# Synchrony Financial (SYF) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from Synchrony Financial's 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1601712/000160171225000044/syf-20241231.htm Accession: 0001601712-25-000044 Filing date: 2025-02-07 Report date: 2024-12-31 Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference. Confidence: high Company profile: /company/SYF/ All MD&A years: /company/SYF/mda/ Previous year: /company/SYF/mda/fy2023/ (FY 2023) Next year: /company/SYF/mda/fy2025/ (FY 2025) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. For a discussion and analysis of our financial condition and results of operations comparing 2023 vs. 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 (our “2023 Form 10-K”). The discussion below contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. See “Cautionary Note Regarding Forward-Looking Statements.” Results of Operations for the Three Years Ended December 31, 2024 ____________________________________________________________________________________________ Key Earnings Metrics [[GREPCENT_TABLE]] [["Net earnings$ in millions","","Net interest income$ in millions"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Net interest margin% of average interest-earning assets","","Efficiency ratio\u201cOther expense\u201d as a % of \u201cNII, after RSA\u201d plus \u201cOther income\u201d"]] [[/GREPCENT_TABLE]] 25 Growth Metrics [[GREPCENT_TABLE]] [["Purchase volume$ in billions","","Loan receivables$ in billions"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Average active accountsin millions","","Interest and fees on loans$ in millions"]] [[/GREPCENT_TABLE]] Asset Quality Metrics [[GREPCENT_TABLE]] [["30+ days past due% of period-end loan receivables","","Net charge-offs% of average loan receivables including held for sale"]] [[/GREPCENT_TABLE]] 26 [[GREPCENT_TABLE]] [["90+ days past due% of period-end loan receivables","","Allowance for credit losses% of period-end loan receivables"]] [[/GREPCENT_TABLE]] Capital and Liquidity [[GREPCENT_TABLE]] [["Capital ratiosCommon equity Tier 1 - Basel III","","LiquidityLiquid assets and undrawn credit facilities$ in billions"]] [[/GREPCENT_TABLE]] 27 Highlights for the Year Ended December 31, 2024 Below are highlights of our performance for the year ended December 31, 2024 compared to the year ended December 31, 2023, as applicable, except as otherwise noted. •Net earnings increased 56.3% to $3.5 billion for the year ended December 31, 2024, primarily driven by the after-tax gain on sale related to Pets Best of $802 million, higher net interest income and lower retailer share arrangements, partially offset by an increase in provision for credit losses. •Loan receivables increased 1.7% to $104.7 billion at December 31, 2024 compared to December 31, 2023, driven by lower customer payment rates and the impact of the Ally Lending acquisition, partially offset by lower purchase volume. •Net interest income increased 6.0% to $18.0 billion for the year ended December 31, 2024. Interest and fees on loans increased 8.5%, primarily driven by growth in average loan receivables, the impact of our product, pricing and policy changes and lower payment rates. Interest expense increased 24.9%, due to higher benchmark rates and higher interest-bearing liabilities. •Retailer share arrangements decreased 6.9% to $3.4 billion for the year ended December 31, 2024, primarily due to higher net charge-offs, partially offset by the impact of our product, pricing and policy changes. •Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased 4 basis points to 4.70% at December 31, 2024 from 4.74% at December 31, 2023. The net charge-off rate increased 144 basis points to 6.31% for the year ended December 31, 2024. •Provision for credit losses increased by $768 million to $6.7 billion, for the year ended December 31, 2024, primarily driven by higher net charge-offs, partially offset by lower reserve build. The reserve build in the year ended December 31, 2024 included $180 million related to the Ally Lending acquisition. Our allowance coverage ratio (allowance for credit losses as a percentage of period-end loan receivables) increased to 10.44% at December 31, 2024, as compared to 10.26% at December 31, 2023. •Other income increased by $1.2 billion to $1.5 billion for the year ended December 31, 2024, primarily driven by the $1.1 billion gain on sale related to the Pets Best disposition. •Other expense increased by $81 million, or 1.7%, for the year ended December 31, 2024, primarily driven by technology investments, costs related to the Ally Lending acquisition and preparatory expenses related to the late fee rule change, partially offset by lower operational losses and prior year restructuring costs. •At December 31, 2024, deposits represented 84% of our total funding sources. Total deposits increased 1.1% to $82.1 billion at December 31, 2024, compared to December 31, 2023. •In February 2024, we issued depositary shares representing $500 million of Series B 8.250% fixed rate reset non-cumulative perpetual preferred stock. •During the year ended December 31, 2024, we declared and paid cash dividends totaling $72 million on our Series A 5.625% fixed rate non-cumulative preferred stock and our Series B 8.250% fixed rate reset non-cumulative perpetual preferred stock. •During the year ended December 31, 2024, we repurchased $1.0 billion of our outstanding common stock, and declared and paid cash dividends of $1.00 per common share, or $398 million in the aggregate. In April 2024, the Board of Directors approved an incremental share repurchase program of up to $1.0 billion, through June 30, 2025, and maintained the quarterly dividend at its current amount of $0.25 per common share. At December 31, 2024 we had a total share repurchase authorization of $600 million remaining. For more information, see “Capital—Dividend and Share Repurchases.” 28 •In March 2024, we sold our wholly-owned subsidiary, Pets Best, for consideration comprising a combination of cash and an equity interest in Independence Pet Holdings, Inc. The sale resulted in the recognition of a gain on sale of $1.1 billion, or $802 million net of tax. •In March 2024, we acquired Ally Lending for cash consideration of $2.0 billion. The assets and liabilities of Ally Lending primarily included loan receivables with an unpaid principal balance of $2.2 billion. See Note 3. Acquisitions and Dispositions to our consolidated financial statements for additional information. 2024 Partner Agreements During the year ended December 31, 2024, and to date, we continued to expand and diversify our portfolios with the addition or renewal of more than 90 partners, as well as enter new strategic relationships, which included the following: [[GREPCENT_TABLE]] [["Home & Auto:"],["New partnerships:","\u2022 Bel Furniture","\u2022 The Carpet Guys"],["\u2022 National Alliance Trade Merchants (NATM)"],["Program extensions:","\u2022 Associated Materials","\u2022 Generac"],["\u2022 Big Sandy","\u2022 Jerome's Furniture"],["\u2022 BrandsMart","\u2022 P.C. Richard & Son"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Digital:"],["New partnerships:","\u2022 Virgin Red"],["Program extensions:","\u2022 Cathay Pacific","\u2022 Verizon"],["\u2022 Newegg"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Diversified & Value:"],["Program extensions:","\u2022 JCPenney","\u2022 Sam's Club"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Health & Wellness:"],["New partnerships:","\u2022 Bond Veterinary","\u2022 Pet Paradise"],["\u2022 Lakefield Veterinary Group","\u2022 Western Veterinary"],["\u2022 LaserAway"],["Extensions:","\u2022 Bosley","\u2022 LCA Vision"],["\u2022 HearingLife","\u2022 SCI"],["\u2022 Innovetive","\u2022 Suveto"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Lifestyle:"],["New partnerships:","\u2022 BRP","\u2022 Gibson"],["Program extensions:","\u2022 CF Moto","\u2022 EC Barton"],["\u2022 Daniel's","\u2022 Reeds"],["\u2022 Dick's Sporting Goods"]] [[/GREPCENT_TABLE]] •We added two new strategic technology partnerships with Adit Practice Management Software and ServiceTitan, both of which expand access for customers to our suite of credit products. •We entered into a relationship with Atlanticus Holdings Corporation to deliver a preferred second look financing solution for private label credit cards and installment loan products across our business. 29 Summary Earnings The following table sets forth our results of operations for the periods indicated. [[GREPCENT_TABLE]] [["","Years ended December 31,"],["($ in millions)","2024","","2023","","2022"],["Interest income","$","22,645","","","$","20,710","","","$","17,146"],["Interest expense","4,634","","","3,711","","","1,521"],["Net interest income","18,011","","","16,999","","","15,625"],["Retailer share arrangements","(3,407)","","","(3,661)","","","(4,331)"],["Provision for credit losses","6,733","","","5,965","","","3,375"],["Net interest income, after retailer share arrangements and provision for credit losses","7,871","","","7,373","","","7,919"],["Other income","1,521","","","289","","","380"],["Other expense","4,839","","","4,758","","","4,337"],["Earnings before provision for income taxes","4,553","","","2,904","","","3,962"],["Provision for income taxes","1,054","","","666","","","946"],["Net earnings","$","3,499","","","$","2,238","","","$","3,016"],["Net earnings available to common stockholders","$","3,427","","","$","2,196","","","$","2,974"]] [[/GREPCENT_TABLE]] 30 Other Financial and Statistical Data The following table sets forth certain other financial and statistical data for the periods indicated.     [[GREPCENT_TABLE]] [["At and for the years ended December 31 ($ in millions)","2024","","2023","","2022"],["Financial Position Data (Average):"],["Loan receivables, including held for sale","$","101,733","","","$","94,832","","","$","84,672"],["Total assets","$","119,386","","","$","109,819","","","$","98,152"],["Deposits","$","82,656","","","$","75,889","","","$","66,006"],["Borrowings","$","15,814","","","$","14,918","","","$","13,783"],["Total equity","$","15,568","","","$","13,669","","","$","13,372"],["Selected Performance Metrics:"],["Purchase volume(1)(2)","$","182,173","","","$","185,178","","","$","180,187"],["Home & Auto","$","45,074","","","$","47,410","","","$","47,288"],["Digital","$","54,700","","","$","55,051","","","$","51,394"],["Diversified & Value","$","61,059","","","$","61,227","","","$","56,666"],["Health & Wellness","$","15,678","","","$","15,565","","","$","13,569"],["Lifestyle","$","5,660","","","$","5,922","","","$","5,498"],["Corp, Other","$","2","","","$","3","","","$","5,772"],["Average active accounts (in thousands)(2)(3)","70,904","","","70,337","","","68,627"],["Net interest margin(4)","14.76","%","","15.15","%","","15.63","%"],["Net charge-offs","$","6,420","","","$","4,620","","","$","2,536"],["Net charge-offs as a % of average loan receivables, including held for sale","6.31","%","","4.87","%","","3.00","%"],["Allowance coverage ratio(5)","10.44","%","","10.26","%","","10.30","%"],["Return on assets(6)","2.9","%","","2.0","%","","3.1","%"],["Return on equity(7)","22.5","%","","16.4","%","","22.6","%"],["Equity to assets(8)","13.04","%","","12.45","%","","13.62","%"],["Other expense as a % of average loan receivables, including held for sale","4.76","%","","5.02","%","","5.12","%"],["Efficiency ratio(9)","30.0","%","","34.9","%","","37.2","%"],["Effective income tax rate","23.1","%","","22.9","%","","23.9","%"],["Selected Period End Data:"],["Loan receivables","$","104,721","","","$","102,988","","","$","92,470"],["Allowance for credit losses","$","10,929","","","$","10,571","","","$","9,527"],["30+ days past due as a % of period-end loan receivables(10)","4.70","%","","4.74","%","","3.65","%"],["90+ days past due as a % of period-end loan receivables(10)","2.40","%","","2.28","%","","1.69","%"],["Total active accounts (in thousands)(2)(3)","71,532","","","73,484","","","70,763"]] [[/GREPCENT_TABLE]] __________________ (1)Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period. (2)Includes activity and accounts associated with loan receivables held for sale. (3)Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. (4)Net interest margin represents net interest income divided by average total interest-earning assets. (5)Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables. (6)Return on assets represents net earnings as a percentage of average total assets. (7)Return on equity represents net earnings as a percentage of average total equity. (8)Equity to assets represents average equity as a percentage of average total assets. (9)Efficiency ratio represents (i) other expense, divided by (ii) sum of net interest income, plus other income, less retailer share arrangements. (10)Based on customer statement-end balances extrapolated to the respective period-end date. 31 Average Balance Sheet The following table sets forth information for the periods indicated regarding average balance sheet data, which are used in the discussion of interest income, interest expense and net interest income that follows. [[GREPCENT_TABLE]] [["","2024","","2023","2022"],["Years ended December 31 ($ in millions)","Average Balance","","Interest Income / Expense","","AverageYield /Rate(1)","","Average Balance","","Interest Income/ Expense","","AverageYield /Rate(1)","","Average Balance","","Interest Income/ Expense","","AverageYield /Rate(1)"],["Assets"],["Interest-earning assets:"],["Interest-earning cash and equivalents(2)","$","17,294","","","$","913","","","5.28","%","","$","13,272","","","$","678","","","5.11","%","","$","10,215","","","$","194","","","1.90","%"],["Securities available for sale","2,965","","","136","","","4.59","%","","4,077","","","130","","","3.19","%","","5,108","","","71","","","1.39","%"],["Loan receivables, including held for sale(3):"],["Credit cards","93,907","","","20,554","","","21.89","%","","89,383","","","19,341","","","21.64","%","","80,119","","","16,471","","","20.56","%"],["Consumer installment loans","5,744","","","854","","","14.87","%","","3,501","","","401","","","11.45","%","","2,834","","","287","","","10.13","%"],["Commercial credit products","1,956","","","179","","","9.15","%","","1,826","","","150","","","8.21","%","","1,642","","","117","","","7.13","%"],["Other","126","","","9","","","7.14","%","","122","","","10","","","8.20","%","","77","","","6","","","7.79","%"],["Total loan receivables, including held for sale","101,733","","","21,596","","","21.23","%","","94,832","","","19,902","","","20.99","%","","84,672","","","16,881","","","19.94","%"],["Total interest-earning assets","121,992","","","22,645","","","18.56","%","","112,181","","","20,710","","","18.46","%","","99,995","","","17,146","","","17.15","%"],["Non-interest-earning assets:"],["Cash and due from banks","887","","","","","","","962","","","","","","","1,472"],["Allowance for credit losses","(10,891)","","","","","","","(9,726)","","","","","","","(8,844)"],["Other assets","7,398","","","","","","","6,402","","","","","","","5,529"],["Total non-interest-earning assets","(2,606)","","","","","","","(2,362)","","","","","","","(1,843)"],["Total assets","$","119,386","","","","","","","$","109,819","","","","","","","$","98,152"],["Liabilities"],["Interest-bearing liabilities:"],["Interest-bearing deposit accounts","$","82,268","","","$","3,806","","","4.63","%","","$","75,487","","","$","2,952","","","3.91","%","","$","65,624","","","$","1,008","","","1.54","%"],["Borrowings of consolidated securitization entities","7,732","","","427","","","5.52","%","","6,274","","","340","","","5.42","%","","6,468","","","196","","","3.03","%"],["Senior and subordinated unsecured notes","8,082","","","401","","","4.96","%","","8,644","","","419","","","4.85","%","","7,315","","","317","","","4.33","%"],["Total interest-bearing liabilities","98,082","","","4,634","","","4.72","%","","90,405","","","3,711","","","4.10","%","","79,407","","","1,521","","","1.92","%"],["Non-interest-bearing liabilities:"],["Non-interest-bearing deposit accounts","388","","","","","","","402","","","","","","","382"],["Other liabilities","5,348","","","","","","","5,343","","","","","","","4,991"],["Total non-interest-bearing liabilities","5,736","","","","","","","5,745","","","","","","","5,373"],["Total liabilities","103,818","","","","","","","96,150","","","","","","","84,780"],["Equity"],["Total equity","15,568","","","","","","","13,669","","","","","","","13,372"],["Total liabilities and equity","$","119,386","","","","","","","$","109,819","","","","","","","$","98,152"],["Interest rate spread(4)","","","","","13.84","%","","","","","","14.36","%","","","","","","15.23","%"],["Net interest income","","","$","18,011","","","","","","","$","16,999","","","","","","","$","15,625"],["Net interest margin(5)","","","","","14.76","%","","","","","","15.15","%","","","","","","15.63","%"]] [[/GREPCENT_TABLE]] ____________________ (1)Average yields/rates are based on total interest income/expense divided by average balances. (2)Includes average restricted cash balances of $73 million, $279 million and $558 million for the years ended December 31, 2024, 2023 and 2022, respectively. 32 (3)Interest income on loan receivables includes fees on loans, which primarily consist of late fees on our credit products, of $2.5 billion, $2.7 billion and $2.7 billion for the years ended December 31, 2024, 2023 and 2022, respectively. (4)Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities. (5)Net interest margin represents net interest income divided by average total interest-earning assets. The following table sets forth the amount of changes in interest income and interest expense due to changes in average volume and average yield/rate. Variances due to changes in both average volume and average yield/rate have been allocated between the average volume and average yield/rate variances on a consistent basis based upon the respective percentage changes in average volume and average yield/rate. [[GREPCENT_TABLE]] [["","2024 vs. 2023","","2023 vs. 2022"],["","Increase (decrease) due to change in:","","Increase (decrease) due to change in:"],["($ in millions)","Average Volume","","Average Yield / Rate","","Net Change","","Average Volume","","Average Yield / Rate","","Net Change"],["Interest-earning assets:"],["Interest-earning cash and equivalents","$","205","","","$","30","","","$","235","","","$","73","","","$","411","","","$","484"],["Securities available for sale","(35)","","","41","","","6","","","(17)","","","76","","","59"],["Loan receivables, including held for sale:"],["Credit cards","979","","","234","","","1,213","","","1,974","","","896","","","2,870"],["Consumer installment loans","257","","","196","","","453","","","73","","","41","","","114"],["Commercial credit products","11","","","18","","","29","","","14","","","19","","","33"],["Other","\u2014","","","(1)","","","(1)","","","4","","","\u2014","","","4"],["Total loan receivables, including held for sale","1,247","","","447","","","1,694","","","2,065","","","956","","","3,021"],["Change in interest income from total interest-earning assets","$","1,417","","","$","518","","","$","1,935","","","$","2,121","","","$","1,443","","","$","3,564"],["Interest-bearing liabilities:"],["Interest-bearing deposit accounts","$","265","","","$","589","","","$","854","","","$","173","","","$","1,771","","","$","1,944"],["Borrowings