UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                             -----------------------

                                    FORM 10-Q

                                   (Mark One)

[X]        Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934

           For the quarterly period ended            September 30, 2000

                                       or

[ ]        Transition Report Pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934

           For the transition period from             __________ to __________

                       Commission file number:              001-12351


                              METRIS COMPANIES INC.

             (Exact name of registrant as specified in its charter)


        Delaware                                         41-1849591
(State of Incorporation)                   (I.R.S. Employer Identification No.)


              10900 Wayzata Boulevard, Minnetonka, Minnesota 55305

                    (Address of principal executive offices)


                                 (952) 525-5020

              (Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

             Yes   X                                   No _____
                 -----

As of October 31, 2000,  62,141,073 shares of the registrant's common stock, par
value $.01 per share, were outstanding.


<PAGE>



                              METRIS COMPANIES INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                               September 30, 2000

                                                                            Page

PART I.           FINANCIAL INFORMATION

         Item 1.      Consolidated Financial Statements (unaudited):
                             Consolidated Balance Sheets.......................3
                             Consolidated Statements of Income.................4
                             Consolidated Statements of Changes in
                                      Stockholders' Equity.....................6
                             Consolidated Statements of Cash Flows.............7
                             Notes to Consolidated Financial Statements........8

         Item 2.      Management's Discussion and Analysis of
                             Financial Condition and Results of
                             Operations.......................................23

         Item 3.      Quantitative and Qualitative Disclosures
                             About Market Risk................................35


PART II. OTHER INFORMATION

         Item 1. Legal Proceedings............................................36

         Item 2. Changes in Securities........................................36

         Item 3. Defaults Upon Senior Securities..............................36

         Item 4. Submission of Matters to a Vote of Security Holders..........36

         Item 5. Other Information............................................36

         Item 6.      Exhibits and Reports on Form 8-K........................36

                      Signatures..............................................37


<PAGE>


<TABLE>
                          Part I. Financial Information

ITEM 1.           CONSOLIDATED FINANCIAL STATEMENTS

METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except per-share data) (Unaudited)

                                                                                                  September 30, December 31,
                                                                                                     2000          1999
                                                                                                     ----          ----
<S>                                                                                                <C>          <C>
Cash and due from banks ........................................................................   $  100,742   $   28,505
Federal funds sold .............................................................................      162,263      118,962
Short-term investments .........................................................................       49,155       46,966
                                                                                                   ----------   ----------
Cash and cash equivalents ......................................................................      312,160      194,433
                                                                                                   ----------   ----------
Retained interests in loans securitized ........................................................    1,899,958    1,617,226
Less:  Allowance for loan losses ...............................................................      610,680      606,853
                                                                                                   ----------   ----------
Net retained interests in loans securitized ....................................................    1,289,278    1,010,373
                                                                                                   ----------   ----------
Credit card loans (net of allowance for loan losses of $118,595 and
   $12,175, respectively).......................................................................      791,010      133,608
Property and equipment, net ....................................................................      120,127       56,914
Accrued interest and fees receivable ...........................................................       27,474       17,704
Prepaid expenses and deferred charges ..........................................................       94,750       57,371
Deferred income taxes ..........................................................................      183,394      185,613
Customer base intangible .......................................................................      100,902       83,809
Other receivables due from credit card
   securitizations, net ........................................................................      216,812      243,978
Other assets ...................................................................................       86,341       61,279
                                                                                                   ----------   ----------
     Total assets ..............................................................................   $3,222,248   $2,045,082
                                                                                                   ==========   ==========
Liabilities:
Deposits .......................................................................................   $1,632,294   $  775,381
Debt ...........................................................................................      355,925      345,012
Accounts payable ...............................................................................       95,660       45,850
Current income taxes payable ...................................................................        9,057       22,969
Deferred income ................................................................................      230,143      171,666
Accrued expenses and other liabilities .........................................................       65,792       60,403
                                                                                                   ----------   ----------
     Total liabilities .........................................................................    2,388,871    1,421,281
                                                                                                   ----------   ----------
Stockholders' Equity:
Convertible preferred stock - Series C, par
     value $.01 per share; 10,000,000
     shares authorized, 946,282 and 885,178 shares issued and outstanding,
     respectively ..............................................................................      352,490      329,729
Common stock, par value $.01 per share;
     100,000,000 shares authorized, 62,129,887 and 57,919,433 shares issued
     and outstanding, respectively..............................................................          621          386
Paid-in capital ................................................................................      195,545      130,772
Retained earnings ..............................................................................      284,721      162,914
                                                                                                   ----------   ----------
     Total stockholders' equity ................................................................      833,377      623,801
                                                                                                   ----------   ----------
     Total liabilities and stockholders' equity ................................................   $3,222,248   $2,045,082
                                                                                                   ==========   ==========

                                    See accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>

<TABLE>

METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per-share data) (Unaudited)

                                                                             Three Months Ended         Nine Months Ended
                                                                               September 30,             September 30,
                                                                               -------------             -------------
                                                                              2000         1999         2000         1999
                                                                              ----         ----         ----         ----

Interest Income:
<S>                                                                        <C>          <C>          <C>          <C>
Credit card loans and retained
     interests in loans securitized ....................................   $ 131,326    $  66,337    $ 339,853    $ 148,449
Federal funds sold .....................................................       2,444          915        5,540        3,390
Other ..................................................................       1,070          683        3,007        1,495
                                                                           ---------    ---------    ---------    ---------
Total interest income ..................................................     134,840       67,935      348,400      153,334
Deposit interest expense ...............................................      24,321        6,451       56,369        9,013
Other interest expense .................................................      11,073        9,274       31,915       26,148
                                                                           ---------    ---------    ---------    ---------
Total interest expense .................................................      35,394       15,725       88,284       35,161
Net Interest Income ....................................................      99,446       52,210      260,116      118,173
Provision for loan losses ..............................................     110,936       67,052      296,944      122,125
                                                                           ---------    ---------    ---------    ---------
Net Interest Loss After Provision for Loan Losses ......................     (11,490)     (14,842)     (36,828)      (3,952)
                                                                           ---------    ---------    ---------    ---------
Other Operating Income:
Net securitization and credit card
     servicing income ..................................................     110,880       89,077      362,448      240,156
Credit card fees, interchange and
     other credit card income ..........................................      59,982       38,368      164,309       83,597
Enhancement services revenues ..........................................      68,767       44,636      192,367      123,481
                                                                           ---------    ---------    ---------    ---------
                                                                             239,629      172,081      719,124      447,234
                                                                           ---------    ---------    ---------    ---------
Other Operating Expense:
Credit card account and other product
     solicitation and marketing expenses................................      36,619       19,103      105,077       70,841
Employee compensation ..................................................      45,773       34,184      132,327       85,101
Data processing services and communications ............................      18,682       14,135       53,669       36,746
Third-party servicing expense ..........................................       3,162        3,515        9,619       11,440
Warranty and debt waiver underwriting
      and claims servicing expense .....................................       7,260        6,515       20,752       14,979
Credit card fraud losses ...............................................       2,227        1,717        6,799        3,830
Customer base intangible amortization ..................................       3,915        7,549       14,107       25,681
Other ..................................................................      32,011       18,809       95,589       59,797
                                                                           ---------    ---------    ---------    ---------
                                                                             149,649      105,527      437,939      308,415
                                                                           ---------    ---------    ---------    ---------
Income Before Income Taxes, Extraordinary
      Loss and Cumulative Effect of Accounting Change...................      78,490       51,712      244,357      134,867
Income taxes ...........................................................      30,130       20,529       94,321       53,542
                                                                           ---------    ---------    ---------    ---------
Income Before Extraordinary Loss and
      Cumulative Effect of Accounting Change............................      48,360       31,183      150,036       81,325
Extraordinary loss from early
      extinguishment of debt ...........................................          --           --           --       50,808
Cumulative effect of accounting change (net
      of income taxes of $2,180)........................................          --           --        3,438           --
                                                                           ---------    ---------    ---------    ---------
Net Income .............................................................      48,360       31,183      146,598       30,517
Preferred stock dividends-Series B .....................................          --           --           --        7,506
Convertible preferred stock dividends-Series C .........................       8,036        7,182       23,404        9,649
Adjustment for the retirement of Series B preferred stock ..............          --           --           --      101,615
                                                                           ---------    ---------    ---------    ---------
Net Income (Loss) Applicable To Common Stockholders ....................   $  40,324    $  24,001    $ 123,194    $ (88,253)
                                                                           =========    =========    =========    =========
</TABLE>

<PAGE>


<TABLE>

                                                  Three Months Ended         Nine Months Ended
                                                     September 30,             September 30,
                                                     -------------             -------------
                                                   2000        1999         2000         1999
                                                   ----        ----         ----         ----
Earnings per share:
<S>                                            <C>          <C>          <C>          <C>
     Basic-income (loss) before
         extraordinary loss and cumulative
         effect of accounting change .......   $     0.66   $     0.41   $     2.13   $    (0.65)
     Basic-extraordinary loss ..............           --           --           --        (0.88)
     Basic-cumulative effect of accounting
         change ............................           --           --        (0.06)          --
     Basic-net income (loss) ...............         0.66         0.41         2.07        (1.53)
     Diluted-income (loss) before
         extraordinary loss and cumulative
         effect of accounting change .......         0.52         0.36         1.64        (0.65)
     Diluted-extraordinary loss ............           --           --           --        (0.88)
     Diluted-cumulative effect of accounting
         change ............................           --           --        (0.04)          --
     Diluted-net income (loss) .............         0.52         0.36         1.60        (1.53)
Shares used to compute earnings per share:
Basic ......................................       61,293       57,877       59,371       57,841
Diluted ....................................       93,444       87,115       91,647       57,841

                                    See accompanying Notes to Consolidated Financial Statements.
</TABLE>


<PAGE>

<TABLE>
METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands) (Unaudited)


                                                                                      Total
                                Preferred      Common     Paid-in      Retained   Stockholders'
                                  Stock        Stock      Capital      Earnings      Equity
                                  -----        -----      -------      --------      ------

<S>                           <C>          <C>         <C>          <C>          <C>
BALANCE AT DECEMBER 31, 1998    $ 201,100    $     193   $ 107,615    $ 124,074    $ 432,982
     Net income .............          --           --          --       30,517       30,517
     Issuance of common stock
         under employee
         benefit plans ......          --           --       1,591           --        1,591
     Cash dividends .........          --           --          --         (829)        (829)
     Retirement of preferred
         stock - Series B ...    (208,606)          --    (101,615)          --     (310,221)
     Issuance of preferred
         stock - Series C ...     312,910           --     122,369           --      435,279
     June 1999 two-for-one
         stock split ........          --          193        (193)          --           --
     Preferred dividends in
         kind - Series B ....       7,506           --          --       (7,506)          --
     Preferred dividends in
         kind - Series C ....       9,563           --          --       (9,563)          --
                                ---------    ---------   ---------    ---------    ---------
BALANCE AT SEPTEMBER 30, 1999   $ 322,473    $     386   $ 129,767    $ 136,693    $ 589,319
                                =========    =========   =========    =========    =========


BALANCE AT DECEMBER 31, 1999    $ 329,729    $     386   $ 130,772    $ 162,914    $ 623,801
     Net income .............          --           --          --      146,598      146,598
     Issuance of common stock
         under employee
         benefit plans ......          --           34      64,974           --       65,008
     Cash dividends .........          --           --          --       (2,030)      (2,030)
     June 2000 three-for-two
         stock split ........          --          201        (201)          --           --
     Preferred dividends in
         kind - Series C ....      22,761           --          --      (22,761)          --
                                ---------    ---------   ---------    ---------    ---------
BALANCE AT SEPTEMBER 30, 2000   $ 352,490    $     621   $ 195,545    $ 284,721    $ 833,377
                                =========    =========   =========    =========    =========


