DISCOVER FINANCIAL SERVICES (Exact name of registrant as specified in its charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C 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): October 24, 2017 DISCOVER FINANCIAL SERVICES (Exact name of registrant as specified in its charter) Commission File Number: Delaware (State or other jurisdiction of incorporation) 2500 Lake Cook Road, Riverwoods, Illinois (Address of principal executive offices, including zip code) (224) (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) (IRS Employer Identification No.) 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 ) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ( of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ( b-2 of this chapter). o 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

2 Item Results of Operations and Financial Condition. On October 24, 2017, Discover Financial Services (the Company ) released financial information with respect to the quarter ended September 30, 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 quotation immediately preceding the caption Segment Results included in Exhibit 99.1 (the Excluded Quote ) and Exhibit 99.3 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act ), or otherwise subject to the liabilities of that section nor shall it be deemed to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act. The information included in Exhibit 99.1, other than in the Excluded Quote, and Exhibit 99.2 shall be deemed filed for purposes of the Exchange Act.

3 Item Financial Statements and Exhibits. (d) Exhibits Exhibit No. Description 99.1 Press Release of the Company dated October 24, 2017 containing financial information for the quarter ended September 30, Financial Data Supplement of the Company for the quarter and the nine months ended September 30, Financial Results Presentation of the Company for the quarter ended September 30, 2017

4 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: October 24, 2017 By: /s/ D. Christopher Greene Name: D. Christopher Greene Title: Vice President, Deputy General Counsel and Assistant Secretary

5 EXHIBIT INDEX Exhibit No. Description Press Release of the Company dated October 24, 2017 containing financial information for the quarter ended September , Financial Data Supplement of the Company for the quarter and the nine months ended September 30, Financial Results Presentation of the Company for the quarter ended September 30, 2017

6 Exhibit 99.1 DISCOVER FINANCIAL SERVICES REPORTS THIRD QUARTER NET INCOME OF $602 MILLION OR $1.59 PER DILUTED SHARE Riverwoods, IL, October 24, Discover Financial Services (NYSE: DFS) today reported net income of $602 million or $1.59 per diluted share for the third quarter of 2017, as compared to $639 million or $1.56 per diluted share for the third quarter of The company s return on equity for the third quarter of 2017 was 22%. Third Quarter Highlights Total loans grew $6.9 billion ( 9% ) from the prior year to $80.4 billion. Credit card loans grew $5.5 billion ( 9% ) to $63.5 billion and Discover card sales volume increased 5% from the prior year. Total net charge-off rate excluding PCI loans increased 61 basis points from the prior year to 2.71% and the total 30+ day delinquency rate excluding PCI loans increased 26 basis points from the prior year to 2.05%. Consumer deposits grew $3.4 billion ( 10% ) from the prior year to $38.7 billion. Payment Services transaction dollar volume was $51.6 billion, up 16% from the prior year. Income tax expense included one-time benefits of $28 million related to the resolution of certain tax matters. We achieved strong growth across our businesses while maintaining our historical emphasis on disciplined underwriting and profitability, said David Nelms, chairman and CEO of Discover. As a result, we generated robust revenue gains and positive operating leverage while investing in technology to enhance the customer experience and drive future growth and efficiency." Segment Results: Direct Banking Direct Banking pretax income of $867 million in the quarter declined $64 million ( 7% ) from the prior year as higher provision for loan losses and operating expenses more than offset higher net interest income. Total loans ended the quarter at $ 80.4 billion, up 9% compared to the prior year. Credit card loans ended the quarter at $63.5 billion, up 9% from the prior year. Personal loans increased $1.1 billion ( 18% ) from the prior year. Private student loans increased $205 million ( 2% ) year-over-year, and grew $711 million ( 11% ) excluding purchased student loans. Net interest income increased $225 million ( 12% ) from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.28%, up 28 basis points from the prior year. Card yield was 12.83%, an increase of 30 basis points from the prior year because of increases in the prime rate, partially offset by higher interest charge-offs and a change in portfolio mix. Interest expense as a percent of total loans increased 17 basis points from the prior year, primarily because of higher market rates and a change in funding mix. Other income decreased $7 million ( 2% ) from the prior year, driven by higher rewards expense. The delinquency rate for credit card loans over 30 days past due was 2.14%, up 27 basis points from the prior year and 14 basis points from the prior quarter. The credit card net charge-off rate for the third quarter was 2.80%, up 63 basis points from the prior year and down 14 basis points from the prior quarter. The student loan net charge-off rate excluding purchased credit-impaired ("PCI") loans was 1.52%, up 50 basis points from the prior year. The personal loans net charge-off rate of 3.19% increased by 56 basis points from the prior year. Net charge-off rates were generally higher because of supply-driven credit normalization and the seasoning of loan growth from the last few years. Provision for loan losses of $675 million increased $230 million from the prior year due to higher net charge-offs and a larger reserve build. The reserve build for the third quarter of 2017 was $ 148 million, compared to a reserve build of $75 million in the third quarter of 2016.

