Synchrony Financial (SYF) Risk Analysis

There was no change in internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The management of Synchrony Financial ("the Company") is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined by Exchange Act Rules 13a-15 and 15d-15. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company's receipts and expenditures are made only in accordance with authorizations of the Company's management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Although any system of internal control can be compromised by human error or intentional circumvention of required procedures, we believe our system provides reasonable assurance that financial transactions are recorded and reported properly, providing an adequate basis for reliable financial statements. The Company's management has used the criteria established in Internal Control - Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") to evaluate the effectiveness of the Company's internal control over financial reporting. The Company's management has assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2025 and has concluded that such internal control over financial reporting is effective. There are no material weaknesses in the Company's internal control over financial reporting that have been identified by the Company's management. KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements of the Company for the year ended December 31, 2025 and has also issued an audit report, which is included in "Consolidated Financial Statements and Supplementary Data" of this Form 10-K Report, on internal control over financial reporting as of December 31, 2025 under Auditing Standard No. 2201 of the Public Company Accounting Oversight Board ("PCAOB").

Basis of PresentationThe accompanying consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles ("GAAP").Preparing financial statements in conformity with U.S. GAAP requires us to make estimates based on assumptions about current, and for some estimates, future, economic and market conditions (for example, unemployment, interest rates and market liquidity) which affect reported amounts and related disclosures in our consolidated financial statements. Although our current estimates contemplate current conditions and how we expect them to change in the future, as appropriate, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in incremental losses on loan receivables, future impairments of debt securities, goodwill and intangible assets, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increases in our tax liabilities.We primarily conduct our business within the United States and substantially all of our revenues are from U.S. customers. The operating activities conducted by our non-U.S. affiliates use the local currency as their functional currency. The effects of translating the financial statements of these non-U.S. affiliates to U.S. dollars are included in equity. Asset and liability accounts are translated at period-end exchange rates, while revenues and expenses are translated at average rates for the respective periods.Consolidated Basis of PresentationThe Company's financial statements have been prepared on a consolidated basis. Under this basis of presentation, our financial statements consolidate all of our subsidiaries – i.e., entities in which we have a controlling financial interest, most often because we hold a majority voting interest, as well as certain variable interest entities ("VIE's").Variable Interest EntitiesWhere we hold current or potential rights that give us the power to direct the activities of a VIE that most significantly impact the VIE's economic performance ("power") combined with a variable interest that gives us the right to receive potentially significant benefits or the obligation to absorb potentially significant losses ("significant economics"), we have a controlling financial interest and consolidate the VIE. In evaluating whether we have power, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity's economic performance as compared to other economic interest holders. In determining whether we have the right to receive significant economics, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity's design, including: the entity's capital structure, contractual rights to earnings or losses, subordination of our interests relative to those of other investors, as well as any other contractual arrangements that might exist that could have the potential to be economically significant. The evaluation of all facts and circumstances to determine whether we have power and significant economics requires the exercise of professional judgment. Rights held by others to remove the party with power over the VIE are not considered unless one party can exercise those rights unilaterally. We consolidate certain securitization entities under the VIE model because we have both power to direct and significant economics, primarily because of Synchrony or the Bank's role as servicer. See Note 6. Variable Interest Entities.Cash and EquivalentsDebt securities, money market instruments and bank deposits with original maturities of three months or less are included in cash and equivalents unless designated as available-for-sale and classified as debt securities. Cash and equivalents at December 31, 2025 primarily included cash and due from banks of $694 million and interest-bearing deposits in other banks of $14.2 billion. Cash and equivalents at December 31, 2024 primarily included cash and due from banks of $646 million and interest-bearing deposits in other banks of $14.0 billion.Restricted Cash and EquivalentsRestricted cash and equivalents represent cash and equivalents that are not available to us due to restrictions related to its use. In addition, our securitization entities are required to fund segregated accounts that may only be used for certain purposes, including payment of interest and servicing fees and repayment of maturing debt. We include our restricted cash and equivalents in Other assets in our Consolidated Statements of Financial Position. Investment SecuritiesWe report investments in debt securities and equity securities with a readily determinable fair value at fair value. See Note 10. Fair Value Measurements for further information on fair value. Changes in fair value on debt securities that are classified as available-for-sale are included in other comprehensive income (loss), net of applicable taxes. Changes in fair value on equity securities are included in earnings. We regularly review investment securities for impairment using both quantitative and qualitative criteria. For debt securities, if we do not intend to sell the security, or it is not more likely than not, that we will be required to sell the security before recovery of our amortized cost, we evaluate other qualitative criteria to determine whether we do not expect to recover the amortized cost basis of the security, such as the financial health of, and specific prospects for the issuer, including whether the issuer is in compliance with the terms and covenants of the security. We also evaluate quantitative criteria including determining whether there has been an adverse change in expected future cash flows. If we do not expect to recover the entire amortized cost basis of the security, we consider the debt security to be impaired. If the security is impaired, we determine whether the impairment is the result of a credit loss or other factors. If a credit loss exists, an allowance for credit losses is recorded, with a related charge to earnings, limited by the amount that the fair value of the security is less than its amortized cost. Given the nature of our current portfolio, we perform a qualitative assessment to determine whether any credit loss is warranted. The assessment considers factors such as adverse conditions and payment structure of the securities, history of payment, and market conditions. If we intend to sell the security or it is more likely than not we will be required to sell the debt security before recovery of its amortized cost basis, the security is also considered impaired and we recognize the entire difference between the security's amortized cost basis and its fair value in earnings. Realized gains and losses are accounted for on the specific identification method. Equity Method InvestmentsWe use the equity method of accounting for investments where we have significant influence, but not control, over the operating and financial policies of the investee. Our assessment of significant influence includes factors such as our ownership interest, legal form, and representation on the board of directors. The Company generally records the initial investment at cost or fair value, as appropriate. Subsequently, we adjust each investment for our proportionate share of net income or loss in the investee. We amortize, where appropriate, differences between the Company's cost basis and underlying equity in net assets, which are reported in Other income. The Company evaluates equity method investments for other-than-temporary impairment when events or changes in circumstance indicate that the carrying amount of the investment might not be recoverable. At December 31, 2025 and 2024, our equity method investments included within Other assets in our Consolidated Statement of Financial Position totaled $834 million and $816 million, respectively, primarily related to our equity interest in Independence Pet Holdings, Inc. See Note 3. Acquisitions and Dispositions for additional information. Loan ReceivablesLoan receivables primarily consist of open-end consumer revolving credit card accounts, closed-end consumer installment loans and open-end commercial revolving credit card accounts. Loans that we have the ability and intent to hold for the foreseeable future, including those securitized through our VIEs, are classified as held for investment. Loan receivables that are classified as held for investment are reported at their amortized cost basis, reflecting amounts due from customers, including unpaid interest and fees, net of unamortized purchase discounts, deferred income and costs. Loan Receivables Held for SaleLoans purchased or originated with the intent to sell are classified as loan receivables held for sale and carried at the lower of amortized cost or fair value. Loans initially classified as held for investment are transferred to loan receivables held for sale and carried at the lower of amortized cost or fair value once a decision has been made to sell the loans. We continue to recognize interest and fees on these loans on the accrual basis. The fair value of loan receivables held for sale is determined on an aggregate homogeneous portfolio basis. If a loan is transferred from held for investment to held for sale, any associated allowance for credit loss is reversed through earnings, and the loan is transferred to held for sale at amortized cost. The amount by which amortized cost basis exceeds fair value is accounted for as a valuation allowance. The loan is carried at the lower of amortized