of consolidated securitization entities","79","","","8","","","87","","","(6)","","","150","","","144"],["Senior and subordinated unsecured notes","(27)","","","9","","","(18)","","","62","","","40","","","102"],["Change in interest expense from total interest-bearing liabilities","317","","","606","","","923","","","229","","","1,961","","","2,190"],["Total change in net interest income","$","1,100","","","$","(88)","","","$","1,012","","","$","1,892","","","$","(518)","","","$","1,374"]] [[/GREPCENT_TABLE]] 33 Business Trends and Conditions We believe our business and results of operations will be impacted in the future by various trends and conditions, including the following: •CFPB final rule on credit card late fees. On March 5, 2024, the CFPB issued a final rule amending its regulations that implement the Truth in Lending Act to, among other things, lower the safe harbor dollar amount for credit card late fees from $30 (adjusted to $41 for each subsequent late payment within the next six billing cycles) to $8 and eliminate the automatic annual inflation adjustment to such safe harbor dollar amount. The final rule, when effective, will result in a significant reduction in our interest and fees on loan receivables. Industry organizations have challenged the final rule in court. The final rule had an original effective date of May 14, 2024; however, on May 10, 2024, the United States District Court for the Northern District of Texas granted an injunction and stay of the final rule, and the injunction remains in effect. As a result, the ultimate outcome and impact of this litigation on the final rule, including whether the final rule will become effective, and if it were to becomes effective, the timing of such implementation, is uncertain. In anticipation that the final rule will become effective, in 2024 we implemented a number of product, pricing and policy changes. See below for discussions on our other trends and conditions, which include consideration of the impact of these changes upon our business and results of operations. While we continue to believe that over time the strategies we have implemented will fully offset the decline in late fee income resulting from an effective final rule, it may take time for such product, pricing and policy changes to offset the expected reduction in late fees if the final rule is implemented. In addition, in the event that the final rule is implemented, this would result in a decrease in payments to partners pursuant to our retailer share arrangements. However, the effects of the final rule are also subject to other factors that could increase the adverse effects to our results of operations, including any potential changes in consumer behavior in response to the product, pricing and policy changes or the implementation of the final rule itself, if that occurs. For a discussion of risks related to a CFPB final late fee rule, please see “—Risk Factors Relating to Our Business—The CFPB’s final rule on credit card late fees, if implemented, would likely materially adversely affect our business and results of operations.” •Growth in loan receivables and interest and fees on loans. For the year ended December 31, 2024 we experienced an increase in period-end loan receivables of 1.7% reflecting a continued moderation of customer payment behavior and the impact of the Ally Lending acquisition, and interest and fees on loans increased by 8.5%, driven primarily by loan receivables growth and the impacts from the implementation of our product, pricing and policy changes. These factors were partially offset by a decrease in purchase volume of 1.6%, primarily driven by lower consumer spending and the impacts from credit actions we have taken across our portfolio. In 2025, we expect interest and fees on loans to increase, primarily reflecting the continued impact of our product, pricing and policy changes implemented 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. 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 the CFPB final rule on credit card late fees. •Asset quality. As a result of the continued moderation of customer payment behavior, our asset quality metrics have generally been higher during 2024 as compared to the prior year period. Our net charge-off rate for the year ended December 31, 2024 increased by 144 basis points to 6.31% and our over-90 day loan delinquencies as a percentage of period-end loan receivables at December 31, 2024 increased by 12 basis points to 2.40%. However, our over-30 day loan delinquencies as a percentage of period-end loan receivables decreased by 4 basis points to 4.70% at December 31, 2024 reflecting the impact of the credit actions we have taken. We anticipate that net charge-offs for the year ended December 31, 2025 will decrease, primarily reflecting the stabilization of our delinquency rates and the impacts from the credit actions we have taken. At December 31, 2024 our allowance coverage rate was 10.44%. We anticipate that our allowance coverage rate will moderate in 2025 reflecting the credit trends discussed above. 34 •Funding costs. During 2024 benchmark interest rates remained at their recently elevated levels for the majority of the year, before lowering beginning in September 2024, which contributed to an increase in our cost of funds of 62 basis points compared to the prior year, to 4.72%. In addition, our average funding liabilities have also increased to support the growth in our loan receivables. As a result, interest expense for the year ended December 31, 2024 increased by $923 million or 24.9%, compared to the prior year. We anticipate both interest expense and our cost of funds will decrease in 2025 due to the lower benchmark rates, including the effects of our certificates of deposit maturities repricing. The amount of the decreases, however, will be dependent on any further benchmark rate changes, competition for our deposit product offerings, the extent of the growth in our loan receivables and the funding mix utilized to support our growth in loan receivables. •Retailer share arrangement payments under our program agreements. Retailer share arrangements decreased 6.9% to $3.4 billion for the year ended December 31, 2024, primarily due to higher net charge-offs, partially offset by the impact of our product, pricing and policy changes. We believe that the payments we make to our partners under our retailer share arrangements, in the aggregate, in 2025 will increase compared to the year ended December 31, 2024, primarily as a result of the impact of our product, pricing and policy changes and an expected reduction in net charge-offs. The expected trend in retailer share arrangements will be dependent in part on the precise timing and extent of the anticipated credit trends discussed above and the magnitude of impact from our product, pricing and policy changes. See Management’s Discussion and Analysis—Retailer Share Arrangements for additional information on these agreements. See above for potential additional impacts from the CFPB final rule on credit card late fees. •Extended duration of our credit card program agreements. Our credit card program agreements typically have contract terms ranging from approximately three to ten years, and the length of our relationship with each of our five largest partners is over 17 years, and in the case of Lowe's, 45 years. We expect to continue to benefit from these and our other programs on a long-term basis. The current expiration dates of our program agreements with our five largest partners range from 2026 through 2034. In addition, a total of 17 of our 25 largest program agreements have an expiration date in 2027 or beyond. These 17 program agreements represented, in the aggregate as a percentage of the total attributable to our 25 largest programs, 82% of our interest and fees on loans for the year ended December 31, 2024 and 81% of our loan receivables at December 31, 2024. •Growth in other income. During the year ended December 31, 2024, other income included the $1.1 billion gain on sale related to the disposition of Pets Best. Absent the effects of this gain, we expect other income to increase in 2025 primarily due to the impact of our product, pricing and policy changes implemented in 2024. We also believe that as a result of the overall growth in Dual Card transactions occurring outside of our credit card partners’ locations and general purpose co-branded credit card transactions, interchange revenues will increase. The expected growth in these transactions is driven, in part, by both existing and new loyalty programs with our credit card partners. In addition, we continue to offer and add new loyalty programs for our private label credit cards, for which we typically do not receive interchange fees. We expect the continued growth in these existing and new loyalty programs will result in an increase in costs associated with these programs. For the year ended December 31, 2024, our loyalty program costs exceeded our interchange revenues and we expect a relatively similar relationship between these costs and revenues to continue in 2025. These trends have been contemplated in our program agreements with our partners and are a component of the calculation of our payments due under our retailer share arrangements. 