7 Expenses increased $52 million from the prior year as a result of higher employee compensation and professional fees. Employee compensation increased as a result of higher staffing levels and higher average salaries. The increase in professional fees is primarily due to investments in technology and analytic capabilities. Payment Services Payment Services pretax income was $36 million in the quarter, up $6 million from the prior year, primarily driven by higher transaction processing and interchange revenue. Payment Services transaction dollar volume was $51.6 billion, up 16% versus the prior year. PULSE transaction dollar volume was up 17% year-over-year. Diners Club volume increased 9% year-over-year driven by continued strength of newer franchise relationships. Network Partners volume increased 15% from the prior year driven by AribaPay. Share Repurchases During the third quarter of 2017, the company repurchased approximately 9.2 million shares of common stock for $555 million. Shares of common stock outstanding declined by 2.4% from the prior quarter. Conference Call and Webcast Information The company will host a conference call to discuss its third quarter results on Tuesday, October 24, 2017, at 5:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at 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 Contacts: Investors: Craig Streem, craigstreem@discover.com Media: Jon Drummond, jondrummond@discover.com

8 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 ( and the company's website ( This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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, and "Management's Discussion & Analysis of Financial Condition and Results of Operations" in the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are filed with the SEC and available at the SEC's internet site (

9 DISCOVER FINANCIAL SERVICES Exhibit 99.2 EARNINGS SUMMARY (unaudited, in millions, except per share statistics) EARNINGS SUMMARY Quarter Ended Nine Months Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 Sep 30, 2017 Sep 30, vs Interest Income $2,476 $2,338 $2,278 $2,258 $2,184 $292 13% $7,092 $6,358 $734 12% Interest Expense % 1,212 1, % Net Interest Income 2,050 1,938 1,892 1,892 1, % 5,880 5, % Discount/Interchange Revenue % 1,937 1, % Rewards Cost % 1,168 1, % Discount and Interchange Revenue, net (5) (2%) (32) (4%) Protection Products Revenue (5) (8%) (11) (6%) Loan Fee Income % % Transaction Processing Revenue % % Other Income % % Total Other Income (1) % 1,403 1,415 (12) (1%) Revenue Net of Interest Expense 2,525 2,419 2,339 2,358 2, % 7,283 6, % Provision for Loan Losses % 1,900 1, % Employee Compensation and Benefits % 1,101 1, % Marketing and Business Development % % Information Processing & Communications (3) (4%) (23) (9%) Professional Fees % % Premises and Equipment % % Other Expense (1) (1%) (15) (5%) Total Other Expense % 2,745 2, % Income Before Income Taxes (58) (6%) 2,638 2,773 (135) (5%) Tax Expense (21) (7%) (17) (2%) Net Income $602 $546 $564 $563 $639 ($37) (6%) $1,712 $1,830 ($118) (6%) Net Income Allocated to Common Stockholders $589 $532 $551 $550 $625 ($36) (6%) $1,672 $1,789 ($117) (7%) Effective Tax Rate 33.3% 37.1% 35.0% 36.3% 33.5% 35.1% 34.0% Net Interest Margin 10.28% 10.11% 10.07% 10.07% 9.99% 29 bps 10.16% 9.96% 20 bps Operating Efficiency 37.5% 37.7% 37.9% 38.0% 38.9% (140) bps 37.7% 39.9% (220) bps ROE 22% 19% 20% 20% 23% 20% 22% Capital Returned to Common Stockholders $667 $547 $620 $581 $689 ($22) (3%) $1,835 $1,725 $110 6% Payout Ratio 113% 103% 113% 106% 110% 110% 96% 1,400 bps Ending Common Shares Outstanding (30) (8%) (30) (8%) Weighted Average Common Shares Outstanding (31) (8%) (31) (8%) Weighted Average Common Shares Outstanding (fully diluted) (31) (8%) (31) (8%) PER SHARE STATISTICS Basic EPS $1.59 $1.41 $1.43 $1.40 $1.56 $0.03 2% $4.42 $4.37 $0.05 1% Diluted EPS $1.59 $1.40 $1.43 $1.40 $1.56 $0.03 2% $4.42 $4.36 $0.06 1% Common Stock Price (period end) $64.48 $62.19 $68.39 $72.09 $56.55 $ % $64.48 $56.55 $ % Book Value per share $30.56 $30.01 $29.46 $29.13 $28.62 $1.94 7% $30.56 $28.62 $1.94 7% Note: See Glossary of Financial Terms for definitions of financial terms

