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): April 25, 2017

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:

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

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

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

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

o Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company

o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Item 2.02. Results of Operations and Financial Condition.

On April 25, 2017, Discover Financial Services (the “Company”) released financial information with respect to the quarter and year ended March 31, 2017. Copies of the press release, financial data supplement and financial results presentation containing this information are attached hereto as exhibits and incorporated herein by reference.

The information contained in this Item 2.02 of this Current Report on Form 8-K, including the exhibits, 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 April 25, 2017 containing financial information for the quarter ended March 31, 2017
99.2	Financial Data Supplement of the Company for the quarter ended March 31, 2017
99.3	Financial Results Presentation of the Company for the quarter ended March 31, 2017

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: April 25, 2017	By:	/s/ D. Christopher Greene
		Name: D. Christopher Greene
		Title: Vice President, Deputy General Counsel and Assistant Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of the Company dated April 25, 2017 containing financial information for the quarter ended March 31, 2017
99.2	Financial Data Supplement of the Company for the quarter ended March 31, 2017
99.3	Financial Results Presentation of the Company for the quarter ended March 31, 2017

EX-99.1

Exhibit 99.1    

DISCOVER FINANCIAL SERVICES REPORTS FIRST QUARTER NET INCOME OF $564 MILLION

OR $1.43 PER DILUTED SHARE

Riverwoods, IL, April 25, 2017 - Discover Financial Services (NYSE: DFS) today reported net income of $564 million or $1.43 per diluted share for the first quarter of 2017, as compared to $575 million or $1.35 per diluted share for the first quarter of 2016. The company’s return on equity for the first quarter of 2017 was 20%.

First Quarter Highlights

• Total loans grew $5.5 billion (8%) from the prior year to $75.9 billion.

• Credit card loans grew $4.1 billion (7%) to $59.8 billion and Discover card sales volume increased 6% from the prior year.

• Total net charge-off rate excluding PCI loans increased 48 basis points from the prior year to 2.69% and the total delinquency rate over 30 days past due excluding PCI loans increased 33 basis points from the prior year to 1.97%.

• Consumer deposits grew $4.3 billion (13%) from the prior year to $37.1 billion.

• Payment Services transaction dollar volume was $47.1 billion, up 5% from the prior year.

"We achieved strong sales and loan growth as consumers responded well to our strategic initiatives, which were augmented by higher industry growth," said David Nelms, chairman and CEO of Discover. "The credit environment remains favorable relative to historical norms. The increase in provisions is the anticipated result of recent loan growth seasoning."

Segment Results:

Direct Banking

Direct Banking pretax income of $824 million in the quarter declined $58 million (7%) from the prior year as higher provision for loan losses and lower other income more than offset higher net interest income.

Total loans ended the quarter at $75.8 billion, up 8% compared to the prior year. Credit card loans ended the quarter at $59.8 billion, up 7% from the prior year. Personal loans increased $1.1 billion (20%) from the prior year. Private student loans increased $224 million (3%) year-over-year, and grew $740 million (12%) excluding purchased student loans.

Net interest income increased $142 million (8%) from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.07%, up 13 basis points from the prior year. Card yield was 12.65%, an increase of 23 basis points from the prior year because of increases in the prime rate and a change in portfolio mix. Interest expense as a percent of total loans increased 15 basis points from the prior year, primarily because of higher market rates and a change in funding mix.

Other income decreased $31 million (8%) from the prior year, driven by higher promotional rewards.

The delinquency rate for credit card loans over 30 days past due was 2.06%, up 38 basis points from the prior year and 2 basis points from the prior quarter. The credit card net charge-off rate for the first quarter was 2.84%, up 50 basis points from the prior year and 37 basis points from the prior quarter. The student loan net charge-off rate excluding purchased credit-impaired ("PCI") loans was 0.83%, down 2 basis points from the prior year. The personal loans net charge-off rate of 3.16% increased by 71 basis points from the prior year. Net charge-off rates were generally higher because of anticipated seasoning of recent loan growth in both new accounts and line increases for select established customers.

Provision for loan losses of $594 million increased $171 million from the prior year primarily because of higher net charge-offs. The reserve build for the first quarter of 2017 was $107 million, compared to a reserve build of $51 million in the first quarter of 2016.

Expenses decreased $2 million from the prior year. Professional fees were lower than the prior year, primarily because of the completion of the look back related anti-money laundering remediation activities in the second quarter of 2016; the first quarter of 2016 included $30 million of expenses related to these look back activities. Higher employee compensation and marketing spend

offset part of the professional fees expense savings. Employee compensation increased mostly because of higher staffing levels, driven in part by regulatory and compliance activities, as well as higher average salaries.

Payment Services

Payment Services pretax income was $44 million in the quarter, up $12 million from the prior year, primarily driven by a reserve release related to a Diners Club International licensee.

Payment Services transaction dollar volume was $47.1 billion, up 5% versus the prior year. PULSE transaction dollar volume was up 4% year-over-year. Diners Club International volume increased 10% from the prior year, driven by growth across all regions.

Share Repurchases

During the first quarter of 2017, the company repurchased approximately 7.4 million shares of common stock for $520 million. Shares of common stock outstanding declined by 1.6% from the prior quarter.

Conference Call and Webcast Information

The company will host a conference call to discuss its fourth quarter results on Tuesday, April 25, 2017, at 5:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at https://investorrelations.discover.com.

About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and 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 issues the Discover card, America's cash rewards pioneer, and offers private student loans, personal loans, home equity loans, checking and savings accounts and certificates of deposit through its direct banking business. It operates the Discover Network, with millions of retail 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 more than 185 countries and territories. For more information, visit www.discover.com/company.

