Provision for loan losses of $333 million increased $197 million from the prior year, driven by an increase in loan loss reserves and to a small extent offset by a decline in charge-offs. The reserve build for the third quarter of 2013 was $42 million due to lower expected recoveries on aged charge-offs and loan growth. The third quarter of 2012 included a reserve release of $167 million.
Expenses were down $68 million, or 8%, from the prior year primarily due to the third quarter of 2012 including a $96 million addition to legal reserves in other expenses. The decrease in expenses was partially offset by higher compensation, due primarily to increased headcount, and higher information processing expenses.
Payment Services pretax income was $28 million in the quarter, down $20 million from the prior year. Revenue decreased $10 million from the prior year primarily due to lower transaction processing revenue for PULSE. Expenses were up $10 million from the prior year mainly due to increased operating costs associated with Diners Club.Payment Services dollar volume was $48.5 billion for the third quarter of 2013, down 2% from the prior year. PULSE transaction dollar volume declined by 2% year-over-year. Share Repurchases During the third quarter of 2013, the company repurchased approximately 7 million shares of common stock for $350 million. Shares of common stock outstanding declined by 1% from the prior quarter. Conference Call and Webcast Information The company will host a conference call to discuss its third quarter results on Monday, October 21, 2013, at 4:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.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 home loans, private student loans, personal loans, home equity loans, checking and savings accounts, certificates of deposit and money market accounts through its direct banking business. It operates the Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.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 ( http://investorrelations.discoverfinancial.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.
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