cost or fair value. Acquired LoansTo determine the fair value of loans at acquisition, we estimate expected cash flows and discount those cash flows using an observable market rate of interest, when available, adjusted for factors that a market participant would consider in determining fair value. In determining fair value, expected cash flows are adjusted to include prepayment, default rate, and loss severity estimates. The difference between the fair value and the amount contractually due is recorded as a loan discount or premium at acquisition. Loans acquired that have experienced more-than-insignificant deterioration in credit quality since origination (referred to as "purchased credit deteriorated" or "PCD" assets) are subject to specific guidance upon acquisition. An allowance for PCD assets is added to the purchase price or fair value of the acquired loans to arrive at the amortized cost basis. Subsequent to initial recognition, the accounting for the PCD asset will generally follow the Allowance for Credit Losses model described below. Loans acquired without a more-than-insignificant credit deterioration since origination are measured under the Allowance for Credit Losses model described below.Allowance for Credit LossesLosses on loan receivables are estimated and recognized upon origination of the loan, and updated based on expected credit losses for the life of the loan balance at the period end date. Expected credit loss estimates involve modeling loss projections attributable to existing loan balances, considering historical experience, current conditions and future expectations for pools of loans with similar risk characteristics, such as retailer, performance and credit attributes, over the reasonable and supportable forecast period and considers historical loss information beyond the reasonable and supportable period.We use a statistical, account-level model that analyzes probability of default and exposure at default to estimate the expected loan loss, which considers uncollectible principal, interest and fees reflected in the loan receivables, segmented into pools of loans with similar risk characteristics, as well as individual credit characteristics for each account. The probability of default estimates the likelihood an account will be written off and the exposure at default estimates the balance of an account at the time of write-off. The model also considers a macroeconomic forecast, with unemployment and certain income measures as primary variables. Additionally, the estimate of expected credit losses includes expected recoveries of amounts previously charged-off and expected to be charged-off. We also perform a qualitative assessment in addition to model estimates and apply qualitative adjustments as necessary.Our credit card loan receivables generally do not have a stated life. The life of a credit card loan receivable is dependent upon the allocation of payments received, as well as a variety of other factors, including the principal balance, promotional terms, interest charges and fees and overall consumer credit profile and usage pattern. We determine the expected credit losses for credit card loan receivables as of the measurement date by using the estimated probability of default and exposure at default model discussed above, and other historical analyses, which considers the payments attributable to the measurement date balance. To do so, we utilize an approach which implicitly considers total expected future payments and applies appropriate allocations to reduce those payments in order to estimate losses pertaining to measurement date loan receivables. Based on our payments analyses, we also ensure that expected future payments from an account do not exceed the measurement date balance.We evaluate our Allowance for credit losses quarterly. Our estimation process includes analysis of historical data, and there is a significant amount of judgment applied in selecting and adjusting inputs as well as analyzing the results produced by the model estimates used to determine the Allowance for credit losses. Other data utilized in our estimate of expected losses, includes past performance, changes in underwriting policies, bankruptcy activity such as filings and loan volumes and amounts. We also evaluate portfolio risk management techniques applied to various accounts, historical behavior of different account vintages, account seasoning, economic conditions, recent trends in delinquencies and net charge-offs, account collection management including the impact of modifications made to borrowers experiencing financial difficulties, forecasting uncertainties, expectations about the future and a qualitative assessment of the adequacy of the allowance for credit losses. The reasonable and supportable forecast period is determined primarily based upon an assessment of the current economic outlook, including our ability to use available data to accurately forecast losses over time. The reasonable and supportable forecast period used in our estimate of credit losses at December 31, 2025 was 12 months, consistent with the forecast period utilized since adoption of CECL. The Company reassesses the reasonable and supportable forecast period on a quarterly basis. Beyond the reasonable and supportable forecast period, we revert to historical loss information at the loan receivables segment level over a 6-month period on a straight-line basis, and utilize historical loss information thereafter for the remaining life of the portfolio. The historical loss information is derived from a combination of recessionary and non-recessionary performance periods, weighted by the estimated time span of each period. Similar to the reasonable and supportable forecast period, we also reassess the reversion period and historical mean on a quarterly basis, considering any required adjustments for differences in underwriting standards, portfolio mix, and other relevant data shifts over time. The underlying assumptions, estimates and assessments we use to provide for losses are updated periodically to reflect our view of current and forecasted conditions, and are subject to the regulatory examination process, which can result in changes to our assumptions. Changes in such estimates can significantly affect the allowance and provision for credit losses. It is possible that we will experience credit losses that are different from our current estimates. Consistent with our other assumptions, we also review segmentation to determine whether the segmentation pools remain relevant as risk characteristics change. Allowance for Credit Losses at December 31, 2024Our Allowance for credit losses methodology discussed above incorporates changes we made during the three months ended March 31, 2025 related to the modeling of loss projections attributable to existing loan balances and the reversion to historical mean. These changes in methodology were made prospectively to enhance our expected credit loss estimation capabilities and did not have a material effect on our Allowance for credit losses in the period of implementation. For periods prior to March 31, 2025, our loss forecasting methodology differed from the current year in that our modeling of loss projections utilized an enhanced migration analysis to estimate the likelihood that a loan will progress through the various stages of delinquency. The enhanced migration analysis considered uncollectible principal, interest and fees reflected in the loan receivables, segmented by credit and business parameters. In addition, while we also utilized a reversion period of six months in the prior year, we applied a weighted approach, gradually increasing the weight of historical losses by an equal amount each month during the reversion period, as compared to the straight-line approach discussed above.Loan Modifications to Borrowers Experiencing Financial DifficultyOur loss mitigation strategy is intended to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions or other actions, for borrowers experiencing financial difficulty. We primarily use long-term modification programs for borrowers experiencing financial difficulty as a loss mitigation strategy to improve long-term collectability of the loans. The long-term modification programs include changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months, reducing the interest rate on the loan, and stopping the assessment of penalty fees. We also make long-term loan modifications for customers who request financial assistance through external sources, such as through consumer credit counseling service agencies. Long-term loan modification programs do not normally include the forgiveness of unpaid principal, interest or fees. We may also provide certain borrowers with a short-term loan modification program (generally up to 3 months) that can include the forgiveness of a percentage of their unpaid principal balance, interest and/or fees. Beginning in late 2024, for borrowers that newly enroll in our short-term modification programs, we no longer charge interest and penalty fees during the term of the program and also typically waive accrued and unpaid interest and fees at the time of enrollment. We generally do not convert revolving loans to term loans, outside of loan modification programs for borrowers experiencing financial difficulties. The evaluation of whether a borrower is experiencing financial difficulty includes our consideration of all relevant facts and circumstances. See Note 5. Loan Receivables and Allowance for Credit Losses for additional information on our loan modifications to borrowers experiencing financial difficulty.Data related to redefault experience is also considered in our overall reserve adequacy review. Once the loan has been modified, it only returns to current status if the borrower pays the total minimum payment due or if the loan is re-aged after three consecutive monthly program payments are received post the modification date, subject to re-aging limitations of once a year, or twice in a five-year period.Delinquencies and Non-accrualsCharge-offs are deducted from the allowance for credit losses and are recorded in the period when we judge the principal to be uncollectible, and subsequent recoveries are added to the allowance, generally at the time cash is received on a charged-off account.Delinquent receivables are those that are 30 days or more past due based on their contractual payments. Non-accrual loan receivables are those on which we have stopped accruing interest. We typically continue to accrueinterest until the accounts are charged-off in the period the account becomes 180 days past due, with the exception of non-credit card accounts, for which we stop accruing interest in the period that the account becomes 90 days past due.The same loan receivable may meet more than one of the definitions above. Accordingly, these categories are not mutually exclusive, and it is possible for a particular loan to meet the definitions of a non-accrual loan and a delinquent loan, or be modified to a borrower experiencing financial difficulty, and be