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• Global political, public health and social events or conditions, including ongoing wars and military conflicts, may harm our business.
−Removed: • Our unsecured loans make us reliant on the future credit performance of our customers, and if customers are unable to repay our loans, our level of future delinquency and write-off rates will increase.
+Added: • Our unsecured loans make us reliant on the future credit performance of our customers, and if customers are unable to repay our loans, our level of future delinquency and charge-off rates will increase.
• A significant percentage of our revenue is generated through relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners, could have an adverse effect on our business.
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• We may be unable to successfully identify, complete or successfully integrate or disaggregate business acquisitions, divestitures and other strategic initiatives.
−Removed: • Competition in our industry is intense.
+Added: • Competition in our industry is intense, including competition from new and non-traditional competitors, such as financial technology companies, and with respect to new products, services and technologies, such as the emergence or increase in popularity of agentic commerce, digital payment platforms and currencies and other alternative payment and deposit solutions.
• Our results of operations and growth depend on our ability to retain existing partners and attract new partners, and our results are impacted, to a significant extent, on the active and effective promotion and support of our products by our partners and on the financial performance of our partners.
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• Our market valuation has been, and may continue to be, volatile, and returns to stockholders may be limited.
−Removed: • We are a holding company and depend on dividends and other payments from our Banks, which are subject to various legal and regulatory restrictions.
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• We face various risks related to the extensive government regulation and supervision of our business, including by the FDIC, CFPB and other federal and state authorities.
−Removed: These risks include pending and future laws and regulations that may adversely impact our business, such as the CFPB’s final rule with respect to late fees, as well as supervisory and other actions that may be taken against us by our regulators.
+Added: These risks include pending and future laws, regulations or executive actions that may adversely impact our business, including with respect to limits on credit card interest rates or late fees, interchange fees or other charges, as well as supervisory and other actions that may be taken against us by our regulators.
• Pending and future litigation could subject us to significant fines, penalties, judgments and/or requirements.
+Added: • We are a holding company and depend on dividends and other payments from our Banks, which are subject to various legal and regulatory restrictions.
• Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities.
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• We rely on third-party vendors, and could be adversely impacted if such vendors fail to fulfill their obligations.
−Removed: • Impacts arising from or relating to the transition of our credit card processing services to strategic outsourcing providers that we completed in 2022 have, and may continue to adversely affect our business.
• Failures in data protection, cybersecurity and information security, as well as business interruptions to our data centers and other systems, could critically impair our products, services and ability to conduct business.
• Our industry is subject to rapid and significant technological changes, and we may be unable to successfully develop and commercialize new or enhanced products and services.
+Added: Moreover, technology transformation projects are complex undertakings, which may result in unanticipated adverse consequences.
• The development and use of AI presents risks and challenges to our business, including compliance with new AI laws and regulations, risks associated with AI models, and the malicious use of AI technology by bad actors.
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Macroeconomic, Global, Strategic, Business and Competitive Risks
−Removed: Weakness and instability in the macroeconomic environment could have a material adverse effect on our business, results of operations and financial condition.
+Added: Weakness and instability in the macroeconomic environment, as well as global political, public health and social events or conditions, could have a material adverse effect on our business, results of operations and financial condition.
Macroeconomic conditions historically have affected our business, results of operations and financial condition and will continue to affect them in the future.
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• Limitations on our ability to replace maturing liabilities and to access the capital and deposit markets to meet liquidity needs.
−Removed: While we closely monitor economic conditions and indicators, including inflation, interest rates, changes in monetary policy, housing values, the state of the commercial real estate industry, energy prices, consumer wages, consumer saving rates and debt levels, including student loan debt, consumer and business spending, unemployment, financial markets, government policy and concerns about the level of U.S.
+Added: While we closely monitor economic conditions and indicators, including inflation, interest rates, changes in monetary policy, housing values, the state of the commercial real estate industry, energy prices, external credit bureau risk scores, consumer wages, consumer saving rates and debt levels, including student loan debt, consumer and business spending, unemployment, financial markets, government policy and concerns about the level of U.S.
government debt, as well as economic and political conditions in the U.S.
and global markets, the outcome of any of these conditions and indicators remains difficult to predict.
−Removed: During 2024, the economic scenario weightings in our credit reserve modeling continued to reflect an increased probability of a recession, high interest rates, persistent inflation, and the increased cost of overall consumer debt.
−Removed: A recession or prolonged period of economic weakness would likely, among other things, adversely affect consumer discretionary spending levels
+Added: During 2025, the economic scenario weightings in our credit reserve modeling continued to
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−Removed: and the ability and willingness of customers to pay amounts owed to us and could have a material adverse effect on our business, key credit trends, results of operations and financial condition.
+Added: reflect an elevated possibility of a recession, high interest rates, persistent inflation, and the increased cost of overall consumer debt.
+Added: A recession or prolonged period of economic weakness would likely, among other things, adversely affect consumer discretionary spending levels and the ability and willingness of customers to pay amounts owed to us and could have a material adverse effect on our business, key credit trends, results of operations and financial condition.
Moreover, the current macroeconomic environment may have a disproportionately adverse impact on us, as compared to our peers, due to our relatively higher proportion of private label credit card accounts and our deeper underwriting.
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Moreover, the current Presidential Administration’s policies on trade, immigration and taxes could create inflationary pressures, which in turn could disproportionately impact our customer base.
−Removed: For context, during the Great Recession, our Delinquency and Net loss rates peaked in 2009 at 6.2% and 10.0%, respectively.
−Removed: As of December 31, 2024, our Delinquency rate was 5.9% and our 2024 full-year Net loss rate was 8.2%.
−Removed: While these 2024 rates were lower than those experienced in 2009 during the Great Recession, the current and near-term anticipated Delinquency and Net loss rates are high, relative to our historical experience, and a prolonged continuation or worsening of these rates could have a material adverse impact on us.
−Removed: In addition, outbreaks of illnesses, pandemics, endemic diseases, or other local or global health issues, political uncertainties (including those arising from significant shifts in policy that impact consumers, such as tariffs and other trade-related measures, taxes and immigration, among others), international hostilities, armed conflict, war (such as the ongoing wars between Ukraine and Russia, and between Israel and Hamas), civil unrest, climate-related events, impacts to the power grid, and natural disasters have, to varying degrees, negatively impacted our operations, brand partners, service providers and consumer spending, and such events and conditions may negatively impact us going forward.
+Added: For context, during the Great Recession, our Delinquency and Net principal loss rates peaked in 2009 at 6.2% and 10.0%, respectively.
+Added: As of December 31, 2025, our Delinquency rate was 5.8% and our 2025 full-year Net principal loss rate was 7.7%.
+Added: While these 2025 rates were lower than those experienced in 2009, the current and near-term anticipated Delinquency and Net principal loss rates remain elevated, relative to our historical experience, and a prolonged continuation or worsening of these rates could have a material adverse impact on us.
+Added: In addition, political events and uncertainties (including those arising from significant shifts in policy that impact consumers, such as tariffs and other trade-related measures, taxes and immigration, among others, and the potential or threat of retaliatory international and domestic policies), international tensions or hostilities, armed conflict, war (such as the ongoing war between Ukraine and Russia and instability in the Middle East), civil unrest, outbreaks of illnesses, pandemics, endemic diseases, or other local or global health issues, climate-related events, impacts to the power grid, and natural disasters have, to varying degrees, negatively impacted our operations, brand partners, service providers and consumer spending, and such events and conditions may negatively impact the economy and us going forward.
+Added: Moreover, political disputes over the debt ceiling, budget deficits, healthcare or immigration policy or other matters may result in prolonged government shutdowns and increase the possibility of the U.S.
+Added: government defaulting on its debt and/or having its credit ratings further downgraded, any of which could weaken the U.S.