                 See accompanying Notes to Consolidated Financial Statements.
</TABLE>


<PAGE>

<TABLE>
METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands) (Unaudited)

                                                              Nine Months Ended
                                                                September 30,
                                                             2000           1999
                                                             ----           ----
<S>                                                      <C>            <C>
Operating Activities:
Net income ...........................................   $   146,598    $    30,517
Adjustments to reconcile net income to net cash
     provided by operating activities:
     Extraordinary loss from early extinguishment
         of debt .....................................            --         50,808
     Cumulative effect of accounting change ..........         3,438             --
     Depreciation and amortization ...................        53,791         56,566
     Change in allowance for loan losses .............       110,247        160,117
     Changes in operating assets and liabilities, net:
         Accrued interest and fees receivable ........        (9,770)        (7,993)
         Prepaid expenses and deferred charges .......       (51,953)       (43,148)
         Deferred income taxes .......................         2,219        (32,200)
         Other receivables due from credit card
              securitizations, net ...................        20,579        (49,713)
         Accounts payable and accrued expenses .......        55,199         82,875
         Current income taxes payable ................       (13,912)       (20,372)
         Deferred income .............................        55,039         29,975
         Other .......................................         6,123        (32,764)
                                                         -----------    -----------
Net cash provided by operating activities ............       377,598        224,668
                                                         -----------    -----------

Investing Activities:
Net proceeds from sales and repayments of
     securitized loans................................       176,964        581,161
Net loans originated or collected ....................    (1,058,924)      (247,027)
Credit card portfolio acquisition ....................      (195,597)    (1,156,673)
Additions to premises and equipment ..................       (72,335)       (33,581)
                                                         -----------    -----------
Net cash used in investing activities ................    (1,149,892)      (856,120)
                                                         -----------    -----------

Financing Activities:
Net increase in debt .................................        10,913        133,891
Net increase in deposits .............................       856,913        588,297
Cash dividends paid ..................................        (2,030)          (829)
Increase in common equity ............................        24,225          1,037
                                                         -----------    -----------
Net cash provided by financing activities ............       890,021        722,396
                                                         -----------    -----------
Net increase in cash and cash equivalents ............       117,727         90,944
Cash and cash equivalents at beginning of period .....       194,433         37,347
                                                         -----------    -----------
Cash and cash equivalents at end of period ...........   $   312,160    $   128,291
                                                         ===========    ===========

                See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>


METRIS COMPANIES INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Metris
Companies Inc. ("MCI") and its subsidiaries, the "Company," including Direct
Merchants Credit Card Bank, N.A., which may be referred to as "we," "us" and
"our." The Company is an information-based direct marketer of consumer credit
products and enhancement services primarily to moderate-income consumers.

     All significant intercompany balances and transactions have been eliminated
in consolidation. Certain prior-year amounts have been reclassified to conform
with the current year's presentation.

Interim Financial Statements

     We have prepared the unaudited interim consolidated financial statements
and related unaudited financial information in the footnotes in accordance with
generally accepted accounting principles and the rules and regulations of the
Securities and Exchange Commission ("SEC") for interim financial statements.
These interim financial statements reflect all adjustments consisting of normal
recurring accruals which, in the opinion of our management, are necessary to
present fairly our consolidated financial position and the results of our
operations and our cash flows for the interim periods. You should read these
consolidated financial statements in conjunction with the financial statements
and the notes thereto contained in our annual report on Form 10-K for the fiscal
year ended December 31, 1999. The nature of our business is such that the
results of any interim period may not be indicative of the results to be
expected for the entire year.

Stock Split

     The Company completed a three-for-two stock split effected in the form of a
50% stock dividend distributed on June 15, 2000. All prior-year common share and
per-share disclosures have been restated to reflect this stock split.

Pervasiveness of Estimates

     We have prepared the consolidated financial statements in accordance with
generally accepted accounting principles, which require us to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements as well as the reported amount of revenues and expenses
during the reporting periods. Actual results could differ from these estimates.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

     The following is a summary of the significant accounting and reporting
policies used in preparing the consolidated financial statements.

Federal Funds Sold and Short-term Investments

     Federal funds sold are short-term loans made to banks through the Federal
Reserve System. It is our policy to make such loans only to banks that are
considered to be in compliance with their regulatory capital requirements.
Short-term investments are investments in commercial paper, money market mutual
funds and certificates of deposits with maturities less than three months.

Credit Card Loans

     Credit card loans are receivables from consumers that we do not intend to
securitize.

Securitization,  Retained Interests in Loans Securitized and
   Securitization Income

     We securitize and publicly and privately sell a significant portion of our
credit card loans to investors through the Metris Master Trust and third-party,
multi-seller receivables conduits. We retain participating interests in the
credit card loans under "Retained interests in loans securitized" on the
consolidated balance sheets. A portion of our retained interests in loans
securitized are subordinate to the interests of investors in the trust and
conduit portfolios. Although we continue to service the securitized credit card
accounts and maintain the customer relationships, we treat these transactions as
sales for financial reporting purposes and do not reflect the associated loans
on our consolidated balance sheets.

     We have recorded the sales of these loans in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." Upon sale, we
remove the sold credit card loans from the balance sheet and initially measure
the related financial and servicing assets controlled and liabilities incurred
at fair value, if practicable. SFAS 125 also requires that servicing assets and
other retained interests in the transferred assets be measured by allocating the
previous carrying amount between the assets sold, if any, and retained
interests, if any, based on their relative fair values at the date of the
transfer.

     The securitization and sale of credit card loans changes our interest in
such loans from lender to servicer, with a corresponding change in how revenue
is reported in the statements of income. For securitized and sold credit card
loans, amounts that otherwise would have been recorded as interest income,
interest expense, fee income and provision for loan losses are instead reported
in other operating income as "Net securitization and credit card servicing
income." We have various receivables from the trust or conduits and other assets
as a result of securitizations, including: amounts deposited in accounts held by
the trust for the benefit of the trust's security holders; amounts due from
interest rate caps, swaps and floors; accrued interest and fees on the
securitized receivables; servicing fee receivables; and various other
receivables. These amounts are reported as "Other receivables due from credit
card securitizations, net" on the consolidated balance sheets. The provision for
loan losses reflected on the statements of income in "Net securitization and
credit card servicing income" was $138.0 million and $369.0 million for the
three- and nine-month periods ended September 30, 2000, respectively, compared
to $146.5 million and $409.4 million for the same periods of 1999.

     We make provisions for loan losses in amounts necessary to maintain the
allowance at a level estimated to be sufficient to absorb probable future losses
of principal and earned interest, net of recoveries, inherent in the existing
loan portfolio, effectively reducing our retained interests in loans securitized
to fair value.

Statements of Cash Flows

     Cash paid for interest during the nine-month periods ended September 30,
2000 and 1999, was $71.2 million and $15.9 million, respectively. Cash paid for
income taxes for the same periods was $75.2 million and $105.7 million,
respectively. The income tax benefit from the deduction triggered by exercises
of employee stock options reflected in "Changes in operating assets and
liabilities, net: Other" on the consolidated statements of cash flows for the
nine-month periods ended September 30, 2000 and 1999, was $40.8 million and $0.6
million, respectively.

Earnings Per Share

     The following table presents the computation of basic and diluted weighted
average shares used in the per-share calculations:
<TABLE>
                                                     Three Months Ended      Nine Months Ended
                                                       September 30,           September 30,
                                                       -------------           -------------
                                                     2000        1999        2000        1999
                                                     ----        ----        ----        ----
(In thousands, except per-share amounts)
<S>                                               <C>         <C>         <C>         <C>
Income before extraordinary loss and
     cumulative effect of accounting change ...   $  48,360   $  31,183   $ 150,036   $  81,325
Preferred dividends - Series B ................          --          --          --       7,506
Preferred dividends - Series C ................       8,036       7,182      23,404       9,649
Adjustment for the retirement of Series B
     preferred stock ..........................          --          --          --     101,615
                                                  ---------   ---------   ---------   ---------
Net income (loss) applicable to common
     stockholders before extraordinary loss
     and cumulative effect of accounting
     change ...................................      40,324      24,001     126,632     (37,445)
Extraordinary loss from the early
     extinguishment of debt ...................          --          --          --      50,808
Cumulative effect of accounting change, net ...          --          --       3,438          --
                                                  ---------   ---------   ---------   ---------
Net income (loss) applicable to common
     stockholders .............................   $  40,324   $  24,001   $ 123,194   $ (88,253)
                                                  =========   =========   =========   =========

Weighted average common shares outstanding ....      61,293      57,877      59,371      57,841
Adjustments for dilutive securities:
Assumed exercise of outstanding stock
     options ..................................       2,987       3,549       3,112          --
Assumed conversion of convertible preferred
     stock ....................................      29,164      25,689      29,164          --
                                                  ---------   ---------   ---------   ---------
Diluted common shares .........................      93,444      87,115      91,647      57,841
                                                  =========   =========   =========   =========

Earnings per share:
     Basic - income (loss) before extra-
         ordinary loss and cumulative effect of
         accounting change ....................   $    0.66   $    0.41   $    2.13   $   (0.65)
     Basic - extraordinary loss ...............          --          --          --       (0.88)
     Basic - cumulative effect of accounting
         change ...............................          --          --       (0.06)         --
     Basic - net income (loss) ................        0.66        0.41        2.07       (1.53)
     Diluted - income (loss) before extra-
         ordinary loss and cumulative effect of
         accounting change ....................        0.52        0.36        1.64       (0.65)
     Diluted - extraordinary loss .............          --          --          --       (0.88)
     Diluted - cumulative effect of accounting
         change ...............................          --          --       (0.04)         --
     Diluted - net income (loss) ..............        0.52        0.36        1.60       (1.53)

</TABLE>

Comprehensive Income

     During 1998, we adopted SFAS 130, "Reporting Comprehensive Income." This
statement does not apply to our current financial results and therefore, net
income equals comprehensive income.

Revenue Recognition in Financial Statements

     During the quarter ended March 31, 2000, we adopted Staff Accounting
Bulletin No. 101 - "Revenue Recognition in Financial Statements" for our Debt
Waiver products. This SAB formalized the accounting for services sold where the
right to a full refund exists, requiring all companies to defer recognition of
revenues until the cancellation period is complete. Previously, we recognized
half of the revenues in the month billed and half in the following month. We now
recognize all of the revenue the month following completion of the cancellation
period. This change resulted in a one-time, non-cash net charge to earnings of
$3.4 million, which is reflected as a cumulative effect of accounting change in
the consolidated statements of income for the nine months ended September 30,
2000. Because we have applied the provisions of this SAB to our membership
programs since 1998, before the SEC formalized its guidance, no adjustment was
required for our membership services revenues. The proforma effect of adopting
SAB 101 was immaterial for the prior-year periods.