included in each of these categories. The categorization of a particular loan also may not necessarily be indicative of the potential for loss. Charge-OffsNet charge-offs consist of the unpaid principal balance of loans held for investment that we determine are uncollectible, net of recovered amounts. We exclude accrued and unpaid finance charges, fees and third-party fraud losses from charge-offs. Charged-off and recovered accrued and unpaid finance charges and fees are included in interest and fees on loans while fraud losses are included in other expense. Charge-offs are recorded as a reduction to the allowance for credit losses, and subsequent recoveries of previously charged-off amounts are credited to the allowance for credit losses. Costs incurred to recover charged-off loans are recorded as collection expense and are included in Other expense in our Consolidated Statements of Earnings. We charge-off our loans based upon days contractually past due, which is typically 120 days for our unsecured closed-end consumer installment loans and loans secured by collateral and in the period the account becomes 180 days for our unsecured open-end revolving loans. Unsecured consumer loans in bankruptcy are charged-off within 60 days of notification of filing by the bankruptcy court or within contractual charge-off periods, whichever occurs earlier. Credit card loans of deceased account holders are charged-off within 60 days of receipt of notification. Goodwill and Intangible AssetsWe do not amortize goodwill but test it at least annually for impairment at the reporting unit level pursuant to FASB Account Standards Codification ("ASC 350"), Intangibles-Goodwill and Other. A reporting unit is defined under GAAP as the operating segment, or one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. Our single operating segment comprises a single reporting unit, based on the level at which segment management regularly reviews and measures the business operating results.When a portion of a reporting unit constitutes a business that is being disposed of, the amount of goodwill to be included in the carrying amount of the business classified as held for sale is based upon the relative fair values of the business to be disposed of and the portion of the reporting unit that will be retained. Goodwill impairment risk is first assessed by performing a qualitative review of entity-specific, industry, market and general economic factors for our reporting unit. If potential goodwill impairment risk exists that indicates that it is more likely than not that the carrying value of our reporting unit exceeds its fair value, a quantitative test is performed. The quantitative test compares the reporting unit's estimated fair value with its carrying value, including goodwill. If the carrying value of our reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the amount of goodwill allocated to the reporting unit. The qualitative assessment for each period presented in the consolidated financial statements was performed without hindsight, assuming only factors and market conditions existing as of those dates, and resulted in no potential goodwill impairment risk for our reporting unit. Consequently, goodwill was not deemed to be impaired for any of the periods presented. Definite-lived intangible assets principally consist of certain costs incurred to develop or acquire capitalized software and customer-related assets including purchased credit card relationships. Capitalized software is amortized on a straight-line basis over its estimated useful life, generally 5 years. Customer-related assets are amortized over their estimated useful lives. Defined-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The evaluation compares the cash inflows expected to be generated from each intangible asset to its carrying value. If cash flows attributable to the intangible asset are less than the carrying value, the asset is considered impaired and written down to its estimated fair value. Other AssetsOther assets primarily consist of deferred income taxes, contract costs related to our retail partner agreements and equity investments. Retail partner contract costs are recognized over the life of the contract with the retail partner and are included as a component of Marketing and business development expense in our Consolidated Statements of Earnings. Discontinued Operations and Held for SaleAn entity is classified as held for sale in the period in which management approves and commits to a plan to sell the entity, the entity is available to be sold in its immediate condition subject to usual and customary terms, the entity is being actively marketed at a reasonable price with other actions required to complete the plan to sale initiated, the sale is generally probable to be completed within one year, and it is unlikely that there will be significant changes to the plan to sell.The disposal of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on the Company's operations and financial results, otherwise the results of the entity to be disposed continue to be presented within continuing operations on the Consolidated Statements of Earnings.Assets and liabilities to be disposed of are reclassified to held for sale in our Consolidated Statements of Financial Position. Revenue RecognitionInterest and Fees on LoansWe use the effective interest method to recognize income on loans. Interest and fees on loans is comprised largely of interest and late fees on credit card and other loans. Interest income is recognized based upon the amount of loans outstanding and their contractual interest rate. Late fees are recognized when billable to the customer. We typically continue to accrue interest and fees on credit cards until the accounts are charged-off in the period the account becomes 180 days past due. For non-credit card loans, we stop accruing interest and fees in the period when the account becomes 90 days past due. Previously recognized interest income that was accrued but not collected from the customer is reversed. Although we stop accruing interest in advance of payments, we recognize interest income as cash is collected when appropriate, provided the amount does not exceed that which would have been earned at the historical effective interest rate; otherwise, payments received are applied to reduce the principal balance of the loan. We resume accruing interest on non-credit card loans when the customer's account is less than 90 days past due and collection of such amounts is probable. Interest income from loans disclosed as long-term modifications to borrowers experiencing financial difficulty is accounted for in the same manner as other accruing loans. Beginning in late 2024, for borrowers that newly enroll in our short-term modification programs, we no longer charge interest and penalty fees during the term of the program and also typically waive accrued and unpaid interest and fees at the time of enrollment. Direct loan origination costs on credit card loans are deferred and amortized on a straight-line basis over a one-year period, or based on the effective interest method over the estimated life of the loan for other loan receivables, and are included in interest and fees on loans in our Consolidated Statements of Earnings. See Note 5. Loan Receivables and Allowance for Credit Losses for further detail. Servicing and other customer-related fees, which include paper statement fees charged to borrowers, totaled $290 million, $180 million, and $36 million for the years ended December 31, 2025, 2024 and 2023, respectively, and are recognized in Other income in our Consolidated Statements of Earnings when the related service is provided or transaction occurs. Promotional FinancingLoans originated with promotional financing may include deferred interest financing (interest accrues during a promotional period and becomes payable if the full purchase amount is not paid off during the promotional period), no interest financing (no interest accrues during a promotional period but begins to accrue thereafter on any outstanding amounts at the end of the promotional period) and reduced interest financing (interest accrues monthly at a promotional interest rate during the promotional period). For deferred interest financing, we bill interest to the borrower, retroactive to the inception of the loan, if the loan is not repaid prior to the specified date. Income is recognized on such loans when it is billable. In almost all cases, our retail partner will pay an upfront fee or reimburse us to compensate us for all or part of the costs associated with providing the promotional financing. Upfront fees are deferred and accreted to income over the promotional period. Reimbursements are estimated and accrued as income over the promotional period. Acquired LoansAcquired loans are recorded at fair value, which may result in the recognition of a loan premium or loan discount. For acquired loans with evidence of more-than-insignificant deterioration in credit quality since origination, the initial allowance for credit losses at acquisition is added to the purchase price to determine the initial cost basis of the loans and loan premium or loan discount. Loan premiums and loan discounts are recognized into interest income using the effective interest method over the estimated remaining life of the loans. The Company develops an allowance for credit losses for all purchased loans, which is recognized upon acquisition, similar to that of an originated financial asset. Subsequent changes to the expected credit losses for these loans follow the allowance for credit losses methodology described above under "-Allowance for Credit Losses." Retailer Share ArrangementsMost of our program agreements with large retail and digital partners contain retailer share arrangements that provide for payments to our partners if the economic performance of the program exceeds a contractually defined threshold. We also provide other economic benefits to our partners such as royalties on purchase volume or payments for new accounts, in some cases instead of retailer share arrangements (for example, on our co-branded credit cards). Although the share arrangements vary by partner, these arrangements are generally structured to measure the economic performance of the program, based typically on agreed upon program revenues (including interest income and certain other income) less agreed upon program expenses (including interest expense, provision for credit losses, retailer payments and operating expenses), and share portions of this amount above a negotiated threshold. These thresholds and the economic performance of a program are based on, among other things, agreed upon measures of program expenses. On a quarterly basis, we make a judgment as to whether it is probable that the performance threshold will be met under a particular retail partner's retailer share arrangement. The current period's estimated contribution to that ultimate expected payment is recorded as a liability. To the extent facts and circumstances change and the cumulative