10 DISCOVER FINANCIAL SERVICES EARNINGS SUMMARY (unaudited, in millions) Quarter Ended Nine Months Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 Sep 30, 2017 Sep 30, vs SEGMENT- INCOME BEFORE INCOME TAXES Direct Banking $867 $831 $824 $868 $931 ($64) (7%) $2,522 $2,681 ($159) (6%) Payment Services % % Total $903 $867 $868 $883 $961 ($58) (6%) $2,638 $2,773 ($135) (5%) TRANSACTIONS PROCESSED ON NETWORKS Discover Network % 1,633 1, % PULSE Network % 2,827 2, % Total 1,575 1,512 1,373 1,457 1, % 4,460 4, % NETWORK VOLUME PULSE Network $39,828 $38,848 $36,066 $35,554 $33,913 $5,915 17% $114,742 $102,449 $12,293 12% Network Partners 3,811 3,461 3,661 3,235 3, % 10,933 10, % Diners Club International 1 7,989 7,800 7,382 7,334 7, % 23,171 21,267 1,904 9% Total Payment Services 51,628 50,109 47,109 46,123 44,557 7,071 16% 148, ,314 14,532 11% Discover Network - Proprietary 33,576 33,342 29,859 34,029 31,759 1,817 6% 96,777 92,115 4,662 5% Total $85,204 $83,451 $76,968 $80,152 $76,316 $8,888 12% $245,623 $226,429 $19,194 8% 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

11 DISCOVER FINANCIAL SERVICES BALANCE SHEET SUMMARY (unaudited, in millions) Quarter Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 BALANCE SHEET SUMMARY Assets Cash and Investment Securities $16,155 $14,722 $17,981 $13,766 $15,728 $427 3% Total Loan Receivables 80,443 77,997 75,853 77,254 73,551 6,892 9% Allowance for Loan Losses (2,531) (2,384) (2,264) (2,167) (2,024) (507) (25%) Net Loan Receivables 77,912 75,613 73,589 75,087 71,527 6,385 9% Premises and Equipment, net % Goodwill and Intangible Assets, net (3) (1%) Other Assets 2,323 2,229 2,055 2,300 2, % Total Assets $97,608 $93,757 $94,795 $92,308 $90,541 $7,067 8% Liabilities & Stockholders' Equity Direct to Consumer and Affinity Deposits $38,703 $37,709 $37,094 $36,002 $35,323 $3,380 10% Brokered Deposits and Other Deposits 17,432 15,155 16,428 15,990 13,922 3,510 25% Deposits 56,135 52,864 53,522 51,992 49,245 6,890 14% Borrowings 26,737 26,438 26,823 25,443 26,830 (93) % Accrued Expenses and Other Liabilities 3,549 3,196 3,185 3,550 3, % Total Liabilities 86,421 82,498 83,530 80,985 79,194 7,227 9% Total Equity 11,187 11,259 11,265 11,323 11,347 (160) (1%) Total Liabilities and Stockholders' Equity $97,608 $93,757 $94,795 $92,308 $90,541 $7,067 8% LIQUIDITY Liquidity Portfolio $13,906 $13,865 $16,213 $12,635 $14,017 (111) (1%) Undrawn Credit Facilities 1 33,696 31,877 30,823 30,194 29,048 4,648 16% Total Liquidity $47,602 $45,742 $47,036 $42,829 $43,065 4,537 11% 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