NOTE 3 - ALLOWANCE FOR LOAN LOSSES
<TABLE>
         The activity in the allowance for loan losses is as follows:

                                               Three Months Ended        Nine Months Ended

                                                  September 30,             September 30,
                                                  -------------             -------------
                                               2000         1999         2000         1999
                                               ----         ----         ----         ----

(In thousands)
<S>                                         <C>          <C>          <C>          <C>
Balance at beginning of period ..........   $ 677,121    $ 475,028    $ 619,028    $ 393,283
Allowance related to assets acquired, net       5,963       10,250        5,963       26,293
Provision for loan losses ...............     110,936       67,052      296,944      122,125
Provision for loan losses (1) ...........     137,971      146,491      369,035      409,371
Loans charged off .......................    (220,689)    (153,672)    (610,731)    (422,059)
Recoveries ..............................      17,973        8,251       49,036       24,387
                                            ---------    ---------    ---------    ---------
Net loans charged off ...................    (202,716)    (145,421)    (561,695)    (397,672)
                                            ---------    ---------    ---------    ---------
Balance at end of period ................   $ 729,275    $ 553,400    $ 729,275    $ 553,400
                                            =========    =========    =========    =========

(1)      Amounts are included in "Net securitization and credit card servicing income."
</TABLE>

NOTE 4 - CONVERTIBLE PREFERRED STOCK

     The Series C Perpetual Convertible Preferred Stock is held by affiliates of
the Thomas H. Lee Company, a private equity firm and is convertible into common
shares at a conversion price of $12.42 per common share subject to adjustment in
certain circumstances. The Series C Preferred has a 9% dividend payable in
additional shares of Series C Preferred and will also receive any dividends paid
on the Company's common stock on a converted basis. One share of Series C
Preferred Stock is convertible into 30 shares of common stock, plus a premium
amount designed to guarantee a portion of seven years' worth of dividends at a
9% annual rate. For conversions this year, the premium amount would be equal to
approximately 14% of those future dividends. Assuming conversion of the Series C
Preferred into common stock, the Lee Company would own approximately 31% of the
Company on a diluted basis at September 30, 2000. The Series C Preferred
entitles the holders to elect four members to our Board of Directors. The Series
C Preferred may be redeemed by us in certain circumstances after December 31,
2001, by paying 103% of the redemption price of $372.50 and any accrued
dividends at the time of redemption. We also have the option to redeem the
Series C Preferred after December 9, 2008, without restriction by paying the
redemption price of $372.50 and any accrued dividends at the time of redemption.

     The Series C Preferred Stock is normally convertible into common stock.
However, in the event that such conversion would result in a stockholder or
group (within the meaning of Rules 13d-3 and 13d-5 promulgated under the
Exchange Act) obtaining 35% or more of the outstanding voting stock of the
Company, the indenture which governs our outstanding 10% Senior Notes due 2004
("10% Notes") requires us to make an offer to purchase those notes. Accordingly,
for so long as any of our 10% Notes remain outstanding, in the event that the
conversion of the Series C Preferred Stock into common stock would cause any
stockholder or group to beneficially own 35% or more of the outstanding voting
stock of the Company, the excess number of shares of Series C Preferred Stock
will be convertible into non-voting stock. Such non-voting stock will consist of
non-voting common stock, or in the alternative, Series D Preferred Stock. The
non-voting common stock, if issued, will automatically convert into common stock
at the time such conversion will not trigger the restrictions on beneficial
ownership of voting stock set forth in the indenture relating to the 10% Notes.
The terms of the Series D Preferred Stock are essentially the same as the terms
of the common stock, except that the Series D Preferred Stock has a liquidation
preference of $.01 per share and is non-voting, except as required by law. In
addition, like the non-voting common stock, the Series D Preferred Stock will
automatically convert into common stock at the time such conversion will not
trigger the restrictions set forth in the indenture described above.

NOTE 5 - SEGMENTS

     We operate in two principal areas: consumer credit products and enhancement
services, previously referred to as fee-based services. Our primary consumer
credit products are unsecured and secured credit cards, including the Direct
Merchants Bank MasterCard(R) and Visa(R). Our credit card accountholders include
customers obtained from third-party lists and other customers for whom general
credit bureau information is available.

     We market our enhancement services, including (i) debt waiver protection
for unemployment, disability, and death; (ii) membership programs such as card
registration, purchase protection and other club memberships; and (iii)
third-party insurance, directly to our credit card customers and customers of
third parties. We currently administer our extended service plans sold through a
third-party retailer, and the customer pays the retailer directly. In addition,
we develop customized targeted mailing lists from information contained in our
databases for use by unaffiliated companies in their own product solicitation
efforts that do not directly compete with our efforts.

     We have presented the segment information reported below on a managed
basis. We use this basis to review segment performance and to make operating
decisions. To do so, we adjust the income statement and balance sheet to reverse
the effects of securitizations. Presentation on a managed basis is not in
conformity with generally accepted accounting principles. The elimination column
in the segment tables includes adjustments to present the information on an
owned basis as reported in the financial statements of this quarterly report.

     We do not allocate the expenses, assets and liabilities attributable to
corporate functions to the operating segments, such as employee compensation,
data processing services and communications, third-party servicing expenses, and
other expenses including occupancy, depreciation and amortization, professional
fees, and other general and administrative expenses. We include these expenses
in the reconciliation of the income before income taxes for the reported
segments to the consolidated total. We do not allocate capital expenditures for
leasehold improvements, capitalized software and furniture and equipment to
operating segments. There were no operating assets located outside of the United
States for the periods presented.

     Our enhancement services operating segment pays a fee to our consumer
credit products segment for successful marketing efforts to the consumer credit
products segment's cardholders at a rate similar to those paid to our other
third parties. Our enhancement services segment reports interest income and the
consumer credit products segment reports interest expense at our weighted
average borrowing rate for the excess cash flow generated by the enhancement
services segment and used by the consumer credit products segment to fund the
growth of cardholder balances.

<PAGE>

<TABLE>
                               Three Months Ended September 30,
                                            2000
                                            ----

                        Consumer
                         Credit    Enhancement
                        Products    Services      Reconciliation (a)   Consolidated
                        --------    --------      ------------------   ------------

(In thousands)
<S>                    <C>          <C>            <C>                  <C>
Interest income....    $  416,509   $    3,337     $   (285,006) (b)    $  134,840
Interest expense...       140,774           --         (105,380) (b)        35,394
                       ----------   ----------     ------------         ----------
  Net interest
    income ........       275,735        3,337         (179,626)            99,446

Other revenue .....       129,207       68,767           41,655            239,629
Total revenue .....       545,716       72,104         (243,351)           374,469

Income before
    income taxes...       137,426 (c)   44,607 (c)     (103,543) (d)        78,490

Total assets ......    $8,447,600   $  160,072     $ (5,385,424) (e)    $3,222,248
</TABLE>

<TABLE>
                                  Three Months Ended September 30,
                                               1999
                                               ----
                         Consumer
                          Credit       Enhancement
                         Products       Services    Reconciliation(a)  Consolidated
                         --------       --------    -----------------  ------------
(In thousands)
<S>                     <C>           <C>             <C>               <C>
Interest income .....   $   318,131   $     1,235     $  (251,431) (b)  $   67,935
Interest expense ....        93,742            --         (78,017) (b)      15,725
                        -----------   -----------     -----------       ----------
  Net interest
    income ..........       224,389         1,235        (173,414)          52,210

Other revenue .......       100,522        44,636          26,923          172,081
Total revenue .......       418,653        45,871        (224,508)         240,016

Income before
  income taxes
  and extra-
  ordinary loss......       105,143 (c)    24,761 (c)    (78,192) (d)       51,712

Total assets ........   $ 6,672,130   $    97,316    $(4,956,974) (e)  $ 1,812,472

</TABLE>

<PAGE>

<TABLE>

                                      Nine Months Ended September 30,
                                                  2000

                             Consumer
                              Credit     Enhancement
                             Products     Services       Reconciliation (a)  Consolidated
                             --------     --------       ------------------  ------------

(In thousands)
<S>                        <C>           <C>               <C>                <C>
Interest income ........   $ 1,152,033   $     8,239       $  (811,872) (b)   $   348,400
Interest expense .......       378,276            --          (289,992) (b)        88,284
                           -----------   -----------       -----------        -----------
  Net interest
    income .............       773,757         8,239          (521,880)          260,116

Other revenue ..........       373,912       192,367           152,845           719,124
Total revenue ..........     1,525,945       200,606          (659,027)        1,067,524

Income before
    income taxes and
    cumulative effect of
    accounting change...       420,518 (c)   129,150 (c)      (305,311) (d)      244,357

Total assets ...........   $ 8,447,600   $   160,072       $(5,385,424) (e)  $ 3,222,248

</TABLE>

<TABLE>

                                        Nine Months Ended September 30,
                                                    1999
                                                    ----

                             Consumer
                              Credit      Enhancement
                             Products      Services       Reconciliation (a) Consolidated
                             --------      --------       -------------------------------

(In thousands)

<S>                        <C>            <C>              <C>               <C>
Interest income ........   $   824,900    $     2,995      $   (674,561) (b) $   153,334
Interest expense .......       234,847             --          (199,686) (b)      35,161
                           -----------    -----------      ------------      -----------
  Net interest
    income .............       590,053          2,995          (474,875)         118,173

Other revenue ..........       258,249        123,481            65,504          447,234
Total revenue ..........     1,083,149        126,476          (609,057)         600,568

Income before
    income taxes
    and extra-
    ordinary loss.......       284,928 (c)     68,704 (c)      (218,765) (d)     134,867

Total assets ...........   $ 6,672,130    $    97,316       $(4,956,974) (e) $ 1,812,472

</TABLE>
(a) The reconciliation column includes: intercompany eliminations; amounts not
allocated to segments; and adjustments to the amounts reported on a managed
basis to reflect the effects of securitization.

(b) The reconciliation to consolidated owned interest revenue and interest
expense includes the elimination of $3.3 million, $1.2 million, $8.2 million and
$3.0 million of intercompany interest received by the enhancement services
segment from the consumer credit products segment for the three months ended
September 30, 2000 and 1999, and the nine months ended September 30, 2000 and
1999, respectively.

(c) Income before income taxes (and extraordinary loss and cumulative effect of
accounting change) includes intercompany commissions paid by the enhancement
services segment to the consumer credit products segment for successful
marketing efforts to consumer credit products cardholders of $6.4 million, $2.5
million, $10.8 million and $3.9 million for the three months ended September 30,
2000 and 1999, and the nine months ended September 30, 2000 and 1999,
respectively.

(d) The reconciliation to the owned income before income taxes includes:
unallocated costs related to employee compensation; data processing and
communications; third-party servicing expenses; and other expenses. The majority
of these expenses, although not allocated for the internal segment reporting
used by management, relate to the consumer credit products segment.

(e) Total assets include the assets attributable to corporate functions not
allocated to operating segments and the removal of investors interests in
securitized loans to present total assets on an owned basis.

<PAGE>

NOTE 6 - DEBT AND DEPOSITS

     During July of 2000, we amended and restated our credit facility. The
amended credit facility consists of a $170 million revolving credit facility and
a $100 million term loan, which mature in July 2003. At September 30, 2000 and
December 31, 1999, we had $100 million outstanding under the term loan facility
with a weighted average interest rate of 10.0% and 8.7%, respectively. As of
September 30, 2000 and December 31, 1999, there were no outstanding borrowings
under the revolving credit facility. At September 30, 2000, we were in
compliance with all financial covenants under the amended and restated credit
facility.

     Direct Merchants Bank issues certificates of deposit of $100,000 or more.
As of September 30, 2000 and December 31, 1999, $1.6 billion and $0.8 billion of
CDs were outstanding, respectively, with original maturities ranging from six
months to five years with fixed interest rates ranging from 5.2% to 7.6%.

     We have various indirect subsidiaries which have not guaranteed the senior
notes or credit facility. The following condensed consolidating financial
statements of the Company, the Guarantor subsidiaries and the non-guarantor
subsidiaries are presented for purposes of complying with SEC reporting
requirements. Separate financial statements of the guarantor subsidiaries and
the non-guarantor subsidiaries are not presented because management has
determined that the subsidiaries' financial statements would not be material to
investors.