+Added: dollar, cause market volatility, negatively impact the economy and banking system and adversely affect our financial condition, including our liquidity and ability to access capital.
The loans we make are unsecured, and we may not be able to ultimately collect from customers that default on their loans.
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We may not be able to successfully identify and evaluate the creditworthiness of borrowers to minimize delinquencies and losses.
−Removed: As part of our efforts to manage our credit risk, we use our automated proprietary scoring technology and verification procedures to make risk-based origination decisions when approving new account holders, establishing or adjusting their credit limits and applying our risk-based pricing.
−Removed: These models may not accurately predict future write-offs for various reasons discussed elsewhere in these Risk Factors, including “ Our risk management policies and procedures may not be effective, and the models we rely on may not be accurate or may be misinterpreted.
+Added: As part of our efforts to manage our credit risk, we use our automated proprietary scoring technology and verification procedures to make risk-based underwriting decisions when approving new account holders, establishing or adjusting their credit limits and applying our risk-based pricing.
+Added: These models may not accurately predict future charge-offs for various reasons discussed elsewhere in these Risk Factors, including in “ Our risk management policies and procedures may not be effective, and the models we rely on may not be accurate or may be misinterpreted.
” While we monitor credit quality on a regular and consistent basis, utilizing internal algorithms and external credit bureau risk scores and other data, these algorithms and data sources may be inaccurate or incomplete, including as a result of certain customers’ credit profiles not fully reflecting their credit risk due to any number of factors, including, for example, the less-regulated reporting requirements for many fintechs offering buy now, pay later products or other lending options and existing or future limitations on the reporting of medical debt.
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General economic conditions, including a recession or prolonged economic slowdown, persistent inflation, interest rates, high unemployment or volatility in energy prices, may result in greater delinquencies that lead to greater credit losses.
−Removed: In addition to being affected by general economic conditions and the success of our collection and recovery efforts, the stability of our Delinquency and Net loss rates are affected by the credit risk inherent in our Credit card and other loan portfolios, as well as the vintage of the accounts in our various credit card portfolios.
−Removed: We are also closely monitoring the effects on our business of the lifting of the moratorium on federal student loan payments in October 2023, which moratorium had been originally implemented as part of the federal government’s COVID-19 response under the CARES Act in March 2020.
−Removed: Under the applicable rules, there was a grace period for federal student loan borrowers until late 2024 before any adverse credit bureau reporting was to be made in the event they fail to resume payments on their loans.
−Removed: This grace period has ended, and we are closely monitoring the segment of our portfolio with student loans to observe payment
+Added: In addition to being affected by general economic conditions and the success of our collection and recovery efforts, the
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−Removed: In addition, targeted government efforts to forgive or discharge portions of student loan debt or provide additional relief may further influence these trends.
−Removed: Further, our pricing strategy may not offset the negative impact on profitability caused by increases in delinquencies and losses, thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us.
+Added: stability of our Delinquency and Net principal loss rates are affected by the credit risk inherent in our Credit card and other loan portfolios, as well as the vintage of the accounts in our various credit card portfolios.
+Added: We also closely monitor the segment of our portfolio with student loans to observe payment rate trends.
+Added: In December 2025, the Department of Education announced that, beginning in early 2026, the federal government would begin garnishing wages of student loan borrowers that are in default on federal student loans;
+Added: provided that the Department of Education subsequently announced that it was indefinitely postponing any such garnishments.
+Added: The impact of this policy change, to the extent it becomes effective, on our customers’ ability to repay us remains uncertain.
+Added: Further, our pricing strategy may not offset the negative impact on profitability caused by increases in delinquencies and credit losses, thus any material increases in delinquencies and credit losses beyond our current estimates could have a material adverse impact on us.
Our Delinquency rates were 5.8% of Credit card and other loans as of December 31, 2025, compared with 5.9% and 6.5% as of December 31, 2024 and 2023, respectively.
For 2025, our Net principal loss rate was 7.7%, compared with 8.2% and 7.5% for 2024 and 2023, respectively.
−Removed: As referenced above, the current and near-term anticipated Delinquency and Net loss rates remain high, relative to our historical experience, and a prolonged continuation or worsening of these rates could have a material adverse impact on our business and results of operations.
−Removed: A significant percentage of our Total net interest and non-interest income, or revenue, is generated through our
−Removed: relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners could cause a significant drop in our revenue.
+Added: As referenced above, the current and near-term anticipated Delinquency and Net principal loss rates remain high, relative to our historical experience, and a prolonged continuation or worsening of these rates could have a material adverse impact on our business and results of operations.
+Added: A significant percentage of our Total net interest and non-interest income, or revenue, is generated through our relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners could cause a significant drop in our revenue.
We depend on a limited number of large partner relationships for a significant portion of our revenue.
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and its retail affiliates, each accounted for 10% or more of our Total net interest and non-interest income for the year ended December 31, 2025.
−Removed: A decrease in business from, or the loss of, any of our significant partners for any reason, could have a material adverse effect on our business.
−Removed: We previously announced the non-renewal of our contract with BJ’s Wholesale Club (BJ’s) and the sale of the BJ’s portfolio, which closed in late February 2023.
−Removed: For the year ended December 31, 2022, BJ’s branded co-brand accounts generated approximately 10% of our Total net interest and non-interest income, and BJ’s branded co-brand accounts were responsible for approximately 11% of our Total credit card and other loans as of December 31, 2022.
Our business is intensely competitive, and we cannot provide assurance that we will retain the business of all of our significant brand partners going forward.
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economy, consumer spending and consumer credit.
−Removed: We are also more susceptible to the risks of increased regulations and legal and other regulatory actions that are targeted at consumer credit or the specific consumer credit products that we offer, such as legislation and regulations relating to credit card late fees, finance charges and promotional financing.
+Added: We are also more susceptible to the risks of increased regulations and legal and other regulatory actions that are targeted at consumer credit or the specific consumer credit products that we offer, such as legislation and regulations relating to credit card late fees, credit card interest rates and promotional financing.
Our business concentration could have an adverse effect on our results of operations.
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See “ Our risk management policies and procedures may not be effective, and the models we rely on may not be accurate or may be misinterpreted.
−Removed: Moreover, under the CECL accounting rules, the acquisition of an existing credit card or other loan portfolio typically has a negative impact on certain key financial metrics in the near-term, including Net income and Earnings per share, because we are required to include a reserve build in our Provision for credit losses for the estimated credit losses to be experienced over the life of the acquired portfolio.
−Removed: The amount of this reserve build (included in the reporting period in which the portfolio is obtained) is often large relative to the amount of revenue generated through such date by the newly-acquired portfolio.
+Added: ” Moreover, under the CECL accounting rules, the acquisition of an existing credit card portfolio typically has a negative impact on certain key financial metrics in the near-term, including Net income and Earnings per share, because we are required to include a reserve build in our Provision for credit losses for the estimated credit losses to be experienced over the life of the acquired portfolio.
+Added: The amount of this reserve build is often large relative to the amount of revenue generated through such date by the related credit card portfolio.
See also “ –The amount of our Allowance for credit losses could adversely affect our business and may prove to be insufficient to cover actual losses on our loans.
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We rely extensively on models in managing many aspects of our business, including liquidity and capital planning (including stress testing), customer selection, underwriting and line management, credit and other risk management, pricing, reserving and collections management.
−Removed: The models may prove in practice to be less predictive than we expect for a variety of reasons, including as a result of errors in constructing, interpreting or using the models or the use of inaccurate assumptions (including models being calibrated on historical cycles and correlations which may not be predictive of the future, or failures to update assumptions appropriately or in a timely manner).