probable payment for prior months has changed, a cumulative adjustment is made to align the retailer share arrangement liability balance with the amount considered probable of being paid relating to past periods. Other Income Interchange and Protection Product RevenueOther Income primarily includes interchange and protection product revenue. We earn interchange revenue at the time the cardholder transaction occurs. Protection product revenue represents fees earned from our Payment Security offering, which is a debt cancellation product. Fees are assessed and recognized during the monthly coverage period, based upon a customer's account balance. Loyalty ProgramsOur loyalty programs are designed to generate increased purchase volume per customer while reinforcing the value of our credit cards and strengthening cardholder loyalty. These programs typically provide cardholders with statement credit or cash back rewards. Other programs include rewards points, which are redeemable for a variety of products or awards, or merchandise discounts that are earned through customers' spending on their private label credit card, Dual Card or general purpose co-branded credit card. We establish a rewards liability based on cash rewards, merchandise discounts and points earned at an average cost per point that are ultimately expected to be redeemed. For the programs we operate, the rewards liability is included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Position. Cash rebates are earned based on a tiered percentage of purchase volume. As points and discounts are redeemed or cash rebates and rewards are issued, the rewards liability is relieved. Certain partners maintain and operate separate loyalty programs for which we make payments to the partner in order to contribute towards the costs of the program. The estimated cost of loyalty programs is classified as a reduction to Other income in our Consolidated Statements of Earnings.Interest ExpenseInterest expense is incurred on our interest-bearing liabilities, which consists of interest-bearing deposit accounts, borrowings of consolidated securitization entities and senior and subordinated unsecured notes, and is recognized as incurred.Other ExpenseFraud LossesWe experience third-party fraud losses from the unauthorized use of credit cards and when loans are obtained through fraudulent means. Fraud losses are included as a charge within Other expense in our Consolidated Statements of Earnings, net of recoveries, when such losses are probable. Loans are charged-off, as applicable, after the investigation period has completed.Income TaxesWe recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. The effects of tax adjustments and settlements from taxing authorities are presented in our consolidated financial statements in the period they occur. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax laws and rates that will be in effect when the differences are expected to reverse. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. In making decisions regarding our ability to realize tax assets, we evaluate all positive and negative evidence, including projected future taxable income, taxable income in carryback periods, expected reversal of deferred tax liabilities and the implementation of available tax planning strategies.We recognize the financial statement impact of uncertain income tax positions when we conclude that it is more likely than not, based on the technical merits of a position, that the position will be sustained upon examination. In certain situations, we establish a liability that represents the difference between a tax position taken (or expected to be taken) on an income tax return and the amount of taxes recognized in our financial statements. The liability associated with the unrecognized tax benefits is adjusted periodically when new information becomes available. We recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and provision for income taxes, respectively, in our Consolidated Statements of Earnings. Fair Value MeasurementsFair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These inputs create the following fair value hierarchy: Level 1- Quoted prices for identical instruments in active markets. Level 2- Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3- Significant inputs to the valuation are unobservable. We maintain policies and procedures to value instruments using the best and most relevant data available. In addition, we have risk management teams that review valuations, including independent price validation for certain instruments. We use non-binding broker quotes and third-party pricing services, when available, as our primary basis for valuation when there is limited or no relevant market activity for a specific instrument or for other instruments that share similar characteristics. We have not adjusted prices that we have obtained. In the absence of such data, such measurements involve developing assumptions based on internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date.The third-party brokers and third-party pricing services do not provide us access to their proprietary valuation models, inputs and assumptions. Accordingly, our risk management, treasury and/or finance personnel conduct reviews of these brokers and services, as applicable. In addition, we conduct internal reviews of pricing provided by our third-party pricing service for all investment securities on a quarterly basis to ensure reasonableness of valuations used in the consolidated financial statements. These reviews are designed to identify prices that appear stale, those that have changed significantly from prior valuations and other anomalies that may indicate that a price may not be accurate. Based on the information available, we believe that the fair values provided by the third-party brokers and pricing services are representative of prices that would be received to sell the assets at the measurement date (exit prices) and are classified appropriately in the hierarchy. Recurring Fair Value MeasurementsOur investments in debt and certain equity securities, as well as certain financial assets and liabilities for which we have elected the fair value option, are measured at fair value every reporting period on a recurring basis. Non-Recurring Fair Value MeasurementsCertain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs. Equity Securities Without Readily Determinable Fair ValuesThe Company measures certain equity securities without readily determinable fair values using observable price changes in orderly transactions for the identical or a similar investment of the same issuer when they occur. Changes in observable price changes are recognized in Other income in our Consolidated Statements of Earnings.Financial Assets and Financial Liabilities Carried at Other than Fair ValueThe following is a description of the valuation techniques used to estimate the fair values of the financial assets and liabilities carried at other than fair value. Loan receivables, netIn estimating the fair value for our loan receivables, we use a discounted future cash flow model. We use various unobservable inputs including estimated interest and fee income, payment rates, loss rates and discount rates (which consider current market interest rate data adjusted for credit risk and other factors) to estimate the fair values of loans. When collateral dependent, loan receivables may be valued using collateral values. DepositsFor demand deposits with no defined maturity, carrying value approximates fair value due to the liquid nature of these deposits. For fixed-maturity certificates of deposit, fair values are estimated by discounting expected future cash flows using market rates currently offered for deposits with similar remaining maturities. BorrowingsThe fair values of borrowings of consolidated securitization entities are based on valuation methodologies that utilize current market interest rate data, which are comparable to market quotes adjusted for our non-performance risk. Borrowings that are publicly traded securities are classified as level 2. Borrowings that are not publicly traded are classified as level 3. The fair values of the senior and subordinated unsecured notes are based on secondary market trades and other observable inputs and are classified as level 2. New Accounting StandardsNewly Adopted Accounting StandardsIn December 2023, the FASB issued Accounting Standard Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the rate reconciliation, as well as additional qualitative information about the reconciliation, and additional disaggregated information about income taxes paid. The Company adopted this guidance as of December 31, 2025 on a retrospective basis. See Note 15. Income Taxes for additional information.Recently Issued But Not Yet Adopted Accounting StandardsIn November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disaggregated information about certain income statement line items in a tabular format in the notes to the financial statements. The Company will adopt this guidance on its effective date, which for us is beginning within our December 31, 2027 Form 10-K, and is currently determining the method of adoption, however, it is not expected to have a material impact to our Consolidated Financial Statements.In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This ASU amends certain aspects of the accounting for and disclosure of software costs. This ASU requires an entity to start capitalizing software costs when both management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in this update are effective for the Company beginning in January 2028, through either a prospective, modified, or retrospective transition approach, with early adoption permitted. The Company is currently evaluating the updated guidance to assess the impact and the method of adoption.In November 2025, the FASB issued ASU 2025-08, Financial Instruments – Credit Losses (Topic 326) – Purchased Loans. ASU expands the population of purchased financial assets subject to the gross-up approach in Topic 326. As a result of this update, loans (excluding credit cards) acquired without credit deterioration and deemed "seasoned" as defined in the ASU will follow the gross-up approach at acquisition and the initial allowance for credit losses at acquisition is added to the amortized cost basis of the loans. The Company is currently evaluating the updated guidance, which is effective prospectively beginning January 2027, with early adoption permitted. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which improves the navigability of the required interim disclosures, provides clarity as to when it is applicable, and provides additional guidance on what disclosures are required in interim reporting periods by establishing a disclosure principle. The guidance is effective for interim reporting periods beginning in 2028 and can be applied either prospectively or retrospectively. The Company is currently evaluating the updated guidance to assess the impact and determining its method of adoption.