12 DISCOVER FINANCIAL SERVICES BALANCE SHEET STATISTICS (unaudited, in millions) Quarter Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 BALANCE SHEET STATISTICS Total Common Equity $10,627 $10,699 $10,705 $10,763 $10,787 ($160) (1%) Total Common Equity/Total Assets 10.9% 11.4% 11.3% 11.7% 11.9% Total Common Equity/Net Loans 13.6% 14.2% 14.5% 14.3% 15.1% Tangible Assets $97,190 $93,338 $94,375 $91,887 $90,120 $7,070 8% Tangible Common Equity 1 $10,209 $10,280 $10,285 $10,342 $10,366 ($157) (2%) Tangible Common Equity/Tangible Assets % 11.0% 10.9% 11.3% 11.5% Tangible Common Equity/Net Loans % 13.6% 14.0% 13.8% 14.5% Tangible Common Equity per share 1 $27.89 $27.40 $26.90 $26.60 $26.15 $1.74 7% REGULATORY CAPITAL RATIOS Basel III Transition Total Risk Based Capital Ratio 14.7% 15.2% 15.7% 15.5% 16.3% Tier 1 Risk Based Capital Ratio 13.2% 13.7% 14.1% 13.9% 14.6% Tier 1 Leverage Ratio 11.4% 11.8% 11.8% 12.3% 12.6% Common Equity Tier 1 Capital Ratio 12.5% 13.0% 13.4% 13.2% 13.9% Basel III Fully Phased-in Common Equity Tier 1 Capital Ratio % 13.0% 13.4% 13.2% 13.8% RATIO OF EARNINGS TO FIXED CHARGES Ratio of Earnings to Fixed Charges 3, Tangible Common Equity ("TCE") is a non-gaap measure. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure see Reconciliation of GAAP to non-gaap Data schedule 2 Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Basel III Fully Phased-in Common Equity Tier 1 Capital, a non-gaap measure. The Company believes that the Common Equity Tier 1 Capital Ratio based on Fully Phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of Common Equity Tier 1 Capital and Risk Weighted Assets calculated under Fully Phased-in Basel III rules to Common Equity Tier 1 Capital and Risk Weighted Assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-gaap data schedule 3 Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense 4 The Ratio of Earnings to Fixed Charges is a year-to-date statistic. The periods reported reflect the nine months ended September 30, 2017, the six months ended June 30, 2017, the three months ended March 31, 2017, the twelve months ended December 31, 2016 and the nine months ended September 30, 2016 Note: See Glossary of Financial Terms for definitions of financial terms.

13 DISCOVER FINANCIAL SERVICES AVERAGE BALANCE SHEET (unaudited, in millions) Quarter Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 AVERAGE BALANCES Assets Cash and Investment Securities $14,547 $14,616 $15,424 $13,567 $13,761 $786 6% Restricted Cash % Credit Card Loans 62,647 60,700 60,122 59,121 57,561 5,086 9% Private Student Loans 8,986 9,020 9,197 8,954 8, % Personal Loans 7,208 6,820 6,582 6,425 6,036 1,172 19% Other Loans % Total Loans 79,189 76,854 76,185 74,775 72,668 6,521 9% Total Interest Earning Assets 94,584 92,029 92,428 88,815 87,050 7,534 9% Allowance for Loan Losses (2,379) (2,262) (2,166) (2,021) (1,947) (432) (22%) Other Assets 4,192 4,147 4,166 4,162 4,282 (90) (2%) Total Assets $96,397 $93,914 $94,428 $90,956 $89,385 $7,012 8% Liabilities and Stockholders' Equity Direct to Consumer and Affinity Deposits $37,900 $36,956 $36,316 $35,396 $34,488 $3,412 10% Brokered Deposits and Other Deposits 16,192 15,600 16,242 14,355 14,267 1,925 13% Total Interest-bearing Deposits 54,092 52,556 52,558 49,751 48,755 5,337 11% Short-term Borrowings (1) (50%) Securitized Borrowings 17,206 16,141 16,960 16,817 16, % Other Long-term Borrowings 9,721 9,979 9,600 9,042 8, % Total Interest-bearing Liabilities 81,020 78,678 79,119 75,611 74,239 6,781 9% Other Liabilities & Stockholders' Equity 15,377 15,236 15,309 15,345 15, % Total Liabilities and Stockholders' Equity $96,397 $93,914 $94,428 $90,956 $89,385 $7,012 8% AVERAGE RATES Assets Cash and Investment Securities 1.31% 1.12% 0.90% 0.72% 0.70% 61 bps Restricted Cash 1.15% 0.89% 0.70% 0.37% 0.32% 83 bps Credit Card Loans 12.83% 12.66% 12.65% 12.62% 12.53% 30 bps Private Student Loans 7.56% 7.45% 7.29% 7.06% 7.13% 43 bps Personal Loans 12.33% 12.22% 12.18% 12.09% 12.23% 10 bps Other Loans 5.56% 5.59% 5.39% 4.88% 4.96% 60 bps Total Loans 12.15% 11.98% 11.94% 11.88% 11.82% 33 bps Total Interest Earning Assets 10.39% 10.19% 9.99% 10.12% 9.98% 41 bps Liabilities and Stockholders' Equity Direct to Consumer and Affinity Deposits 1.37% 1.29% 1.25% 1.26% 1.26% 11 bps Brokered Deposits and Other Deposits 2.12% 2.07% 1.98% 1.93% 1.90% 22 bps Total Interest-bearing Deposits 1.59% 1.52% 1.48% 1.45% 1.45% 14 bps Short-term Borrowings 1.33% 1.06% 0.67% 0.60% 0.62% 71 bps Securitized Borrowings 2.37% 2.31% 2.17% 2.09% 2.07% 30 bps Other Long-term Borrowings 4.30% 4.36% 4.38% 4.26% 4.27% 3 bps Total Interest-bearing Liabilities 2.08% 2.04% 1.98% 1.93% 1.92% 16 bps Net Interest Margin 10.28% 10.11% 10.07% 10.07% 9.99% 29 bps Net Yield on Interest-earning Assets 8.60% 8.44% 8.30% 8.47% 8.34% 26 bps Note: See Glossary of Financial Terms for definitions of financial terms