+Added: The models may prove in practice to be less accurate, predictive or useful than we expect for a variety of reasons, including as a result of (i) errors in constructing, interpreting or using the models, (ii) the use of inaccurate assumptions (including models being calibrated on historical cycles and correlations which may not be predictive of the future, or failures to update assumptions appropriately or in a timely manner), or (iii) the model producing results that are not compliant with fair lending or other laws and regulations.
Our assumptions may be inaccurate for many reasons including that they often involve matters that are inherently difficult to predict and beyond our control (e.g., macroeconomic conditions, including continued elevated inflation, low unemployment, increasing consumer debt levels and weakening in macroeconomic indicators, and their impact on partner and customer behaviors) and they often involve complex interactions between a number of dependent and independent variables, factors and other assumptions.
In particular, in recent years, we have observed rates and correlations among several key macroeconomic variables, such as unemployment and interest rates, perform outside of observed historical norms, which could impact the reliability of certain models in the current economic environment.
+Added: In addition, as we seek to update and enhance our models, these updates and enhancements may produce unexpected or unreliable results.
The errors or inaccuracie s in our models may be material, and could lead us to make poor or sub-optimal decisions in managing our business, and this could have a material adverse effect on our business, results of operations and financial condition.
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Our resources, technologies and fraud prevention tools may be insufficient to accurately detect and prevent fraud.
−Removed: Our fraud-related operational losses were $65 million, $127 million and $73 million for the years ended December 31, 2024, 2023 and 2022, respectively.
−Removed: During 2023, we believe the financial services industry generally experienced an uptick in both the volume and sophistication of fraud attacks, and we also experienced that trend in our business, with fraud-related operational losses increasing significantly from 2022 levels.
−Removed: While we were successful in decreasing fraud-related losses in 2024, the perpetrators of fraud attacks remain persistent and we cannot provide assurance that fraud-related losses will remain at these lower levels going forward.
+Added: Our fraud-related operational losses were $65 million for both the years ended December 31, 2025 and 2024, and $127 million for the year ended December 31, 2023.
+Added: During 2023, we believe the financial services industry generally experienced an uptick in both the volume and sophistication of fraud attacks, and we also experienced that trend in our business, with fraud-related operational losses increasing significantly.
+Added: While we were successful in decreasing fraud-related losses in 2024 and 2025, t he perpetrators of fraud attacks remain persistent and we cannot provide assurance that fraud-related losses will remain at or below these lower levels going forward.
In addition to direct financial impacts, high profile fraudulent activity could also negatively affect our brand and reputation, which could negatively impact the use of our services, leading to a material adverse effect on our results of operations.
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Regulators and consumer activists have also sought to expand financial institutions’ responsibility to hold customers harmless for fraudulent transactions on their accounts, which increases our exposure to fraud-related losses.
−Removed: The amount of our Allowance for credit losses could adversely affect our business and may prove to be insufficient to cover actual losses on our loans.
−Removed: The Financial Accounting Standards Board’s CECL accounting standard became effective for us on January 1, 2020 and requires us to determine periodic estimates of the lifetime expected credit losses on loans, and reserve for those expected
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−Removed: credit losses through an allowance for credit losses against the loans.
−Removed: In addition, as referenced above, for loan portfolios we acquire, we are required to establish at the time of acquisition such an allowance for credit losses.
−Removed: Any subsequent deterioration in the performance of a purchased portfolio after acquisition results in incremental credit loss reserves.
+Added: The amount of our Allowance for credit losses could adversely affect our business and may prove to be insufficient to cover actual losses on our loans.
+Added: The Financial Accounting Standards Board’s CECL accounting standard requires us to determine periodic estimates of the lifetime expected credit losses on our Credit card and other loans, and reserve for those expected credit losses through an allowance for credit losses against the loans.
+Added: In addition, as referenced above, for credit card loan portfolios we acquire, we are required to establish such an allowance for credit losses.
+Added: Any subsequent deterioration in the performance of a purchased portfolio results in incremental credit loss reserves.
Growth in our loan portfolio generally would also lead to an increase in our Allowance for credit losses.
−Removed: The process for establishing an allowance for credit losses is critical to our results of operations and financial condition, and requires complex modeling and judgments, including forecasts of economic conditions.
+Added: The process for establishing our Allowance for credit losses is critical to our results of operations and financial condition, and requires complex modeling and judgments, including forecasts of economic conditions.
The ongoing impact of CECL will be significantly influenced by the composition, characteristics and quality of our Credit card and other loans, as well as the prevailing economic conditions and forecasts utilized.
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• the diversion of management’s attention from other business concerns;
−Removed: continued financial responsibility with respect to a divested business, including required equity ownership, guarantees, indemnities or other financial obligations;
+Added: • continued financial responsibility with respect to a divested business, including guarantees, indemnities or other financial obligations;
• the assumption of unknown liabilities of the acquired company;
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• unforeseen legal, regulatory or other challenges that we may not be able to manage effectively;
−Removed: and the reduction of cash available for operations, payment of dividends, stock repurchase programs or other uses and potentially dilutive issuances of equity securities or incurrence of additional debt.
+Added: • the reduction of cash available for operations, payment of dividends, stock repurchase programs or other uses and potentially dilutive issuances of equity securities or incurrence of additional debt.
Furthermore, if the operations of an acquired or new business do not meet expectations, our profitability may decline and we may seek to restructure the acquired business or to impair the value of some or all of the assets of the acquired or new business.
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Competition in our industry is intense, and the markets for the services that we offer may contract or fail to expand, each of which could negatively impact our growth and profitability.
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We compete with a wide range of businesses, and some of our current competitors have longer operating histories, stronger brand names and greater financial, technical, marketing and other resources than we do.
−Removed: Moreover, the consumer credit and payments industry is highly competitive and we face an increasingly dynamic industry as emerging technologies enter the marketplace.
−Removed: For a more detailed discussion regarding how we compete with respect to each of our product categories, see “Item 1.
+Added: Moreover, the consumer credit and payments industry is highly competitive and we face an increasingly dynamic industry as emerging products, services and technologies, as well as new and non-traditional competitors, enter the marketplace.
+Added: For a more detailed discussion regarding how we compete with respect to each of our product categories, as well as detail on emerging competitive trends, see “Item 1.
Business—Competition” of this Form 10-K above.
Additionally, downturns in the economy or the performance of our retail or other partners, including as a result of macroeconomic conditions, geopolitical events or global health events or other pandemic or endemic diseases, may result in a decrease in the demand for our products and services.
−Removed: Our ability to
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−Removed: generate significant revenue from partners and customers will depend on our ability to differentiate ourselves through the products and services we provide and the attractiveness of our programs to consumers.
+Added: Our ability to generate significant revenue from partners and customers will depend on our ability to differentiate ourselves through the products and services we provide and the attractiveness of our programs to consumers.
If we are not able to differentiate our products and services from those of our competitors, drive value for our partners and their customers, or effectively and efficiently align our resources with our goals and objectives, we may not be able to compete effectively in the market.
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See also, “ A significant percentage of our Total net interest and non-interest income, or revenue, is generated through our relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners could cause a significant drop in our revenue.
−Removed: There is significant competition for our existing partners, and our failure to retain our existing larger partner relationships upon the expiration of a contractual arrangement or our earlier loss of a relationship upon the exercise of a partner’s early termination rights, or the expiration or termination of a substantial number of smaller partner contracts or relationships, could have a material adverse effect on our results of operations (including growth rates) and financial condition to the extent we do not acquire new partners of similar size and profitability or otherwise grow our business.
−Removed: In addition, existing relationships may be renewed with less favorable terms to us in response to increased competition for such relationships.
