Loan Receivables 2		3.01	%		1.31	%		2.59	%
Loan Receivables
Total Loans	$	51,032,382		$	50,888,704		$	47,841,491
Average Total Loans	$	51,132,761		$	51,877,845		$	47,472,077
Managed Interest Yield		12.19	%		12.17	%		12.41	%
Managed Net Principal Charge-off Rate		7.79	%		6.48	%		4.99	%
Managed Delinquency Rate (over 30 days)		5.08	%		5.25	%		3.81	%
Managed Delinquency Rate (over 90 days)		2.73	%		2.69	%		1.96	%
Credit Card Loans
Credit Card Loans - Managed	$	48,903,632		$	49,011,177		$	47,124,842
Average Credit Card Loans - Managed	$	49,108,321		$	50,254,235		$	46,857,480
Managed Interest Yield		12.37	%		12.28	%		12.43	%
Managed Net Principal Charge-off Rate		7.99	%		6.61	%		5.05	%
Managed Delinquency Rate (over 30 days)		5.23	%		5.41	%		3.85	%
Managed Delinquency Rate (over 90 days)		2.82	%		2.78	%		1.99	%
Total Discover Card Volume	$	24,336,751		$	23,964,577		$	25,596,794
Discover Card Sales Volume	$	21,494,174		$	21,293,757		$	22,457,651

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 quarters ended February 28, 2009 and May 31, 2009 include $475 million pre-tax (estimated $297 million after-tax) and $473 million pre-tax ($295 million after-tax), respectively related to the antitrust settlement.

Discover Financial Services
Third-Party Payments Segment
(unaudited, dollars in thousands)
	Quarter Ended
	May 31, 2009		Feb 28, 2009		May 31, 2008
Earnings Summary
Interest Income	$	338	$	487	$	533
Interest Expense		61		79		-
Net Interest Income		277		408		533
Other Income		58,451		60,234		37,133
Revenue Net of Interest Expense		58,728		60,642		37,666
Provision for Loan Losses		-		-		-
Total Other Expense		32,020		31,716		20,876
Income (Loss) Before Income Taxes	$	26,708	$	28,926	$	16,790
Volume
PULSE Network	$	29,128,044	$	27,454,173	$	27,830,403
Third-Party Issuers		1,340,532		1,362,446		1,603,006
Diners Club International 1		6,240,604		6,293,574		-
Total Third-Party Payments	$	36,709,180	$	35,110,193	$	29,433,409
Transactions Processed on PULSE Network (000's)		762,175		686,527		703,404

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
	May 31, 2009			Feb 28, 2009			May 31, 2008
Interest Income
GAAP Basis	$	857,984		$	815,793		$	612,063
Securitization Adjustments 1		749,468			788,056			960,634
Managed Basis	$	1,607,452		$	1,603,849		$	1,572,697
Interest Expense
GAAP Basis	$	320,005		$	312,720		$	313,248
Securitization Adjustments		94,058			125,697			237,381
Managed Basis	$	414,063		$	438,417		$	550,629
Net Interest Income
GAAP Basis	$	537,979		$	503,073		$	298,815
Securitization Adjustments		655,410			662,359			723,253
Managed Basis	$	1,193,389		$	1,165,432		$	1,022,068
Other Income
GAAP Basis	$	1,081,120		$	1,189,956		$	844,892
Securitization Adjustments		(188,039	)		(266,499	)		(352,685	)
Managed Basis	$	893,081		$	923,457		$	492,207
Revenue Net of Interest Expense
GAAP Basis	$	1,619,099		$	1,693,029		$	1,143,707
Securitization Adjustments		467,371			395,860			370,568
Managed Basis	$	2,086,470		$	2,088,889		$	1,514,275
Provision for Loan Losses
GAAP Basis	$	643,861		$	937,813		$	210,969
Securitization Adjustments		467,371			395,860			370,568
Managed Basis	$	1,111,232		$	1,333,673		$	581,537
Total Assets
GAAP Basis	$	41,518,288		$	40,606,518		$	34,020,245
Securitization Adjustments		23,328,536			22,625,139			28,128,332
Managed Basis	$	64,846,824		$	63,231,657		$	62,148,577
Tangible Common Equity/Total Assets
GAAP Basis		14.1	%		13.8	%		16.4	%
Securitization Adjustments		24.9	%		24.5	%		19.7	%
Managed Basis		9.0	%		8.8	%		9.0	%
Loan Receivables
Total Loans
GAAP Basis	$	27,441,514		$	28,034,208		$	20,502,063
Securitization Adjustments		23,590,868			22,854,496			27,339,428
Managed Basis	$	51,032,382		$	50,888,704		$	47,841,491
Average Total Loans
GAAP Basis	$	28,257,484		$	27,733,143		$	19,890,330
Securitization Adjustments		22,875,277			24,144,702			27,581,747
Managed Basis	$	51,132,761		$	51,877,845		$	47,472,077