35 •Capital and liquidity levels. We continue to expect to maintain sufficient capital and liquidity resources to support our daily operations, our business growth, and our credit ratings as well as regulatory and compliance requirements in a cost effective and prudent manner through expected and unexpected market environments. During the year ended December 31, 2024, we declared and paid common stock dividends of $398 million and repurchased $1.0 billion of our outstanding common stock. We plan to continue to deploy capital through both dividends and share repurchases, as guided by our business performance, market conditions and subject to regulatory restrictions. At December 31, 2024 we had $600 million remaining in share repurchase authorization. We continue to expect to maintain capital ratios well in excess of minimum regulatory requirements. At December 31, 2024, the Company had a Basel III common equity Tier 1 ratio of 13.3%, which reflects our election to defer the impact of CECL on our regulatory capital and the current year phase-in, which cumulatively represents 75% of the impact. The effects of CECL will be fully phased-in beginning in the first quarter of 2025, which we expect will result in a reduction of our common equity Tier 1 ratio of approximately 50 additional basis points. We expect that our liquidity portfolio will continue to be sufficient to support all of our business objectives and to meet all regulatory requirements for the foreseeable future. At December 31, 2024 our liquid assets were $17.2 billion, or 14.4% of total assets. Seasonality We experience fluctuations in purchase volume and the level of loan receivables as a result of higher seasonal consumer spending and payment patterns that typically result in an increase of loan receivables from August through a peak in late December, with reductions in loan receivables typically occurring over the first and second quarters of the following year as customers pay their balances down. The seasonal impact to purchase volume and the loan receivables balance typically results in fluctuations in our results of operations, delinquency metrics and the allowance for credit losses as a percentage of total loan receivables between quarterly periods. These fluctuations are generally most evident between the fourth quarter and the first quarter of the following year. In addition to the seasonal variance in loan receivables discussed above, we also typically experience a seasonal increase in delinquency rates and delinquent loan receivables balances during the third and fourth quarters of each year due to lower customer payment rates, resulting in higher net charge-off rates in the first half of the calendar year. Our delinquency rates and delinquent loan receivables balances typically decrease during the subsequent first and second quarters as customers begin to pay down their loan balances and return to current status, resulting in lower net charge-off rates in the second half of the calendar year. Because customers who were delinquent during the fourth quarter of a calendar year have a higher probability of returning to current status when compared to customers who are delinquent at the end of each of our interim reporting periods, we expect that a higher proportion of delinquent accounts outstanding at an interim period end will result in charge-offs, as compared to delinquent accounts outstanding at a year end. Consistent with this historical experience, we generally experience a higher allowance for credit losses as a percentage of total loan receivables at the end of an interim period, as compared to the end of a calendar year. In addition, even in instances of improving credit metrics such as declining past due amounts, we may experience an increase in our allowance for credit losses at an interim period end compared to the prior year end, reflecting these same seasonal trends. However, in addition to these seasonal trends, the moderation in customer payment behavior from the previously elevated levels we experienced in recent periods, has also significantly impacted our key financial metrics, such as our net charge-off rate, and also the fluctuations experienced between quarterly periods. The effects from these changes in customer payment behavior have resulted and may continue to result in either partial, or in some instances full, offset to the impact from the ongoing seasonal trends discussed above. 36 Interest Income Interest income is comprised of interest and fees on loans, which includes merchant discounts provided by partners to compensate us in almost all cases for all or part of the promotional financing provided to their customers, and interest on cash and equivalents and investment securities. We include in interest and fees on loans any past due interest and fees deemed to be collectible. Direct loan origination costs on credit card loans are deferred and amortized on a straight-line basis over a one-year period and recorded in interest and fees on loans. For non-credit card receivables, direct loan origination costs are deferred and amortized over the life of the loan and recorded in interest and fees on loans. We analyze interest income as a function of two principal components: average interest-earning assets and yield on average interest-earning assets. Key drivers of average interest-earning assets include: •purchase volumes, which are influenced by a number of factors including macroeconomic conditions and consumer confidence generally, our partners’ sales and our ability to increase our share of those sales; •payment rates, reflecting the extent to which customers maintain a credit balance; •charge-offs, reflecting the receivables that are deemed not to be collectible; •the size of our liquidity portfolio; and •portfolio acquisitions when we enter into new partner relationships. Key drivers of yield on average interest-earning assets include: •pricing (contractual rates of interest, movement in prime rates, late fees and merchant discount rates); •changes to our mix of loans (e.g., the number of loans bearing promotional rates as compared to standard rates); •frequency of late fees incurred when account holders fail to make their minimum payment by the required due date; •credit performance and accrual status of our loans, including reversals of interest and fees; and •yield earned on our liquidity portfolio. Interest income increased by $1.9 billion, or 9.3%, for the year ended December 31, 2024, primarily driven by the increase in interest and fees on loans of 8.5%. The increase in interest and fees on loans was primarily driven by growth in average loan receivables, the impact of our product, pricing and policy changes and lower customer payment rates, partially offset by higher reversals. Average interest-earning assets [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Loan receivables, including held for sale","$","101,733","","","$","94,832"],["Liquidity portfolio and other","20,259","","","17,349"],["Total average interest-earning assets","$","121,992","","","$","112,181"]] [[/GREPCENT_TABLE]] Average loan receivables, including held for sale, increased 7.3% for the year ended December 31, 2024, primarily driven by lower customer payment rates and the impact of the Ally Lending acquisition, partially offset by lower purchase volume. Purchase volume decreased 1.6% for the year ended December 31, 2024, reflecting lower consumer spend as well as the impact of credit actions, partially offset by the Ally Lending acquisition. 37 Yield on average interest-earning assets The yield on average interest-earning assets increased for the year ended December 31, 2024 primarily due to increases in the yield on average loan receivables. The loan receivables yield increased 24 basis points to 21.23% for the year ended, driven by repricing actions including the impacts of our product, pricing and policy changes, and lower customer payment rates, partially offset by the impact of higher reversals. Interest Expense Interest 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. Key drivers of interest expense include: •the amounts outstanding of our deposits and borrowings; •the interest rate environment and its effect on interest rates paid on our funding sources; and •the changing mix in our funding sources. Interest expense increased by $923 million, or 24.9%, for the year ended December 31, 2024, primarily attributed to higher benchmark rates and higher interest-bearing liabilities. Our cost of funds increased to 4.72% for the year ended December 31, 2024 compared to 4.10% for the year ended December 31, 2023. Average interest-bearing liabilities [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Interest-bearing deposit accounts","$","82,268","","","$","75,487"],["Borrowings of consolidated securitization entities","7,732","","","6,274"],["Senior and subordinated unsecured notes","8,082","","","8,644"],["Total average interest-bearing liabilities","$","98,082","","","$","90,405"]] [[/GREPCENT_TABLE]] Net Interest Income Net interest income represents the difference between interest income and interest expense. Net interest income increased by $1.0 billion, or 6.0%, for the year ended December 31, 2024, resulting from the changes in interest income and interest expense discussed above. 