14 DISCOVER FINANCIAL SERVICES LOAN STATISTICS (unaudited, in millions) Quarter Ended Nine Months Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 Sep 30, 2017 Sep 30, vs TOTAL LOAN RECEIVABLES Ending Loans 1, 2 $80,443 $77,997 $75,853 $77,254 $73,551 $6,892 9% $80,443 $73,551 $6,892 9% Average Loans 1, 2 $79,189 $76,854 $76,185 $74,775 $72,668 $6,521 9% $77,420 $71,442 $5,978 8% Interest Yield 12.15% 11.98% 11.94% 11.88% 11.82% 33 bps 12.03% 11.75% 28 bps Gross Principal Charge-off Rate 3.26% 3.36% 3.25% 2.91% 2.66% 60 bps 3.29% 2.78% 51 bps Gross Principal Charge-off Rate excluding PCI Loans % 3.47% 3.37% 3.02% 2.77% 58 bps 3.40% 2.89% 51 bps Net Principal Charge-off Rate 2.63% 2.71% 2.60% 2.31% 2.02% 61 bps 2.65% 2.10% 55 bps Net Principal Charge-off Rate excluding PCI Loans % 2.79% 2.69% 2.39% 2.10% 61 bps 2.73% 2.19% 54 bps Delinquency Rate (over 30 days) excluding PCI Loans % 1.93% 1.97% 1.97% 1.79% 26 bps 2.05% 1.79% 26 bps Delinquency Rate (over 90 days) excluding PCI Loans % 0.88% 0.92% 0.87% 0.77% 14 bps 0.91% 0.77% 14 bps Gross Principal Charge-off Dollars $651 $645 $611 $548 $488 $163 33% $1,907 $1,486 $421 28% Net Principal Charge-off Dollars $527 $520 $489 $435 $370 $157 42% $1,536 $1,126 $410 36% Net Interest and Fee Charge-off Dollars $107 $110 $106 $94 $80 $27 34% $323 $250 $73 29% Loans Delinquent Over 30 Days 3 $1,605 $1,457 $1,445 $1,469 $1,269 $336 26% $1,605 $1,269 $336 26% Loans Delinquent Over 90 Days 3 $709 $667 $675 $652 $545 $164 30% $709 $545 $164 30% Allowance for Loan Loss (period end) $2,531 $2,384 $2,264 $2,167 $2,024 $507 25% $2,531 $2,024 $507 25% Change in Loan Loss Reserves $147 $120 $97 $143 $75 $72 $364 $155 $209 Reserve Rate 3.15% 3.06% 2.98% 2.80% 2.75% 40 bps 3.15% 2.75% 40 bps Reserve Rate Excluding PCI Loans % 3.11% 3.04% 2.86% 2.81% 39 bps 3.20% 2.81% 39 bps CREDIT CARD LOANS Ending Loans $63,475 $61,797 $59,757 $61,522 $58,006 $5,469 9% $63,475 $58,006 $5,469 9% Average Loans $62,647 $60,700 $60,122 $59,121 $57,561 $5,086 9% $61,165 $56,606 $4,559 8% Interest Yield 12.83% 12.66% 12.65% 12.62% 12.53% 30 bps 12.72% 12.46% 26 bps Gross Principal Charge-off Rate 3.53% 3.71% 3.61% 3.19% 2.93% 60 bps 3.61% 3.09% 52 bps Net Principal Charge-off Rate 2.80% 2.94% 2.84% 2.47% 2.17% 63 bps 2.86% 2.30% 56 bps Delinquency Rate (over 30 days) 2.14% 2.00% 2.06% 2.04% 1.87% 27 bps 2.14% 1.87% 27 bps Delinquency Rate (over 90 days) 1.02% 0.98% 1.03% 0.97% 0.86% 16 bps 1.02% 0.86% 16 bps Gross Principal Charge-off Dollars $555 $561 $535 $474 $425 $130 31% $1,651 $1,312 $339 26% Net Principal Charge-off Dollars $439 $445 $422 $369 $314 $125 40% $1,306 $974 $332 34% Loans Delinquent Over 30 Days $1,359 $1,237 $1,233 $1,252 $1,086 $273 25% $1,359 $1,086 $273 25% Loans Delinquent Over 90 Days $646 $603 $616 $597 $500 $146 29% $646 $500 $146 29% Allowance for Loan Loss (period end) $2,091 $1,980 $1,892 $1,790 $1,661 $430 26% $2,091 $1,661 $430 26% Change in Loan Loss Reserves $111 $88 $102 $129 $58 $53 $301 $107 $194 Reserve Rate 3.29% 3.21% 3.17% 2.91% 2.86% 43 bps 3.29% 2.86% 43 bps Total Discover Card Volume $35,581 $35,297 $32,406 $35,440 $33,471 $2,110 6% $103,284 $96,884 $6,400 7% Discover Card Sales Volume $32,161 $32,172 $29,134 $32,486 $30,683 $1,478 5% $93,467 $88,937 $4,530 5% Rewards Rate 1.30% 1.20% 1.25% 1.26% 1.20% 10 bps 1.25% 1.16% 9 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