Discover Financial Services
Reconciliation of GAAP to Managed Data 1
(unaudited, dollars in thousands)
	Quarter Ended
	May 31, 2009			Feb 28, 2009			May 31, 2008
Interest Yield
GAAP Basis		11.54	%		11.24	%		10.40	%
Securitization Adjustments		13.00	%		13.24	%		13.86	%
Managed Basis		12.19	%		12.17	%		12.41	%
Net Principal Charge-off Rate
GAAP Basis		7.53	%		6.34	%		4.49	%
Securitization Adjustments		8.11	%		6.65	%		5.34	%
Managed Basis		7.79	%		6.48	%		4.99	%
Delinquency Rate (over 30 days)
GAAP Basis		4.87	%		5.04	%		3.54	%
Securitization Adjustments		5.32	%		5.52	%		4.01	%
Managed Basis		5.08	%		5.25	%		3.81	%
Delinquency Rate (over 90 days)
GAAP Basis		2.60	%		2.57	%		1.81	%
Securitization Adjustments		2.88	%		2.83	%		2.07	%
Managed Basis		2.73	%		2.69	%		1.96	%
Credit Card Loans
Credit Card Loans
GAAP Basis	$	25,312,764		$	26,156,681		$	19,785,414
Securitization Adjustments		23,590,868			22,854,496			27,339,428
Managed Basis	$	48,903,632		$	49,011,177		$	47,124,842
Average Credit Card Loans
GAAP Basis	$	26,233,044		$	26,109,533		$	19,275,733
Securitization Adjustments		22,875,277			24,144,702			27,581,747
Managed Basis	$	49,108,321		$	50,254,235		$	46,857,480
Interest Yield
GAAP Basis		11.81	%		11.39	%		10.40	%
Securitization Adjustments		13.00	%		13.24	%		13.86	%
Managed Basis		12.37	%		12.28	%		12.43	%
Net Principal Charge-off Rate
GAAP Basis		7.88	%		6.58	%		4.63	%
Securitization Adjustments		8.11	%		6.65	%		5.34	%
Managed Basis		7.99	%		6.61	%		5.05	%
Delinquency Rate (over 30 days)
GAAP Basis		5.15	%		5.32	%		3.63	%
Securitization Adjustments		5.32	%		5.52	%		4.01	%
Managed Basis		5.23	%		5.41	%		3.85	%
Delinquency Rate (over 90 days)
GAAP Basis		2.77	%		2.73	%		1.87	%
Securitization Adjustments		2.88	%		2.83	%		2.07	%
Managed Basis		2.82	%		2.78	%		1.99	%