Contacts:

Investors:

Tim Schmidt, 224-405-4996

timothyschmidt@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 filed as Exhibit 99.2 to the company's Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC's website (http://www.sec.gov) and the company's website (https://investorrelations.discover.com).

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Such statements are based upon the current beliefs and expectations of the company's 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: 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, the levels of consumer confidence and consumer debt, and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including, but not limited to, those related to financial regulatory reform, consumer financial services practices, anti-corruption, and funding, capital and liquidity; the actions and initiatives of current and potential competitors; the company's ability to manage its expenses; the company's ability to successfully achieve card acceptance across its networks and maintain relationships with network participants; the company's ability to sustain and grow its non-card products; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; the company's ability to manage its credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in the company's investment portfolio; limits on the company's ability to pay dividends and repurchase its common stock; limits on the company's ability to receive payments from its subsidiaries; fraudulent activities or material security breaches of key systems; the company's ability to remain organizationally effective; the company's ability to increase or sustain Discover card usage or attract new customers; the company's ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; the company's ability to introduce new products or services; the company's ability to manage its relationships with third-party vendors; the company's ability to maintain current technology and integrate new and acquired systems; the company's ability to collect amounts for disputed transactions from merchants and merchant acquirers; the company's ability to attract and retain employees; the company's ability to protect its reputation and its intellectual property; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. The company routinely evaluates and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or the company's debt or equity securities.

Additional factors that could cause the company's results to differ materially from those described in the forward-looking statements can be found under “Risk Factors,” “Business - Competition,” “Business - Supervision and Regulation” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's Annual Report on Form 10-K for the year ended December 31, 2016, which is filed with the SEC and available at the SEC's internet site (http://www.sec.gov).