+Added: There is significant competition for our existing partners, and our failure to retain our existing larger partner relationships upon the expiration of a program agreement or our earlier loss of a relationship upon the exercise of a partner’s early termination rights, or the expiration or termination of a substantial number of smaller partner contracts or relationships, could have a material adverse effect on our results of operations (including growth rates) and financial condition to the extent we do not acquire new partners of similar size and profitability or otherwise grow our business.
+Added: In addition, existing relationships may be renewed on less favorable terms to us in response to increased competition for such relationships.
The competition for new partners is also significant, and our failure to attract new partners could adversely affect our ability to grow.
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In addition, if our partners engage in improper business practices, do not adhere to the terms of our program agreements or other contractual arrangements or standards, or otherwise diminish the value of our brand, we may suffer reputational damage and customers may be less likely to use our products, which could have a material adverse effect on our business and results of operations.
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Our results are impacted, to a significant extent, by the financial performance of our partners.
−Removed: Our ability to originate new credit card accounts, generate new loans, and earn interest and fees and other income is dependent, in part, upon sales of merchandise and services by our partners.
+Added: Our ability to originate new credit card accounts, generate new loans, and earn interest and fees and other income is dependent, in part, upon sales of merchandise and services by our partners and the use of our products by customers.
The retail and other industries in which our partners operate are intensely competitive.
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If our partners’ sales decline for any reason, it generally results in lower credit sales, and therefore lower loan volumes and associated interest and fees and other income for us from our customers.
−Removed: In addition, if a partner closes some or all of its stores or becomes subject to a voluntary or involuntary bankruptcy proceeding (or if there is a perception that such an event may occur), its customers who have used our financing products may have less incentive to pay their outstanding balances to us, which could result in higher charge-off rates than anticipated and our costs for servicing its customers’ accounts may increase.
−Removed: This risk is particularly acute with respect to our largest partners that account for a significant amount of our Total net
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−Removed: interest and non-interest income.
+Added: In addition, if a partner closes some or all of its stores or becomes subject to a voluntary or involuntary bankruptcy proceeding (or if there is a perception that such an event may occur), we may be adversely impacted in a number of different ways.
+Added: In such circumstances, we may lose future credit sales and existing customers may have less incentive to pay their outstanding balances to us, which could result in higher charge-off rates than anticipated and our costs for servicing its customers’ accounts may increase.
+Added: This risk is particularly acute with respect to our largest partners that account for a significant amount of our Total net interest and non-interest income.
See “ A significant percentage of our Total net interest and non-interest income, or revenue, is generated through our relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners could cause a significant drop in our revenue.
” Moreover, if the financial condition of a partner deteriorates significantly or a partner becomes subject to a bankruptcy proceeding, we may not be able to recover customer returns, customer payments made in partner stores or other amounts due to us from the partner.
+Added: The impact of the bankruptcy of any particular brand partner on our business is difficult to predict;
+Added: most recently, for example, our brand partner Saks Fifth Avenue filed for Chapter 11 bankruptcy protection in January 2026.
A decrease in sales by our partners for any reason, or a bankruptcy proceeding involving any of them could have a material adverse impact on our business and results of operations.
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We earn interchange fees on co-brand and general purpose credit card transactions, but we typically do not charge or earn interchange fees from our partners or customers on our private label credit card products.
−Removed: Certain merchants, in an effort to decrease their operating expenses, have with some success sought to lower interchange fees, including through promoting alternative payment platforms with lower processing costs and lobbying for legislative or regulatory changes.
+Added: Certain merchants, in an effort to decrease their operating expenses, have with some success sought to lower interchange fees, including through litigation against the payment networks, promoting alternative payment platforms with lower processing costs and lobbying for legislative or regulatory changes.
Several recent events and actions indicate a continuing focus on interchange by legislators, regulators and merchants.
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House of Representatives and Senate, which, among other things, would require large issuing banks (over $100 billion) to offer a choice of at least two unaffiliated networks over which electronic transactions may be processed.
−Removed: At the state level, the Illinois legislature passed a bill that would, beginning in July 2025, prohibit the charging of interchange fees on sales tax and gratuities and restrict use of electronic payment transaction data except to facilitate or process the transaction or as required by law.
−Removed: This Illinois legislation is being challenged in federal court.
+Added: At the state level, the Illinois legislature passed a bill that would prohibit the charging of interchange fees on sales tax and gratuities and restrict use of electronic payment transaction data except to facilitate or process the transaction or as required by law.
+Added: This Illinois legislation is being challenged in federal court, and on February 10, 2026, the court issued a ruling denying a permanent injunction sought by the plaintiffs that would have enjoined the interchange fee provisions of the legislation, although the court did grant a permanent injunction with respect to the data use restrictions in the legislation.
+Added: Tabl e of Contents
+Added: The court’s ruling against the plaintiffs will be appealed.
+Added: Unless the plaintiffs obtain a stay or injunction during the appeal process or the legislature otherwise intervenes, the prohibition on charging interchange fees on sales tax and gratuities in Illinois will become effective July 1, 2026.
Similar legislation has been introduced in other states and, absent a successful legal challenge, these bills would have a number of adverse impacts on us, including negatively impacting our interchange revenue and creating operational challenges.
+Added: In addition, in November 2025, a proposed settlement was announced in the long-standing Visa/Mastercard litigation, which began in 2005 when a class of merchant plaintiffs alleged that Visa and Mastercard, along with their member banks, engaged in anti-competitive practices by collectively setting excessive interchange fees and imposing other restrictive rules on merchants.
+Added: The proposed settlement would, among other items, reduce interchange fees and give merchants greater choice in accepting credit cards in various categories, which could have various adverse impacts on our business, including reduced interchange revenue and decreased acceptance of certain of our cards by retailers.
+Added: The proposed settlement remains subject to court approval, and we can provide no assurance with respect to the timing or outcome of the court approval process or the effects on us of the settlement if approved.
Furthermore, to the extent interchange fees are reduced, one of our current competitive advantages with our partners—that we typically do not charge interchange fees when our private label credit card products are used to purchase our partners’ goods and services—may be reduced.
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Our failure to comply with these operating regulations, which may change from time to time, could subject us to various penalties or fees, or the termination of our license to use the applicable payment network, all of which could have a material adverse effect on our business and results of operations.
−Removed: We may not be able to retain and/or attract and hire a highly qualified and diverse workforce or maintain our corporate culture, and having a large segment of our workforce working from home may exacerbate these risks and cause new risks.
+Added: We may not be able to retain and/or attract and hire a highly qualified workforce or maintain our corporate culture, and having a large segment of our workforce periodically working from home may exacerbate these risks and cause new risks.
Our performance largely depends on the talents and efforts of our employees, particularly our key personnel and senior management.
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The market for key personnel is highly competitive, particularly in technology and other skill areas significant to our business.
−Removed: Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain a corporate culture that fosters innovation, creativity and teamwork could harm our overall business and results of operations.
−Removed: We rely on key personnel to lead with
−Removed: Tabl e of Contents
−Removed: integrity and decency.
−Removed: To the extent our leaders behave in a manner that is not consistent with our values, we could experience significant impacts to our brand and reputation, as well as to our corporate culture.
+Added: Failure to attract, hire, develop, motivate and retain highly qualified employee talent, or to maintain a corporate culture that fosters innovation, creativity and teamwork could harm our overall business and results of operations.
+Added: We rely on key personnel to lead with integrity and decency.
+Added: To the extent our leaders behave in a manner that is not consistent with our values and leadership behaviors, we could experience significant impacts to our brand and reputation, as well as to our corporate culture.
Moreover, in connection with the COVID-19 pandemic, we transitioned nearly all of our workforce to work remotely, and nearly all of our workforce continues to work on a hybrid office/remote schedule.
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Our operations and financial performance could be adversely affected by severe weather and natural disasters, as well as by climate change and ESG-related regulations and actions.