<PAGE>
<TABLE>

                                                         METRIS COMPANIES INC.
                                               Supplemental Consolidating Balance Sheets
                                                          September 30, 2000
                                                        (Dollars in thousands)
                                                               Unaudited

                                                Metris         Guarantor     Non-Guarantor
                                             Companies Inc.  Subsidiaries    Subsidiaries    Eliminations      Consolidated
                                             --------------  ------------    ------------    ------------      ------------
<S>                                           <C>            <C>            <C>              <C>              <C>
Assets:
Cash and cash equivalents .................   $    44,443    $     6,617    $   261,100    $          --      $   312,160
Net retained interests in loans
   securitized ............................          (418)            --      1,289,696               --        1,289,278
Credit card loans .........................         4,090             --        786,920               --          791,010
Property and equipment, net ...............            --         72,306         47,821               --          120,127
Prepaid expenses and deferred charges                  --         14,063         88,873           (8,186)          94,750
Deferred income taxes .....................        (2,288)        19,852        165,830               --          183,394
Customer base intangible ..................           248             --        100,654               --          100,902
Other receivables due from credit card
   securitizations, net....................            15             --        216,797               --          216,812
Other assets ..............................        14,838         18,431         88,732           (8,186)         113,815
Investment in subsidiaries ................     1,517,975      1,371,815             --       (2,889,790)              --
                                              -----------    -----------    -----------      -----------      -----------
Total assets ..............................   $ 1,578,903    $ 1,503,084    $ 3,046,423      $(2,906,162)     $ 3,222,248
                                              ===========    ===========    ===========      ===========      ===========

Liabilities:
Deposits ..................................   $    (1,000)   $        --    $ 1,633,294       $       --      $ 1,632,294
Debt ......................................       793,701        (69,074)      (368,702)              --          355,925
Accounts payable ..........................          (454)        18,179         86,121           (8,186)          95,660
Current income taxes payable                      (72,589)       (33,165)       114,811               --            9,057
Deferred income ...........................        15,171         39,143        184,015           (8,186)         230,143
Accrued expenses and other liabilities.....        10,697         30,026         25,069               --           65,792
                                              -----------    -----------    -----------      -----------      -----------
Total liabilities .........................       745,526        (14,891)     1,674,608          (16,372)       2,388,871
Total stockholders' equity ................       833,377      1,517,975      1,371,815       (2,889,790)         833,377
                                              -----------    -----------    -----------      -----------      -----------
Total liabilities and
   stockholders' equity....................  $  1,578,903    $ 1,503,084    $ 3,046,423      $(2,906,162)     $ 3,222,248
                                              ===========    ===========    ===========      ===========      ===========
</TABLE>




<PAGE>


<TABLE>
                                                            METRIS COMPANIES INC.
                                                   Supplemental Consolidating Balance Sheets
                                                               December 31, 1999
                                                            (Dollars in thousands)
                                                                   Unaudited

                                            Metris        Guarantor    Non-Guarantor
                                        Companies Inc.  Subsidiaries   Subsidiaries  Eliminations    Consolidated
                                        --------------  ------------   ------------  ------------    ------------
<S>                                      <C>            <C>            <C>            <C>            <C>
Assets:
Cash and cash equivalents ............   $    43,619    $       309    $   150,505    $        --    $   194,433
Net retained interests in loans
   securitized .......................          (228)            --      1,010,601             --      1,010,373
Credit card loans ....................         2,570             --        131,038             --        133,608
Property and equipment, net ..........            --         33,152         23,762             --         56,914
Prepaid expenses and
   deferred charges ..................            --         26,441         30,930             --         57,371
Deferred income taxes ................        (1,835)        25,241        162,207             --        185,613
Customer base intangible .............            --             --         83,809             --         83,809
Other receivables due from
   credit card securitizations, net ..             5           --          243,973             --        243,978
Other assets .........................        12,951          8,488         57,544             --         78,983
Investment in subsidiaries ...........     1,184,006      1,105,992             --     (2,289,998)            --
                                         -----------    -----------    -----------    -----------    -----------
Total assets .........................   $ 1,241,088    $ 1,199,623    $ 1,894,369    $(2,289,998)   $ 2,045,082
                                         ===========    ===========    ===========    ===========    ===========

Liabilities:
Deposits .............................   $    (1,000)   $        --    $   776,381    $        --    $   775,381
Debt .................................       569,956        (82,779)      (142,165)            --        345,012
Accounts payable .....................           494         12,337         33,019             --         45,850
Current income taxes payable..........        16,183        (10,985)        17,771             --         22,969
Deferred income ......................        22,231         58,856         90,579             --        171,666
Accrued expenses and
   other liabilities..................         9,423         38,188         12,792             --         60,403
                                         -----------    -----------    -----------    -----------    -----------
Total liabilities ....................       617,287         15,617        788,377             --      1,421,281
Total stockholders' equity ...........       623,801      1,184,006      1,105,992     (2,289,998)       623,801
                                         -----------    -----------    -----------    -----------    -----------
Total liabilities and stockholders'
   equity ............................   $ 1,241,088    $ 1,199,623    $ 1,894,369    $(2,289,998)   $ 2,045,082
                                         ===========    ===========    ===========    ===========    ===========
</TABLE>


<PAGE>

<TABLE>
                                                                  METRIS COMPANIES INC.
                                                      Supplemental Consolidating Statements of Income
                                                           Three Months Ended September 30, 2000
                                                                  (Dollars in thousands)
                                                                         Unaudited

                                           Metris        Guarantor     Non-Guarantor
                                       Companies Inc.   Subsidiaries   Subsidiaries     Eliminations    Consolidated
                                       --------------   ------------   ------------     ------------    ------------
<S>                                      <C>             <C>             <C>             <C>               <C>
Net Interest
   (Expense) Income .................    $ (17,105)      $  (1,606)      $ 118,157       $      --         $  99,446
Provision for loan losses ...........           21              --         110,915              --           110,936
                                         ---------       ---------       ---------       ---------         ---------
Net Interest (Expense) Income After
   Provision for Loan Losses ........      (17,126)         (1,606)          7,242              --           (11,490)
                                         ---------       ---------       ---------       ---------         ---------
Other Operating Income:
Net securitization and credit card
   servicing income .................        2,379               1         108,500              --           110,880
Credit card fees, interchange
   and other credit card income .....       (1,735)            503          61,214              --            59,982
Enhancement services revenues .......           --           9,188          59,579              --            68,767
                                         ---------       ---------       ---------       ---------         ---------
                                               644           9,692         229,293              --           239,629
                                         ---------       ---------       ---------       ---------         ---------
Other Operating Expense:
Credit card account and other
   product solicitation and
   marketing expenses ...............           --           2,250          34,369              --            36,619
Employee compensation ...............           --          37,969           7,804              --            45,773
Data processing services and
   communications ...................           --           4,061          14,621              --            18,682
Third-party servicing expense .......           --         (25,388)         28,550              --             3,162
Warranty and debt waiver underwriting
   and claims servicing expense .....           --              99           7,161              --             7,260
Credit card fraud losses ............            1              --           2,226              --             2,227
Customer base intangible
   amortization .....................           --              --           3,915              --             3,915
Other ...............................         (396)         22,771           9,636              --            32,011
                                         ---------       ---------       ---------       ---------         ---------
                                              (395)         41,762         108,282              --           149,649
                                         ---------       ---------       ---------       ---------         ---------
(Loss) Income Before Income Taxes
   and Equity in Income
   of Subsidiaries ..................      (16,087)        (33,676)        128,253              --            78,490
Income taxes ........................       (6,178)        (13,341)         49,649              --            30,130
Equity in income of subsidiaries ....       58,269          78,604              --        (136,873)               --
                                         ---------       ---------       ---------       ---------         ---------
Net Income ..........................    $  48,360       $  58,269       $  78,604       $(136,873)        $  48,360
                                         =========       =========       =========       =========         =========

</TABLE>

<PAGE>


<TABLE>
                                                          METRIS COMPANIES INC.
                                             Supplemental Consolidating Statements of Income
                                                  Three Months Ended September 30, 1999
                                                         (Dollars in thousands)
                                                                Unaudited

                                            Metris       Guarantor    Non-Guarantor
                                        Companies Inc.  Subsidiaries   Subsidiaries  Eliminations      Consolidated
                                        --------------  ------------   ------------  ------------      ------------
<S>                                       <C>            <C>            <C>            <C>            <C>
Net Interest
   (Expense) Income...................    $  (9,088)     $    (385)     $  61,683      $      --      $  52,210
Provision for loan losses ............          177             --         66,875             --         67,052
                                          ---------      ---------      ---------      ---------      ---------
Net Interest (Expense) Income After
   Provision for Loan Losses..........       (9,265)          (385)        (5,192)            --        (14,842)
                                          ---------      ---------      ---------      ---------      ---------
Other Operating Income:
Net securitization and credit card
   servicing income...................        1,229             --         87,848             --         89,077
Credit card fees, interchange
   and other credit card income.......          297            366         37,705             --         38,368
Enhancement services revenues.........           --         12,297         32,339             --         44,636
                                          ---------      ---------      ---------      ---------      ---------
                                              1,526         12,663        157,892             --        172,081
                                          ---------      ---------      ---------      ---------      ---------
Other Operating Expense:
Credit card account and other
   product solicitation and
   marketing expenses.................           --          7,797         11,306             --         19,103
Employee compensation ................           --         30,973          3,211             --         34,184
Data processing services and
   communications ....................           --          2,285         11,850             --         14,135
Third-party servicing expense.........           --        (18,651)        22,166             --          3,515
Warranty and debt waiver underwriting
   and claims servicing expense.......           --            225          6,290             --          6,515
Credit card fraud losses .............            8             --          1,709             --          1,717
Customer base intangible
   amortization.......................           --             --          7,549             --          7,549
Other ................................         (758)         4,251         15,316             --         18,809
                                          ---------      ---------      ---------      ---------      ---------
                                               (750)        26,880         79,397             --        105,527
                                          ---------      ---------      ---------      ---------      ---------
(Loss) Income Before Income Taxes,
   Equity in Income of Subsidiaries
   and Extraordinary Loss.............       (6,989)       (14,602)        73,303             --         51,712
Income taxes .........................       (2,774)        (6,529)        29,832             --         20,529
Equity in income of subsidiaries......       35,398         43,471             --        (78,869)            --
                                          ---------      ---------      ---------      ---------      ---------
Net Income ............................   $  31,183      $  35,398      $  43,471      $ (78,869)     $  31,183
                                          =========      =========      =========      =========      =========
</TABLE>







<PAGE>






<TABLE>

                                                                     METRIS COMPANIES INC.
                                                        Supplemental Consolidating Statements of Income
                                                             Nine Months Ended September 30, 2000
                                                                    (Dollars in thousands)
                                                                           Unaudited