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																					Six Months Ended
	May 31, 2009			Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			May 31, 2009 vs May 31, 2008						May 31, 2009			May 31, 2008			2009 vs 2008
Earnings Summary
Interest Income	$	857,984		$	815,793		$	736,006		$	681,692		$	612,063		$	245,921			40	%	$	1,673,777		$	1,274,865		$	398,912			31	%
Interest Expense		320,005			312,720			329,672			305,643			313,248			6,757			2	%		632,725			652,689			(19,964	)		(3	%)
Net Interest Income		537,979			503,073			406,334			376,049			298,815			239,164			80	%		1,041,052			622,176			418,876			67	%
Other Income 1		1,081,120			1,189,956			1,568,901			875,121			844,892			236,228			28	%		2,271,076			1,820,436			450,640			25	%
Revenue Net of Interest Expense		1,619,099			1,693,029			1,975,235			1,251,170			1,143,707			475,392			42	%		3,312,128			2,442,612			869,516			36	%
Provision for Loan Losses		643,861			937,813			714,176			364,838			210,969			432,892		NM				1,581,674			516,601			1,065,073		NM
Employee Compensation and     Benefits		208,151			219,488			187,306			222,426			218,290			(10,139	)		(5	%)		427,639			435,660			(8,021	)		(2	%)
Marketing and Business     Development		102,922			111,433			119,382			137,928			132,038			(29,116	)		(22	%)		214,355			273,591			(59,236	)		(22	%)
Information Processing &     Communications		74,441			74,897			81,543			76,675			79,449			(5,008	)		(6	%)		149,338			157,725			(8,387	)		(5	%)
Professional Fees		74,550			70,123			111,645			82,775			81,392			(6,842	)		(8	%)		144,673			155,064			(10,391	)		(7	%)
Premises and Equipment		18,223			18,072			20,676			20,274			19,803			(1,580	)		(8	%)		36,295			39,444			(3,149	)		(8	%)
Other Expense		82,341			65,110			73,530			72,469			75,853			6,488			9	%		147,451			147,684			(233	)		(0	%)
Total Other Expense		560,628			559,123			594,082			612,547			606,825			(46,197	)		(8	%)		1,119,751			1,209,168			(89,417	)		(7	%)
Income (Loss) Before Income Taxes 1		414,610			196,093			666,977			273,785			325,913			88,697			27	%		610,703			716,843			(106,140	)		(15	%)
Tax Expense		188,810			75,699			223,336			94,885			124,370			64,440			52	%		264,509			276,471			(11,962	)		(4	%)
Income From Continuing Operations 1		225,800			120,394			443,641			178,900			201,543			24,257			12	%		346,194			440,372			(94,178	)		(21	%)
Discontinued Operations, Net of Tax 2		0			0			(11,306	)		1,153			32,605			(32,605	)		(100	%)		0			(125,010	)		125,010			100	%
Net Income (Loss) 1, 2	$	225,800		$	120,394		$	432,335		$	180,053		$	234,148		$	(8,348	)		(4	%)	$	346,194		$	315,362		$	30,832			10	%
Net Income (Loss) Available to Common Stockholders 1, 2 , 3	$	209,246		$	120,394		$	432,335		$	180,053		$	234,148		$	(24,902	)		(11	%)	$	329,640		$	315,362		$	14,278			5	%
Effective Tax Rate From Continuing Operations		45.5	%		38.6	%		33.5	%		34.7	%		38.2	%								43.3	%		38.6	%
Balance Sheet Statistics 4
Total Assets	$	41,518,288		$	40,606,518		$	39,892,382		$	37,283,548		$	34,020,245		$	7,498,043			22	%	$	41,518,288		$	34,020,245		$	7,498,043			22	%
Total Equity	$	7,415,640		$	5,999,351		$	5,915,823		$	6,000,393		$	5,849,691		$	1,565,949			27	%	$	7,415,640		$	5,849,691		$	1,565,949			27	%
Total Tangible Common Equity	$	5,808,764		$	5,542,532		$	5,457,083		$	5,539,274		$	5,538,240		$	270,524			5	%	$	5,808,764		$	5,538,240		$	270,524			5	%
Tangible Common Equity/Total Owned Assets 5		14.1	%		13.8	%		13.8	%		15.0	%		16.4	%								14.1	%		16.4	%
ROE 1, 2		12	%		8	%		29	%		12	%		16	%								10	%		11	%
ROE from Continuing Operations 1		12	%		8	%		30	%		12	%		14	%								10	%		15	%
Allowance for Loan Loss (period end)	$	1,986,473		$	1,878,942		$	1,374,585		$	959,769		$	846,775		$	1,139,698			135	%	$	1,986,473		$	846,775		$	1,139,698			135	%