−Removed: Severe weather events and natural disasters could have a material adverse effect on our financial position and results of operations, and the timing and effects of any such event cannot accurately be predicted.
+Added: Severe weather events and natural disasters could have a material adverse effect on our financial position and results of operations, and the timing and effects of any such events cannot accurately be predicted.
The frequency and severity of some types of weather events and natural disasters, including wildfires, tornadoes, severe storms and hurricanes, have increased in recent years, which further reduces our ability to predict their effects accurately.
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Many of our customers were affected by the particularly intense 2024 hurricane season in the U.S.
−Removed: As a result of these hurricanes, we froze delinquency progression for cardholders in Federal Emergency Management Agency (FEMA) identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net loss rate in the fourth quarter of 2024, and consequently these actions will negatively impact Net principal losses and the Net loss rate in the second quarter of 2025.
−Removed: In addition, many governments, investors and other stakeholders are under pressure to accelerate actions to address climate change and other environmental, social and governance topics.
+Added: Tabl e of Contents
+Added: result of these hurricanes, we froze delinquency progression for cardholders in Federal Emergency Management Agency (FEMA) identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net principal loss rate in the fourth quarter of 2024, and consequently negatively impacted Net principal losses and the Net principal loss rate in the second quarter of 2025.
+Added: In addition, many governments, investors and other stakeholders have sought to accelerate actions to address climate change and other environmental, social and governance topics.
This has led to new regulations and expectations, which may be conveyed to us in the form of stockholder proposals, public campaigns, proxy solicitations or otherwise, that may cause significant shifts in disclosure, commerce and consumption behaviors.
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Multiple lawsuits were filed against the SEC, and the SEC issued a voluntary stay of the rules, pending review by the U.S.
−Removed: Court of Appeals for the Eighth Circuit, where the litigation had been consolidated.
−Removed: To the extent these rules become effective as issued, we and/or our partners could incur increased costs related to the assessment and disclosure of climate-related information.
+Added: Court of Appeals for the Eighth Circuit, where the litigation had been consolidated and is currently being held in abeyance until the SEC reconsiders the final rule or renews its defense.
+Added: While it currently appears unlikely these rules will become effective as issued, to the extent such rules do become effective, we and/or our partners could incur increased costs related to the assessment and disclosure of climate-related information.
Our failure to comply with these requirements, if adopted, or any future regulatory requirements or disclosure standards, may expose us to government enforcement actions or private litigation and otherwise damage our reputation, any of which could adversely impact our business.
Conversely, other stakeholders hold differing views on sustainability-related goals and initiatives.
−Removed: Certain state governments and activist groups, and most recently the new Presidential Administration through a series of executive orders and other actions, have pursued measures that appear designed to discourage companies from engaging in ESG practices or adhering to certain ESG principles.
−Removed: These circumstances, among others, may result in pressure from investors, unfavorable reputational impacts, including inaccurate perceptions or misrepresentation of our actual business practices, diversion of management’s attention and resources, and potential proxy fights, among other adverse impacts.
−Removed: Any failure, or perceived failure, by us to adhere to our public statements, comply fully with developing interpretations of sustainability-related laws and regulations, or meet evolving and varied stakeholder expectations and standards could negatively impact our business, reputation, financial condition and operating results.
−Removed: Tabl e of Contents
+Added: Certain state governments and activist groups, as well as the current Presidential Administration through a series of executive orders and other actions, have pursued measures that appear designed to discourage companies from engaging in ESG practices or adhering to certain ESG principles.
+Added: The complex regulatory and legal frameworks applicable to such actions or measures continue to evolve.
+Added: We cannot be certain of the impact of such regulatory, legal and other developments on our business.
+Added: These dynamic, and sometimes conflicting, circumstances may result in pressure from investors, unfavorable reputational impacts, including inaccurate perceptions or misrepresentation of our actual business practices, diversion of management’s attention and resources, potential proxy fights, and litigation or investigations initiated by government authorities or private actors alleging that our activities are anti-competitive, discriminatory or otherwise unlawful, among other adverse impacts.
+Added: Any failure, or perceived failure, by us to adhere to our public statements, comply fully with developing interpretations of sustainability-related laws and regulations, or meet evolving and varied stakeholder expectations and standards could negatively impact our business, reputation, operating results and financial condition.
Our Board-approved sustainability strategy, which focuses on opportunities to create value for all our stakeholders, while advancing our long-term financial and reputational goals, is intended to drive additional progress on initiatives that promote sustainability, responsible business practices and increased transparency in our disclosures.
We continue to advance the integration of sustainability into our overall governance and risk management practices.
−Removed: Statements in this and other filings we make with the SEC and other public statements, including in our annual sustainability reports, related to these initiatives reflect our current plans and expectations and are not a guarantee that these initiatives will be achieved or achieved on the currently anticipated timeline.
−Removed: Our ability to execute on our sustainability strategy or achieve sustainability initiatives is subject to numerous factors and conditions, some of which are outside of our control.
+Added: Statements in this and other filings we make with the SEC and other public statements, including in our annual sustainability reporting, related to these initiatives reflect our current plans and expectations and are not a guarantee that these initiatives will be achieved or achieved on the currently anticipated timeline.
+Added: Our ability to execute on our sustainability strategy or achieve sustainability initiatives is subject to numerous factors and conditions, many of which are outside of our control.
Damage to our reputation could damage our business.
−Removed: In recent years, financial services companies have experienced increased reputational risk as consumers protest and regulators scrutinize business and compliance practices of such companies.
Maintaining a positive reputation is critical to attracting and retaining partners, customers, investors and employees.
Damage to our reputation can therefore cause significant harm to our business and prospects.
−Removed: Harm to our reputation can arise from numerous sources, including, among others, employee misconduct;
+Added: Harm to our reputation can arise from numerous sources, including, among others:
+Added: • employee misconduct;
• a breach of our or our service providers’ cybersecurity defenses;
−Removed: service outages, such as those many of our customers experienced in 2022 in connection with the transition of our credit card processing services to strategic outsourcing providers;
+Added: • service outages;
• litigation or regulatory outcomes;
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• compliance failures;
−Removed: the use of our, or our partners’ products to facilitate legal, but controversial, products and services, including adult content, cryptocurrencies, firearms and gambling activity;
−Removed: and the activities of customers, business partners and counterparties.
+Added: • the use of our, or our partners’ products to facilitate legal, but controversial, products and services;
+Added: • the activities of customers, business partners and counterparties.
+Added: Tabl e of Contents
Social media also can cause harm to our reputation.
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We need to effectively manage our funding and liquidity in order to meet our cash requirements such as day-to-day operating expenses, extensions of credit to our customers, investments to grow our business, payments of principal and interest on our borrowings and payments on our other obligations.
−Removed: Our primary sources of funding and liquidity are collections from our customers, deposits, funds from securitized financings and proceeds from unsecured borrowings, including our credit facility and outstanding senior notes.
+Added: Our primary sources of liquidity include cash generated from operating activities, our credit facility, issuances of senior unsecured, subordinated or convertible debt securities and preferred stock, financings through our securitization programs, and deposits with the Banks.
If we do not have sufficient liquidity, we may not be able to meet our debt service requirements and other obligations, particularly during a liquidity stress event.
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We will need additional financing in the future to repay or refinance our existing debt at maturity, or otherwise, and to fund our growth.
−Removed: As of the date of this Annual Report on Form 10-K, we had outstanding $10 million of 4.25% convertible senior notes due in June 2028 and $900 million of 9.750% senior notes due in March 2029.
+Added: As of the date of this Annual Report on Form 10-K, we had outstanding $500 million of 6.750% senior notes due in 2035 and $400 million of 8.375% subordinated notes due in 2035.