                                                Metris       Guarantor     Non-Guarantor
                                            Companies Inc.  Subsidiaries   Subsidiaries   Eliminations      Consolidated
<S>                                           <C>             <C>           <C>             <C>               <C>
Net Interest (Expense) Income .............   $ (49,986)     $   (3,404)   $    313,506    $        --        $ 260,116
Provision for loan losses .................          (1)             --         296,945             --          296,944
                                              ---------       ---------     -----------     ----------        ---------
Net Interest (Expense) Income After
   Provision for Loan Losses...............     (49,985)         (3,404)         16,561             --          (36,828)
                                              ---------       ---------     -----------     ----------        ---------
Other Operating Income:
Net securitization and credit card
   servicing income .......................       7,143              (3)        355,308             --          362,448
Credit card fees, interchange and other
   credit card income......................      (4,932)          1,373         167,868             --          164,309
Enhancement services revenues .............          --          36,907         155,460             --          192,367
                                              ---------       ---------     -----------     ----------        ---------
                                                  2,211          38,277         678,636             --          719,124
                                              ---------       ---------     -----------     ----------        ---------
Other Operating Expense:
Credit card account and other product
   solicitation and marketing expenses.....          --          12,898          92,179             --          105,077
Employee compensation .....................          --         108,742          23,585             --          132,327
Data processing services
   and communications......................          --          11,612          42,057             --           53,669
Third-party servicing expense .............          --         (70,792)         80,411             --            9,619
Warranty and debt waiver underwriting
   and claims servicing expense............          --             917          19,835             --           20,752
Credit card fraud losses ..................           4              --           6,795             --            6,799
Customer base intangible amortization......          --              --          14,107             --           14,107
Other .....................................        (303)         56,233          39,659             --           95,589
                                              ---------       ---------     -----------     ----------        ---------
                                                   (299)        119,610         318,628             --          437,939
                                              ---------       ---------     -----------     ----------        ---------
(Loss) Income Before Income Taxes,
   Equity in Income of Subsidiaries
   and Cumulative Effect of
   Accounting Change.......................     (47,475)        (84,737)        376,569             --          244,357
Income taxes ..............................     (18,325)        (33,481)        146,127             --           94,321
Equity in income of subsidiaries...........     175,748         227,004              --       (402,752)              --
                                              ---------       ---------     -----------     ----------        ---------
Income Before Cumulative Effect of
   Accounting Change ......................     146,598         175,748         230,442       (402,752)         150,036
Cumulative effect of
   accounting change, net..................          --              --           3,438             --            3,438
                                              ---------       ---------     -----------     ----------        ---------
Net Income ................................   $ 146,598       $ 175,748     $   227,004     $ (402,752)       $ 146,598
                                              =========       =========     ===========     ==========        =========

</TABLE>






<PAGE>
<TABLE>
                                                          METRIS COMPANIES INC.
                                             Supplemental Consolidating Statements of Income
                                                  Nine Months Ended September 30, 1999
                                                         (Dollars in thousands)
                                                                Unaudited

                                                   Metris       Guarantor    Non-Guarantor
                                               Companies Inc.  Subsidiaries  Subsidiaries   Eliminations   Consolidated
                                               --------------  ------------  ------------   ------------   ------------
<S>                                              <C>           <C>           <C>             <C>             <C>
Net Interest (Expense) Income ................   $ (25,256)    $    (897)     $ 144,326       $      --      $ 118,173
Provision for loan losses ....................         283            --        121,842              --        122,125
                                                 ---------     ---------      ---------       ---------      ---------
Net Interest (Expense) Income
   After Provision for Loan Losses............     (25,539)         (897)        22,484              --         (3,952)
                                                 ---------     ---------      ---------       ---------      ---------
Other Operating Income:

Net securitization and credit
   card servicing income .....................       4,644            --        235,512              --        240,156
Credit card fees, interchange
   and other income...........................         838           264         82,495              --         83,597
Enhancement services revenues ................          --        36,446         87,035              --        123,481
                                                 ---------     ---------      ---------       ---------      ---------
                                                     5,482        36,710        405,042              --        447,234
                                                 ---------     ---------      ---------       ---------      ---------
Other Operating Expense:
Credit card account and other product
   solicitation and marketing expenses........          --        26,954        43,887              --          70,841
Employee compensation ........................          --        76,887         8,214              --          85,101
Data processing services
   and communications.........................          --         5,459        31,287              --          36,746
Third-party servicing expenses ...............          --       (49,180)       60,620              --          11,440
Warranty and debt waiver underwriting and
   claims servicing expenses..................          --         2,167        12,812              --          14,979
Credit card fraud losses .....................          16            --         3,814              --           3,830
Customer base intangible amortization.........          --            --        25,681              --          25,681
Other ........................................         490        24,014        35,293              --          59,797
                                                 ---------     ---------     ---------       ---------       ---------
                                                       506        86,301       221,608              --         308,415
                                                 ---------     ---------     ---------       ---------       ---------
(Loss) Income Before Income Taxes,
   Equity in Income of Subsidiaries
   and Extraordinary Loss.....................     (20,563)      (50,488)      205,918              --         134,867
Income taxes .................................      (8,163)      (20,243)       81,948              --          53,542
Equity in income of subsidiaries..............      93,725       123,970            --        (217,695)             --
                                                 ---------     ---------     ---------       ---------       ---------
Income Before Extraordinary Loss..............      81,325        93,725       123,970        (217,695)         81,325
Extraordinary loss from the early
   extinguishment of debt ....................      50,808            --            --              --          50,808
                                                 ---------     ---------     ---------       ---------       ---------
Net Income ...................................   $  30,517     $  93,725     $ 123,970       $(217,695)      $  30,517
                                                 =========     =========     =========       =========       =========
</TABLE>


<PAGE>

<TABLE>
                                                           METRIS COMPANIES INC.
                                        Supplemental Condensed Consolidating Statements of Cash Flows
                                                   Nine Months Ended September 30, 2000
                                                           (Dollars in thousands)
                                                                 Unaudited

                                                         Metris      Guarantor     Non-Guarantor
                                                     Companies Inc.  Subsidiaries  Subsidiaries   Consolidated
                                                     --------------  ------------  ------------   ------------
<S>                                                   <C>            <C>            <C>            <C>
Operating Activities:
Net cash (used in) provided by
   operating activities............................   $   (85,127)   $   (81,397)   $   544,122    $   377,598
                                                      -----------    -----------    -----------    -----------
Investing Activities:
Net proceeds from sales and repayments of
   securitized loans ..............................            --             --        176,964        176,964
Net loans originated or collected .................        (1,768)            --     (1,057,156)    (1,058,924)
Credit card portfolio acquisition .................            --             --       (195,597)      (195,597)
Additions to premises and equipment ...............            --        (45,960)       (26,375)       (72,335)
                                                      -----------    -----------    -----------    -----------
Net cash used in investing activities .............        (1,768)       (45,960)    (1,102,164)    (1,149,892)
                                                      -----------    -----------    -----------    -----------
Financing Activities:
Net increase in deposits ..........................            --             --        856,913        856,913
Net increase (decrease) in debt ...................       223,744         13,705       (226,536)        10,913
Cash dividends paid ...............................        (2,030)            --             --         (2,030)
Net (decrease) increase in equity .................      (133,995)       119,960         38,260         24,225
                                                      -----------    -----------    -----------    -----------
Net cash provided by financing activities .........        87,719        133,665        668,637        890,021
                                                      -----------    -----------    -----------    -----------
Net increase in cash and cash equivalents .........           824          6,308        110,595        117,727
Cash and cash equivalents at beginning of
   period .........................................        43,619            309        150,505        194,433
                                                      -----------    -----------    -----------    -----------
Cash and cash equivalents at end of period ........   $    44,443    $     6,617    $   261,100    $   312,160
                                                      ===========    ===========    ===========    ===========
</TABLE>

<TABLE>
                                                           METRIS COMPANIES INC.
                                        Supplemental Condensed Consolidating Statements of Cash Flows
                                                    Nine Months Ended September 30, 1999
                                                           (Dollars in thousands)
                                                                 Unaudited

                                                         Metris       Guarantor    Non-Guarantor
                                                     Companies Inc.  Subsidiaries  Subsidiaries    Consolidated
                                                     --------------  ------------  ------------    ------------
<S>                                                   <C>            <C>            <C>            <C>
Operating Activities:
Net cash (used in) provided by
   operating activities...........................    $      (878)   $   (17,178)   $   242,724    $   224,668
                                                      -----------    -----------    -----------    -----------
Investing Activities:
Proceeds from repayments of
   securitized loans ..............................            --             --        581,161        581,161
Net loans originated or collected .................       (14,222)            --       (232,805)      (247,027)
Credit card portfolio acquisition .................            --             --     (1,156,673)    (1,156,673)
Additions to premises and equipment ...............            --        (15,077)       (18,504)       (33,581)
                                                      -----------    -----------    -----------    -----------
Net cash provided by (used in)
   investing activities ...........................       (14,222)       (15,077)      (826,821)      (856,120)
                                                      -----------    -----------    -----------    -----------
Financing Activities:
Net increase in deposits ..........................            --             --        588,297        588,297
Net increase (decrease) in debt ...................       317,500       (106,357)       (77,252)       133,891
Cash dividends paid ...............................          (829)          (804)           804           (829)
Net (decrease) increase in equity .................      (296,994)       139,723        158,308          1,037
                                                      -----------    -----------    -----------    -----------
Net cash provided by financing activities .........        19,677         32,562        670,157        722,396
                                                      -----------    -----------    -----------    -----------
Net increase in cash and cash equivalents .........         4,577            307         86,060         90,944
Cash and cash equivalents at beginning of period...        (5,007)          (156)        42,510         37,347
                                                      -----------    -----------    -----------    -----------
Cash and cash equivalents at end of period ........   $      (430)   $       151    $   128,570    $   128,291
                                                      ===========    ===========    ===========    ===========
</TABLE>





<PAGE>


ITEM 2.

                     METRIS COMPANIES INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis provides information management
believes to be relevant to understanding the financial condition and results of
operations of Metris Companies Inc. ("MCI") and its subsidiaries, the "Company,"
including Direct Merchants Credit Card Bank, N.A., which may be referred to as
"we," "us" and "our." This discussion should be read in conjunction with the
following documents for a full understanding of our financial condition and
results of operations: Management's Discussion and Analysis of Financial
Condition and Results of Operations in our 1999 Annual Report to Shareholders;
our annual report on Form 10-K for the fiscal year ended December 31, 1999; and
our Proxy Statement for the 2000 Annual Meeting of Shareholders. In addition,
this discussion should be read in conjunction with our quarterly report on Form
10-Q for the period ended September 30, 2000, of which this commentary is a
part, and the condensed consolidated financial statements and related notes
thereto.

Results of Operations

     Net income for the three months ended September 30, 2000, was $48.4
million, up from $31.2 million for the third quarter of 1999. Earnings per share
for the three months ended September 30, 2000, was $0.52 compared to $0.36 per
share for the third quarter of 1999. The increase in net income is the result of
an increase in net interest income and other operating income partially offset
by increases in the provision for loan losses and other operating expenses.
These increases are largely attributable to the growth in average managed loans
to $8.2 billion for the third quarter 2000 from $6.6 billion for the third
quarter 1999, an increase of 25%, and growth in total credit card accounts to
4.4 million at September 30, 2000, from 3.5 million at September 30, 1999.
Enhancement services revenues continue to contribute to the net income growth
due to continued strong product sales. At September 30, 2000, combined active
enhancement members totaled over 6.0 million.