For a description of how we estimate fair value, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies. The following tables present our assets measured at fair value on a recurring basis. Liabilities measured at fair value on a recurring basis were not material for the periods presented.Recurring Fair Value MeasurementsAt December 31, 2025 ($ in millions)Level 1Level 2Level 3Total(a)AssetsDebt securitiesU.S. government and federal agency$- $1,492 $- $1,492 State and municipal- - 35 35 Residential mortgage-backed- 297 - 297 Asset-backed- 515 - 515 Other- - 9 9 Other(b)15 - 7 22 Total $15 $2,304 $51 $2,370 At December 31, 2024 ($ in millions)Level 1Level 2Level 3Total(a)AssetsDebt securitiesU.S. government and federal agency$- $1,844 $- $1,844 State and municipal- - 16 16 Residential mortgage-backed- 289 - 289 Asset-backed- 922 - 922 Other- - 8 8 Other(b)14 - 6 20 Total $14 $3,055 $30 $3,099 _______________________(a)    For the years ended December 31, 2025 and 2024, there were no fair value measurements transferred between levels.(b)    Other is primarily comprised of equity investments measured at fair value, which are included in Other assets in our Consolidated Statements of Financial Position. Level 3 Fair Value MeasurementsOur Level 3 recurring fair value measurements primarily relate to state and municipal and corporate debt instruments, which are valued using non-binding broker quotes or other third-party sources, and financial assets and liabilities for which we have elected the fair value option. For a description of our process to evaluate third-party pricing servicers, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies. Our state and municipal debt securities are classified as available-for-sale with changes in fair value included in Accumulated other comprehensive income in our Consolidated Statements of Financial Position.The changes in our Level 3 assets and liabilities that are measured on a recurring basis for the years ended December 31, 2025 and 2024 were not material.Financial Assets and Financial Liabilities Carried at Other Than Fair ValueCarryingCorresponding fair value amountAt December 31, 2025 ($ in millions)valueTotalLevel 1Level 2Level 3Financial AssetsFinancial assets for which carrying values equal or approximate fair value(a): Cash and equivalents$14,973 $14,973 $14,973 $- $- Accrued interest receivable$27 $27 $27 $- $- Other assets(b)$44 $44 $44 $- $- Financial assets carried at other than fair value: Loan receivables, net(c)$93,364 $106,591 $- $- $106,591 Financial LiabilitiesFinancial liabilities for which carrying values equal or approximate fair value(a):Accrued interest payable$287 $287 $287 $- $- Financial liabilities carried at other than fair value:Deposits(d)$81,144 $81,374 $- $81,374 $- Borrowings of consolidated securitization entities$8,415 $8,477 $- $5,559 $2,918 Senior and subordinated unsecured notes$6,767 $6,870 $- $6,870 $- CarryingCorresponding fair value amountAt December 31, 2024 ($ in millions)valueTotalLevel 1Level 2Level 3Financial AssetsFinancial assets for which carrying values equal or approximate fair value(a): Cash and equivalents$14,711 $14,711 $14,711 $- $- Accrued interest receivable$25 $25 $25 $- $- Other assets(b)$44 $44 $44 $- $- Financial assets carried at other than fair value: Loan receivables, net(c)$93,785 $106,632 $- $- $106,632 Financial LiabilitiesFinancial liabilities for which carrying values equal or approximate fair value(a):Accrued interest payable$339 $339 $339 $- $- Financial liabilities carried at other than fair value:Deposits(d)$82,062 $82,256 $- $82,256 $- Borrowings of consolidated securitization entities$7,842 $7,871 $- $4,950 $2,921 Senior and subordinated unsecured notes$7,620 $7,502 $- $7,502 $- _______________________(a)Carrying value approximates fair value as the financial assets and liabilities are liquid in nature or have a short-term maturity.(b)This balance relates to restricted cash and equivalents, which is included in Other assets in our Consolidated Statements of Financial Position.(c)Excludes financial assets for which we have elected the fair value option. Under certain retail partner program agreements, the expected sales proceeds in the event of a sale of their credit card portfolio may be limited to the amounts owed by our customers, which may be less than the fair value indicated above.(d)Includes demand deposits with no defined maturity.Equity Securities Without Readily Determinable Fair ValuesAt or for the year ended December 31 ($ in millions)20252024Carrying Value$269 $270 Upward adjustments(a)- - Downward adjustments(a)(8)(7)_______________________(a)    Between January 1, 2018 and December 31, 2025, cumulative upward and downward carrying value adjustments were $201 million and $(17) million, respectively.

____________________________________________________________________________________________For the years ended December 31 ($ in millions)202520242023Cash flows - operating activitiesNet earnings$3,552 $3,499 $2,238 Adjustments to reconcile net earnings to cash provided from operating activitiesProvision for credit losses5,225 6,733 5,965 Deferred income taxes184 (98)(458)Depreciation and amortization514 481 458 Gain on sale of business- (1,069)- All other operating activities537 507 735 Changes in operating assets and liabilities, net of effects of acquisitions and dispositions(Increase) decrease in interest and fees receivable(598)33 (645)(Increase) decrease in other assets123 (117)7 Increase (decrease) in accrued expenses and other liabilities314 (121)293 Cash provided from (used for) operating activities9,851 9,848 8,593 Cash flows - investing activitiesMaturity and sales of debt securities1,952 3,616 5,011 Purchases of debt securities(1,187)(2,811)(3,623)Acquisitions, net of cash acquired(161)(1,935)- Proceeds from sale of business, net of cash and restricted cash sold- 491 - Net (increase) decrease in loan receivables, including held for sale(4,606)(7,576)(14,900)All other investing activities (852)(688)(722)Cash provided from (used for) investing activities(4,854)(8,903)(14,234)Cash flows - financing activitiesBorrowings of consolidated securitization entitiesProceeds from issuance of securitized debt2,242 1,694 2,294 Maturities and repayment of securitized debt(1,675)(1,125)(1,257)Senior and subordinated unsecured notesProceeds from issuance of senior and subordinated unsecured notes1,788 745 740 Maturities and repayment of senior and subordinated unsecured notes(2,650)(1,850)- Proceeds from issuance of preferred stock- 488 - Dividends paid on preferred stock(83)(72)(42)Net increase (decrease) in deposits(926)879 9,437 Purchases of treasury stock(2,941)(1,008)(1,112)Dividends paid on common stock(427)(398)(406)All other financing activities(63)36 (22)Cash provided from (used for) financing activities(4,735)(611)9,632 Increase (decrease) in cash and equivalents, including restricted and held for sale amounts262 334 3,991 Cash and equivalents, including restricted amounts, at beginning of year14,755 14,421 10,430 Cash and equivalents at end of year:Cash and equivalents14,973 14,711 14,259 Restricted cash and equivalents included in other assets44 44 50 Cash and equivalents, including restricted amounts, held for sale- - 112 Total cash and equivalents, including restricted and held for sale amounts, at end of year$15,017 $14,755 $14,421 Supplemental disclosure of cash flow informationCash paid during the year for interest$(4,162)$(4,662)$(3,551)

PageCONSOLIDATED FINANCIAL STATEMENTSConsolidated Statements of Earnings107Consolidated Statements of Comprehensive Income108Consolidated Statements of Financial Position109Consolidated Statements of Changes in Equity110Consolidated Statements of Cash Flows111NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1. Business Description112Note 2. Basis of Presentation and Summary of Significant Accounting Policies112Note 3. Acquisitions and Dispositions123Note 4. Debt Securities124Note 5. Loan Receivables and Allowance for Credit Losses127Note 6. Variable Interest Entities133Note 7. Goodwill and Other Intangible Assets134Note 8. Deposits135Note 9. Borrowings136Note 10. Fair Value Measurements137Note 11. Regulatory and Capital Adequacy139Note 12. Employee Benefit Plans141Note 13. Earnings Per Share142Note 14. Equity and Other Stock Related Information143Note 15. Income Taxes144Note 16. Parent Company Financial Information146Note 17. Segment Reporting148Note 18. Legal Proceedings and Regulatory Matters150

For the years ended December 31($ in millions, except per share data)202520242023Interest income:Interest and fees on loans (Note 5)$21,698 $21,596 $19,902 Interest on cash and debt securities903 1,049 808 Total interest income22,601 22,645 20,710 Interest expense:Interest on deposits3,330 3,806 2,952 Interest on borrowings of consolidated securitization entities417 427 340 Interest on senior and subordinated unsecured notes388 401 419 Total interest expense4,135 4,634 3,711 Net interest income18,466 18,011 16,999 Retailer share arrangements(4,005)(3,407)(3,661)Provision for credit losses (Note 5)5,225 6,733 5,965 Net interest income, after retailer share arrangements and provision for credit losses9,236 7,871 7,373 Other income:Interchange revenue1,067 1,026 1,031 Protection product revenue596 562 510 Loyalty programs(1,438)(1,382)(1,370)Other (Note 3)295 1,315 118 Total other income520 1,521 289 Other expense:Employee costs2,093 1,872 1,884 Professional fees936 936 842 Marketing and business development 511 524 527 Information processing 899 803 712 Other 696 704 793 Total other expense 5,135 4,839 4,758 Earnings before provision for income taxes4,621 4,553 2,904 Provision for income taxes (Note 15)1,069 1,054 666 Net earnings$3,552 $3,499 $2,238 Net earnings available to common stockholders$3,469 $3,427 $2,196 Earnings per share (Note 13)Basic$9.38 $8.64 $5.21 Diluted$9.28 $8.55 $5.19

For the years ended December 31 ($ in millions)202520242023Net earnings$3,552 $3,499 $2,238 Other comprehensive income (loss)Debt securities17 10 60 Currency translation adjustments (6)(6)- Employee benefit plans and other- 5 (3)Other comprehensive income (loss)11 9 57 Comprehensive income$3,563 $3,508 $2,295 Amounts presented net of taxes.