EX-99.2

DISCOVER FINANCIAL SERVICES																					Exhibit 99.2
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
EARNINGS SUMMARY
Interest Income		$2,278			$2,258			$2,184			$2,090			$2,084			$194		9	%
Interest Expense	386			366			359			339			334			52			16	%
Net Interest Income	1,892			1,892			1,825			1,751			1,750			142			8	%
Discount/Interchange Revenue	596			665			631			636			565			31			5	%
Rewards Cost	363			411			368			371			292			71			24	%
Discount and Interchange Revenue, net	233			254			263			265			273			(40		)	(15	%)
Protection Products Revenue	58			59			60			59			61			(3		)	(5	%)
Loan Fee Income	89			93			91			79			80			9			11	%
Transaction Processing Revenue	39			40			40			39			36			3			8	%
Other Income	28			20			22			23			24			4			17	%
Total Other Income	447			466			476			465			474			(27		)	(6	%)
Revenue Net of Interest Expense	2,339			2,358			2,301			2,216			2,224			115			5	%
Provision for Loan Losses	586			578			445			412			424			162			38	%
Employee Compensation and Benefits	363			352			342			340			345			18			5	%
Marketing and Business Development	168			176			195			198			162			6			4	%
Information Processing & Communications	80			81			81			89			88			(8		)	(9	%)
Professional Fees	147			152			143			150			160			(13		)	(8	%)
Premises and Equipment	25			23			25			23			24			1			4	%
Other Expense	102			113			109			106			107			(5		)	(5	%)
Total Other Expense	885			897			895			906			886			(1		)	—	%
Income Before Income Taxes	868			883			961			898			914			(46		)	(5	%)
Tax Expense	304			320			322			282			339			(35		)	(10	%)
Net Income		$564			$563			$639			$616			$575			($11	)	(2	%)
Net Income Allocated to Common Stockholders		$551			$550			$625			$602			$562			($11	)	(2	%)
Effective Tax Rate	35.0		%	36.3		%	33.5		%	31.4		%	37.1		%
Net Interest Margin	10.07		%	10.07		%	9.99		%	9.94		%	9.94		%	13			bps
Operating Efficiency	37.9		%	38.0		%	38.9		%	40.9		%	39.8		%	(190		)	bps
ROE	20		%	20		%	23		%	22		%	21		%
Capital Returned to Common Stockholders		$620			$581			$689			$523			$513			$107		21	%
Payout Ratio	113		%	106		%	110		%	87		%	91		%
Ending Common Shares Outstanding	382			389			396			407			414			(32		)	(8	%)
Weighted Average Common Shares Outstanding	386			392			402			410			417			(31		)	(7	%)
Weighted Average Common Shares Outstanding (fully diluted)	386			393			402			411			417			(31		)	(7	%)
PER SHARE STATISTICS
Basic EPS		$1.43			$1.40			$1.56			$1.47			$1.35			$0.08		6	%
Diluted EPS		$1.43			$1.40			$1.56			$1.47			$1.35			$0.08		6	%
Common Stock Price (period end)		$68.39			$72.09			$56.55			$53.59			$50.92			$17.47		34	%
Book Value per share		$29.46			$29.13			$28.62			$28.03			$27.32			$2.14		8	%
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
EARNINGS SUMMARY
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017		Dec 31, 2016		Sep 30, 2016		Jun 30, 2016		Mar 31, 2016		Mar 31, 2017 vs. Mar 31, 2016
SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking		$824		$868		$931		$868		$882		($58	)	(7	%)
Payment Services	44		15		30		30		32		12			38	%
Total		$868		$883		$961		$898		$914		($46	)	(5	%)
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network	503		566		535		538		486		17			3	%
PULSE Network	870		891		871		853		841		29			3	%
Total	1,373		1,457		1,406		1,391		1,327		46			3	%
NETWORK VOLUME
PULSE Network		$36,066		$35,554		$33,913		$33,856		$34,680		$1,386		4	%
Network Partners	3,661		3,235		3,313		3,713		3,572		89			2	%
Diners Club International 1	7,382		7,334		7,331		7,198		6,738		644			10	%
Total Payment Services	47,109		46,123		44,557		44,767		44,990		2,119			5	%
Discover Network - Proprietary	29,859		34,029		31,759		31,780		28,576		1,283			4	%
Total		$76,968		$80,152		$76,316		$76,547		$73,566		$3,402		5	%
1 Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
BALANCE SHEET SUMMARY
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
BALANCE SHEET SUMMARY
Assets
Cash and Investment Securities		$17,981			$13,766			$15,728			$14,236			$16,101			$1,880		12	%
Total Loan Receivables	75,853			77,254			73,551			71,924			70,320			5,533			8	%
Allowance for Loan Losses	(2,264		)	(2,167		)	(2,024		)	(1,949		)	(1,921		)	(343		)	(18	%)
Net Loan Receivables	73,589			75,087			71,527			69,975			68,399			5,190			8	%
Premises and Equipment, net	750			734			722			708			706			44			6	%
Goodwill and Intangible Assets, net	420			421			421			422			422			(2		)	—	%
Other Assets	2,055			2,300			2,143			2,170			2,465			(410		)	(17	%)
Total Assets		$94,795			$92,308			$90,541			$87,511			$88,093			$6,702		8	%
Liabilities & Stockholders' Equity
Direct to Consumer and Affinity Deposits		$37,094			$36,002			$35,323			$34,101			$32,818			$4,276		13	%
Brokered Deposits and Other Deposits	16,428			15,990			13,922			14,426			15,647			781			5	%
Deposits	53,522			51,992			49,245			48,527			48,465			5,057			10	%
Borrowings	26,823			25,443			26,830			24,681			24,752			2,071			8	%
Accrued Expenses and Other Liabilities	3,185			3,550			3,119			2,906			3,560			(375		)	(11	%)
Total Liabilities	83,530			80,985			79,194			76,114			76,777			6,753			9	%
Total Equity	11,265			11,323			11,347			11,397			11,316			(51		)	—	%
Total Liabilities and Stockholders' Equity		$94,795			$92,308			$90,541			$87,511			$88,093			$6,702		8	%
LIQUIDITY
Liquidity Portfolio		$16,213			$12,635			$14,017			$13,455			$14,556			$1,657		11	%
Undrawn Credit Facilities 1	30,823			30,194			29,048			30,777			30,077			746			2	%
Total Liquidity		$47,036			$42,829			$43,065			$44,232			$44,633			$2,403		5	%
1  Excludes investments pledged to the Federal Reserve, which is included within the liquidity portfolio
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
BALANCE SHEET STATISTICS
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
BALANCE SHEET STATISTICS
Total Common Equity		$10,705			$10,763			$10,787			$10,837			$10,756			($51	)	—	%
Total Common Equity/Total Assets	11.3		%	11.7		%	11.9		%	12.4		%	12.2		%
Total Common Equity/Net Loans	14.5		%	14.3		%	15.1		%	15.5		%	15.7		%
Tangible Assets		$94,375			$91,887			$90,120			$87,089			$87,671			$6,704		8	%
Tangible Common Equity 1		$10,285			$10,342			$10,366			$10,415			$10,334			($49	)	—	%
Tangible Common Equity/Tangible Assets 1	10.9		%	11.3		%	11.5		%	12.0		%	11.8		%
Tangible Common Equity/Net Loans 1	14.0		%	13.8		%	14.5		%	14.9		%	15.1		%
Tangible Common Equity per share  1		$26.90			$26.60			$26.15			$25.62			$24.95			$1.95		8	%
REGULATORY CAPITAL RATIOS	Basel III Transition
Total Risk Based Capital Ratio	15.7		%	15.5		%	16.3		%	16.7		%	16.8		%
Tier 1 Risk Based Capital Ratio	14.1		%	13.9		%	14.6		%	15.0		%	15.0		%
Tier 1 Leverage Ratio	11.8		%	12.3		%	12.6		%	12.8		%	12.8		%
Common Equity Tier 1 Capital Ratio	13.4		%	13.2		%	13.9		%	14.3		%	14.3		%
	Basel III Fully Phased-in
Common Equity Tier 1 Capital Ratio 2	13.4		%	13.2		%	13.8		%	14.2		%	14.2		%
RATIO OF EARNINGS TO FIXED CHARGES
Ratio of Earnings to Fixed Charges 3, 4	3.3			3.6			3.7			3.7			3.8
1Tangible Common Equity ("TCE") is a non-GAAP measure. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure see Reconciliation of GAAP to non-GAAP Data schedule
2 Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Basel III Fully Phased-in Common Equity Tier 1 Capital, a non-GAAP measure. The Company believes that the Common Equity Tier 1 Capital Ratio based on Fully Phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of Common Equity Tier 1 Capital and Risk Weighted Assets calculated under Fully Phased-in Basel III rules to Common Equity Tier 1 Capital and Risk Weighted Assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-GAAP data schedule
3 Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense
4 The Ratio of Earnings to Fixed Charges is a year-to-date statistic. The periods reported reflect the three months ended March 31, 2017, the twelve months ended December 31, 2016, the nine months ended September 30, 2016, the six months ended June 30, 2016 and the three months ended March 31, 2016
Note: See Glossary of Financial Terms for definitions of financial terms.