The availability of additional financing will depend on a variety of factors such as financial market conditions generally, including the availability of credit to the financial services industry and our lender counterparties’ willingness to lend to us, consumers’ willingness to place money on deposit with us, our performance and credit ratings and the performance of our securitized portfolios.
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federal banking regulators proposed new rules in July 2023, commonly referred to as the Basel III “Endgame” or B3E, which would significantly revise the capital requirements applicable for large banking organizations with total assets of $100 billion or more.
+Added: Following initial consultation, federal banking regulators are in the process of reproposing rules implementing B3E, targeting a new proposal in 2026 and phase-in several years later.
+Added: The future of B3E implementation remains uncertain.
While the proposed B3E rules would not directly apply to us because we are under the $100 billion asset threshold, most of our institutional lenders would be subject to the enhanced capital requirements under B3E, which could limit their lending capacity available to lend to us and other borrowers.
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As a result, we may be forced to delay obtaining funding or be forced to issue or raise funding on undesirable terms, which could significantly reduce our financial flexibility and cause us to contract or not grow our business, all of which could have a material adverse effect on our results of operations and financial condition.
−Removed: Tabl e of Contents
−Removed: Given potential changes in the interest rate environment and other recessionary pressures, the debt markets may be volatile, and there can be no assurance that significant disruptions, uncertainties and volatility will not occur in the future.
+Added: The debt markets may be volatile for a number of reasons, including due to the interest rate environment, macroeconomic conditions and political events and uncertainties, and there can be no assurance that significant disruptions, uncertainties and volatility will not occur in the future.
Specifically, availability of capital from the non-investment grade debt markets may be subject to significant volatility, and there can be no assurance that we will be able to access those markets at attractive rates, or at all.
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If we are unable to securitize our credit card loans due to changes in the market or other circumstances or events, we may not be able to fund new credit card loans, which would have a material adverse effect on our operations and profitability.
−Removed: A significant source of funding is our securitization of credit card loans, which involves the transfer of credit card loans to a trust, and the issuance by the trust of notes to third-party investors collateralized by the beneficial interest in the transferred credit card loans.
+Added: A significant source of funding is our securitization of credit card loans, which involves the transfer of credit card loans to a trust, and the issuance by the trust of notes to third-party investors collateralized by the beneficial interest in the
+Added: Tabl e of Contents
+Added: transferred credit card loans.
A number of factors affect our ability to fund our credit card loans in the securitization market, some of which are beyond our control, including:
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Such cost increases may result, for example, because the investors are entitled to indemnification for increased costs resulting from such regulatory changes, such as increased capital requirements.
+Added: The future of B3E implementation remains uncertain.
The inability to securitize credit card loans due to changes in the market, regulatory proposals, the unavailability of credit enhancements, or any other circumstance or event would have a material adverse effect on our operations, cost of funds and overall financial condition.
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Deteriorating economic conditions and increased competition in the retail industry, among other factors, may lead to an increase in bankruptcies among retailers who have entered into credit card programs with us.
−Removed: The bankruptcy of one
−Removed: Tabl e of Contents
−Removed: or more retailers or other partners could lead to a decline in the amount of new loans and could lead to increased delinquencies and defaults on the associated loans.
+Added: The bankruptcy of one or more retailers or other partners could lead to a decline in the amount of new loans and could lead to increased delinquencies and defaults on the associated loans.
Any of these effects of a partner bankruptcy could result in the commencement of an early amortization for one or more series of such funding securities, particularly if such an event were to occur with respect to a retailer or other partner relating to a large percentage of such securitization trust’s assets.
1 unchanged sentence
Lower payment rates on our securitized credit card loans could materially adversely affect our liquidity and financial condition .
−Removed: Certain collections from our securitized credit card loans come back to us through our subsidiaries, and we use these collections to fund our purchase of newly originated loans to collateralize our securitized financings.
+Added: Certain collections from our securitized credit card loans come back to us through our subsidiaries, and we use these collections to fund the purchase of newly originated loans to collateralize our securitized financings.
If payment rates on our securitized credit card loans are lower than they have historically been, fewer collections will be remitted to us on an ongoing basis.
Further, certain series of our asset-backed securities include a requirement that we accumulate principal collections in a restricted account for a specified number of months prior to the applicable security’s maturity date.
−Removed: We are required under the program documents to lengthen this accumulation period to the extent we expect the payment rates to be low enough that the current length of the accumulation period is inadequate to fully fund the restricted account by the applicable security’s maturity date.
+Added: Tabl e of Contents
+Added: required under the program documents to lengthen this accumulation period to the extent we expect the payment rates to be low enough that the current length of the accumulation period is inadequate to fully fund the restricted account by the applicable security’s maturity date.
Lower payment rates, and in particular payment rates that are low enough that we are required to lengthen our accumulation periods, could materially adversely affect our liquidity and financial condition.
Inability to grow or maintain our deposit levels in the future could have a material adverse effect on our liquidity, ability to grow our business and profitability.
−Removed: A significant source of our funds is customer deposits, primarily in the form of certificates of deposit and other savings products.
−Removed: We obtain deposits directly from retail and commercial customers or through brokerage firms that offer our deposit products to their customers.
−Removed: In recent years, deposits have become an increasingly important source of funds for us, with, for example, our DTC deposits growing 19% from $6.5 billion as of December 31, 2023 to $7.7 billion as of December 31, 2024, and average DTC deposits representing 43% of our total funding sources.
+Added: A significant source of our funding is through customer deposits, primarily in the form of certificates of deposit and other savings products.
+Added: We obtain deposits directly from retail customers or through brokerage firms that offer our deposit products to their customers.
+Added: In recent years, deposits have become an increasingly important source of funds for us, with, for example, our DTC deposits growing 11% from $7.7 billion as of December 31, 2024 to $8.5 billion as of December 31, 2025, and average DTC deposits representing 48% of our total funding sources, which is comprised of retail and wholesale deposits, and secured and unsecured borrowings.
Our funding strategy includes continued growth of our liquidity through deposits.
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Conversely, any adjustments we make to the rates offered on our deposit products to remain competitive may adversely affect our liquidity or our profitability.
−Removed: The FDIA prohibits an insured bank from offering interest rates on any deposits that significantly exceed rates in its prevailing market, unless it is “well capitalized”.
−Removed: A bank that is less than “well capitalized” may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.
+Added: The FDIA prohibits an insured bank from offering interest rates on any deposits that significantly exceed rates in its prevailing market, unless it is “well capitalized.” A bank that is less than “well capitalized” may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.
There are no such restrictions under the FDIA on a bank that is “well capitalized” and as of December 31, 2025, each of our Banks met or exceeded all applicable requirements to be deemed “well capitalized” for purposes of the FDIA.
2 unchanged sentences
The FDIA also prohibits an insured bank from accepting brokered deposits, unless it is “well capitalized” or it is “adequately capitalized” and receives a waiver from the FDIC.
−Removed: Limitations on our Banks’ ability to accept brokered deposits for any reason (including regulatory limitations on the volume of brokered deposits in total or as a percentage of
−Removed: Tabl e of Contents
−Removed: total assets) in the future could materially adversely impact our liquidity, funding costs and profitability.
+Added: Limitations on our Banks’ ability to accept brokered deposits for any reason (including regulatory limitations on the volume of brokered deposits in total or as a percentage of total assets) in the future could materially adversely impact our liquidity, funding costs and profitability.
In December 2020, the FDIC updated its regulations that implement Section 29 of the FDIA to establish a new framework for analyzing whether certain deposit arrangements qualify as brokered deposits.
1 unchanged sentence
All deposits on the Consolidated Balance Sheets of our Banks categorized as non-brokered in accordance with the current regulations mentioned above comply with all application requirements of those regulations.