38 Retailer Share Arrangements Most of our program agreements with large retail and certain other 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). All of these arrangements are designed to align our interests and provide an additional incentive to our partners to promote our credit products. Although the retailer 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. The threshold and economic performance of a program that are used to calculate payments to our partners may be based on, among other things, agreed upon measures of program expenses rather than our actual expenses, and therefore increases in our actual expenses (such as funding costs, higher provision for credit losses or operating expenses) may not necessarily result in reduced payments under our retailer share arrangements. These arrangements are typically designed to permit us to achieve an economic return before we are required to make payments to our partners based on the agreed contractually defined threshold. Our payments to partners pursuant to these retailer share arrangements are dependent upon the growth and performance, including credit trends, of the programs in which we have retailer share arrangements, as well as changes to the terms of certain program agreements that have been renegotiated in the past few years. See above in Business Trends and Conditions, for a discussion of our expected trends in retailer share arrangements for 2025. We believe that our retailer share arrangements have been effective in helping us to grow our business by aligning our partners’ interests with ours. We also believe that the changes to the terms of certain program agreements in recent years will help us to grow our business by providing an additional incentive to the relevant partners to promote our credit products going forward. Payments to partners pursuant to these retailer share arrangements would generally decrease, and mitigate the impact on our profitability, in the event of declines in the performance of the programs or the occurrence of other unfavorable developments that impact the calculation of payments to our partners pursuant to our retailer share arrangements. Retailer share arrangements decreased by $254 million, or 6.9%, for the year ended December 31, 2024, primarily due to higher net charge-offs, partially offset by the impact of our product, pricing and policy changes. Provision for Credit Losses Provision for credit losses is the expense related to maintaining the allowance for credit losses at an appropriate level to absorb the expected credit losses for the life of the loan balance as of the period end date. Provision for credit losses in each period is primarily a function of net charge-offs (gross charge-offs net of recoveries) and changes in our allowance for credit losses. Our process to determine our allowance for credit losses is based upon our estimate of expected credit losses for the life of the loan balance as of the period end date. See “Critical Accounting Estimates - Allowance for Credit Losses” and Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements for additional information on our allowance for credit loss methodology. Provision for credit losses increased by $768 million to $6.7 billion, for the year ended December 31, 2024, primarily driven by higher net charge-offs, partially offset by a lower reserve build in the current year. The net charge-off rate for the year ended December 31, 2024 increased by 144 basis points to 6.31%, as compared to the prior year, and was 76 basis points above the average of 2017 through 2019. The reserve build in the year ended December 31, 2024 included $180 million related to the Ally Lending acquisition. 39 Other Income [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Interchange revenue","$","1,026","","","$","1,031"],["Protection product revenue","562","","","510"],["Loyalty programs","(1,382)","","","(1,370)"],["Other","1,315","","","118"],["Total other income","$","1,521","","","$","289"]] [[/GREPCENT_TABLE]] Interchange revenue We earn interchange fees on Dual Card transactions outside of our partners’ sales channels, and from general purpose co-branded credit cards, generally based on a flat fee plus a percentage of the purchase amount. Interchange revenue has been, and is expected to continue to be, driven primarily by growth in our Dual Card and general purpose co-branded credit card products. Interchange revenue decreased by $5 million, or 0.5%, for the year ended December 31, 2024, driven by a decrease in purchase volume outside of our retail partners' sales channels. Protection product revenue We offer our Payment Security program, which is a debt cancellation product, to our credit card customers via direct to consumer online and mobile channels. For customers who choose to purchase these products, we earn a monthly fee based on their account balance. In return, we will cancel all or a portion of a customer’s credit card balance in the event of certain qualifying life events. Protection product revenue increased by $52 million, or 10.2%, for the year ended December 31, 2024, primarily as a result of higher average balances on enrolled accounts and increases in customer enrollment. Loyalty programs We operate a number of loyalty programs that provide rewards to our customers that are designed to foster engagement, drive incremental purchases, and promote customer retention. These programs typically provide cardholders with statement credit or cash back rewards. Other programs include reward offers that accrue, typically based upon customer spend, and can be applied toward a future purchase. Growth in loyalty program payments has been, and is expected to continue to be, driven by growth in purchase volume related to existing loyalty programs and the rollout of new loyalty programs. Loyalty programs cost increased by $12 million, or 0.9%, for the year ended December 31, 2024, primarily as a result of growth in purchase volume associated with existing loyalty programs. Other Other includes a variety of items including other customer-related fees, such as paper statement fees, changes in the fair value of equity investments and realized gains or losses associated with the sale of businesses, investments, loan receivables or other assets. Other increased by $1.2 billion for the year ended December 31, 2024 primarily driven by the gain on sale related to the Pets Best disposition. 40 Other Expense [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Employee costs","$","1,872","","","$","1,884"],["Professional fees","936","","","842"],["Marketing and business development","524","","","527"],["Information processing","803","","","712"],["Other","704","","","793"],["Total other expense","$","4,839","","","$","4,758"]] [[/GREPCENT_TABLE]] Employee costs Employee costs primarily consist of employee compensation and benefit costs. Employee costs decreased by $12 million, or 0.6%, for the year ended December 31, 2024, primarily attributable to $43 million of restructuring costs related to a voluntary early retirement program in the prior year, partially offset by costs related to the Ally Lending acquisition. Professional fees Professional fees primarily consist of consulting services, outsourced provider fees (e.g., collection agencies and call centers), legal, accounting, and recruiting expenses. Professional fees increased by $94 million, or 11.2%, for the year ended December 31, 2024, primarily due to costs related to the Ally Lending acquisition and technology investments. Marketing and business development Marketing and business development costs primarily consist of our contractual and discretionary marketing and business development spend, as well as amortization expense associated with contract costs related to our retail partner agreements. Marketing and business development decreased by $3 million, or 0.6%, for the year ended December 31, 2024, as higher marketing investments in the current year were offset by the impacts of the Pets Best disposition. Information processing Information processing costs primarily consist of fees related to outsourced information processing providers, credit card associations and software licensing agreements, as well as amortization of capitalized software expenditures. Information processing costs increased by $91 million, or 12.8%, for the year ended December 31, 2024, primarily driven by technology investments, including an increase in software licensing costs and higher amortization of capitalized software expenditures. Other Other primarily consists of postage, fraud-related operational losses, litigation and regulatory matters expense and various other corporate overhead items such as facilities' costs and telephone charges. Postage is driven primarily by the number of our active accounts and the percentage of customers that utilize our electronic billing option. Fraud-related operational losses are driven primarily by the number of our active Dual Card and general purpose co-branded credit card accounts. Other decreased by $89 million, or 11.2%, for the year ended December 31, 2024, primarily due to lower operational losses. 