Change in Loan Loss Reserves	$	107,531		$	504,357		$	414,816		$	112,994		$	(13,603	)	$	121,134		NM			$	611,888		$	86,850		$	525,038		NM
Reserve Rate		7.24	%		6.70	%		5.45	%		4.41	%		4.28	%		296		bps				7.24	%		4.28	%		296		bps
Interest-only Strip Receivable (period end)	$	94,670		$	198,536		$	300,120		$	408,649		$	447,994		$	(353,324	)		(79	%)	$	94,670		$	447,994		$	(353,324	)		(79	%)
Net Revaluation of Retained Interests	$	(92,954	)	$	(98,242	)	$	(116,335	)	$	(33,513	)	$	(44,473	)	$	(48,481	)		109	%	$	(191,196	)	$	30,524		$	(221,720	)	NM
Per Share Statistics
Basic EPS 1, 2, 6	$	0.43		$	0.25		$	0.90		$	0.38		$	0.49		$	(0.06	)		(12	%)	$	0.69		$	0.66		$	0.03			5	%
Basic EPS from Continuing Operations 1, 6	$	0.43		$	0.25		$	0.92		$	0.38		$	0.42		$	0.01			2	%	$	0.69		$	0.92		$	(0.23	)		(25	%)
Diluted EPS 1, 2, 6	$	0.43		$	0.25		$	0.89		$	0.37		$	0.48		$	(0.05	)		(10	%)	$	0.68		$	0.65		$	0.03			5	%
Diluted EPS from Continuing Operations 1, 6	$	0.43		$	0.25		$	0.92		$	0.37		$	0.42		$	0.01			2	%	$	0.68		$	0.91		$	(0.23	)		(25	%)
Common Stock Price (period end)	$	9.56		$	5.73		$	10.23		$	16.45		$	17.15		$	(7.59	)		(44	%)	$	9.56		$	17.15		$	(7.59	)		(44	%)
Tangible Common Equity	$	12.06		$	11.51		$	11.37		$	11.55		$	11.55		$	0.51			4	%	$	12.06		$	11.55
Book Value	$	15.40		$	12.46		$	12.32		$	12.51		$	12.20		$	3.20			26	%	$	15.40		$	12.20		$	3.20			26	%
Ending Common Shares Outstanding (000's)		481,676			481,459			479,987			479,764			479,346			2,330			0	%		481,676			479,346			2,330			0	%
Weighted Average Common Shares Outstanding (000's)		481,636			480,497			479,931			479,618			479,270			2,366			0	%		481,092			478,896			2,196			0	%
Weighted Average Common Shares Outstanding (fully diluted) (000's)		484,965			485,043			484,558			484,128			483,753			1,212			0	%		484,998			482,735			2,263			0	%
Loan Receivables  4
Total Loans - Owned	$	27,441,514		$	28,034,208		$	25,216,611		$	21,767,483		$	20,502,063		$	6,939,451			34	%	$	27,441,514		$	20,502,063		$	6,939,451			34	%
Average Total Loans - Owned	$	28,257,484		$	27,733,143		$	22,945,494		$	21,053,804		$	19,890,330		$	8,367,154			42	%	$	27,998,194		$	20,702,505		$	7,295,689			35	%
Interest Yield		11.54	%		11.24	%		11.36	%		11.41	%		10.40	%		114		bps				11.39	%		10.37	%		102		bps
Net Principal Charge-off Rate		7.53	%		6.34	%		5.25	%		4.76	%		4.49	%		304		bps				6.95	%		4.15	%		280		bps
Delinquency Rate (over 30 days)		4.87	%		5.04	%		4.35	%		3.58	%		3.54	%		133		bps				4.87	%		3.54	%		133		bps
Delinquency Rate (over 90 days)		2.60	%		2.57	%		2.06	%		1.73	%		1.81	%		79		bps				2.60	%		1.81	%		79		bps
Transactions Processed on Networks (000's)
Discover Network		366,315			369,647			377,356			388,504			370,596			(4,281	)		(1	%)		735,962			749,508			(13,546	)		(2	%)
PULSE Network		762,175			686,527			644,045			713,791			703,404			58,771			8	%		1,448,702			1,324,476			124,226			9	%
Total		1,128,490			1,056,174			1,021,401			1,102,295			1,074,000			54,490			5	%		2,184,664			2,073,984			110,680			5	%
Volume
PULSE Network	$	29,128,044		$	27,454,173		$	25,033,235		$	28,364,575		$	27,830,403		$	1,297,641			5	%	$	56,582,217		$	52,614,298		$	3,967,919			8	%
Third-Party Issuers		1,340,532			1,362,446			1,538,013			1,711,617			1,603,006			(262,474	)		(16	%)		2,702,978			3,148,949			(445,971	)		(14	%)
Diners Club International 7		6,240,604			6,293,574			7,457,893			5,227,795			-			6,240,604			100	%		12,534,178			-			12,534,178			100	%
Total Third-Party Payments		36,709,180			35,110,193			34,029,141			35,303,987			29,433,409			7,275,771			25	%		71,819,373			55,763,247			16,056,126			29	%
Discover Network - Proprietary 8		21,972,596			22,424,367			22,875,272			25,117,321			23,621,519			(1,648,923	)		(7	%)		44,396,963			47,695,850			(3,298,887	)		(7	%)
Total	$	58,681,776		$	57,534,560		$	56,904,413		$	60,421,308		$	53,054,928		$	5,626,848			11	%	$	116,216,336		$	103,459,097		$	12,757,239			12	%