All of our debt securities are classified as available-for-sale and are held to meet our liquidity objectives or to comply with the Community Reinvestment Act ("CRA"). Our debt securities consist of the following: December 31, 2025December 31, 2024GrossGrossGrossGrossAmortizedunrealizedunrealizedEstimatedAmortizedunrealizedunrealizedEstimated ($ in millions)costgainslossesfair valuecostgainslossesfair valueU.S. government and federal agency$1,485 $7 $- $1,492 $1,841 $3 $- $1,844 State and municipal35 - - 35 17 - (1)16 Residential mortgage-backed(a)318 1 (22)297 324 - (35)289 Asset-backed(b)509 6 - 515 919 4 (1)922 Other8 1 - 9 8 - - 8 Total(c)$2,355 $15 $(22)$2,348 $3,109 $7 $(37)$3,079 _____________(a)    All of our residential mortgage-backed securities have been issued by government-sponsored entities and are collateralized by U.S. mortgages. (b)    Our asset-backed securities are collateralized by credit card and auto loans.(c)    At December 31, 2025 and 2024, the estimated fair value of debt securities pledged by the Bank as collateral to the Federal Reserve to secure Federal Reserve discount window advances was $470 million and $551 million, respectively. The following table presents the estimated fair values and gross unrealized losses of our available-for-sale debt securities: In loss position forLess than 12 months12 months or moreGrossGrossEstimatedunrealizedEstimatedunrealized ($ in millions)fair valuelossesfair valuelossesAt December 31, 2025U.S. government and federal agency$- $- $- $- State and municipal17 - 5 - Residential mortgage-backed- - 229 (22)Asset-backed- - - - Other- - - - Total(a)$17 $- $234 $(22)At December 31, 2024U.S. government and federal agency$199 $- $- $- State and municipal12 (1)3 - Residential mortgage-backed5 - 279 (35)Asset-backed79 (1)4 - Other- - - - Total(a)$295 $(2)$286 $(35)______________________(a)Consists of 211 and 224 securities in gross unrealized loss positions as of December 31, 2025 and 2024, respectively. We regularly review debt securities for impairment resulting from credit loss using both qualitative and quantitative criteria, as necessary based on the composition of the portfolio at period end. Based on our assessment, no material impairments from credit losses were recognized during the period.We presently do not intend to sell our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell these securities before recovery of our amortized cost. Contractual Maturities of Investments in Available-for-Sale Debt Securities At December 31, 2025 ($ in millions)Due within 1 yearDue after 1 year through 5 yearsDue after 5 years through 10 yearsDue after 10 yearsTotalU.S. government and federal agency$1,052 $440 $- $- $1,492 State and municipal- 5 - 30 35 Residential mortgage-backed- 14 141 142 297 Asset-backed174 341 - - 515 Other- 9 - - 9 Total estimated fair value$1,226 $809 $141 $172 $2,348 Amortized cost$1,222 $800 $151 $182 $2,355 Weighted average yield(a)4.4 %4.3 %1.5 %4.0 %4.2 %______________________(a)Weighted average yield is calculated based on the amortized cost of each security. In calculating yield, no adjustment has been made with respect to any tax-exempt obligations.All securities are presented above based upon contractual maturity date, except our asset-backed securities which are allocated based upon expected final payment date. We expect actual maturities to differ from contractual maturities because borrowers have the right to prepay certain obligations. There were no material realized gains or losses recognized for the years ended December 31, 2025, 2024 and 2023. Although we generally do not have the intent to sell any specific securities held at December 31, 2025, in the ordinary course of managing our debt securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield, liquidity requirements and funding obligations.