DISCOVER FINANCIAL SERVICES
AVERAGE BALANCE SHEET
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
AVERAGE BALANCES
Assets
Cash and Investment Securities		$15,424			$13,567			$13,761			$14,299			$13,452			$1,972		15	%
Restricted Cash	819			473			621			263			801			18			2	%
Credit Card Loans	60,122			59,121			57,561			56,124			56,124			3,998			7	%
Private Student Loans	9,197			8,954			8,795			8,816			8,967			230			3	%
Personal Loans	6,582			6,425			6,036			5,608			5,503			1,079			20	%
Other Loans	284			275			276			262			243			41			17	%
Total Loans	76,185			74,775			72,668			70,810			70,837			5,348			8	%
Total Interest Earning Assets	92,428			88,815			87,050			85,372			85,090			7,338			9	%
Allowance for Loan Losses	(2,166		)	(2,021		)	(1,947		)	(1,918		)	(1,866		)	(300		)	(16	%)
Other Assets	4,166			4,162			4,282			4,502			4,453			(287		)	(6	%)
Total Assets		$94,428			$90,956			$89,385			$87,956			$87,677			$6,751		8	%
Liabilities and Stockholders' Equity
Direct to Consumer and Affinity Deposits		$36,316			$35,396			$34,488			$33,215			$31,529			$4,787		15	%
Brokered Deposits and Other Deposits	16,242			14,355			14,267			14,740			15,982			260			2	%
Total Interest-bearing Deposits	52,558			49,751			48,755			47,955			47,511			5,047			11	%
Short-term Borrowings	1			1			2			2			2			(1		)	(50	%)
Securitized Borrowings	16,960			16,817			16,736			16,635			16,950			10			—	%
Other Long-term Borrowings	9,600			9,042			8,746			7,984			7,934			1,666			21	%
Total Interest-bearing Liabilities	79,119			75,611			74,239			72,576			72,397			6,722			9	%
Other Liabilities & Stockholders' Equity	15,309			15,345			15,146			15,380			15,280			29			—	%
Total Liabilities and Stockholders' Equity		$94,428			$90,956			$89,385			$87,956			$87,677			$6,751		8	%
AVERAGE RATES
Assets
Cash and Investment Securities	0.90		%	0.72		%	0.70		%	0.71		%	0.72		%	18			bps
Restricted Cash	0.70		%	0.37		%	0.32		%	0.41		%	0.40		%	30			bps
Credit Card Loans	12.65		%	12.62		%	12.53		%	12.42		%	12.42		%	23			bps
Private Student Loans	7.29		%	7.06		%	7.13		%	7.13		%	7.02		%	27			bps
Personal Loans	12.18		%	12.09		%	12.23		%	12.25		%	12.20		%	(2		)	bps
Other Loans	5.39		%	4.88		%	4.96		%	5.04		%	5.18		%	21			bps
Total Loans	11.94		%	11.88		%	11.82		%	11.72		%	11.69		%	25			bps
Total Interest Earning Assets	9.99		%	10.12		%	9.98		%	9.84		%	9.85		%	14			bps
Liabilities and Stockholders' Equity
Direct to Consumer and Affinity Deposits	1.25		%	1.26		%	1.26		%	1.22		%	1.22		%	3			bps
Brokered Deposits and Other Deposits	1.98		%	1.93		%	1.90		%	1.78		%	1.68		%	30			bps
Total Interest-bearing Deposits	1.48		%	1.45		%	1.45		%	1.39		%	1.37		%	11			bps
Short-term Borrowings	0.67		%	0.60		%	0.62		%	0.64		%	0.64		%	3			bps
Securitized Borrowings	2.17		%	2.09		%	2.07		%	2.06		%	2.04		%	13			bps
Other Long-term Borrowings	4.38		%	4.26		%	4.27		%	4.40		%	4.38		%	—			bps
Total Interest-bearing Liabilities	1.98		%	1.93		%	1.92		%	1.88		%	1.86		%	12			bps
Net Interest Margin	10.07		%	10.07		%	9.99		%	9.94		%	9.94		%	13			bps
Net Yield on Interest-earning Assets	8.30		%	8.47		%	8.34		%	8.25		%	8.27		%	3			bps
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
TOTAL LOAN RECEIVABLES
Ending Loans 1, 2		$75,853			$77,254			$73,551			$71,924			$70,320			$5,533	8	%
Average Loans 1, 2		$76,185			$74,775			$72,668			$70,810			$70,837			$5,348	8	%
Interest Yield	11.94		%	11.88		%	11.82		%	11.72		%	11.69		%	25		bps
Gross Principal Charge-off Rate	3.25		%	2.91		%	2.66		%	2.87		%	2.80		%	45		bps
Gross Principal Charge-off Rate excluding PCI Loans 3	3.37		%	3.02		%	2.77		%	2.99		%	2.92		%	45		bps
Net Principal Charge-off Rate	2.60		%	2.31		%	2.02		%	2.18		%	2.11		%	49		bps
Net Principal Charge-off Rate excluding PCI Loans 3	2.69		%	2.39		%	2.10		%	2.27		%	2.21		%	48		bps
Delinquency Rate (over 30 days) excluding PCI Loans 3	1.97		%	1.97		%	1.79		%	1.60		%	1.64		%	33		bps
Delinquency Rate (over 90 days) excluding PCI Loans 3	0.92		%	0.87		%	0.77		%	0.71		%	0.79		%	13		bps
Gross Principal Charge-off Dollars		$611			$548			$488			$505			$493			$118	24	%
Net Principal Charge-off Dollars		$489			$435			$370			$384			$372			$117	31	%
Net Interest and Fee Charge-off Dollars		$106			$94			$80			$84			$86			$20	23	%
Loans Delinquent Over 30 Days 3		$1,445			$1,469			$1,269			$1,104			$1,105			$340	31	%
Loans Delinquent Over 90 Days 3		$675			$652			$545			$491			$531			$144	27	%