1 The quarters ended November 30, 2008, February 28, 2009, and May 31, 2009 include $863 million pre-tax (estimated $535 million after-tax), $475 million pre-tax (estimated $297 million after-tax), and $473 million pre-tax (estimated $295 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 Net Income (Loss) available to common stockholders equals net income (loss) less dividends and accretion of discount on preferred shares.

4 Based on Continuing Operations except equity and ROE.  Equity is based on company's equity.  Equity includes $1.2 billion of preferred stock and $6.2 billion of common equity as of May 31, 2009.

5 Represents common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.

6 Earnings per share is based on net income (loss) available to common shareholders.

7 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.

8 Gross proprietary sales volume on the Discover Network.

Discover Financial Services
Managed Basis 1
(unaudited, dollars in thousands)
	Quarter Ended																					Six Months Ended
	May 31, 2009			Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			May 31, 2009 vs May 31, 2008						May 31, 2009			May 31, 2008			2009 vs 2008
Earnings Summary
Interest Income	$	1,607,452		$	1,603,849		$	1,682,267		$	1,638,250		$	1,572,697		$	34,755			2	%	$	3,211,301		$	3,225,312		$	(14,011	)		(0	%)
Interest Expense		414,063			438,417			602,450			534,887			550,629			(136,566	)		(25	%)		852,480			1,219,582			(367,102	)		(30	%)
Net Interest Income		1,193,389			1,165,432			1,079,817			1,103,363			1,022,068			171,321			17	%		2,358,821			2,005,730			353,091			18	%
Other Income 2		893,081			923,457			1,287,213			536,997			492,207			400,874			81	%		1,816,538			1,128,886			687,652			61	%
Revenue Net of Interest Expense		2,086,470			2,088,889			2,367,030			1,640,360			1,514,275			572,195			38	%		4,175,359			3,134,616			1,040,743			33	%
Provision for Loan Losses		1,111,232			1,333,673			1,105,971			754,028			581,537			529,695			91	%		2,444,905			1,208,605			1,236,300			102	%
Employee Compensation and     Benefits		208,151			219,488			187,306			222,426			218,290			(10,139	)		(5	%)		427,639			435,660			(8,021	)		(2	%)
Marketing and Business     Development		102,922			111,433			119,382			137,928			132,038			(29,116	)		(22	%)		214,355			273,591			(59,236	)		(22	%)
Information Processing &     Communications		74,441			74,897			81,543			76,675			79,449			(5,008	)		(6	%)		149,338			157,725			(8,387	)		(5	%)
Professional Fees		74,550			70,123			111,645			82,775			81,392			(6,842	)		(8	%)		144,673			155,064			(10,391	)		(7	%)
Premises and Equipment		18,223			18,072			20,676			20,274			19,803			(1,580	)		(8	%)		36,295			39,444			(3,149	)		(8	%)
Other Expense		82,341			65,110			73,530			72,469			75,853			6,488			9	%		147,451			147,684			(233	)		(0	%)
Total Other Expense		560,628			559,123			594,082			612,547			606,825			(46,197	)		(8	%)		1,119,751			1,209,168			(89,417	)		(7	%)
Income (Loss) Before Income Taxes 2		414,610			196,093			666,977			273,785			325,913			88,697			27	%		610,703			716,843			(106,140	)		(15	%)
Tax Expense		188,810			75,699			223,336			94,885			124,370			64,440			52	%		264,509			276,471			(11,962	)		(4	%)
Income From Continuing Operations 2		225,800			120,394			443,641			178,900			201,543			24,257			12	%		346,194			440,372			(94,178	)		(21	%)
Discontinued Operations, Net of Tax 2, 3		0			0			(11,306	)		1,153			32,605			(32,605	)		(100	%)		0			(125,010	)		125,010			100	%
Net Income (Loss) 2, 3	$	225,800		$	120,394		$	432,335		$	180,053		$	234,148		$	(8,348	)		(4	%)	$	346,194		$	315,362		$	30,832			10	%
Balance Sheet Statistics 4
Total Assets	$	64,846,824		$	63,231,657		$	65,620,476		$	65,632,825		$	62,148,577		$	2,698,247			4	%	$	64,846,824		$	62,148,577		$	2,698,247			4	%
Total Equity 5	$	7,415,640		$	5,999,351		$	5,915,823		$	6,000,393		$	5,849,691		$	1,565,949			27	%	$	7,415,640		$	5,849,691		$	1,565,949			27	%
Total Tangible Common Equity 5	$	5,808,764		$	5,542,532		$	5,457,083		$	5,539,274		$	5,538,240		$	270,524			5	%	$	5,808,764		$	5,538,240		$	270,524			5	%
Tangible Common Equity/Net Managed Receivables		11.8	%		11.3	%		11.0	%		11.2	%		11.8	%								11.8	%		11.8	%
Tangible Common Equity/Total Managed Assets 6		9.0	%		8.8	%		8.4	%		8.5	%		9.0	%								9.0	%		9.0	%
Net Yield on Loan Receivables		9.26	%		9.11	%		8.56	%		8.95	%		8.57	%		69		bps				9.19	%		8.33	%		86		bps
Return on Loan Receivables 2		1.75	%		0.94	%		3.52	%		1.45	%		1.69	%		6		bps				1.35	%		1.83	%		(48	)	bps
Loan Receivables 4
Total Loans - Managed	$	51,032,382		$	50,888,704		$	51,095,278		$	50,427,305		$	47,841,491		$	3,190,891			7	%	$	51,032,382		$	47,841,491		$	3,190,891			7	%
Average Total Loans - Managed	$	51,132,761		$	51,877,845		$	50,707,090		$	49,019,083		$	47,472,077		$	3,660,684			8	%	$	51,501,209		$	48,163,820		$	3,337,389			7	%
Managed Interest Yield		12.19	%		12.17	%		12.65	%		12.67	%		12.41	%		(22	)	bps				12.18	%		12.56	%		(38	)	bps
Managed Net Principal Charge-off Rate		7.79	%		6.48	%		5.48	%		5.20	%		4.99	%		280		bps				7.14	%		4.66	%		248		bps
Managed Delinquency Rate (over 30 days)		5.08	%		5.25	%		4.56	%		3.85	%		3.81	%		127		bps				5.08	%		3.81	%		127		bps
Managed Delinquency Rate (over 90 days)		2.73	%		2.69	%		2.17	%		1.88	%		1.96	%		77		bps				2.73	%		1.96	%		77		bps
Total Discover Card Volume	$	24,336,751		$	23,964,577		$	25,318,553		$	28,611,680		$	25,596,794		$	(1,260,043	)		(5	%)	$	48,301,328		$	51,803,822		$	(3,502,494	)		(7	%)
Discover Card Sales Volume	$	21,494,174		$	21,293,757		$	22,025,264		$	24,601,611		$	22,457,651		$	(963,477	)		(4	%)	$	42,787,931		$	45,612,904		$	(2,824,973	)		(6	%)
Segment - Income Before Income Taxes
U.S. Card	$	387,902		$	167,167		$	646,427		$	245,241		$	309,123		$	78,779			25	%	$	555,069		$	684,526		$	(129,457	)		(19	%)
Third-Party Payments		26,708			28,926			20,550			28,544			16,790			9,918			59	%		55,634			32,317			23,317			72	%
Total	$	414,610		$	196,093		$	666,977		$	273,785		$	325,913		$	88,697			27	%	$	610,703		$	716,843		$	(106,140	)		(15	%)

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 quarters ended November 30, 2008, February 28, 2009, and May 31, 2009 include $863 million pre-tax (estimated $535 million after-tax),  $475 million pre-tax (estimated $297 million after-tax), and $473 million pre-tax (estimated $295 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 except equity and ROE.  Equity is based on company's equity.  Equity includes $1.2 billion of preferred stock and $6.2 billion of common equity as of May 31, 2009.