−Removed: However, in the third quarter of 2024, the FDIC issued a proposed rule that, if finalized as proposed, would expand the scope of deposits that constitute “brokered deposits” and therefore could potentially cause certain of our present or prospective deposits to be treated as brokered.
−Removed: While we cannot speculate on whether this proposed rule will be implemented or on what terms, limitations on the ability of our Banks to participate in the gathering of deposits may competitively disadvantage us, impede our ability to meet our funding goals and result in a material adverse effect on our business.
+Added: In the third quarter of 2024, the FDIC published in the Federal Register a proposed rule that, if finalized as proposed, would have expanded the scope of deposits that constitute “brokered deposits” and therefore could potentially have caused certain of our present or prospective deposits to be treated as brokered.
+Added: The FDIC withdrew this proposed rule in March 2025.
As of December 31, 2025, we had $13.9 billion in deposits, with approximately $7.7 billion in non-maturity savings deposits and approximately $6.2 billion in certificates of deposit.
If, for whatever reason, we are unable to grow or maintain our deposit levels, our liquidity, ability to grow our business and profitability could be materially adversely affected.
+Added: Tabl e of Contents
Our level of indebtedness could materially adversely affect our ability to generate sufficient cash to repay our outstanding debt, and our ability to react to changes in our business and our incurrence of additional indebtedness to fund future needs could exacerbate these risks.
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• prevent us from raising the funds necessary to repurchase all senior notes tendered to us upon the occurrence of certain changes of control.
−Removed: Tabl e of Contents
Restrictions imposed by the indenture governing our senior notes, our credit agreement and our other outstanding or future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities.
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If we fail to comply with such covenants, we may not be able to obtain waivers of non-compliance from the lenders and/or amend the covenants so that we are in compliance therewith.
+Added: Tabl e of Contents
Any reduction in our credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition.
Ratings of our debt are based on a number of factors, including financial strength, as well as factors not within our control, including conditions affecting the financial services industry, and the macroeconomic environment.
−Removed: Our ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding.
+Added: Our ratings or outlook could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding.
Our ability to raise funding through the securitization market also depends, in part, on the credit ratings of the securities we issue from our securitization trusts.
If we are not able to satisfy rating agency requirements to confirm the ratings of our asset-backed securities, it could limit our ability to access the securitization markets.
+Added: In addition, ratings issued by a ratings agency may differ as among different securities, and ratings issued for the same security may differ as among the different issuing ratings agencies.
Changes in market interest rates could negatively affect our profitability.
1 unchanged sentence
We fund Credit card and other loans with a combination of fixed rate and floating rate funding sources that include deposits and securitized financings.
−Removed: We also have unsecured debt that is subject to variable interest rates, and we may in the future incur additional debt or issue preferred equity that may rely on variable interest rates.
+Added: We also have unsecured debt that is subject to variable interest rates, and we may in the future incur additional debt and/or issue preferred equity that may rely on variable interest rates.
The interest rate benchmark for most of our floating rate assets is the Prime rate, and the interest rate benchmark for our floating rate liabilities is generally either the Secured Overnight Financing Rate (SOFR) or the Federal funds rate.
5 unchanged sentences
Conversely, our profitability could also be adversely affected if the interest we receive on our Credit card and other loans falls more quickly than the interest we pay on deposits and other borrowings.
−Removed: Tabl e of Contents
Future sales of our common stock, or the perception that future sales could occur, may adversely affect our common stock price.
2 unchanged sentences
We have reserved 8,320,451 shares of our common stock for issuance under our employee stock purchase plan and our long-term incentive plans, of which 1,052,261 shares have been issued and 2,696,814 shares are issuable upon vesting of restricted stock awards and restricted stock units.
−Removed: Under the terms of the applicable indenture, we also reserved 337,216 shares in connection with the issuance of our 4.25% convertible senior notes due in June 2028.
We have reserved for issuance 1,500,000 shares of our common stock, 107,291 of which remain issuable, under our 401(k) Plan as of December 31, 2025.
3 unchanged sentences
The trading price of shares of our common stock has from time to time fluctuated widely and, in the future, may be subject to similar fluctuations.
−Removed: The trading price of our common stock may be affected by a number of factors, including our operating results, changes in our earnings estimates, additions or departures of key personnel, our financial condition, legislative and regulatory changes, general conditions in the industries in which we and our brand partners operate, general economic conditions, and general conditions in the securities markets.
+Added: The trading price of our common stock may be affected by a number of factors, including our operating results, changes in our earnings estimates, additions or departures of key personnel, our financial condition, legislative, executive and regulatory changes, monetary and fiscal policy, general conditions in the industries in which we and our brand partners operate, general economic conditions, and general conditions in the securities markets.
Other risks described in this Annual Report on Form 10-K could also materially adversely affect our share price.
−Removed: There is no guarantee that we will pay future dividends or repurchase shares of our common stock at a level anticipated by stockholders, which could reduce returns to our stockholders.
−Removed: Decisions to declare future dividends on or repurchase our common stock will be at the discretion of our Board of Directors based upon a review of relevant considerations.
+Added: Tabl e of Contents
+Added: There is no guarantee that we will pay future dividends or repurchase shares of our stock at a level anticipated by stockholders, which could reduce returns to our stockholders.
+Added: Decisions to declare future dividends on or repurchase our stock will be at the discretion of our Board of Directors based upon a review of relevant considerations and restrictions imposed by the terms of our outstanding preferred stock.
Since October 2016, our Board of Directors has declared quarterly cash dividend payments on our outstanding common stock.
−Removed: Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by our Board of Directors.
−Removed: The Board’s determination to declare dividends on, or repurchase shares of, our common stock will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable laws and regulations, including those governing our Banks’ ability to pay dividends and make distributions or other payments to us, and other factors that the Board of Directors deems relevant.
−Removed: For example, beginning with the second quarter of 2020, our Board of Directors reduced our quarterly dividend payment by 67% from $0.63 to $0.21 per quarter.
+Added: We issued our inaugural series of publicly-traded preferred stock in November 2025, and we expect to pay our first quarterly dividend payment on our preferred stock in March 2026.
+Added: Future declarations of quarterly dividends and the establishment of future record and payment dates on our common and preferred stock are subject to approval by our Board of Directors.
+Added: The Board’s determination to declare dividends on, or repurchase shares of, our stock will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable laws and regulations, including those governing our Banks’ ability to pay dividends and make distributions or other payments to us, and other factors that the Board of Directors deems relevant.
Based on an evaluation of these factors, the Board of Directors may determine in the future not to declare dividends at all, to declare dividends at a reduced amount, not to repurchase shares or to repurchase shares at reduced levels compared to historical levels, any or all of which could reduce returns to our stockholders.
−Removed: Additionally, we may be unable to obtain
−Removed: regulatory approvals, if required, to repurchase shares.
−Removed: We are a holding company and depend on payments from our subsidiaries.
−Removed: Although not a bank holding company as defined under the Bank Holding Company Act, Bread Financial Holdings, Inc.
−Removed: is our parent holding company and, as such, depends on dividends, distributions and other payments from subsidiaries, particularly our Banks, to fund dividend payments, any potential share repurchases, payment obligations, including debt obligations, and to provide funding and capital, as needed, to our other operating subsidiaries.
−Removed: Banking laws and regulations and our banking regulators may limit or prohibit our transfer of funds freely, either to or from our subsidiaries, at any time.
−Removed: These laws, regulations and rules may hinder our ability to access funds that we may need to make payments on our obligations or otherwise achieve strategic objectives.
−Removed: For more information, see “Business — Supervision and Regulation”.
+Added: Further, under the terms of our outstanding preferred stock, our ability to declare, pay or set aside any payment for dividend or distribution on our common stock, or repurchase, redeem or otherwise acquire for consideration, directly or indirectly, any shares of our common stock, is subject to restrictions in the event that we do not declare and either pay or set aside a sum sufficient for payment of dividends on our preferred stock for the immediately preceding dividend period.