15 DISCOVER FINANCIAL SERVICES LOAN STATISTICS (unaudited, in millions) Quarter Ended Nine Months Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 Sep 30, 2017 Sep 30, vs PRIVATE STUDENT LOANS Ending Loans $9,200 $8,916 $9,138 $8,977 $8,995 $205 2% $9,200 $8,995 $205 2% Ending PCI Loans 1 $2,202 $2,322 $2,449 $2,584 $2,708 ($506) (19%) $2,202 $2,708 ($506) (19%) Interest Yield 7.56% 7.45% 7.29% 7.06% 7.13% 43 bps 7.43% 7.09% 34 bps Net Principal Charge-off Rate 1.14% 0.85% 0.60% 1.00% 0.70% 44 bps 0.86% 0.67% 19 bps Net Principal Charge-off Rate excluding PCI Loans % 1.15% 0.83% 1.42% 1.02% 50 bps 1.17% 0.99% 18 bps Delinquency Rate (over 30 days) excluding PCI Loans % 2.12% 2.04% 2.22% 1.87% 27 bps 2.14% 1.87% 27 bps Reserve Rate 1.77% 1.78% 1.70% 1.74% 1.74% 3 bps 1.77% 1.74% 3 bps Reserve Rate excluding PCI Loans % 1.91% 1.80% 1.91% 1.92% (3) bps 1.89% 1.92% (3) bps PERSONAL LOANS Ending Loans $7,397 $6,955 $6,663 $6,481 $6,273 $1,124 18% $7,397 $6,273 $1,124 18% Interest Yield 12.33% 12.22% 12.18% 12.09% 12.23% 10 bps 12.24% 12.23% 1 bps Net Principal Charge-off Rate 3.19% 3.18% 3.16% 2.70% 2.63% 56 bps 3.18% 2.49% 69 bps Delinquency Rate (over 30 days) 1.27% 1.14% 1.12% 1.12% 0.98% 29 bps 1.27% 0.98% 29 bps Reserve Rate 3.63% 3.38% 3.10% 3.09% 2.98% 65 bps 3.63% 2.98% 65 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

16 DISCOVER FINANCIAL SERVICES SEGMENT RESULTS (unaudited, in millions) Quarter Ended Nine Months Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 Sep 30, 2017 vs. Sep 30, 2016 Sep 30, 2017 Sep 30, vs DIRECT BANKING Interest Income $2,476 $2,338 $2,278 $2,258 $2,184 $292 13% $7,092 $6,358 $734 12% Interest Expense % 1,212 1, % Net Interest Income 2,050 1,938 1,892 1,892 1, % 5,880 5, % Other Income (7) (2%) 1,184 1,210 (26) (2%) Revenue Net of Interest Expense 2,451 2,346 2,267 2,293 2, % 7,064 6, % Provision for Loan Losses % 1,908 1, % Total Other Expense % 2,634 2, % Income Before Income Taxes $867 $831 $824 $868 $931 ($64) (7%) $2,522 $2,681 ($159) (6%) Net Interest Margin 10.28% 10.11% 10.07% 10.07% 10.00% 28 bps 10.16% 9.96% 20 bps Pretax Return on Loan Receivables 4.35% 4.34% 4.39% 4.62% 5.10% (75) bps 4.36% 5.01% (65) bps Allowance for Loan Loss (period end) $2,525 $2,377 $2,258 $2,151 $2,007 $518 26% $2,525 $2,007 $518 26% Change in Loan Loss Reserves $148 $119 $107 $144 $75 $73 $374 $154 $220 PAYMENT SERVICES Interest Income $ $ $ $ $ $ NM $ $ $ NM Interest Expense NM NM Net Interest Income NM NM Other Income % % Revenue Net of Interest Expense % % Provision for Loan Losses (1) 1 (8) (1) (1) NM (8) 2 (10) NM Total Other Expense % % Income Before Income Taxes $36 $36 $44 $15 $30 $6 20% $116 $92 $24 26% Note: See Glossary of Financial Terms for definitions of financial terms