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 Basis 1
(unaudited, dollars in thousands)
	Quarter Ended																					Six Months Ended
	May 31, 2009			Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			May 31, 2009 vs May 31, 2008						May 31, 2009			May 31, 2008			2009 vs 2008
Earnings Summary
Interest Income	$	1,607,114		$	1,603,362		$	1,680,925		$	1,637,588		$	1,572,164		$	34,950			2	%	$	3,210,476		$	3,224,151		$	(13,675	)		(0	%)
Interest Expense		414,002			438,338			602,386			534,870			550,629			(136,627	)		(25	%)		852,340			1,219,580			(367,240	)		(30	%)
Net Interest Income		1,193,112			1,165,024			1,078,539			1,102,718			1,021,535			171,577			17	%		2,358,136			2,004,571			353,565			18	%
Other Income 2		834,630			863,223			1,234,100			482,311			455,074			379,556			83	%		1,697,853			1,057,485			640,368			61	%
Revenue Net of Interest Expense		2,027,742			2,028,247			2,312,639			1,585,029			1,476,609			551,133			37	%		4,055,989			3,062,056			993,933			32	%
Provision for Loan Losses		1,111,232			1,333,673			1,105,971			754,028			581,537			529,695			91	%		2,444,905			1,208,605			1,236,300			102	%
Total Other Expense		528,608			527,407			560,241			585,760			585,949			(57,341	)		(10	%)		1,056,015			1,168,925			(112,910	)		(10	%)
Income (Loss) Before Income Taxes 2	$	387,902		$	167,167		$	646,427		$	245,241		$	309,123		$	78,779			25	%	$	555,069		$	684,526		$	(129,457	)		(19	%)
Net Yield on Loan Receivables		9.26	%		9.11	%		8.55	%		8.95	%		8.56	%		70		bps				9.18	%		8.32	%		86		bps
Pretax Return on Loan Receivables 2		3.01	%		1.31	%		5.13	%		1.99	%		2.59	%		42		bps				2.16	%		2.84	%		(68	)	bps
Loan Receivables
Total Loans	$	51,032,382		$	50,888,704		$	51,095,278		$	50,427,305		$	47,841,491		$	3,190,891			7	%	$	51,032,382		$	47,841,491		$	3,190,891			7	%
Average Total Loans	$	51,132,761		$	51,877,845		$	50,707,090		$	49,019,083		$	47,472,077		$	3,660,684			8	%	$	51,501,209		$	48,163,820		$	3,337,389			7	%
Managed Interest Yield		12.19	%		12.17	%		12.65	%		12.67	%		12.41	%		(22	)	bps				12.18	%		12.56	%		(38	)	bps
Managed Net Principal Charge-off Rate		7.79	%		6.48	%		5.48	%		5.20	%		4.99	%		280		bps				7.14	%		4.66	%		248		bps
Managed Delinquency Rate (over 30 days)		5.08	%		5.25	%		4.56	%		3.85	%		3.81	%		127		bps				5.08	%		3.81	%		127		bps
Managed Delinquency Rate (over 90 days)		2.73	%		2.69	%		2.17	%		1.88	%		1.96	%		77		bps				2.73	%		1.96	%		77		bps
Credit Card Loans
Credit Card Loans - Managed	$	48,903,632		$	49,011,177		$	49,692,974		$	49,348,507		$	47,124,842		$	1,778,790			4	%	$	48,903,632		$	47,124,842		$	1,778,790			4	%
Average Credit Card Loans - Managed	$	49,108,321		$	50,254,235		$	49,420,412		$	48,168,124		$	46,857,480		$	2,250,841			5	%	$	49,674,982		$	47,668,191		$	2,006,791			4	%
Managed Interest Yield		12.37	%		12.28	%		12.72	%		12.70	%		12.43	%		(6	)	bps				12.32	%		12.58	%		(26	)	bps
Managed Net Principal Charge-off Rate		7.99	%		6.61	%		5.59	%		5.28	%		5.05	%		294		bps				7.30	%		4.70	%		260		bps
Managed Delinquency Rate (over 30 days)		5.23	%		5.41	%		4.66	%		3.92	%		3.85	%		138		bps				5.23	%		3.85	%		138		bps
Managed Delinquency Rate (over 90 days)		2.82	%		2.78	%		2.22	%		1.92	%		1.99	%		83		bps				2.82	%		1.99	%		83		bps
Total Discover Card Volume	$	24,336,751		$	23,964,577		$	25,318,553		$	28,611,680		$	25,596,794		$	(1,260,043	)		(5	%)	$	48,301,328		$	51,803,822		$	(3,502,494	)		(7	%)
Discover Card Sales Volume	$	21,494,174		$	21,293,757		$	22,025,264		$	24,601,611		$	22,457,651		$	(963,477	)		(4	%)	$	42,787,931		$	45,612,904		$	(2,824,973	)		(6	%)

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 quarters ended November 30, 2008, February 28, 2009 and May 31, 2009 include $863 million pre-tax (estimated $535 million after-tax), $475 million pre-tax (estimated $297 million after-tax), and $473 million pre-tax ($295 million after-tax), respectively related to the antitrust settlement.