At December 31 ($ in millions)20252024Credit cards$96,346 $96,818 Consumer installment loans5,548 5,971 Commercial credit products1,833 1,826 Other 81 106 Total loan receivables, before allowance for credit losses(a)(b)(c)$103,808 $104,721 _______________________(a)Total loan receivables include $22.4 billion and $21.3 billion of restricted loans of consolidated securitization entities at December 31, 2025 and 2024, respectively. See Note 6. Variable Interest Entities for further information. (b)At December 31, 2025 and 2024, loan receivables included deferred costs, net of purchase discounts and deferred income, of $(53) million and $(212) million, respectively.(c)At December 31, 2025 and 2024, $18.3 billion and $20.7 billion, respectively, of loan receivables were pledged by the Bank as collateral to the Federal Reserve to secure Federal Reserve discount window advances.Disposition of Loan Receivables In October 2025, we sold $0.2 billion of loan receivables associated with one of our retailer program agreements.Allowance for Credit Losses(a) ($ in millions)Balance at January 1, 2025Provision charged to operations(b)Gross charge-offsRecoveriesOther(c)Balance at December 31, 2025Credit cards$10,259 $4,750 $(6,673)$1,452 $1 $9,789 Consumer installment loans542 326 (386)61 - 543 Commercial credit products127 99 (127)10 - 109 Other1 1 (1)- - 1 Total$10,929 $5,176 $(7,187)$1,523 $1 $10,442 ($ in millions)Balance at January 1, 2024Provision charged to operations(b)Gross charge-offsRecoveriesOther(c)Balance at December 31, 2024Credit cards$10,156 $6,005 $(7,133)$1,224 $7 $10,259 Consumer installment loans279 595 (416)45 39 542 Commercial credit products131 135 (147)8 - 127 Other5 (3)(1)- - 1 Total$10,571 $6,732 $(7,697)$1,277 $46 $10,929 ($ in millions)Balance at January 1, 2023Impact of ASU 2022-02 AdoptionPost-Adoption Balance at January 1, 2023Provision charged to operations(b)Gross charge-offsRecoveriesBalance at December 31, 2023Credit cards$9,225 $(294)$8,931 $5,536 $(5,263)$952 $10,156 Consumer installment loans208 1 209 259 (218)29 279 Commercial credit products87 (1)86 164 (128)9 131 Other7 - 7 (1)(1)- 5 Total$9,527 $(294)$9,233 $5,958 $(5,610)$990 $10,571 _______________________(a)Excluded from the tables above are allowance for credit losses for loan receivables acquired and immediately written off within the period presented.(b)Provision for credit losses in the Consolidated Statements of Earnings also includes amounts associated with off-balance sheet credit exposures recorded in Accrued expenses and other liabilities in the Consolidated Statements of Financial Position. Such amounts in the year ended December 31, 2025 include those associated with our commitment to purchase a loan portfolio.(c)Primarily represents allowance for credit losses for purchased credit deteriorated assets.The reasonable and supportable forecast period used in our estimate of credit losses at December 31, 2025 was 12 months, consistent with the forecast period utilized since the adoption of CECL. Beyond the reasonable and supportable forecast period, we revert to historical loss information at the loan receivables segment level over a 6-month period, and utilize historical loss information thereafter for the remaining life of the portfolio.Losses on loan receivables, including those which are modified for borrowers experiencing financial difficulty, are estimated and recognized upon origination of the loan, and updated based on expected credit losses for the life of the loan balance at the period end date. Expected credit loss estimates are developed using both quantitative models and qualitative adjustments, and incorporates a macroeconomic forecast, as described within Note 2. Basis of Presentation and Summary of Significant Accounting Policies. The current and forecasted economic conditions at the balance sheet date are reflected in our current estimate of expected credit losses, which includes consideration of the decrease in delinquent balances as a percentage of loan receivables, compared to the prior year period, as well as expectations of the macroeconomic environment. Our allowance for credit losses decreased to $10.4 billion during the year ended December 31, 2025, compared to $10.9 billion at December 31, 2024, primarily reflecting these conditions. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for additional information on our significant accounting policies related to our allowance for credit losses.Delinquent and Non-accrual LoansThe following table provides information on our delinquent and non-accrual loans:At December 31, 2025 ($ in millions)30-89 days delinquent90 or more days delinquentTotal past due90 or more days delinquent and accruingTotal non-accruingCredit cards$2,223 $2,181 $4,404 $2,181 $- Consumer installment loans144 31 175 - 31 Commercial credit products45 36 81 36 - Total delinquent loans$2,412 $2,248 $4,660 $2,217 $31 Percentage of total loan receivables2.3 %2.2 %4.5 %2.1 %- %At December 31, 2024 ($ in millions)30-89 days delinquent90 or more days delinquentTotal past due90 or more days delinquent and accruingTotal non-accruingCredit cards$2,229 $2,431 $4,660 $2,431 $- Consumer installment loans139 39 178 - 39 Commercial credit products45 42 87 42 - Total delinquent loans$2,413 $2,512 $4,925 $2,473 $39 Percentage of total loan receivables2.3 %2.4 %4.7 %2.4 %- % Credit Quality IndicatorsOur loan receivables portfolio includes both secured and unsecured loans. Secured loan receivables are largely comprised of consumer installment loans secured by equipment. Unsecured loan receivables are largely comprised of our open-end consumer and commercial revolving credit card loans. As part of our credit risk management activities, on an ongoing basis, we assess overall credit quality by reviewing information related to the performance of a customer's account with us, including delinquency information, as well as information from credit bureaus relating to the customer's broader credit performance. We utilize VantageScore credit data and scores to assist in our assessment of consumer credit quality. VantageScore credit data and scores are obtained at origination of the account and are refreshed, at a minimum quarterly, but could be as often as weekly, to assist in predicting customer behavior. We categorize these credit scores into the following three credit score categories: (i) 651 or higher, which are considered the strongest credits; (ii) 591 to 650, considered moderate credit risk; and (iii) 590 or less, which are considered weaker credits. There are certain customer accounts, including for our commercial credit products, for which a VantageScore credit score may not be available where we use alternative sources to assess their credit quality and predict behavior. The following table provides the most recent VantageScore credit scores, or equivalent, available for our revolving credit card and commercial credit product customers at December 31, 2025 and 2024, respectively, as a percentage of each class of loan receivables. The table below excludes 0.4% and 0.3% of our total loan receivables balance for our credit cards and commercial credit products at December 31, 2025 and 2024, respectively, which represents those customer accounts for which a VantageScore credit score, or equivalent, is not available. At December 3120252024651 or591 to590 or651 or591 to590 orhigher650 lesshigher650 lessCredit cards74 %18 %8 %73 %19 %8 %Commercial credit products 83 %11 %6 %83 %7 %10 %Consumer Installment LoansDelinquency trends are the primary credit quality indicator for our consumer installment loans, which we use to monitor credit quality and risk within the portfolio. The tables below include information on our consumer installment loans by origination year.Consumer Installment Loans by Origination YearBy origination yearAt December 31, 2025 ($ in millions)20252024202320222021PriorTotalAmortized cost basis$1,959 $1,524 $1,091 $655 $241 $78 $5,548 30-89 days delinquent$37 $37 $35 $23 $9 $3 $144 90 or more days delinquent$9 $9 $7 $4 $1 $1 $31 By origination yearAt December 31, 2024 ($ in millions)20242023202220212020PriorTotalAmortized cost basis$2,581 $1,761 $1,005 $424 $166 $34 $5,971 30-89 days delinquent$47 $44 $30 $12 $5 $1 $139 90 or more days delinquent$13 $13 $9 $3 $1 $- $39 Gross Charge-offs for Consumer Installment Loans by Origination YearBy origination yearFor the years ended ($ in millions)20252024202320222021PriorTotalDecember 31, 2025$26 $129 $117 $78 $27 $9 $386 December 31, 2024$- $55 $178 $117 $46 $20 $416 Loan Modifications to Borrowers Experiencing Financial DifficultyThe following table provides information on our loan modifications made to borrowers experiencing financial difficulty during the periods presented, which do not include loans that are classified as loan receivables held for sale:For the years ended December 31202520242023($ in millions)Amount(a)% of Total Class of Loan ReceivablesAmount(a)% of Total Class of Loan ReceivablesAmount(a)% of Total Class of Loan ReceivablesLong-term modificationsCredit cards$1,608 1.7 %$1,743 1.8 %$1,573 1.6 %Consumer installment loans- - %- - %- - %Commercial credit products9 0.5 %10 0.5 %6 0.3 %Short-term modificationsCredit cards867 0.9 %948 1.0 %628 0.6 %Consumer installment loans- - %- - %- - %Commercial credit products2 - %1 - %1 - %Total$2,486 2.4 %$2,702 2.6 %$2,208 2.1 %_______________________(a)Represents balance at enrollment date.Financial Effects of Loan Modifications to Borrowers Experiencing Financial DifficultyAs part of our loan modifications to borrowers experiencing financial difficulty, we may provide multiple concessions to minimize our economic loss and improve long-term loan performance and collectability.For long-term modifications made in the years ended December 31, 2025, 2024 and 2023, the financial effect of these modifications reduced the weighted-average interest rates by 97% for all periods. For short-term modifications made in the years ended December 31, 2025, 2024 and 2023, unpaid balances of $296 million, $316 million and $186 million, respectively, were forgiven related to borrowers who successfully exited the program. Additionally, beginning