SYFSynchrony Financial

Losses 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 as of 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 over the reasonable characteristics, such as retailer, performance and supportable forecast period. The model considers a macroeconomic forecast, with unemployment as the primary macroeconomic variable considered. We also perform a qualitative assessment in addition to model estimates and apply qualitative adjustments as necessary. 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, 2024 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, gradually increasing the weight of historical losses by an equal amount each month during the reversion period, 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 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.

We Additionally, emerging digital assets, such as stablecoins, may also face increased competition from current competitors or others who introduce or embrace disruptive technology grow to become an alternative form of payment tender that significantly changes the consumer credit and competes with our payment industry. products. We compete for customers and their usage of our products, and to minimize transfers to competitors of our customers’ outstanding balances, based on a number of factors, including pricing (interest rates and fees), product offerings, credit limits, incentives (including loyalty programs) and customer service. Although we offer a variety of consumer credit products, some of our competitors provide a broader selection of services, including home and automobile loans and other consumer banking services, which may position them better among customers who prefer to use a single financial institution to meet all of their financial needs. Some of our competitors are substantially larger than we are, which may give those competitors advantages, including a more diversified product and customer base, the ability to reach out to more customers and potential customers, operational efficiencies, more versatile technology platforms, broad-based local distribution capabilities and lower-cost funding. In addition, some of our competitors, including new and emerging competitors in the digital and mobile payments space, are not subject to the same regulatory requirements or legislative scrutiny to which we are subject. Non-bank providers of pay-over-time solutions, such as Affirm, Afterpay, Klarna and others, extend consumer credit-like offerings but do not face the same restrictions, such as capital requirements and other regulatory requirements, as banks, which also could place us at a competitive disadvantage. In addition, some larger technology focused companies, e.g., Apple and Google, and larger retailers, e.g., Walmart and Target, are now offering financial products sometimes in collaboration with our competitors. Customer attrition from any or all of our credit products or any lowering of the pricing of our products by reducing interest rates or fees in order to retain customers could reduce our revenues and, therefore, our earnings.

•Growth in loan receivables and interest and fees on loans. For the year ended December 31, 2024 2025 we experienced an increase a decrease in period-end loan receivables of 1.7% 0.9%, reflecting higher payment rates as a result of our improved credit mix, as well as flat purchase volume and lower average active accounts compared to the year ended December 31, 2024 as the credit actions we took across our portfolio in prior years continued moderation of customer payment behavior and the to impact of the Ally Lending acquisition, and interest loan receivable growth. Interest and fees on loans increased by 8.5%, 0.5%, driven primarily by loan receivables growth and the impacts from the implementation of our product, pricing and policy changes. These factors were changes, offset by a combination of lower benchmark rates and a decrease in average loan receivables, as well as lower late fee incidence. In 2026, we expect loan receivables to increase, reflecting growth in both purchase volume and average active accounts, including the impact from new or recently launched programs, partially offset by a decrease in purchase volume of 1.6%, primarily driven by lower consumer spending and the impacts continued effects from credit actions we have taken across our portfolio. elevated payment rates. In 2025, addition, we expect interest and fees on loans to increase, primarily reflecting the continued impact of our product, pricing and policy changes implemented changes, and growth in 2024, and expect loan receivables growth to continue to be impacted by the effects from the credit actions we have taken and consumer spend behavior, while also reflecting generally stable customer payment rates. receivables. In addition, the amount of the increases will be dependent on various factors, including whether customer payment rate trends and consumer spend behavior differs from our expectations, as well as any changes in benchmark interest rates. See above for potential additional impacts from rates or other regulatory or legislative developments that may impact the CFPB final rule yield on credit card late fees. our loan receivables.