     Net income for the nine months ended September 30, 2000 was $146.6 million,
up from $30.5 million for the first nine months of 1999. Net income reported for
the nine- month period ended September 30, 2000 includes the $3.4 million
cumulative effect of accounting change described below. Net income for the nine
months ended September 30, 1999, includes the $50.8 million extraordinary loss
related to the early extinguishment of the 12% Lee Senior Notes. Without these
items, reported earnings would have been $150.0 million and $81.3 million for
the nine-month periods ended September 30, 2000 and 1999, respectively. Reported
earnings per share for the nine months ended September 30, 2000, was $1.60,
compared to a loss of $1.53 per share for the same period in 1999. The reported
earnings per share for the nine-month period ended September 30, 2000 was
reduced by $0.04 due to the cumulative effect of accounting change described
below. The loss per share reported for the third quarter of 1999 included the
$152.4 million one-time, non-cash accounting impact from the issuance of the
Series C Perpetual Convertible Preferred Stock and the extinguishment of the
Series B Perpetual Convertible Preferred Stock, the 12% Senior Notes and the
ten-year warrants. Without the impact of these charges, earnings per share would
have been $1.64 and $1.02 for the nine months ended September 30, 2000 and 1999,
respectively. The increase in net income is the result of an increase in net
interest income and other operating income partially offset by increases in the
provision for loan losses and other operating expenses. These increases are
largely attributable to the growth in average managed loans to $7.7 billion for
the nine months ended September 30, 2000, from $5.7 billion for the same period
in 1999, an increase of 36%. In addition, credit card and interchange fee income
increased due to an increase in credit card charge volume, which was $5.6
billion for the first nine months of 2000, a 50% increase over the same period
in 1999.

     Net income for the nine months ended September 30, 2000, was reduced by a
$3.4 million net impact for the adoption of Staff Accounting Bulletin 101 -
"Revenue Recognition in Financial Statements" issued December 1999 for our debt
waiver products. This adjustment reduced reported earnings per share by $0.04
for the nine months ended September 30, 2000, and is reported as the cumulative
effect of accounting change in the consolidated statements of income.

<PAGE>

Managed Loan Portfolio

     We analyze our financial performance on a managed loan portfolio basis. To
do so, we adjust the income statement and balance sheet to reverse the effects
of securitization. Our discussion of revenues, where applicable, and provision
for loan losses includes comparisons to amounts reported in our consolidated
statements of income ("owned basis") as well as on a managed basis.

     Our managed loan portfolio is comprised of credit card loans, retained
interests in loans securitized and the investors' share of securitized credit
card loans. The investors' share of securitized credit card loans is not an
asset of ours, therefore, we do not show it on our consolidated balance sheets.
The following tables summarize our managed loan portfolio:

<TABLE>
                                        September 30,  December 31,  September 30,
                                            2000           1999          1999
                                            ----           ----          ----
(Dollars in thousands)
<S>                                      <C>           <C>            <C>
Period-end balances
Credit card loans:
   Credit card loans .................   $  909,605    $  145,783     $   29,462
   Retained interests in loans
       securitized ...................    1,899,958     1,617,226      1,516,310
   Investors' interests in
       securitized loans .............    5,695,276     5,518,313      5,139,303
                                         ----------    ----------     ----------
Total managed loan portfolio .........   $8,504,839    $7,281,322     $6,685,075
                                         ==========    ==========     ==========
</TABLE>

<TABLE>


                                                                 Three Months Ended                    Nine Months Ended
                                                                    September 30,                        September 30,
                                                                    -------------                        -------------
                                                                2000             1999               2000            1999
                                                                ----             ----               ----            ----
(Dollars in thousands)
<S>                                                          <C>            <C>                 <C>             <C>
Average balances
Credit card loans:
   Credit card loans .....................................   $  731,331     $   61,588          $  471,738      $   61,216
   Retained interests in loans securitized ...............    1,877,956      1,269,414           1,820,697         942,775
   Investors' interests in securitized loans .............    5,601,047      5,257,414           5,434,233       4,679,000
                                                             ----------     ----------          ----------      ----------
Total managed loan portfolio .............................   $8,210,334     $6,588,416          $7,726,668      $5,682,991
                                                             ==========     ==========          ==========      ==========
</TABLE>





<PAGE>


Impact of Credit Card Securitizations

     The following table provides a summary of the effects of credit card
securitizations on selected line items of our statements of income for each of
the periods  presented,  as well as selected  financial  information  on both an
owned and managed loan portfolio basis:

<TABLE>
                                       Three Months Ended               Nine Months Ended
                                         September 30,                    September 30,
                                         -------------                    -------------
                                      2000            1999             2000            1999
                                      ----            ----             ----            ----
(Dollars in thousands)
<S>                                 <C>             <C>             <C>             <C>
Statements of Income
  (owned basis):
   Net interest income .......      $  99,446       $  52,210       $ 260,116       $ 118,173
   Provision for loan losses .        110,936          67,052         296,944         122,125
   Other operating income ....        239,629         172,081         719,124         447,234
   Other operating expense ...        149,649         105,527         437,939         308,415
                                    ---------       ---------       ---------       ---------
   Income before income taxes,
      extraordinary loss and
      cumulative effect of
      accounting change ......      $  78,490       $  51,712       $ 244,357       $ 134,867
                                    =========       =========       =========       =========

Adjustments for
   Securitizations:
   Net interest income .......      $ 179,626       $ 173,414       $ 521,880       $ 474,875
   Provision for loan losses .        137,971         146,491         369,035         409,371
   Other operating income ....        (41,655)        (26,923)       (152,845)        (65,504)
   Other operating expense ...             --              --              --              --
                                    ---------       ---------       ---------       ---------
   Income before income taxes,
      extraordinary loss and
      cumulative effect of
      accounting change ......      $      --       $      --         $    --         $    --
                                    =========       =========       =========       =========

Statements of Income
  (managed basis):
   Net interest income .......      $ 279,072       $ 225,624       $ 781,996       $ 593,048
   Provision for loan losses .        248,907         213,543         665,979         531,496
   Other operating income ....        197,974         145,158         566,279         381,730
   Other operating expense ...        149,649         105,527         437,939         308,415
                                    ---------       ---------       ---------       ---------
   Income before income taxes,
      extraordinary loss and
      cumulative effect of
      accounting change ......      $  78,490       $  51,712       $ 244,357       $ 134,867
                                    =========       =========       =========       =========
</TABLE>




<PAGE>


<TABLE>
                                             Three Months Ended                   Nine Months Ended
                                               September 30,                        September 30,
                                               -------------                        -------------
                                         2000                 1999            2000                 1999
                                         ----                 ----            ----                 ----
(Dollars in thousands)
<S>                                  <C>                <C>                <C>                <C>
Other Data:
Owned Basis:
Average interest-earning assets      $  2,824,446       $  1,458,894       $  2,480,251       $  1,140,608
Return on average assets* .....               6.4%               7.6%               7.5%               8.4%
Return on average total equity*              24.0%              21.4%              27.0%              21.0%
Net interest margin (1) .......              14.0%              14.2%              14.0%              13.9%
Managed Basis:
Average interest-earning assets      $  8,425,493       $  6,716,308       $  7,914,484       $  5,819,608
Return on average assets* .....               2.2%               1.8%               2.4%               1.8%
Return on average total equity*              24.0%              21.4%              27.0%              21.0%
Net interest margin (1) .......              13.2%              13.3%              13.2%              13.6%
</TABLE>

(1) Net interest margin is equal to annualized net interest income divided by
average interest-earning assets.

*1999 nine-month periods presented before extraordinary loss.


Risk-Based Pricing

     We price credit card offers based on a prospect's risk profile prior to
solicitation or upon receipt of a completed application. We evaluate a prospect
to determine credit needs, credit risk and existing credit availability and then
develop a customized offer that includes the most appropriate product, brand,
pricing and credit line. After customers open credit card accounts, we
periodically monitor customers' internal and external credit performance and
periodically recalculate behavior, revenue, attrition and bankruptcy predictors.
Customers' risk profiles are re-evaluated on a regular basis, and the lending
relationship can evolve to include more competitive (or more restrictive)
pricing and product configurations. These analyses consider the overall
profitability of accounts using both credit information and the profitability
from selling enhancement services to the customers.

Net Interest Income

     Net interest income consists primarily of interest earned on our credit
card loans, less interest expense on borrowings to fund the loans. Managed net
interest income for the three- and nine-month periods ended September 30, 2000,
was $279.1 million and $782.0 million compared to $225.6 million and $593.0
million for the same periods in 1999. The increase was primarily due to $1.6
billion and $2.0 billion increases in average managed loans over the comparable
periods in 1999, partially offset by a reduction in net interest margin.

     Managed net interest margin was 13.2% for both the three- and nine-month
periods ended September 30, 2000, compared to 13.3% and 13.6% for the same
periods in 1999. The third quarter and year-to-date periods of 2000 net interest
margins were negatively impacted by the interest rate increases made by the
Federal Reserve during the year. The decrease in the net interest margin from
the nine-month period ended September 30, 1999, is also due to an unusually high
margin in the first quarter of 1999 due to the Company's repricing of the
acquired PNC portfolio and approximately 25 percent of the Metris core portfolio
late in 1998. Financing costs as a percentage of borrowings for the third
quarter and year-to-date periods of 2000 were 7.4% and 7.1%, compared with 6.1%
and 6.0% in the same periods of 1999. The increases in borrowing rates for the
current-year periods are the result of interest rate increases made by the
Federal Reserve during the year.

<PAGE>

     The following tables provide an analysis of interest income and expense,
net interest spread, net interest margin and average balance sheet data for the
three- and nine-month periods ended September 30, 2000 and 1999:

Analysis of Average Balances, Interest and Average Yields and Rates

<TABLE>
                                                                              Three Months Ended September 30,
                                                                     2000                                           1999
                                        ---------------------------------------------- ---------------------------------------------
                                            Average                          Yield/         Average                       Yield/
                                            Balance          Interest         Rate          Balance         Interest       Rate
                                            -------          --------         ----          -------         --------       ----
(Dollars in thousands)
<S>                                     <C>              <C>                    <C>     <C>                <C>               <C>
Owned Basis
Assets:
Interest-earning assets:
Federal funds sold...................   $      149,496   $      2,444            6.5%   $       73,090     $       915        5.0%
Short-term investments...............           65,663          1,070            6.5%           54,802             683        4.9%
Credit card loans and
 retained interests in loans
 securitized.........................        2,609,287        131,326           20.0%        1,331,002          66,337       19.8%
                                        ---------------  ------------      ----------   --------------     -----------    --------
Total interest-earning assets........   $    2,824,446   $    134,840           19.0%   $    1,458,894     $    67,935       18.5%

Other assets.........................          889,667             --             --           690,323              --          --
Allowances for loan losses...........         (713,028)            --             --          (526,156)             --          --
                                        --------------                                  ---------------
Total assets.........................   $     3,001,085            --             --    $    1,623,061              --          --
                                        ===============                                 ==============
Liabilities and Equity:
Interest-bearing liabilities:
Deposits.............................   $     1,403,696  $     24,321            6.9%   $      437,861    $      6,451        5.9%
Debt.................................           353,626        11,073           12.5%          338,784           9,274       10.9%
                                        ---------------  ------------      ----------   --------------    ------------  ----------
Total interest-bearing
   liabilities.......................   $     1,757,322  $     35,394            8.0%   $      776,645    $     15,725        8.0%

Other liabilities....................           440,522            --              --          267,106              --          --
                                        ---------------                                 --------------
Total liabilities....................         2,197,844            --              --        1,043,751              --          --
Stockholders' equity.................           803,241            --              --          579,310              --          --
                                        ---------------                                 --------------
Total liabilities and equity.........   $     3,001,085            --              --   $    1,623,061              --          --
                                        ===============                                 ==============
Net interest income and
   interest margin (1)...............                --  $     99,446           14.0%               --    $     52,210       14.2%
Net interest rate spread (2).........                --            --           11.0%               --              --       10.5%

Managed Basis
Credit card loans....................   $     8,210,334  $    412,996           20.0%  $     6,588,416    $    316,533       19.1%
Total interest-earning assets........         8,425,493       416,509           19.6%        6,716,308         318,131       18.8%
Total interest-bearing
   liabilities.......................         7,358,369       137,437            7.4%        6,034,060          92,507        6.1%
Net interest income and
   interest margin (1)...............                --  $    279,072           13.2%               --    $    225,624       13.3%
Net interest rate spread (2).........                --            --           12.2%               --              --       12.7%

</TABLE>

(1) Net interest margin is computed by dividing annualized net interest income
by average total interest-earning assets.
(2) The net interest rate spread is the annualized yield on average
interest-earning assets minus the annualized funding rate on average
interest-bearing liabilities.