Allowance for Loan Loss (period end)		$2,264			$2,167			$2,024			$1,949			$1,921			$343	18	%
Change in Loan Loss Reserves		$97			$143			$75			$28			$52			$45
Reserve Rate	2.98		%	2.80		%	2.75		%	2.71		%	2.73		%	25		bps
Reserve Rate Excluding PCI Loans 3	3.04		%	2.86		%	2.81		%	2.77		%	2.80		%	24		bps
CREDIT CARD LOANS
Ending Loans		$59,757			$61,522			$58,006			$57,219			$55,620			$4,137	7	%
Average Loans		$60,122			$59,121			$57,561			$56,124			$56,124			$3,998	7	%
Interest Yield	12.65		%	12.62		%	12.53		%	12.42		%	12.42		%	23		bps
Gross Principal Charge-off Rate	3.61		%	3.19		%	2.93		%	3.21		%	3.15		%	46		bps
Net Principal Charge-off Rate	2.84		%	2.47		%	2.17		%	2.39		%	2.34		%	50		bps
Delinquency Rate (over 30 days)	2.06		%	2.04		%	1.87		%	1.63		%	1.68		%	38		bps
Delinquency Rate (over 90 days)	1.03		%	0.97		%	0.86		%	0.78		%	0.86		%	17		bps
Gross Principal Charge-off Dollars		$535			$474			$425			$448			$439			$96	22	%
Net Principal Charge-off Dollars		$422			$369			$314			$334			$326			$96	29	%
Loans Delinquent Over 30 Days		$1,233			$1,252			$1,086			$933			$934			$299	32	%
Loans Delinquent Over 90 Days		$616			$597			$500			$444			$480			$136	28	%
Allowance for Loan Loss (period end)		$1,892			$1,790			$1,661			$1,603			$1,590			$302	19	%
Change in Loan Loss Reserves		$102			$129			$58			$13			$36			$66
Reserve Rate	3.17		%	2.91		%	2.86		%	2.80		%	2.86		%	31		bps
Total Discover Card Volume		$32,406			$35,440			$33,471			$33,409			$30,004			$2,402	8	%
Discover Card Sales Volume		$29,134			$32,486			$30,683			$30,702			$27,552			$1,582	6	%
Rewards Rate	1.25		%	1.26		%	1.20		%	1.21		%	1.06		%	19		bps
1 Total Loans includes Home Equity and other loans
2 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables
3 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
PRIVATE STUDENT LOANS
Ending Loans		$9,138			$8,977			$8,995			$8,725			$8,914			$224		3	%
Ending PCI Loans 1		$2,449			$2,584			$2,708			$2,834			$2,965			($516	)	(17	%)
Interest Yield	7.29		%	7.06		%	7.13		%	7.13		%	7.02		%	27			bps
Net Principal Charge-off Rate	0.60		%	1.00		%	0.70		%	0.74		%	0.56		%	4			bps
Net Principal Charge-off Rate excluding PCI Loans 2	0.83		%	1.42		%	1.02		%	1.10		%	0.85		%	(2		)	bps
Delinquency Rate (over 30 days) excluding PCI Loans 2	2.04		%	2.22		%	1.87		%	1.88		%	1.92		%	12			bps
Reserve Rate	1.70		%	1.74		%	1.74		%	1.73		%	1.65		%	5			bps
Reserve Rate excluding PCI Loans 2	1.80		%	1.91		%	1.92		%	1.95		%	1.86		%	(6		)	bps
PERSONAL LOANS
Ending Loans		$6,663			$6,481			$6,273			$5,708			$5,534			$1,129		20	%
Interest Yield	12.18		%	12.09		%	12.23		%	12.25		%	12.20		%	(2		)	bps
Net Principal Charge-off Rate	3.16		%	2.70		%	2.63		%	2.38		%	2.45		%	71			bps
Delinquency Rate (over 30 days)	1.12		%	1.12		%	0.98		%	1.02		%	0.97		%	15			bps
Reserve Rate	3.10		%	3.09		%	2.98		%	3.07		%	2.99		%	11			bps
1 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables
2 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES
SEGMENT RESULTS
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016			Mar 31, 2017 vs. Mar 31, 2016
DIRECT BANKING
Interest Income		$2,278			$2,258			$2,184			$2,090			$2,084			$194		9	%
Interest Expense	386			366			359			339			334			52			16	%
Net Interest Income	1,892			1,892			1,825			1,751			1,750			142			8	%
Other Income	375			401			408			396			406			(31		)	(8	%)
Revenue Net of Interest Expense	2,267			2,293			2,233			2,147			2,156			111			5	%
Provision for Loan Losses	594			579			445			411			423			171			40	%
Total Other Expense	849			846			857			868			851			(2		)	—	%
Income Before Income Taxes		$824			$868			$931			$868			$882			($58	)	(7	%)
Net Interest Margin	10.07		%	10.07		%	10.00		%	9.95		%	9.94		%	13			bps
Pretax Return on Loan Receivables	4.39		%	4.62		%	5.10		%	4.93		%	5.01		%	(62		)	bps
Allowance for Loan Loss (period end)		$2,258			$2,151			$2,007			$1,932			$1,905			$353		19	%
Change in Loan Loss Reserves		$107			$144			$75			$27			$51			$56
PAYMENT SERVICES
Interest Income		$—			$—			$—			$—			$—			$—		NM
Interest Expense	—			—			—			—			—			—			NM
Net Interest Income	—			—			—			—			—			—			NM
Other Income	72			65			68			69			68			4			6	%
Revenue Net of Interest Expense	72			65			68			69			68			4			6	%
Provision for Loan Losses	(8		)	(1		)	—			1			1			(9		)	NM
Total Other Expense	36			51			38			38			35			1			3	%
Income Before Income Taxes		$44			$15			$30			$30			$32			$12		38	%
Note: See Glossary of Financial Terms for definitions of financial terms