41 Provision for Income Taxes [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Effective tax rate","23.1","%","","22.9","%"],["Provision for income taxes","$","1,054","","","$","666"]] [[/GREPCENT_TABLE]] The effective tax rate for the year ended December 31, 2024, increased compared to the prior year primarily due to the increase in pretax income reducing the tax rate benefit of tax credits and other tax benefits. The effective tax rate differs from the U.S. federal statutory tax rate primarily due to state income taxes. Platform Analysis As discussed above under “Our Business—Our Sales Platforms,” we offer our credit products through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle). The following is a discussion of certain supplemental information for the years ended December 31, 2024 and 2023, for each of our five sales platforms and Corp, Other. Home & Auto [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Purchase volume","$","45,074","","","$","47,410"],["Period-end loan receivables","$","32,034","","","$","31,969"],["Average loan receivables, including held for sale","$","32,298","","","$","30,722"],["Average active accounts (in thousands)","19,014","","","18,967"],["Interest and fees on loans","$","5,777","","","$","5,270"],["Other income","$","190","","","$","106"]] [[/GREPCENT_TABLE]] Home & Auto interest and fees on loans increased by $507 million, or 9.6%, for the year ended December 31, 2024, primarily driven by higher average loan receivables, the impact of product, pricing and policy changes and higher benchmark rates. The increase in average loan receivables primarily reflects the completion of the Ally Lending acquisition as well as the impact of lower customer payment rates, partially offset by lower purchase volume. Purchase volume decreased 4.9%, for the year ended December 31, 2024, as the impact of the Ally Lending acquisition was more than offset by a combination of lower consumer traffic, fewer large ticket purchases and the impact of credit actions. Other income increased by $84 million, or 79.2%, for the year ended December 31, 2024 primarily due to the impact of product, pricing and policy change related fees, lower loyalty costs and higher protection product revenue. Digital [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Purchase volume","$","54,700","","","$","55,051"],["Period-end loan receivables","$","29,347","","","$","28,925"],["Average loan receivables, including held for sale","$","27,872","","","$","26,005"],["Average active accounts (in thousands)","20,986","","","20,793"],["Interest and fees on loans","$","6,286","","","$","5,894"],["Other income","$","4","","","$","(14)"]] [[/GREPCENT_TABLE]] Digital interest and fees on loans increased by $392 million, or 6.7%, for the year ended December 31, 2024, primarily driven by higher average loan receivables, lower payment rates and higher benchmark rates. Purchase volume decreased 0.6% for the year ended December 31, 2024, primarily driven by lower consumer spend per account and the impact of credit actions. Average active accounts increased by 0.9% for the year ended December 31, 2024. 42 Other income increased by $18 million for the year ended December 31, 2024, primarily due to the impact of product, pricing and policy change related fees and higher protection product revenue, partially offset by lower interchange revenue. Diversified & Value [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Purchase volume","$","61,059","","","$","61,227"],["Period-end loan receivables","$","20,867","","","$","20,666"],["Average loan receivables, including held for sale","$","19,540","","","$","18,414"],["Average active accounts (in thousands)","20,437","","","20,738"],["Interest and fees on loans","$","4,794","","","$","4,533"],["Other income","$","(59)","","","$","(93)"]] [[/GREPCENT_TABLE]] Diversified & Value interest and fees on loans increased by $261 million, or 5.8%, for the year ended December 31, 2024, primarily driven by growth in average loan receivables, lower payment rates and higher benchmark rates. Purchase volume decreased by 0.3%, for the year ended December 31, 2024 primarily driven by fewer active accounts and the impact of credit actions. Average active accounts decreased 1.5% for the year ended December 31, 2024. Other income increased by $34 million for the year ended December 31, 2024 primarily due to the impact of product, pricing and policy change related fees and higher interchange revenue, partially offset by higher loyalty costs. Health & Wellness [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Purchase volume","$","15,678","","","$","15,565"],["Period-end loan receivables","$","15,436","","","$","14,521"],["Average loan receivables, including held for sale","$","15,143","","","$","13,261"],["Average active accounts (in thousands)","7,743","","","7,169"],["Interest and fees on loans","$","3,671","","","$","3,231"],["Other income","$","254","","","$","271"]] [[/GREPCENT_TABLE]] Health & Wellness interest and fees on loans increased by $440 million, or 13.6%. for the year ended December 31, 2024, primarily driven higher average loan receivables. The growth in average loan receivables reflected higher purchase volume over the last 12 months and lower customer payment rates, as well as the completion of the Ally Lending acquisition. Purchase volume increased 0.7%, and average active accounts increased 8.0% for the year ended December 31, 2024, reflecting growth in Pet and Audiology, partially offset by lower spend in Dental, Cosmetic and Vision, as well as the impact of credit actions. Other income decreased by $17 million for the year ended December 31, 2024, primarily due to lower commission fees following the Pets Best disposition, partially offset by higher protection product revenue and the impact of product, pricing and policy change related fees. 43 Lifestyle [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Purchase volume","$","5,660","","","$","5,922"],["Period-end loan receivables","$","6,914","","","$","6,744"],["Average loan receivables, including held for sale","$","6,749","","","$","6,246"],["Average active accounts (in thousands)","2,674","","","2,587"],["Interest and fees on loans","$","1,051","","","$","959"],["Other income","$","30","","","$","29"]] [[/GREPCENT_TABLE]] Lifestyle interest and fees on loans increased by $92 million, or 9.6%, for the year ended December 31, 2024, primarily driven by growth in average loan receivables and higher benchmark rates. The growth in average loan receivables reflected lower customer payment rates. Purchase volume decreased 4.4% for the year ended December 31, 2024, reflecting lower transaction values and the impact of credit actions. Corp, Other [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023"],["Purchase volume","$","2","","","$","3"],["Period-end loan receivables","$","123","","","$","163"],["Average loan receivables, including held for sale","$","131","","","$","184"],["Average active accounts (in thousands)","50","","","83"],["Interest and fees on loans","$","17","","","$","15"],["Other income","$","1,102","","","$","(10)"]] [[/GREPCENT_TABLE]] Other income for the year ended December 31, 2024 in Corp, Other primarily included the gain on sale related to the Pets Best disposition of $1.1 billion. 44 Loan Receivables ____________________________________________________________________________________________ Loan receivables are our largest category of assets and represent our primary source of revenue. The following discussion provides supplemental information regarding our loan receivables portfolio. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 5. Loan Receivables and Allowance for Credit Losses to our consolidated financial statements for additional information related to our loan receivables. The following table sets forth the composition of our loan receivables portfolio by product type at the dates indicated. [[GREPCENT_TABLE]] [["($ in millions)","At December 31, 2024","","%","","At December 31, 2023","","%"],["Loan receivables"],["Credit cards","$","96,818","","","92.5","%","","$","97,043","","","94.2","%"],["Consumer installment loans","5,971","","","5.7","","","3,977","","","3.9"],["Commercial credit products","1,826","","","1.7","","","1,839","","","1.8"],["Other","106","","","0.1","","","129","","","0.1"],["Total loan receivables","$","104,721","","","100.0","%","","$","102,988","","","100.0","%"]] [[/GREPCENT_TABLE]] Loan receivables increased 1.7% to $104.7 billion at December 31, 2024 compared to $103.0 billion at December 31, 2023, primarily driven by lower customer payment rates and the impact of the Ally Lending acquisition, partially offset by lower purchase volume. Our loan receivables portfolio, excluding held for sale, had the following maturity distribution at December 31, 2024. [[GREPCENT_TABLE]] [["($ in millions)","Within 1Year(1)","","1-5 Years(2)","","5-15 Years","","After 15 Years","","Total"],["Loan receivables"],["Credit cards","$","95,388","","","$","1,430","","","$","\u2014","","","$","\u2014","","","$","96,818"],["Consumer installment loans(3)","2,124","","","3,701","","","146","","","\u2014","","","5,971"],["Commercial credit products","1,793","","","33","","","\u2014","","","\u2014","","","1,826"],["Other","39","","","42","","","16","","","9","","","106"],["Total loan receivables","$","99,344","","","$","5,206","","","$","162","","","$","9","","","$","104,721"],["Loans due after one year at fixed interest rates","N/A","","$","5,206","","","$","162","","","$","9","","","$","5,377"],["Loans due after one year at variable interest rates","N/A","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Total loan receivables due after one year","N/A","","$","5,206","","","$","162","","","$","9","","","$","5,377"]] [[/GREPCENT_TABLE]] ______________________ (1)Credit card loans have minimum payment requirements but no stated maturity and therefore are included in the due within one year category. However, many of our credit card holders will revolve their balances, which may extend their repayment period beyond one year for balances at December 31, 2024. (2)Credit card and commercial loans due after one year relate to loans modified to borrowers experiencing financial difficulty. (3)Reflects scheduled repayments up to the final contractual maturity of our installment loans. Our loan receivables portfolio had the following geographic concentration at December 31, 2024. [[GREPCENT_TABLE]] [["($ in millions)","","Loan Receivables Outstanding","","% of Total Loan Receivables Outstanding"],["State"],["Texas","","$","11,486","","","11.0","%"],["California","","$","10,767","","","10.3","%"],["Florida","","$","9,743","","","9.3","%"],["New York","","$","4,978","","","4.8","%"],["North Carolina","","$","4,399","","","4.2","%"]] [[/GREPCENT_TABLE]] 45 Delinquencies Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased to 4.70% at December 31, 2024, as compared to 4.74% at December 31, 2023, reflecting the