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Discover Financial Services Reports First Quarter Net Income Of MILLION PER DILUTED SHARE

The following excerpt is from the company's SEC filing.

- Discover Financial Services (NYSE: DFS) today reported net income of

$575 million

per diluted share for the

first quarter of 2016

, as compared to

$586 million

first quarter of 2015

. The company's return on equity for the

First Quarter Highlights

Total loans grew

$2.7 billion

, from the prior year to

$70.3 billion

Credit card loans grew

$2.1 billion

$55.6 billion

and Discover card sales volume increased

from the prior year.

Total net cha rge-off rate excluding PCI loans decreased

basis points from the prior year to

and the total delinquency rate excluding PCI loans over 30 days past due increased

Direct to consumer and affinity deposits grew

$3.5 billion

$32.8 billion

Payment Services transaction dollar volume for the segment was

$45.0 billion

, down

“We made progress on our priorities this quarter, most notably accelerating loan growth into our target range,” said David Nelms, chairman and CEO of Discover. “We continue to focus on generating strong returns while prudently managing credit and effectively deploying capital.”

Segment Results:

Direct Banking

Direct Banking pretax income of

$882 million

in the quarter increased

$1 million

from the prior year as higher net interest income was offset by lower other income, higher provision for loan losses and higher expenses.

Total loans ended the quarter at

compared to the prior year. Credit card loans ended the quarter at

from the prior year. Personal loans increased

$469 million

, from the prior year. Relative to the prior year, private student loans increased

$218 million

, and grew

$772 million

, excluding purchased student loans.

Net interest income increased

$121 million

, from the prior year, driven by loan growth and higher net interest margin. Net interest margin was

basis points from the prior year. Card yield was

12.42%

, an increase of

basis points from the prior year due to portfolio mix and the prime rate increase. Interest expense as a percent of total loans increased

basis points from the prior year primarily due to funding mix.

Other income decreased

$62 million

, from the prior year driven primarily by the lack of mortgage origination revenue, as the prior year included

$42 million

in income related to the now discontinued mortgage operation. In addition, protection products revenue was lower by

$10 million

The delinquency rate for credit card loans over 30 days past due was

basis points from the prior year and down

basis points from the prior quarter. Credit card net charge-off rate for the first quarter was

basis points from the prior year and up

basis points from the prior quarter. The personal loans net charge-off rate of

increased by

basis points from the prior year. The student loan net charge-off rate excluding purchased credit-impaired ("PCI") loans was

Provision for loan losses of

$423 million

$35 million

from the prior year primarily due to a larger reserve build. The reserve build for the

million,

million higher than the prior year reserve build primarily due to loan growth.

Expenses increased

$23 million

, from the prior year mostly driven by higher regulatory and compliance costs. The prior year included

$37 million

in expenses related to the mortgage origination business that was subsequently closed. Professional fees increased primarily due to $

30 million

in look...


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