Discover Financial Services
Third-Party Payments Segment
(unaudited, dollars in thousands)
	Quarter Ended																Six Months Ended
	May 31, 2009		Feb 28, 2009		Nov 30, 2008		Aug 31, 2008		May 31, 2008		May 31, 2009 vs May 31, 2008						May 31, 2009		May 31, 2008		2009 vs 2008
Earnings Summary
Interest Income	$	338	$	487	$	1,342	$	662	$	533	$	(195	)		(37	%)	$	825	$	1,161	$	(336	)		(29	%)
Interest Expense		61		79		64		17		-		61		NM				140		2		138		NM
Net Interest Income		277		408		1,278		645		533		(256	)		(48	%)		685		1,159		(474	)		(41	%)
Other Income		58,451		60,234		53,113		54,686		37,133		21,318			57	%		118,685		71,401		47,284			66	%
Revenue Net of Interest Expense		58,728		60,642		54,391		55,331		37,666		21,062			56	%		119,370		72,560		46,810			65	%
Provision for Loan Losses		-		-		-		-		-		-		NM				-		-		-		NM
Total Other Expense		32,020		31,716		33,841		26,787		20,876		11,144			53	%		63,736		40,243		23,493			58	%
Income (Loss) Before Income Taxes	$	26,708	$	28,926	$	20,550	$	28,544	$	16,790	$	9,918			59	%	$	55,634	$	32,317	$	23,317			72	%
Volume
PULSE Network	$	29,128,044	$	27,454,173	$	25,033,235	$	28,364,575	$	27,830,403	$	1,297,641			5	%	$	56,582,217	$	52,614,298	$	3,967,919			8	%
Third-Party Issuers		1,340,532		1,362,446		1,538,013		1,711,617		1,603,006		(262,474	)		(16	%)		2,702,978		3,148,949		(445,971	)		(14	%)
Diners Club International 1		6,240,604		6,293,574		7,457,893		5,227,795		-		6,240,604			100	%		12,534,178		-		12,534,178			100	%
Total Third-Party Payments	$	36,709,180	$	35,110,193	$	34,029,141	$	35,303,987	$	29,433,409	$	7,275,771			25	%	$	71,819,373	$	55,763,247	$	16,056,126			29	%
Transactions Processed on PULSE Network (000's)		762,175		686,527		644,045		713,791		703,404		58,771			8	%		1,448,702		1,324,476		124,226			9	%

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															Six Months Ended
	May 31, 2009			Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			May 31, 2009			May 31, 2008
Interest Income
GAAP Basis	$	857,984		$	815,793		$	736,006		$	681,692		$	612,063		$	1,673,777		$	1,274,865
Securitization Adjustments 1		749,468			788,056			946,261			956,558			960,634			1,537,524			1,950,447
Managed Basis	$	1,607,452		$	1,603,849		$	1,682,267		$	1,638,250		$	1,572,697		$	3,211,301		$	3,225,312
Interest Expense
GAAP Basis	$	320,005		$	312,720		$	329,672		$	305,643		$	313,248		$	632,725		$	652,689
Securitization Adjustments		94,058			125,697			272,778			229,244			237,381			219,755			566,893
Managed Basis	$	414,063		$	438,417		$	602,450		$	534,887		$	550,629		$	852,480		$	1,219,582
Net Interest Income
GAAP Basis	$	537,979		$	503,073		$	406,334		$	376,049		$	298,815		$	1,041,052		$	622,176
Securitization Adjustments		655,410			662,359			673,483			727,314			723,253			1,317,769			1,383,554
Managed Basis	$	1,193,389		$	1,165,432		$	1,079,817		$	1,103,363		$	1,022,068		$	2,358,821		$	2,005,730
Other Income
GAAP Basis	$	1,081,120		$	1,189,956		$	1,568,901		$	875,121		$	844,892		$	2,271,076		$	1,820,436
Securitization Adjustments		(188,039	)		(266,499	)		(281,688	)		(338,124	)		(352,685	)		(454,538	)		(691,550	)
Managed Basis	$	893,081		$	923,457		$	1,287,213		$	536,997		$	492,207		$	1,816,538		$	1,128,886
Revenue Net of Interest Expense
GAAP Basis	$	1,619,099		$	1,693,029		$	1,975,235		$	1,251,170		$	1,143,707		$	3,312,128		$	2,442,612
Securitization Adjustments		467,371			395,860			391,795			389,190			370,568			863,231			692,004
Managed Basis	$	2,086,470		$	2,088,889		$	2,367,030		$	1,640,360		$	1,514,275		$	4,175,359		$	3,134,616
Provision for Loan Losses
GAAP Basis	$	643,861		$	937,813		$	714,176		$	364,838		$	210,969		$	1,581,674		$	516,601
Securitization Adjustments		467,371			395,860			391,795			389,190			370,568			863,231			692,004
Managed Basis	$	1,111,232		$	1,333,673		$	1,105,971		$	754,028		$	581,537		$	2,444,905		$	1,208,605
Total Assets
GAAP Basis	$	41,518,288		$	40,606,518		$	39,892,382		$	37,283,548		$	34,020,245		$	41,518,288		$	34,020,245
Securitization Adjustments		23,328,536			22,625,139			25,728,094			28,349,277			28,128,332			23,328,536			28,128,332
Managed Basis	$	64,846,824		$	63,231,657		$	65,620,476		$	65,632,825		$	62,148,577		$	64,846,824		$	62,148,577
Tangible Common Equity/Total Assets
GAAP Basis		14.1	%		13.8	%		13.8	%		15.0	%		16.4	%		14.1	%		16.4	%
Securitization Adjustments		24.9	%		24.5	%		21.2	%		19.5	%		19.7	%		24.9	%		19.7	%
Managed Basis		9.0	%		8.8	%		8.4	%		8.5	%		9.0	%		9.0	%		9.0	%
Loan Receivables
Total Loans
GAAP Basis	$	27,441,514		$	28,034,208		$	25,216,611		$	21,767,483		$	20,502,063		$	27,441,514		$	20,502,063
Securitization Adjustments		23,590,868			22,854,496			25,878,667			28,659,822			27,339,428			23,590,868			27,339,428
Managed Basis	$	51,032,382		$	50,888,704		$	51,095,278		$	50,427,305		$	47,841,491		$	51,032,382		$	47,841,491
Average Total Loans
GAAP Basis	$	28,257,484		$	27,733,143		$	22,945,494		$	21,053,804		$	19,890,330		$	27,998,194		$	20,702,505
Securitization Adjustments		22,875,277			24,144,702			27,761,596			27,965,279			27,581,747			23,503,015			27,461,315
Managed Basis	$	51,132,761		$	51,877,845		$	50,707,090		$	49,019,083		$	47,472,077		$	51,501,209		$	48,163,820