impact of the credit actions we have taken. Net Charge-Offs Net charge-offs consist of the unpaid principal balance of loans held for investment that we determine are uncollectible, net of recovered amounts. We exclude accrued and unpaid finance charges and fees and third-party fraud losses from charge-offs. Charged-off and recovered finance charges and fees are included in interest and fees on loans while third-party fraud losses are included in Other expense. Charge-offs are recorded as a reduction to the allowance for credit losses and subsequent recoveries of previously charged-off amounts are credited to the allowance for credit losses. Costs incurred to recover charged-off loans are recorded as collection expense and included in Other expense in our Consolidated Statements of Earnings. The table below sets forth net charge-offs and the ratio of net charge-offs to average loan receivables, including held for sale, (“net charge-off rate”) for the periods indicated. [[GREPCENT_TABLE]] [["Years ended December 31","2024","","2023","","2022"],["($ in millions)","Amount","","Rate","","Amount","","Rate","","Amount","","Rate"],["Credit cards","$","5,909","","","6.29","%","","$","4,311","","","4.82","%","","$","2,392","","","2.99","%"],["Consumer installment loans","371","","","6.46","%","","189","","","5.40","%","","80","","","2.82","%"],["Commercial credit products","139","","","7.11","%","","119","","","6.52","%","","63","","","3.84","%"],["Other","1","","","0.79","%","","1","","","0.80","%","","1","","","1.30","%"],["Total net charge-offs","$","6,420","","","6.31","%","","$","4,620","","","4.87","%","","$","2,536","","","3.00","%"]] [[/GREPCENT_TABLE]] Allowance for Credit Losses The allowance for credit losses totaled $10.9 billion at December 31, 2024, compared to $10.6 billion at December 31, 2023, and reflects our estimate of expected credit losses for the life of the loan receivables on our Consolidated Statements of Financial Position. Our allowance for credit losses as a percentage of total loan receivables increased to 10.44% at December 31, 2024, from 10.26% at December 31, 2023. The increase in the allowance for credit losses compared to December 31, 2023 includes the addition of the Ally Lending portfolio. See Note 5. Loan Receivables and Allowance for Credit Losses to our consolidated financial statements for additional information. 46 Funding, Liquidity and Capital Resources ____________________________________________________________________________________________ We maintain a strong focus on liquidity and capital. Our funding, liquidity and capital policies are designed to ensure that our business has the liquidity and capital resources to support our daily operations, our business growth, our credit ratings and our regulatory and policy requirements, in a cost effective and prudent manner through expected and unexpected market environments. Funding Sources Our primary funding sources include cash from operations, deposits (direct and brokered deposits), securitized financings and senior and subordinated unsecured notes. The following table summarizes information concerning our funding sources during the periods indicated: [[GREPCENT_TABLE]] [["","2024","","2023","","2022"],["Years ended December 31 ($ in millions)","Average Balance","","%","","Average Rate","","Average Balance","","%","","Average Rate","","Average Balance","","%","","Average Rate"],["Deposits(1)","$","82,268","","","83.9","%","","4.6","%","","$","75,487","","","83.5","%","","3.9","%","","$","65,624","","","82.6","%","","1.5","%"],["Securitized financings","7,732","","","7.9","","","5.5","","","6,274","","","6.9","","","5.4","","","6,468","","","8.2","","","3.0"],["Senior and subordinated unsecured notes","8,082","","","8.2","","","5.0","","","8,644","","","9.6","","","4.8","","","7,315","","","9.2","","","4.3"],["Total","$","98,082","","","100.0","%","","4.7","%","","$","90,405","","","100.0","%","","4.1","%","","$","79,407","","","100.0","%","","1.9","%"]] [[/GREPCENT_TABLE]] ______________________ (1)Excludes $388 million, $402 million and $382 million average balance of non-interest-bearing deposits for the years ended December 31, 2024, 2023 and 2022, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the years ended December 31, 2024, 2023 and 2022. Deposits We obtain deposits directly from retail, affinity relationships and commercial customers (“direct deposits”) or through third-party brokerage firms that offer our deposits to their customers (“brokered deposits”). At December 31, 2024, we had $72.3 billion in direct deposits and $9.8 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to utilize our direct deposit base as a source of stable and diversified low-cost funding. Our direct deposits are primarily from retail customers and include a range of FDIC-insured deposit products, including certificates of deposit, IRAs, money market accounts, savings accounts, sweep and affinity deposits. Brokered deposits are primarily from retail customers of large brokerage firms. We have relationships with 10 brokers that offer our deposits through their networks. Our brokered deposits primarily consist of certificates of deposit that bear interest at a fixed rate. These deposits generally are not subject to early withdrawal. Our ability to attract deposits is sensitive to, among other things, the interest rates we pay, and therefore, we bear funding risk if we fail to pay higher rates, or interest rate risk if we are required to pay higher rates, to retain existing deposits or attract new deposits. To mitigate these risks, our funding strategy includes a range of deposit products, and we seek to maintain access to multiple other funding sources, including securitized financings (including our undrawn committed and uncommitted capacity) and unsecured debt. 47 The following table summarizes certain information regarding our interest-bearing deposits by type (all of which constitute U.S. deposits) for the periods indicated: [[GREPCENT_TABLE]] [["Years ended December 31 ($ in millions)","2024","","2023","","2022"],["Average Balance","","%","","Average Rate","","Average Balance","","%","","Average Rate","","Average Balance","","%","","Average Rate"],["Direct deposits:"],["Certificates of deposit (including IRA certificates of deposit)","$","40,768","","","49.6","%","","4.8","%","","$","33,104","","","43.9","%","","3.8","%","","$","22,405","","","34.1","%","","1.3","%"],["Savings accounts, money market and demand accounts","29,722","","","36.1","","","4.5","","","29,073","","","38.5","","","4.1","","","30,915","","","47.1","","","1.5"],["Brokered deposits","11,778","","","14.3","","","4.5","","","13,310","","","17.6","","","3.9","","","12,304","","","18.8","","","2.1"],["Total interest-bearing deposits","$","82,268","","","100.0","%","","4.6","%","","$","75,487","","","100.0","%","","3.9","%","","$","65,624","","","100.0","%","","1.5","%"]] [[/GREPCENT_TABLE]] Our deposit liabilities provide funding with maturities ranging from one day to ten years. At December 31, 2024, the weighted average maturity of our interest-bearing time deposits was one year. See Note 8. Deposits to our consolidated financial statements for more information on the maturities of our time deposits. The standard FDIC deposit insurance amount is $250,000 per depositor, for each account ownership category. Our estimate of the uninsured portion of total deposit balances, excluding any intercompany balance, at December 31, 2024 was $6.1 billion. The following table summarizes the portion of uninsured deposits that are certificates of deposit by contractual maturity at December 31, 2024. [[GREPCENT_TABLE]] [["($ in millions)","3 Months or Less","","Over 3 Months but within 6 Months","","Over 6 Months but within 12 Months","","Over 12 Months","","Total"],["Certificates of deposit (including IRA certificates of deposit)","$","794","","","$","1,237","","","$","1,045","","","$","660","","","$","3,736"]] [[/GREPCENT_TABLE]] Securitized Financings We access the asset-backed securitization market using the Synchrony Card Issuance Trust (“SYNIT”) through which we may issue asset-backed securities through both public transactions and private transactions funded by financial institutions and commercial paper conduits. In addition, we issue asset-backed securities in private transactions through the Synchrony Credit Card Master Note Trust (“SYNCT”) and the Synchrony Sales Finance Master Trust (“SFT”). At December 31, 2024, we had $2.9 billion of outstanding private asset-backed securities and $4.9 billion of outstanding public asset-backed securities, in each case held by unrelated third parties. 