DISCOVER FINANCIAL SERVICES

GLOSSARY OF FINANCIAL TERMS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regulatory Capital Ratios are regulatory measures used to evaluate capital adequacy. Under Basel III, for a Bank Holding Company to be considered "well-capitalized," total risk-based and tier 1 risk-based capital ratios of 10% and 6% respectively must be maintained. Under Basel III, to meet the regulatory minimum a Bank Holding Company must maintain total risk-based, tier 1 risk-based, tier 1 leverage, and common equity tier 1 ratios of 8%, 6%, 4%, and 4.5% respectively. As of January 1, 2015 regulatory capital ratios are calculated under Basel III rules subject to transition provisions. Total Risk Based Capital Ratio represents total capital divided by risk-weighted assets. Tier 1 Capital Ratio represents tier 1 capital divided by risk-weighted assets. Tier 1 Leverage Ratio represents tier 1 capital divided by average total assets. The Tier 1 Common Capital Ratio has been replaced by the Common Equity Tier 1 Ratio under Basel III

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

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

Rewards Rate represents rewards cost divided by Discover Card sales volume

Tangible Assets represents total assets less goodwill and intangibles

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

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

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

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

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

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

DISCOVER FINANCIAL SERVICES
RECONCILIATION OF GAAP TO NON-GAAP DATA
(unaudited, in millions)
	Quarter Ended
	Mar 31, 2017			Dec 31, 2016			Sep 30, 2016			Jun 30, 2016			Mar 31, 2016
GAAP Total Common Equity		$10,705			$10,763			$10,787			$10,837			$10,756
Less: Goodwill	(255		)	(255		)	(255		)	(255		)	(255		)
Less: Intangibles	(165		)	(166		)	(166		)	(167		)	(167		)
Tangible Common Equity 1		$10,285			$10,342			$10,366			$10,415			$10,334
Common Equity Tier 1 Capital (Basel III Transition)		$10,501			$10,592			$10,618			$10,677			$10,593
Adjustments Related To Capital Components During Transition 2	(26		)	(52		)	(52		)	(53		)	(54		)
Common Equity Tier 1 Capital (Basel III Fully Phased-in)		$10,475			$10,540			$10,566			$10,624			$10,539
Common Equity Tier 1 Capital Ratio (Basel III Transition)	13.4		%	13.2		%	13.9		%	14.3		%	14.3		%
Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) 3	13.4		%	13.2		%	13.8		%	14.2		%	14.2		%
GAAP Book Value Per Share		$29.46			$29.13			$28.62			$28.03			$27.32
Less: Goodwill	(0.67		)	(0.67		)	(0.64		)	(0.62		)	(0.62		)
Less: Intangibles	(0.43		)	(0.42		)	(0.42		)	(0.41		)	(0.40		)
Less: Preferred Stock	(1.46		)	(1.44		)	(1.41		)	(1.38		)	(1.35		)
Tangible Common Equity Per Share		$26.90			$26.60			$26.15			$25.62			$24.95
1 Tangible Common Equity ("TCE"), a non-GAAP financial measure, represents common equity less goodwill and intangibles. A reconciliation of TCE to common equity, a GAAP financial measure, is shown above. Other financial services companies may also use TCE and definitions may vary, so users of this information are advised to exercise caution in comparing TCE of different companies. TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful measure to investors of the true net asset value of the Company
2  Adjustments related to capital components for fully phased-in Basel III include the phase-in of the intangible asset exclusion
3  Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Common Equity Tier 1 Capital (Basel III Fully Phased-in), a non-GAAP measure, divided by Risk Weighted Assets (Basel III Fully Phased-in)
Note: See Glossary of Financial Terms for definitions of financial terms

EX-99.3

1Q17 Financial Results April 25, 2017 ©2017 DISCOVER FINANCIAL SERVICES

Notice The following slides are part of a presentation by Discover Financial Services (the "Company") in connection with reporting quarterly financial results and are intended to be viewed as part of that presentation. No representation is made that the information in these slides is complete. For additional financial, statistical, and business related information, as well as information regarding business and segment trends, see the earnings release and financial supplement included as exhibits to the Company’s Current Report on Form 8-K filed today and available on the Company’s website (www.discover.com) and the SEC’s website (www.sec.gov). The information provided herein includes certain non-GAAP financial measures. The reconciliations of such measures to the comparable GAAP figures are included at the end of this presentation, which is available on the Company’s website and the SEC’s website. The presentation contains forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s estimates, projections, expectations or beliefs at that time, and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of certain risks and uncertainties that may affect the future results of the Company, please see "Special Note Regarding Forward-Looking Statements," "Risk Factors," "Business – Competition," "Business – Supervision and Regulation" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which is filed with the SEC and available at the SEC's website (www.sec.gov). The Company does not undertake to update or revise forward-looking statements as more information becomes available. Notic 2