Discover Financial Services
Reconciliation of GAAP to Managed Data 1
(unaudited, dollars in thousands)
	Quarter Ended															Six Months Ended
	May 31, 2009			Feb 28, 2009			Nov 30, 2008			Aug 31, 2008			May 31, 2008			May 31, 2009			May 31, 2008
Interest Yield
GAAP Basis		11.54	%		11.24	%		11.36	%		11.41	%		10.40	%		11.39	%		10.37	%
Securitization Adjustments		13.00	%		13.24	%		13.71	%		13.61	%		13.86	%		13.12	%		14.21	%
Managed Basis		12.19	%		12.17	%		12.65	%		12.67	%		12.41	%		12.18	%		12.56	%
Net Principal Charge-off Rate
GAAP Basis		7.53	%		6.34	%		5.25	%		4.76	%		4.49	%		6.95	%		4.15	%
Securitization Adjustments		8.11	%		6.65	%		5.68	%		5.54	%		5.34	%		7.37	%		5.04	%
Managed Basis		7.79	%		6.48	%		5.48	%		5.20	%		4.99	%		7.14	%		4.66	%
Delinquency Rate (over 30 days)
GAAP Basis		4.87	%		5.04	%		4.35	%		3.58	%		3.54	%		4.87	%		3.54	%
Securitization Adjustments		5.32	%		5.52	%		4.77	%		4.06	%		4.01	%		5.32	%		4.01	%
Managed Basis		5.08	%		5.25	%		4.56	%		3.85	%		3.81	%		5.08	%		3.81	%
Delinquency Rate (over 90 days)
GAAP Basis		2.60	%		2.57	%		2.06	%		1.73	%		1.81	%		2.60	%		1.81	%
Securitization Adjustments		2.88	%		2.83	%		2.27	%		2.00	%		2.07	%		2.88	%		2.07	%
Managed Basis		2.73	%		2.69	%		2.17	%		1.88	%		1.96	%		2.73	%		1.96	%
Credit Card Loans
Credit Card Loans
GAAP Basis	$	25,312,764		$	26,156,681		$	23,814,307		$	20,688,685		$	19,785,414		$	25,312,764		$	19,785,414
Securitization Adjustments		23,590,868			22,854,496			25,878,667			28,659,822			27,339,428			23,590,868			27,339,428
Managed Basis	$	48,903,632		$	49,011,177		$	49,692,974		$	49,348,507		$	47,124,842		$	48,903,632		$	47,124,842
Average Credit Card Loans
GAAP Basis	$	26,233,044		$	26,109,533		$	21,658,816		$	20,202,845		$	19,275,733		$	26,171,967		$	20,206,876
Securitization Adjustments		22,875,277			24,144,702			27,761,596			27,965,279			27,581,747			23,503,015			27,461,315
Managed Basis	$	49,108,321		$	50,254,235		$	49,420,412		$	48,168,124		$	46,857,480		$	49,674,982		$	47,668,191
Interest Yield
GAAP Basis		11.81	%		11.39	%		11.45	%		11.45	%		10.40	%		11.61	%		10.37	%
Securitization Adjustments		13.00	%		13.24	%		13.71	%		13.61	%		13.86	%		13.12	%		14.21	%
Managed Basis		12.37	%		12.28	%		12.72	%		12.70	%		12.43	%		12.32	%		12.58	%
Net Principal Charge-off Rate
GAAP Basis		7.88	%		6.58	%		5.47	%		4.92	%		4.63	%		7.24	%		4.25	%
Securitization Adjustments		8.11	%		6.65	%		5.68	%		5.54	%		5.34	%		7.37	%		5.04	%
Managed Basis		7.99	%		6.61	%		5.59	%		5.28	%		5.05	%		7.30	%		4.70	%
Delinquency Rate (over 30 days)
GAAP Basis		5.15	%		5.32	%		4.55	%		3.72	%		3.63	%		5.15	%		3.63	%
Securitization Adjustments		5.32	%		5.52	%		4.77	%		4.06	%		4.01	%		5.32	%		4.01	%
Managed Basis		5.23	%		5.41	%		4.66	%		3.92	%		3.85	%		5.23	%		3.85	%
Delinquency Rate (over 90 days)
GAAP Basis		2.77	%		2.73	%		2.16	%		1.81	%		1.87	%		2.77	%		1.87	%
Securitization Adjustments		2.88	%		2.83	%		2.27	%		2.00	%		2.07	%		2.88	%		2.07	%
Managed Basis		2.82	%		2.78	%		2.22	%		1.92	%		1.99	%		2.82	%		1.99	%

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.