17 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 phasedin) 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)

18 DISCOVER FINANCIAL SERVICES RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited, in millions) Quarter Ended Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016 GAAP Total Common Equity $10,627 $10,699 $10,705 $10,763 $10,787 Less: Goodwill (255) (255) (255) (255) (255) Less: Intangibles (163) (164) (165) (166) (166) Tangible Common Equity 1 $10,209 $10,280 $10,285 $10,342 $10,366 Common Equity Tier 1 Capital (Basel III Transition) $10,419 $10,492 $10,501 $10,592 $10,618 Adjustments Related To Capital Components During Transition 2 (25) (25) (26) (52) (52) Common Equity Tier 1 Capital (Basel III Fully Phased-in) $10,394 $10,467 $10,475 $10,540 $10,566 Common Equity Tier 1 Capital Ratio (Basel III Transition) 12.5% 13.0% 13.4% 13.2% 13.9% Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) % 13.0% 13.4% 13.2% 13.8% GAAP Book Value Per Share $30.56 $30.01 $29.46 $29.13 $28.62 Less: Goodwill (0.69) (0.68) (0.67) (0.67) (0.64) Less: Intangibles (0.45) (0.44) (0.43) (0.42) (0.42) Less: Preferred Stock (1.53) (1.49) (1.46) (1.44) (1.41) Tangible Common Equity Per Share $27.89 $27.40 $26.90 $26.60 $ 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

19 3Q17 Financial Results October 24, DISCOVER FINANCIAL SERVICES Exhibit 99.3

20 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 ( and the SEC s website ( 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, and under Management s Discussion and Analysis of Financial Condition and Results of Operations in the company s Quarterly Report on Form 10-Q for the quarters ended June 30, 2017, and March 31, 2017, which are filed with the SEC and available at the SEC's website ( The Company does not undertake to update or revise forward-looking statements as more information becomes available. Notice 2

21 Delivered net income of $602MM, diluted EPS of $1.59 and 10% revenue growth YOY Achieved 9% total loan growth YOY with solid gains across all primary lending products (credit cards, private student and personal loans) Net interest margin up 29 bps YOY to 10.28% Continued to drive positive operating leverage Increased Payment Services volume rate of growth (up 16% YOY) Remained disciplined on risk-adjusted returns with 22% return on equity Returned $667MM of capital through dividends and share repurchases 3Q17 Highlights 3

22 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 Highlights Diluted EPS of $1.59, up 2% YOY Revenue net of interest expense of $2.5Bn, up 10% YOY, driven by higher net interest income Provision for loan losses increased $229MM YOY (51%) on higher net charge-offs and a larger reserve build Expenses rose 6%, primarily from higher compensation and professional fees Income tax expense of $301MM was lower by 7% YOY. Both 3Q16 and 3Q17 include a tax benefit of $28MM 3Q17 Summary Financial Results B / (W) ($MM, except per share data) 3Q17 3Q16 $ Δ % Δ Revenue Net of Interest Expense $2,525 $2,301 $224 10% Net Principal Charge-off (157) (42%) Reserve Change build/(release) (72) (96%) Provision for Loan Losses (229) (51%) Operating Expense (53) (6%) Direct Banking (64) (7%) Payment Services % Total Pre-Tax Income (58) (6%) Income Tax Expense % Net Income $602 $639 ($37) (6%) ROE 22% 23% Diluted EPS $1.59 $1.56 $0.03 2% Pre-Tax, Pre-Provision Income (1) $1,577 $1,406 $171 12% 4

23 Payment Services 3Q16 3Q17 $73.6 $58.0 $9.0 $6.3 $80.4 $63.5 $9.2 $7.4 +9% +9% +2% +18% Note(s) 1. Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment Total Network Volume up 12% YOY Ending Loans ($Bn) Volume ($Bn) 3Q16 3Q17 $31.8 $33.9 $7.3 $3.3 $33.6 $39.8 $8.0 $3.8 Total Card Student Personal +6% +17% +9% 15% Proprietary PULSE Network PartnersDiners (1) 3Q17 Loan and Volume Growth 5