<PAGE>

<TABLE>
                                                                 Nine Months Ended September 30,
                                                      2000                                           1999
                                  ---------------------------------------------- ----------------------------------------------
                                      Average                          Yield/         Average                        Yield/
                                      Balance          Interest         Rate          Balance         Interest        Rate
                                      -------          --------         ----          -------         --------        ----
(Dollars in thousands)
<S>                                <C>               <C>               <C>        <C>               <C>               <C>
Owned Basis
Assets:
Interest-earning assets:
Federal funds sold ..........      $   118,939       $     5,540        6.2%      $    94,202       $     3,390        4.8%
Short-term investments ......           68,877             3,007        5.8%           42,415             1,495        4.7%
Credit card loans and
 retained interests in loans
 securitized ................        2,292,435           339,853       19.8%        1,003,991           148,449       19.8%
                                   -----------       -----------      -----       -----------       -----------      -----
Total interest-earning assets      $ 2,480,251       $   348,400       18.8%      $ 1,140,608       $   153,334       18.0%

Other assets ................          798,234                --         --           623,956                --         --
Allowances for loan losses ..         (674,808)               --         --          (476,423)               --         --
                                   -----------                                    -----------
Total assets ................      $ 2,603,677                --         --       $ 1,288,141                --         --
                                   ===========                                    ===========
Liabilities and Equity:
Interest-bearing liabilities:
Deposits ....................      $ 1,131,089       $    56,369        6.7%          211,113       $     9,013        5.7%
Debt ........................          352,478            31,915       12.1%          313,202            26,148       11.2%
                                   -----------       -----------      -----       -----------       -----------      -----
Total interest-bearing
   liabilities ..............      $ 1,483,567       $    88,284        7.9%      $   524,315       $    35,161        9.0%

Other liabilities ...........          393,925                --         --           245,428                --         --
                                   -----------                                    -----------
Total liabilities ...........        1,877,492                --         --           769,743                --         --
Stockholders' equity ........          726,185                --         --           518,398                --         --
                                   -----------                                    -----------
Total liabilities and equity       $ 2,603,677                --         --       $ 1,288,141                --         --
                                   ===========                                    ===========
Net interest income and
   interest margin (1) ......             --         $   260,116       14.0%               --       $   118,173       13.9%
Net interest rate spread (2)              --                  --       10.9%               --                --        9.0%

Managed Basis
Credit card loans ...........      $ 7,726,668       $ 1,143,487       19.8%      $ 5,682,991       $   820,015       19.3%
Total interest-earning assets        7,914,484         1,152,033       19.4%        5,819,608           824,900       19.0%
Total interest-bearing
   liabilities ..............        6,917,800           370,037        7.1%        5,203,314           231,852        6.0%
Net interest income and
   interest margin (1) ......             --         $   781,996       13.2%               --       $   593,048       13.6%
Net interest rate spread (2)              --                  --       12.3%               --                --       13.0%

</TABLE>

(1) Net interest margin is computed by dividing annualized net interest income
by average total interest-earning assets.

(2) The net interest rate spread is the annualized yield on average
interest-earning assets minus the annualized funding rate on average
interest-bearing liabilities.

<PAGE>

Other Operating Income

     Other operating income contributes substantially to our results of
operations, representing 71% and 73% of owned revenues for the three- and
nine-month periods ended September 30, 2000, respectively.

     Other operating income increased $67.5 million and $271.9 million for the
three- and nine-month periods ended September 30, 2000, over the comparable
periods in 1999. These increases are primarily due to the $21.8 million and
$122.3 million increases in income generated from net securitization and credit
card servicing income as a result of increases in average managed loans. For the
three- and nine-month periods ended September 30, 2000, credit card fees,
interchange and other credit card income increased $21.6 million and $80.7
million over the comparable periods in 1999. These increases were primarily due
to the growth in total accounts and loans in the managed credit card portfolio.
The increase for the nine-month period ended September 30, 2000, also includes
the favorable impact of $12.1 million related to the operational policy change
in the billing of overlimit fees. Previously we charged a customer an overlimit
fee at the time the customer statement was generated. Our new policy is to
charge the overlimit fee at the time the customer's account exceeds the credit
limit.

     Additionally, enhancement services revenues increased by $24.1 million and
$68.9 million for the three- and nine-month periods ended September 30, 2000.
These increases reflect the strong sales of our debt waiver product and the
increase in membership program revenues resulting from increased account
penetration for membership programs and additional product offers to
third-parties' cardholders.

Other Operating Expense

     Total other operating expenses for the three- and nine-month periods ended
September 30, 2000, increased $44.1 million and $129.5 million over the
comparable periods in 1999, largely due to costs associated with the growth of
our business activities. Employee compensation increased $11.6 million and $47.2
million for the three- and nine-month periods ended September 30, 2000, due to
increased staffing needs to support the increase in credit card accounts and
enhancement services active member growth and increased collections and customer
service staff. Other expenses increased $13.2 million and $35.8 million for the
three- and nine-month periods ended September 30, 2000, due to increased fees
associated with increased credit card volume and higher professional fees. Also,
credit card account and other product solicitation and marketing expenses
increased $17.5 million and $34.2 million over the comparable periods in 1999,
largely due to the increase in enhancement services marketing activity and
additional costs associated with our credit card marketing activity which
resulted in over 1.3 million new credit card accounts during the first nine
months of 2000.

Income Taxes

     Our provision for income taxes includes both federal and state income
taxes. Applicable income tax expense was $30.1 million and $94.3 million for the
three- and nine-month periods ended September 30, 2000, compared to $20.5
million and $53.5 million for the same periods in 1999. This tax expense
represents an effective tax rate of 38.6% for the nine-month period ended
September 30, 2000, compared to 39.7% for the same period in 1999.

Asset Quality

     Our delinquency and net loan charge-off rates at any point in time reflect,
among other factors, the credit risk of loans, the average age of our various
credit card account portfolios, the success of our collection and recovery
efforts, and general economic conditions. The average age of our credit card
portfolio affects the stability of delinquency and loss rates. In order to
minimize losses, we continue to focus our resources on refining our credit
underwriting standards for new accounts, and on collections and post charge-off
recovery efforts. At September 30, 2000, 63% of managed accounts and 51% of
managed loans were less than 36 months old.

     For the quarter ended September 30, 2000, our managed net charge-off ratio
was 9.8% compared to 8.8% for the quarter ended September 30, 1999. For the nine
months ended September 30, 2000, the net charge-off rate stood at 9.7% compared
to 9.4% for the nine months ended September 30, 1999. Without the impact of
purchase accounting related to acquired portfolios, the charge-off rate was 9.9%
and 10.0% for the three- and nine-month periods ended September 30, 2000,
compared to 10.3% and 10.6% for the same periods of 1999. Our charge-offs have
been stable, with losses between 9.7% and 11.0% for the last eleven quarters. We
believe, consistent with our statistical models and other credit analysis, that
this rate will continue to fluctuate between 9.5% and 10.5% over the next few
quarters.

     We use credit line analyses, account management and customer transaction
authorization procedures to minimize loan losses. Our risk models determine
initial credit lines at the time of solicitation and generally result in lower
credit lines than the industry average. We manage credit lines on an ongoing
basis and adjust them based on customer usage and payment patterns. To maximize
profitability, we continually monitor customer accounts. We initiate appropriate
collection activities when an account is delinquent or overlimit.

<PAGE>

Delinquencies

     Delinquencies not only have the potential to affect earnings in the form of
net loan losses, but are also costly in terms of the personnel and other
resources dedicated to their resolution. We monitor delinquency levels on a
managed basis, since delinquency on either an owned or managed basis subjects us
to credit loss exposure. A credit card account is contractually delinquent if we
do not receive the minimum payment by the specified date on the cardholder's
statement. It is our policy to continue to accrue interest and fee income on all
credit card accounts, except in limited circumstances, until we charge off the
account and all related loans, interest and other fees. The following table
presents the delinquency trends of our credit card loan portfolio on a managed
portfolio basis:

<TABLE>

Managed Loan Delinquency

                         September 30,       % of      December 31,       % of     September 30,      % of
                             2000           Total         1999           Total         1999          Total
                             ----           -----         ----           -----         ----          -----
(Dollars in thousands)
<S>                       <C>                <C>       <C>                <C>       <C>                <C>
Managed loan
   portfolio.......       $8,504,839         100%      $7,281,322         100%      $6,685,075         100%
Loans contractually
   delinquent:
     30 to 59 days .         220,791         2.6%         168,882         2.3%         166,616         2.5%
     60 to 89 days .         157,923         1.9%         117,740         1.6%         116,097         1.7%
     90 or more days         319,031         3.7%         270,092         3.7%         218,034         3.3%
                          ----------       -----       ----------       -----       ----------       -----
      Total .......       $  697,745         8.2%      $  556,714         7.6%      $  500,747         7.5%
                          ==========       =====       ==========       =====       ==========       =====
</TABLE>

     The above numbers reflect the continued seasoning of our managed loan
portfolio. Without the impact of purchase accounting related to acquired
portfolios, delinquency rates were 8.3%, 7.8% and 8.1%, respectively. We intend
to continue to focus our resources on our collection efforts to minimize the
negative impact to net loan losses that results from increased delinquency
levels.


<PAGE>


Net Charge-Offs

     Net charge-offs include the principal amount of losses from cardholders
unwilling or unable to pay their loan balances, as well as bankrupt and deceased
cardholders, less current period recoveries. Net charge-offs exclude accrued
finance charges and fees, which are charged against the related income at the
time of charge-off.

     During the quarter ended March 31, 2000, we changed our policy for secured
card accounts to charge off accounts 120 days contractually delinquent. Prior to
the first quarter our charge-off policy for secured card accounts was the same
as our overall charge-off policy, which is to charge off accounts 180 days
contractually delinquent. This change was made based on our experience that
secured card customers who are 120 days delinquent more closely resemble
recovery accounts. The following charge-off amounts on an owned and managed
basis reflect the $1.2 million charge-off related to this policy change for the
nine months ended September 30, 2000.

     The following table presents our net charge-offs for the periods indicated
as reported in the consolidated financial statements and on a managed portfolio
basis:

<TABLE>
                                                   Three Months Ended                 Nine Months Ended
                                                      September 30,                      September 30,
                                                     -------------                      -------------
                                                 2000             1999              2000             1999
                                                 ----             ----              ----             ----
(Dollars in thousands)
<S>                                           <C>              <C>              <C>              <C>
Owned basis:
     Average loans and retained
        interests in loans securitized
        outstanding ....................      $2,609,287       $1,331,002       $2,292,435       $1,003,991
     Net charge-offs ...................          69,289           25,541          172,586           66,081
     Net charge-offs as a percentage
        of average loans outstanding (1)            10.6%             7.6%            10.1%             8.8%
                                              ==========       ==========       ==========       ==========

Managed basis:
     Average loans outstanding .........      $8,210,334       $6,588,416       $7,726,668       $5,682,991
     Net charge-offs ...................         202,716          145,421          561,695          397,672
     Net charge-offs as a percentage of
        average loans outstanding(1) ...             9.8%             8.8%             9.7%             9.4%
                                              ==========       ==========       ==========       ==========

(1)      Annualized
</TABLE>

Provision and Allowance for Loan Losses

     We maintain an allowance for loan losses for both owned loans and the
retained interest in loans securitized. The portion allocated to the retained
interest in loans securitized represents our estimate of a valuation adjustment
to report this asset in accordance with SFAS 125. For securitized loans,
anticipated losses and related provisions for loan losses are reflected in the
calculations of net securitization and credit card servicing income. We make
provisions for loan losses in amounts necessary to maintain the allowance at a
level estimated to be sufficient to absorb probable future losses of principal
and earned interest, net of recoveries, inherent in the existing loan portfolio.