Be the leading direct bank and payments partner Vision, Strategic Objectives and Goal 3 Vision Create long-term shareholder value Goal Focus areas and strategic objectives Invest for the future • Build awareness and consideration • Enhance capabilities and operating model Achieve profitable, disciplined growth • Excel at serving our customers; simple, secure experience with deep relationships • Offer differentiated products • Leverage payments network Manage risk prudently

1Q17 Highlights • Maintained loan growth momentum across all primary lending products (credit cards, student and personal loans) • Increased earnings per share 6% to $1.43 and returned $620 million of capital • Remained disciplined on risk-adjusted returns with 20% return on equity • Grew revenue 5% over the prior year, with 8% growth in net interest income partially offset by higher rewards • Restored PULSE volume growth Profitable, disciplined growth • Supported awareness and consideration with targeted marketing investments • Continued to drive customer engagement with Cashback Match and 5% rotating rewards categories • Achieved robust consumer deposit growth while holding deposit rates steady • Submitted 2017 capital plan and intend to remain among industry leaders in capital payout ratio and shareholder yield Investments for the future 4

($MM, except per share data) 1Q17 1Q16 $ ∆ % ∆ Revenue Net of Interest Expense $2,339 $2,224 $115 5% Net Prinicpal Charge-off 489 372 (117) (31%) Reserve Changes build/(release) 97 52 (45) NM Provision for Loan Losses 586 424 (162) (38%) Operating Expense 885 886 1 -% Direct Banking 824 882 (58) (7%) Payment Services 44 32 12 38% Total Pre-Tax Income 868 914 (46) (5%) Income Tax Expense 304 339 35 10% Net Income $564 $575 ($11) (2%) ROE 20% 21% Diluted EPS $1.43 $1.35 $0.08 6% Pre-Tax, Pre-Provision Income(1) $1,454 $1,338 $116 9% B / (W) 1Q17 Summary Financial Results 5 Note(s) 1. Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-GAAP financial measure which should be viewed in addition to, and not as a substitute for, the Company’s reported results. Management believes this information helps investors understand the effect of provision for loan losses on reported results and provides an alternate presentation of the Company’s performance; see appendix for a reconciliation • Diluted EPS of $1.43, up 6% YOY • Revenue net of interest expense of $2.3Bn, up 5% YOY as higher net interest income was partially offset by higher rewards expense • Provision for loan losses increased $162MM YOY (38%) on higher net charge-offs • Expenses were flat, primarily driven by lower professional fees, partially offset by higher compensation and benefits and higher marketing spend Highlights

4Q16 Loan and Volume Growth +8% +7% +3% +20% +4% +4% +10% 2% Note(s) 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 (1) Total Network Volume up 5% YOY Payment Services 1Q17 Loan and olume r Ending Loans ($Bn) Volume ($Bn) 6

($MM) 1Q17 1Q16 $ ∆ % ∆ Interest Income $2,278 $2,084 $194 9% Interest Expense 386 334 (52) (16%) Net Interest Income 1,892 1,750 142 8% Discount/Interchange Revenue 596 565 31 5% Rewards Cost 363 292 (71) (24%) Net Discount/Interchange Revenue 233 273 (40) (15%) Protection Products Revenue 58 61 (3) (5%) Loan Fee Income 89 80 9 11% Transaction Processing Revenue 39 36 3 8% Other Income 28 24 4 17% Total Non-Interest Income 447 474 (27) (6%) Revenue Net of Interest Expense $2,339 $2,224 $115 5% Direct Banking $2,267 $2,156 $111 5% Payment Services 72 68 4 6% Revenue Net of Interest Expense $2,339 $2,224 $115 5% ($MM) 1Q17 1Q16 QOQ YOY Discover Card Sales Volume $29,134 $27,552 (10%) 6% Rewards Rate(1) 1.25% 1.06% -1 bp 19 bps B / (W) Change 1Q17 Revenue Detail 7 Note(s) 1. Rewards cost divided by Discover card sales volume • Net interest income of $1.9Bn, up 8% YOY on higher loan growth and some NIM expansion • Discount and interchange revenue of $596MM, up 5% YOY, driven by increased card sales • Net discount and interchange revenue declined $40MM (15%) on higher rewards cost • Rewards rate increased 19 bps YOY, driven by higher promotional rewards, primarily due to greater customer engagement in rotating 5% categories Highlights

1Q17 Net Interest Margin 8 • Net interest margin on receivables increased 13 bps YOY on higher card yield, partially offset by higher funding costs • Credit card yield increased 23 bps YOY as the prime rate increased and portfolio mix changed • Average direct to consumer and affinity deposits grew 15% YOY and composed 46% of total average funding • Funding costs on interest-bearing liabilities increased 12 bps YOY driven by higher market rates and funding mix Highlights Average Average ($MM) Balance Rate Balance Rate Credit Card $60,122 12.65% $56,124 12.42% Private Student 9,197 7.29% 8,967 7.02% Personal 6,582 12.18% 5,503 12.20% Other 284 5.39% 243 5.18% Total Loans 76,185 11.94% 70,837 11.69% Other Interest-Earning Assets 16,243 0.89% 14,253 0.70% Total Interest-Earning Assets $92,428 9.99% $85,090 9.85% Direct to Consumer and Affinity $36,316 1.25% $31,529 1.22% Brokered Deposits and Other 16,242 1.98% 15,982 1.68% Interest Bearing Deposits 52,558 1.48% 47,511 1.37% Borrowings 26,561 2.97% 24,886 2.79% Total Interest-Bearing Liabilities $79,119 1.98% $72,397 1.86% (%) 1Q17 QOQ YOY Total Interest Yiel 11.94% 6 bps 25 bps NIM on Receivables 10.07% - 13 bps NIM on Interes -E rning Assets 8.30% -17 bps 3 bps Change 1Q17 1Q16