in late 2024, for borrowers that newly enroll in our short-term loan modification programs, we no longer charge interest and penalty fees during the term of the program and also typically waive accrued and unpaid interest and fees at the time of enrollment. Performance of Loans Modified to Borrowers Experiencing Financial DifficultyThe following tables provide information on the performance of loans modified to borrowers experiencing financial difficulty which have been modified within the previous 12 months from the applicable balance sheet date and remained in a modification program at the periods presented:Amortized cost basisAt December 31, 2025 ($ in millions)Current30-89 days delinquent90 or more days delinquentTotal past due(a)Long-term modificationsCredit cards$935 $157 $112 $269 Consumer installment loans- - - - Commercial credit products4 1 1 2 Short-term modificationsCredit cards54 30 36 66 Consumer installment loans- - - - Commercial credit products- - - - Total loans modified $993 $188 $149 $337 Percentage of total loan receivables1.0 %0.2 %0.1 %0.3 %Amortized cost basisAt December 31, 2024 ($ in millions)Current30-89 days delinquent90 or more days delinquentTotal past due(a)Long-term modificationsCredit cards$987 $169 $136 $305 Consumer installment loans- - - - Commercial credit products4 1 1 2 Short-term modificationsCredit cards65 37 45 82 Consumer installment loans- - - - Commercial credit products- - - - Total loans modified$1,056 $207 $182 $389 Percentage of total loan receivables1.0 %0.2 %0.2 %0.4 %Amortized cost basisAt December 31, 2023 ($ in millions)Current30-89 days delinquent90 or more days delinquentTotal past due(a)Long-term modificationsCredit cards$861 $180 $141 $321 Consumer installment loans- - - - Commercial credit products2 1 1 2 Short-term modificationsCredit cards53 32 41 73 Consumer installment loans- - - - Commercial credit products- - - - Total loans modified $916 $213 $183 $396 Percentage of total loan receivables0.9 %0.2 %0.2 %0.4 %___________________(a)    Once a loan has been modified, it only returns to current status if the borrower pays the total minimum payment due or if the loan is re-aged after three consecutive monthly program payments are received post the modification date. Payment DefaultsThe following table presents loans to borrowers experiencing financial difficulty that enrolled in a long-term modification program within the previous 12 months from the applicable balance sheet date, and experienced a payment default and charged-off during the periods presented:For the years ended December 31 ($ in millions)202520242023Credit cards$212 $268 $233 Consumer installment loans- - - Commercial credit products1 2 2 Total$213 $270 $235 Of the loans modified to borrowers experiencing financial difficulty that enrolled in a short-term modification program within the previous 12 months from the applicable balance sheet date, 63%, 61% and 54% had fully completed all required payments and successfully exited the program during the years ended December 31, 2025, 2024 and 2023, respectively.Unfunded Lending Commitments We manage the potential risk in credit commitments by limiting the total amount of credit, both by individual customer and in total, by monitoring the size and maturity of our portfolios and by applying a consistent underwriting approach for all of our credit products. Unused credit card lines available to our customers totaled approximately $440 billion and $433 billion at December 31, 2025 and 2024, respectively. While these amounts represented the total available unused credit card lines, we have not experienced and do not anticipate that all of our customers will access their entire available line at any given point in time. Interest Income by ProductThe following table provides additional information about our interest and fees on loans, including merchant discounts, from our loan receivables, including held for sale: For the years ended December 31 ($ in millions)202520242023Credit cards(a)$20,683 $20,554 $19,341 Consumer installment loans824 854 401 Commercial credit products186 179 150 Other5 9 10 Total(b)$21,698 $21,596 $19,902 _______________________(a)Interest income on credit cards that was reversed related to accrued interest and fees receivables written off was $2.4 billion, $2.4 billion and $1.8 billion for the years ended December 31, 2025, 2024 and 2023, respectively.(b)Deferred merchant discounts to be recognized in interest income at both December 31, 2025 and December 31, 2024, was $1.8 billion, which are included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Position.

We use VIEs to securitize loan receivables and arrange public and private asset-backed financing in the ordinary course of business through Synchrony Card Issuance Trust, as well as private asset-backed financing through Synchrony Credit Card Master Note Trust and Synchrony Sales Finance Master Trust. Investors in these entities only have recourse to the assets owned by the entity and not to our general credit. We do not have implicit support arrangements with any VIE and we did not provide non-contractual support for previously transferred loan receivables to any of these VIEs in the years ended December 31, 2025 and 2024. Our VIEs are able to accept new loan receivables and arrange new asset-backed financings, consistent with the requirements and limitations on such activities placed on the VIE by existing investors. Once an account has been designated to a VIE, the contractual arrangements we have require all existing and future loan receivables originated under such account to be transferred to the VIE. The amount of loan receivables held by our VIEs in excess of the minimum amount required under the asset-backed financing arrangements with investors may be removed by us under removal of accounts provisions. All loan receivables held by a VIE are subject to claims of third-party investors. The loan receivables in these entities have risks and characteristics similar to our other loan receivables and were underwritten to the same standard. Accordingly, the performance of these assets has been similar to our other comparable loan receivables, and the blended performance of the pools of receivables in these entities reflects the eligibility criteria that we apply to determine which receivables are selected for transfer. Contractually, the cash flows from these loan receivables must first be used to pay third-party debt holders, as well as other expenses of the entity. Excess cash flows, if any, are available to us. The creditors of these entities have no claim on our other assets. The table below summarizes the assets and liabilities of our consolidated securitization VIEs described above.At December 31 ($ in millions)20252024Assets Loan receivables, net(a)$20,457 $19,439 Other assets(b)46 44 Total$20,503 $19,483  LiabilitiesBorrowings$8,415 $7,842 Other liabilities28 27 Total$8,443 $7,869 _______________________(a)    Includes $1.9 billion and $1.9 billion of related allowance for credit losses resulting in gross restricted loan receivables of $22.4 billion and $21.3 billion at December 31, 2025 and 2024, respectively.(b)    Includes $42 million and $40 million of segregated funds held by the VIEs at December 31, 2025 and 2024, respectively, which are classified as restricted cash and equivalents and included as a component of Other assets in our Consolidated Statements of Financial Position. The balances presented above are net of intercompany balances and transactions that are eliminated in our consolidated financial statements, including amounts related to servicing of the loan receivables held by our VIEs. We provide servicing for all of our consolidated VIEs. Collections are required to be placed into segregated accounts owned by each VIE in amounts that meet contractually specified minimum levels. These segregated funds are invested in cash and cash equivalents and are restricted as to their use, principally to pay maturing principal and interest on debt and the related servicing fees. Collections above these minimum levels are remitted to us on a daily basis. The table below summarizes selected financial metrics of our consolidated securitization VIEs described above:For the years ended December 31 ($ in millions)202520242023Interest and fees on loans$4,377 $4,358 $3,930 Provision for credit losses$973 $963 $857 Interest expense$417 $427 $340 These amounts do not include intercompany transactions, which are eliminated in our consolidated financial statements. Non-consolidated VIEsAs part of our community reinvestment initiatives, we invest in funds that invest in affordable housing properties and receive affordable housing tax credits for these investments. We account for these investments using the proportional amortization method, where the costs of the investment are amortized in proportion to the income tax credits and other income tax benefits received. These investments are included in Other assets within our Consolidated Statements of Financial Position and totaled $943 million and $776 million at December 31, 2025 and December 31, 2024, respectively. At December 31, 2025, we are committed to provide funding related to these investments of $507 million, which is expected to be paid between 2026 and 2042, and is reported within Other liabilities within our Consolidated Statements of Financial Position.The table below summarizes amortization expense and tax credits and other tax benefits associated with investments in affordable housing properties included in Provision for income taxes in our Consolidated Statements of Earnings:For the years ended December 31 ($ in millions)202520242023Amortization expense$143 $90 $71 Tax credits and other benefits$(171)$(108)$(90)Our other investments in non-consolidated VIEs totaled $301 million and $274 million at December 31, 2025 and 2024, respectively, and are included in Other assets within our Consolidated Statements of Financial Position. At December 31, 2025, the Company also had investment commitments of $194 million related to these investments. We may be required to fund these commitments between 2026 and 2046.