     The provision for loan losses on a managed basis for the three- and
nine-month periods ended September 30, 2000, totaled $248.9 million and $666.0
million compared to a provision of $213.5 million and $531.5 million for the
three- and nine-month periods ended September 30, 1999. The increase for the
three- and nine-month periods ended September 30, 2000, as compared to the
three- and nine-month periods ended September 30, 1999, is primarily reflective
of the increase in loans. The allowance for loan losses on a managed basis was
8.6% at September 30, 2000, compared to 8.3% at September 30, 1999.

Derivatives Activities

     We use derivative financial instruments for the purpose of managing our
exposure to interest rate risks. We have a number of procedures in place to
monitor and control both market and credit risk from these derivatives
activities. Our senior management approves all derivatives strategies and
transactions.

<PAGE>

Liquidity, Funding and Capital Resources

     One of our primary financial goals is to maintain an adequate level of
liquidity through active management of assets and liabilities. Because the
pricing and maturing characteristics of our assets and liabilities change,
liquidity management is a dynamic process, affected by changes in short- and
long-term interest rates. We use a variety of financing sources to manage
liquidity, refunding and interest rate risks.

     We finance the growth of our credit card loan portfolio through cash flow
from operations, asset securitization, bank loans, subsidiary bank deposits,
long-term debt issuance, and equity issuance.

     At September 30, 2000 and 1999, we had received cumulative net proceeds of
approximately $5.7 billion and $5.1 billion, respectively, from sales of credit
card loans to the trust and conduits. We used cash generated from these
transactions to fund credit card loan portfolio growth and reduce borrowings. We
rely upon the securitization of our credit card loans to fund portfolio growth.
To date, we have completed securitization transactions on terms that we believe
are satisfactory. Our ability to securitize our assets depends on the favorable
investor demand and legal, regulatory and tax conditions for securitization
transactions, as well as continued favorable performance of our securitized
portfolio of receivables. Any adverse change could force us to rely on other
potentially more expensive funding sources, and in the worst case scenario,
could create liquidity risks if other funding is unavailable or significantly
limit our ability to grow.

     Direct Merchants Bank issues certificates of deposit of $100,000 or more.
As of September 30, 2000 and December 31, 1999, $1.6 billion and $0.8 billion of
CDs were outstanding, respectively, with original maturities ranging from six
months to five years with fixed interest rates ranging from 5.2% to 7.6%.

     As of September 30, 2000, we had a $170 million, three-year revolving
credit facility and a $100 million, three-year term loan. At September 30, 2000,
we were in compliance with all financial covenants under these agreements. At
September 30, 2000, and December 31, 1999, we had $100 million of outstanding
borrowings under the term loan facility for both periods.

     As the portfolio of credit card loans grows our funding needs will increase
accordingly. We believe that our cash flow from operations, asset
securitization, long term debt, subsidiary bank deposits, bank loans and equity
will provide us with adequate liquidity for meeting anticipated cash needs,
although no assurance can be given to that effect.


<PAGE>


Newly Issued Pronouncements

     In September 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
which replaces SFAS No. 125, and revises the standards for accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures. It requires enterprises to recognize, upon
transfer of financial assets, the financial and servicing assets it controls and
the liabilities it has incurred, derecognize financial assets when control has
been surrendered, and derecognize liabilities when extinguished. This statement
is effective for transfers and servicing of financial assets and extinguishment
of liabilities occurring after March 31, 2001. The statement is effective for
recognition and reclassification of collateral and for disclosures related to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. We are evaluating the financial impact the adoption of this
statement will have on our financial statements.

     The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and subsequent amendments No. 137 and No.
138, which establish accounting and reporting standards for derivative
instruments. They require enterprises to recognize all derivatives as either
assets or liabilities in the statement of financial position and to measure
those instruments at fair value. These statements are effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. We are evaluating the
financial impact the adoption of these statements will have on our financial
statements.

Forward-Looking Statements

     This quarterly report contains some forward-looking statements.
Forward-looking statements give our current expectations of future events. You
will recognize these statements because they do not strictly relate to
historical or current facts. Such statements may use words such as "anticipate,"
"estimate," "expect," "project," "intend," "think," "believe" and other words or
terms of similar meaning in connection with any discussion of future performance
of the Company. For example, these include statements relating to future
actions, future performance of current or anticipated products, solicitation
efforts, expenses, the outcome of contingencies such as litigation, and the
impact of the capital markets on liquidity. From time to time, we also may
provide oral or written forward-looking statements in other material released to
the public.

     Any or all of our forward-looking statements in this report and in any
other public statements we make may turn out to be wrong. They can be affected
by inaccurate assumptions or by known or unknown risks and uncertainties. Many
factors, which can not be predicted with certainty, will be important in
determining future results. Among such factors are our limited operating history
as a stand alone entity, our limited experience in originating and servicing
credit card accounts, the lack of seasoning of our credit card accounts which
renders predictability of delinquencies more difficult, higher default and
bankruptcy rates of our target market of moderate-income consumers, interest
rate risks, risks associated with acquired portfolios, dependence on the
securitization markets and other funding sources, state and federal laws and
regulations, and general economic conditions that can have a major impact on the
performance of loans. Each of these factors and others are more fully discussed
under the caption "Business--Risk Factors" contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. As a result of these
factors, we cannot guarantee any forward-looking statements. Actual future
results may vary materially. Also, please note that the factors we provide are
those we think could cause our actual results to differ materially from expected
and historical results. Other factors besides those listed here or in our 10-K
for the year ended December 31, 1999, could also adversely affect us.

     We undertake no obligations to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosure we make on related
subjects in our periodic filings with the Securities and Exchange Commission.
This discussion is provided to you as permitted by the Private Securities
Litigation Reform Act of 1995.


<PAGE>


ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss from adverse changes in market prices and
rates. Our principal market risk is due to changes in interest rates. This
affects us directly in our lending and borrowing activities, as well as
indirectly as interest rates may impact the payment performance of our
cardholders.

     To manage our direct risk to market interest rates, management actively
monitors the interest rates and the interest sensitive components of our owned
and managed balance sheet to minimize the impact changes in interest rates have
on the fair value of assets, net income and cash flow. We seek to minimize the
impact of changes in interest rates on us primarily by matching asset and
liability repricings.

     Our primary owned and managed assets are credit card loans, which are
virtually all priced at rates indexed to the variable Prime Rate. Retained
interests in loans securitized and loans held for securitization are funded
through a combination of cash flow from operations, subsidiary bank deposits,
our $270 million bank credit facility, $250 million in senior notes, and equity
issuance. Our securitized loans are owned by a trust and bank-sponsored
multiseller receivables conduits, which have committed funding indexed to
variable commercial paper rates, as well as term funding which is either
directly indexed to LIBOR or at fixed rates. The $270 million bank credit
facility has pricing that is indexed to the variable London Interbank Offered
Rate ("LIBOR") or a Prime Rate. At September 30, 2000, approximately 12.7% of
the trust and conduit funding of securitized receivables was funded with
fixed-rate certificates.

     Including the impact of interest rate derivative transactions with the
trust and conduit funding, in an interest rate environment with rates
significantly below current rates, 87.3% of the funding for the securitized loan
portfolio is indexed to floating commercial paper and LIBOR rates. In an
interest rate environment with rates significantly above current rates, the
potentially negative impact on earnings of higher interest expense is mitigated
by the fixed rate funding and interest rate cap contracts.

     The approach used by management to quantify interest rate risk is a
sensitivity analysis which management believes best reflects the risk inherent
in our business. This approach calculates the impact on net income from an
instantaneous and sustained change in interest rates by 200 basis points.
Assuming no counteractive measures by management, a 200 basis point increase in
interest rates affecting our floating rate financial instruments, including both
debt obligations and loans, will result in an increase in net income of
approximately $32.8 million relative to a base case over the next 12 months;
while a decrease of 200 basis points will result in a reduction in net income of
approximately $32.8 million. Our use of this methodology to quantify the market
risk of financial instruments should not be construed as an endorsement of its
accuracy or the accuracy of the related assumptions. In addition, this
methodology does not take into account the indirect impact interest rates may
have on the payment performance of our cardholders. The quantitative information
about market risk is necessarily limited because it does not take into account
operating transactions or other costs associated with managing immediate changes
in interest rates.


<PAGE>


                           Part II. Other Information

Item 1.        Legal Proceedings

               We are a party to various legal proceedings resulting from the
               ordinary business activities relating to our operations. In July
               2000 an Amended Complaint was filed in Hennepin County Court in
               Minneapolis, Minnesota against Metris Companies Inc., Metris
               Direct, Inc. and Direct Merchants Credit Card Bank. The complaint
               seeks damages in unascertained amounts and purports to be a class
               action complaint on behalf of all cardholders who were issued a
               credit card by Direct Merchants Credit Card Bank and were
               assessed fees or charges that the cardholder did not authorize.
               Specifically, the complaint alleges violations of the Minnesota
               Prevention of Consumer Fraud Act, the Minnesota Deceptive Trade
               Practices Act and breach of contract. We filed our answer to the
               complaint in August 2000. To date, the complaint has not been
               certified as a class action claim. We believe we have numerous
               substantive legal defenses to these claims and are prepared to
               vigorously defend the case. Because we are unable to estimate the
               damages at this time, there can be no assurance that defense or
               resolution of these matters will not have a material adverse
               effect on our financial position.

Item 2.        Changes in Securities

               Not applicable

Item 3.        Defaults Upon Senior Securities

               Not applicable

Item 4.        Submission of Matters to a Vote of Security Holders

               (a) and (c). The Company held a special meeting of stockholders
               on September 14, 2000, and the matters voted on in that meeting
               were the following:

               The approval of an amendment to the Amended and Restated
               Certificate of Incorporation of Metris Companies Inc. to increase
               the authorized number of shares of common stock from 100,000,000
               to 300,000,000.



                    For      Against   Withheld   Abstentions   Broker Non-Vote
                    ---      -------   --------   -----------   ---------------
                74,680,732  8,859,707    None       45,977            None


Item 5.         Other Information

                Not applicable

Item 6.         Exhibits and Reports on Form 8-K

               (a) Exhibits:

                    3.1 Certificate of Amendment to the Amended and Restated
                    Certificate of Incorporation of Metris Companies Inc.

                    11. Computation of Earnings Per Share.

                    27. Financial Data Schedule.

               (b) Reports on Form 8-K:
                   Not applicable


<PAGE>


                                   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 thereunto duly authorized.

                              METRIS COMPANIES INC.


Signature                       Title                               Date
---------                       -----                               ----

Principal financial officer:    Chief Financial Officer        November 13, 2000

/s/ Benson Woo
--------------
Benson Woo



Principal accounting officer:   Executive Vice President,      November 13, 2000
                                Finance, Corporate Controller

/s/ Jean C. Benson
------------------
Jean C. Benson