48 The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at December 31, 2024. [[GREPCENT_TABLE]] [["($ in millions)","Less Than One Year","","One Year Through Three Years","","Four Years Through Five Years","","After Five Years","","Total"],["Scheduled maturities of borrowings\u2014owed to securitization investors:"],["SYNCT","$","1,050","","","$","600","","","$","\u2014","","","$","\u2014","","","$","1,650"],["SFT","275","","","1,000","","","\u2014","","","\u2014","","","1,275"],["SYNIT(1)","1,675","","","3,250","","","\u2014","","","\u2014","","","4,925"],["Total borrowings\u2014owed to securitization investors","$","3,000","","","$","4,850","","","$","\u2014","","","$","\u2014","","","$","7,850"]] [[/GREPCENT_TABLE]] ______________________ (1)Excludes any subordinated classes of SYNIT notes that we owned at December 31, 2024. We retain exposure to the performance of trust assets through: (i) in the case of SYNCT, SFT and SYNIT, subordinated retained interests in the loan receivables transferred to the trust in excess of the principal amount of the notes for a given series that provide credit enhancement for a particular series, as well as a pari passu seller’s interest in each trust and (ii) in the case of SYNIT, any subordinated classes of notes that we own. All of our securitized financings include early repayment triggers, referred to as early amortization events, including events related to material breaches of representations, warranties or covenants, inability or failure of the Bank to transfer loan receivables to the trusts as required under the securitization documents, failure to make required payments or deposits pursuant to the securitization documents, and certain insolvency-related events with respect to the related securitization depositor, Synchrony (solely with respect to SYNCT) or the Bank. In addition, an early amortization event will occur with respect to a series if the excess spread as it relates to a particular series or for the trust, as applicable, falls below zero. Following an early amortization event, principal collections on the loan receivables in the applicable trust are applied to repay principal of the trust's asset-backed securities rather than being available on a revolving basis to fund the origination activities of our business. The occurrence of an early amortization event also would limit or terminate our ability to issue future series out of the trust in which the early amortization event occurred. No early amortization event has occurred with respect to any of the securitized financings in SYNCT, SFT or SYNIT. The following table summarizes for each of our trusts the three-month rolling average excess spread at December 31, 2024. [[GREPCENT_TABLE]] [["","Note Principal Balance ($ in millions)","","# of Series Outstanding","","Three-Month RollingAverage ExcessSpread(1)"],["SYNCT","$","1,650","","","3","","","~ 15.1% to 15.7%"],["SFT","$","1,275","","","5","","","12.2","%"],["SYNIT","$","4,925","","","1","","","16.9","%"]] [[/GREPCENT_TABLE]] ______________________ (1)Represents the excess spread (generally calculated as interest income collected from the applicable pool of loan receivables less applicable net charge-offs, interest expense and servicing costs, divided by the aggregate principal amount of loan receivables in the applicable pool) for SFT or, in the case of SYNCT, a range of the excess spreads relating to the particular series issued within such trust or, in the case of SYNIT, the excess spread relating to the one outstanding series issued within such trust, in all cases omitting any series that have not been outstanding for at least three full monthly periods and calculated in accordance with the applicable trust or series documentation, for the three securitization monthly periods ended December 31, 2024. 49 Senior and Subordinated Unsecured Notes During the year ended December 31, 2024, we made repayments totaling $1.85 billion of senior unsecured notes issued by Synchrony Financial. The following table provides a summary of our outstanding senior and subordinated unsecured notes at December 31, 2024, which includes $750 million of senior unsecured notes issued by Synchrony Financial in August 2024. [[GREPCENT_TABLE]] [["Issuance Date","","Interest Rate(1)","","Maturity","","Principal Amount Outstanding(2)"],["($ in millions)"],["Fixed rate senior unsecured notes:"],["Synchrony Financial"],["July 2015","","4.500%","","July 2025","","1,000"],["August 2016","","3.700%","","August 2026","","500"],["December 2017","","3.950%","","December 2027","","1,000"],["March 2019","","5.150%","","March 2029","","650"],["October 2021","","2.875%","","October 2031","","750"],["June 2022","","4.875%","","June 2025","","750"],["Synchrony Bank"],["August 2022","","5.400%","","August 2025","","900"],["August 2022","","5.625%","","August 2027","","600"],["Fixed-to-floating rate senior unsecured notes:"],["Synchrony Financial"],["August 2024","","5.935%(3)","","August 2030","","750"],["Fixed rate subordinated unsecured notes:"],["Synchrony Financial"],["February 2023","","7.250%","","February 2033","","750"],["Total fixed rate and fixed-to-floating rate senior and subordinated unsecured notes","","","","","","$","7,650"]] [[/GREPCENT_TABLE]] ______________________ (1)Weighted average interest rate of all senior and subordinated unsecured notes at December 31, 2024 was 4.91%. (2)The amounts shown exclude unamortized debt discounts, premiums and issuance costs. (3)Interest rate fixed through August 1, 2029; resets August 2, 2029 to floating rate based on compounded Secured Overnight Financing Rate ("SOFR") plus 213 basis points. Short-Term Borrowings Except as described above, there were no material short-term borrowings for the periods presented. Covenants The indentures pursuant to which our senior and subordinated unsecured notes have been issued include various covenants, including covenants that restrict (subject to certain exceptions) Synchrony’s ability to dispose of, or incur liens on, any of the voting stock of the Bank or otherwise permit the Bank to be merged, consolidated, leased or sold in a manner that results in the Bank being less than 80% controlled by us. 50 If we do not satisfy any of these covenants discussed above, the maturity of amounts outstanding thereunder may be accelerated and become payable. We were in compliance with all of these covenants at December 31, 2024. At December 31, 2024, we were not in default under any of our credit facilities. Credit Ratings Our borrowing costs and capacity in certain funding markets, including securitizations and senior and subordinated debt, may be affected by the credit ratings of the Company, the Bank and the ratings of our asset-backed securities. The table below reflects our current credit ratings and outlooks: [[GREPCENT_TABLE]] [["","","S&P","","Fitch Ratings"],["Synchrony Financial"],["Senior unsecured debt","","BBB-","","BBB-"],["Subordinated unsecured debt","","BB+","","BB+"],["Preferred stock","","BB-","","B+"],["Outlook for Synchrony Financial","","Stable","","Positive"],["Synchrony Bank"],["Senior unsecured debt","","BBB","","BBB-"],["Outlook for Synchrony Bank","","Stable","","Positive"]] [[/GREPCENT_TABLE]] In addition, certain of the asset-backed securities issued by SYNIT are rated by Fitch, S&P and/or Moody’s. A credit rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. Downgrades in these credit ratings could materially increase the cost of our funding from, and restrict our access to, the capital markets. 51 Liquidity ____________________________________________________________________________________________ We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth, satisfy debt obligations and to meet regulatory expectations under normal and stress conditions. We maintain policies outlining the overall framework and general principles for managing liquidity risk across our business, which is the responsibility of our Asset and Liability Management Committee, a management committee under the oversight of the Risk Committee of our Board of Directors. We employ a variety of metrics to monitor and manage liquidity. We perform regular liquidity stress testing and contingency planning as part of our liquidity management process. We evaluate a range of stress scenarios including Company specific and systemic events that could impact funding sources and our ability to meet liquidity needs. We maintain a liquidity portfolio, which at December 31, 2024 had $17.2 billion of liquid assets, primarily consisting of cash and equivalents, less cash in transit which is not considered to be liquid, compared to $16.8 billion of liquid assets at December 31, 2023. The increase in liquid assets was primarily due to deposit growth and the issuances of securitized debt and preferred stock, as well as the proceeds from the Pets Best disposition, partially offset by loan receivables growth. We believe our liquidity position at December 31, 2024 remains strong as we continue to operate in a period of uncertain economic conditions and we will continue to closely monitor our liquidity as economic conditions change. As a general matter, investments included in our liquidity portfolio are expected to be highly liquid, giving us the ability to readily convert them to cash. The level and composition of our liquidity portfolio may fluctuate based upon the level of expected maturities of our funding sources as well as operational requirements and market conditions. We also have access to several additional sources of liquidity beyond our liquidity portfolio. At December 31, 2024, we had an aggregate of $11.5 billion of available borrowing capacity through the Federal Reserve's discount window. In addition, we had $2.6 billion of undrawn capacity on our securitized financings, subject to customary borrowing conditions, from private lenders under our securitization programs, of which $2.1 billion was committed and $450 million was uncommitted, as well as $500 million of undrawn committed capacity under our unsecured revolving credit facility with private lenders. We also have other unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window. We rely significantly on dividends and other distributions and payments from the Bank for liquidity; however, bank regulations, contractual restrictions and other factors limit the amount of dividends and other distributions and payments that the Bank may pay to us. For a discussion of regulatory restrictions on the Bank’s ability to pay dividends, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness,” “Regulation—Savings Association Regulation—Dividends and Stock Repurchases” and —Liquidity," and Regulation—Savings and Loan Holding Company Regulation—Liquidity." 52