24 Note(s) 1. Rewards cost divided by Discover card sales volume Highlights Receivables growth and margin expansion drove 12% YOY increase in net interest income Net discount and interchange revenue decreased $5MM (2%) because of higher rewards expense Enhanced customer engagement with promotional rewards drove a 10 bps increase in rewards rate YOY 3Q17 Revenue Detail B / (W) ($MM) 3Q17 3Q16 $ Δ % Δ Interest Income $2,476 $2,184 $292 13% Interest Expense (67) (19%) Net Interest Income 2,050 1, % Discount/Interchange Revenue % Rewards Cost (49) (13%) Net Discount/Interchange Revenue (5) (2%) Protection Products Revenue (5) (8%) Loan Fee Income % Transaction Processing Revenue % Other Income % Total Non-Interest Income (1) % Revenue Net of Interest Expense $2,525 $2,301 $224 10% Direct Banking $2,451 $2,233 $218 10% Payment Services % Revenue Net of Interest Expense $2,525 $2,301 $224 10% Change ($MM) 3Q17 3Q16 QOQ YOY Discover Card Sales Volume $32,161 $30,683 % 5% Rewards Rate (1) 1.30% 1.20% 10 bps 10 bps 6

25 Highlights Net interest margin on receivables increased 29 bps YOY on higher loan yields, partially offset by higher funding costs Credit card yield increased 30 bps YOY as the prime rate increased, partially offset by higher interest charge-offs and portfolio mix Average consumer deposits grew 10% YOY and composed 47% of total average funding Funding costs on interest-bearing liabilities increased 16 bps YOY, driven by higher market rates and funding mix 3Q17 Net Interest Margin 3Q17 3Q16 ($MM) Average Balance Rate Average Balance Rate Credit Card $62, % $57, % Private Student 8, % 8, % Personal 7, % 6, % Other % % Total Loans 79, % 72, % Other Interest-Earnings Assets 15, % 14, % Total Interest-Earnings Assets $94, % $87, % Direct to Consumer and Affinity $37, % $34, % Brokered Deposits and Other 16, % 14, % Interest Bearing Deposits 54, % 48, % Borrowings 26, % 25, % Total Interest-Bearing Liabilities $81, % $74, % Change (%) 3Q17 QOQ YOY Total Interest Yield 12.15% 17bps 33bps NIM on Receivables 10.28% 17bps 29bps NIM on Interest-Earning Assets 8.60% 16bps 26bps 7

26 Note(s) 1. Defined as reported total operating expense divided by revenue net of interest expense Highlights Employee compensation and benefits up 8% YOY, primarily on higher staffing levels, as well as higher average salaries Professional fees up 14% YOY, primarily due to investments in technology and analytic capabilities Operating efficiency improved 140 bps on strong revenue growth coupled with disciplined expense growth 3Q17 Operating Expense Detail B / (W) ($MM) 3Q17 3Q16 $ Δ % Δ Employee Compensation and Benefits $371 $342 ($29) (8%) Marketing and Business Development (8) (4%) Information Processing & Communications % Professional Fees (20) (14%) Premises and Equipment % Other Expense % Total Operating Expense $948 $895 ($53) (6%) Direct Banking ($52) (6%) Payment Services (1) (3%) Total Operating Expense $948 $895 ($53) (6%) Operating Efficiency(1) 37.5% 38.9% 140 bps 8

27 Total Company Loans Credit Card Loans Private Student Loans Personal Loans NCO rate (%) 30+ day DQ rate ex-pci (%) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q NCO rate (%) 30+ day DQ rate (%) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q NCO rate (%) 30+ day DQ rate (%) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q NCO rate (%) 30+ day DQ rate ex-pci (%) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q Credit Performance Trends 9

28 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q Capital Trends 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 Common Equity Tier 1 (CET1) Capital Ratio(1) (%) Payout Ratio(2) (%) 10

29 Balance Sheet Total loans grew 9% ($6.9Bn) YOY with strong contributions from all primary lending products Credit card loans grew 9% ($5.5Bn) YOY as sales volume increased 5% Average consumer deposits grew 10% ($3.4Bn) YOY, while deposit rates increased slightly 3Q17 Financial Summary 11 Total NCO rate of 2.63%, up 61 bps YOY Driven by supply- induced credit normalization and loan seasoning Capital plan execution Repurchased 9.2MM shares of common stock for $555MM CET1 capital ratio(1) of 12.5%, down 140 bps YOY Net income of $602MM and diluted EPS of $1.59 Revenue growth of 10% on higher net interest income NIM of 10.28%, up 29 bps YOY Return on equity remains strong at 22% Efficiency ratio stable QOQ at 38% Credit and Capital Profitability Note(s) 1. Basel III Transition

30 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 Appendix Reconciliation of GAAP to Non-GAAP Data (unaudited, $MM) 3Q17 3Q16 Provision for loan losses $674 $445 Income before income taxes Pre-tax, pre-provision income(1) $1,577 $1,406 12

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