1Q17 Operating Expense Detail 9 Note(s) 1. Defined as reported total operating expense divided by revenue net of interest expense 2. 1Q16 operating efficiency ratio adjusted for $30 million in look back related anti-money laundering remediation expenses. Management believes adjusted operating efficiency, which is a non-GAAP measure, helps investors understand the effect of activities that are not expected to continue and provides investors with a useful metric to evaluate the company’s ongoing operating performance; see appendix for a reconciliation • Employee compensation and benefits up 5% YOY primarily on higher regulatory and compliance staffing, as well as higher average salaries • Marketing and business development expenses increased 4% YOY, primarily driven by higher card acquisition and brand spend • Professional fees down 8% YOY, primarily due to look back related anti-money laundering remediation expenses in 1Q16 • Operating efficiency improved 190 bps Highlights ($MM) 1Q17 1Q16 $ ∆ % ∆ Employee Compensation and Benefits $363 $345 ($18) (5%) Marketing and Business Development 168 162 (6) (4%) Information Processing & Communications 80 88 8 9% Professional Fees 147 160 13 8% Premises and Equipment 25 24 (1) (4%) Other Expense 102 107 5 5% Total Operating Expense $885 $886 $1 -% Direct Banking $849 $851 $2 -% Payment Services 36 35 (1) (3%) Total Operating Expense $885 $886 $1 -% Operating Efficiency(1) 37.9% 39.8% 190 bps Adjusted Operating Efficiency(2) 37.9% 38.5% 60 bps B / (W)

Credit Performance Trends Total Company Loans Credit Card Loans Private Student Loans Personal Loans 2.18 2.26 2.16 1.94 2.11 2.21 2.27 2.10 2.39 2.69 1.66 1.57 1.49 1.60 1.67 1.64 1.60 1.79 1.97 1.97 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 NCOs ex-PCI (%) 30 day DQ rate ex-PCI (%) 2.26 2.40 2. 8 2.04 2.18 2.34 2.39 2.17 2.47 2.84 1.73 1.64 1.55 1.65 1.72 1.68 1.63 1.87 2.04 2.06 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 NCO rate (%) 30 day DQ rate (%) 1.40 1.03 1.02 0.94 1.30 0.85 1.10 1.02 1.42 0.83 1.80 1.66 1.78 1.88 .91 .92 1.88 1.87 2.22 2.04 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 NCO rate ex-PCI (%) 30 day DQ rate ex-PCI (%) 2.20 2.22 2.10 1.99 2.28 2.45 2.38 2.63 2.70 3.16 0.79 0.76 0.71 0.80 0.89 0.97 1.02 0.98 1.12 1.12 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 NCO rate (%) 30 day DQ rate (%) 10 Note(s) 1. Excludes PCI loans which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing

14.8 14.5 14.4 13.9 14.3 14.3 13.9 13.2 13.4 88 102 95 93 95 94 99 99 104 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 Common Equity Tier 1 Capital Ratio (%) Payout Ratio (%) Key Capital Metrics 11 Note(s) 1. Common Equity Tier 1 Capital Ratio (Basel III Transition) 2. Payout Ratio is displayed on a trailing twelve month basis. This represents the trailing twelve months’ Capital Return to Common Stockholders divided by the trailing twelve months’ Net Income Allocated to Common Stockholders (1) (2) Capital Trends

1Q17 Financial Summary 12 • Net income of $564MM and diluted EPS of $1.43 • Revenue growth of 5% on higher net interest income, partially offset by higher rewards • NIM of 10.07%, up 13 bps YOY • Return on equity stable at 20% • Efficiency ratio low at 38% Profitability • Total loans grew 8% ($5.5Bn) YOY with strong contributions from all primary products • Credit card loans grew 7% ($4.1Bn) YOY as sales volume increased 6% • Average DTC deposits grew 15% ($4.8Bn) YOY with steady deposit rates Balance Sheet • Credit fundamentals remain favorable relative to historical standards • Card NCO rate of 2.84%, up 50 bps YOY, primarily on seasoning of recent loan growth • Payout ratio of 104% (trailing twelve months) • CET1 ratio of 13.4%, down 90 bps YOY, on capital return and loan growth Credit and Capital

Appendix 13

Reconciliation of GAAP to Non-GAAP Data Note(s) 1. Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-GAAP financial measure which should be viewed in addition to, and not as a substitute for, the Company's reported results. Management believes this information helps investors understand the effect of provision for loan losses on reported results and provides an alternate presentation of the Company's performance 2. Adjusted operating efficiency, which is a non-GAAP measure, helps investors understand the effect of activities that are not expected to continue and provides investors with a useful metric to evaluate the company’s ongoing operating performance Reconciliati of GA t Non- t 14 (unaudited, in millions, except per share statistics) Mar 31, 2017 Mar 31, 2016 Provision for loan losses $586 $424 Income before income taxes 868 914 Pre-tax, pre-provision income(1) $1,454 $1,338 eve ue net of interest expense $2,339 $2,224 Total operating expense 885 886 Excluding anti-money laundering and related compliance program expenses - 30 Adjusted operating expense $885 $856 Adjusted operating efficiency(2) 37.9% 38.5% Quarter Ended