In preparing our financial statements we make certain assumptions, judgments and estimates that affect amounts reported in our audited Consolidated Financial Statements, which, if not accurate, may significantly impact our financial results.
We make assumptions, judgments and estimates in determining the Allowance for credit losses, accruals for employee-related liabilities, accruals for uncertain tax positions, valuation allowances on deferred tax assets and legal contingencies.
−Removed: We also make assumptions, judgments and estimates for items such as the fair value of financial instruments, any
−Removed: Tabl e of Contents
−Removed: impairment of goodwill, long-lived assets and other prepaid or intangible assets, the fair value of stock awards, as well as the recognition of revenue.
+Added: We also make assumptions, judgments and estimates for items such as the fair value of financial instruments, any impairment of goodwill, long-lived assets and other prepaid or intangible assets, the fair value of stock awards, as well as the recognition of revenue.
These assumptions, judgments and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the audited Consolidated Financial Statements.
−Removed: Actual results could differ materially from our estimates as a result of adverse impacts from various factors, including regulatory or legislative changes, or if future macroeconomic conditions or future operating results differ significantly from our current assumptions, and such differences could significantly impact our financial results.
+Added: Actual results could differ materially from our estimates as a result of adverse impacts from various factors, including regulatory or legislative changes, unexpected developments in legal contingencies, or if future macroeconomic conditions or future operating results differ significantly from our current assumptions, and such differences could significantly impact our financial results.
Legal, Regulatory and Compliance Risks
Our business is subject to extensive and evolving government regulation and supervision, which could materially adversely affect our results of operations and financial condition.
−Removed: We, primarily through our Banks and certain non-bank subsidiaries, are subject to extensive federal and state regulation, supervision and examination by regulators, including the FDIC, the Delaware Office of the State Bank Commissioner,
−Removed: the Utah Department of Financial Institutions, and the CFPB.
+Added: We, primarily through our Banks and certain non-bank subsidiaries, are subject to extensive federal and state regulation, supervision and examination by regulators, including the FDIC, the Delaware Office of the State Bank Commissioner, the Utah Department of Financial Institutions, and the CFPB.
Banking and consumer financial protection laws and regulations are intended to protect consumers, depositors’ funds, the DIF, and the safety and soundness of the banking system as a whole, not stockholders and non-deposit creditors.
4 unchanged sentences
We believe that regulatory enforcement and fines have also increased across the banking and financial services sector.
−Removed: Further, while the new Presidential Administration and the congressional majorities in the U.S.
−Removed: Senate and House of Representatives support reducing the regulatory burden, the scope of legislation, executive action and regulation and the intensity of supervision will likely remain uncertain in the current regulatory and political environments at both the federal and state levels, including with respect to late fees, finance charges, interchange fees, credit card reward programs and other matters.
+Added: Further, while the current Presidential Administration and the congressional majorities in the U.S.
+Added: Senate and House of Representatives have supported reducing the regulatory burden, the scope of legislation, executive action and regulation and the intensity of supervision will likely remain uncertain in the current regulatory and political environments at both the
+Added: Tabl e of Contents
+Added: federal and state levels, including with respect to late fees and credit card interest rates.
+Added: Moreover, in certain cases, uncertainty at the federal level has prompted a rise in state lawmakers, regulators and attorneys general taking more active roles in consumer finance regulation and enforcement, potentially creating a complex regulatory patchwork in areas such as interchange fees, credit card reward programs and other matters.
Such changes could subject us to additional costs, limit the types of financial services and products we may offer, and/or limit what we may charge for certain banking services, among other things.
−Removed: For example, in March 2024, the CFPB published a final rule that would significantly reduce the amount of late fees that we are authorized to charge under the CARD Act safe harbor.
−Removed: The CFPB’s late fee rule, which is currently subject to a preliminary injunction, is discussed in more detail in the subsequent risk factor below.
−Removed: Other examples of federal and state legislation we are tracking include legislation intended to place caps on the interest rates that we and other financial institutions are permitted to charge.
−Removed: For example, in 2023, Colorado passed a law (initially effective July 2024) to opt out of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA), a federal law addressing interstate loans by state-chartered banks.
−Removed: Colorado contends that, by opting out of DIDMCA, Colorado would have the ability to impose its interest rate limits (generally capped at 21%) and fee terms (e.g., $15 late fee and 10-day grace period) on any loan made by a state-chartered bank to a resident of Colorado located in Colorado at the time of the loan.
−Removed: This Colorado law is currently subject to a preliminary injunction, but we cannot provide any assurance as to the outcome of this or other similar pending or future legislation in other states, any of which would have an adverse effect on our business and results of operations.
−Removed: President Trump and various federal legislators have also recently made public statements regarding potential efforts to place caps on credit card interest rates, and a bill was introduced in the U.S.
+Added: Examples of federal and state legislation that we track include legislation intended to place caps on the interest rates that we and other financial institutions are permitted to charge.
+Added: For instance, in 2023, Colorado passed a law (initially scheduled to be effective July 2024) to “opt out” of the national standard interest rate for interstate loans by state-chartered banks as provided by federal law in the Depository Institutions Deregulation and Monetary Control Act (DIDMCA).
+Added: By opting out of DIDMCA, Colorado would have the ability to regulate and limit interest rates on loans “made in” Colorado, and the Colorado law would generally cap interest rates at 21% and late fees at $15 with a 10-day grace period.
+Added: In June 2024, the U.S.
+Added: District Court for the District of Colorado preliminarily enjoined Colorado from enforcing the interest rates in the Colorado Uniform Consumer Credit Code with respect to any loan made by the plaintiffs’ members to the extent the loan is not made by a lender in Colorado and the applicable interest rate in 12 U.S.C.
+Added: 1831d(a) exceeds the rate that would otherwise be permitted.
+Added: In November 2025, the U.S.
+Added: Court of Appeals for the Tenth Circuit reversed the District Court’s preliminary injunction, concluding that “made in” encompasses loans in which either the lender or the borrower is located in Colorado, meaning that Colorado could impose interest-rate caps on loans made by out-of-state banks to Colorado borrowers.
+Added: The plaintiffs in the litigation (who are opposing the Colorado law) are challenging this ruling.
+Added: Legislatures in other states have proposed similar laws in the past and may again in the future.
+Added: We cannot provide any assurance as to the final outcome of this or other similar proposed or future legislation in other states, any of which would have an adverse effect on our business and results of operations.
+Added: While still subject to potential reversal, the recent Tenth Circuit decision could also encourage other states to adopt similar legislation.
+Added: In addition, President Trump and various federal legislators have also made public statements regarding potential efforts to place caps on credit card interest rates, and a bill was introduced in the U.S.
Senate in February 2025 proposing to cap credit card interest rates at 10% for a period of five years.
+Added: Most recently, in January 2026, President Trump made public statements on social media and elsewhere in support of placing a cap of 10% on credit card interest rates for a one-year period.
+Added: The likelihood of any such cap being effectuated in any new executive action, legislation or regulation remains uncertain, but any such cap on interest rates would significantly limit our ability to extend credit to certain of our customers and would have a material adverse effect on our business, results of operations and financial condition.
In connection with their continuous supervision and examinations of us, the FDIC, CFPB and/or other regulatory agencies may require changes in our business or operations.
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We may also become subject to formal or informal enforcement and other supervisory actions, including memoranda of understanding, written agreements, cease-and-desist orders, and prompt-corrective-action or safety-and-soundness directives.
−Removed: For example, in late November 2023, the FDIC issued a consent order to one of our subsidiaries, arising out of the June 2022 transition of our credit card processing services to strategic outsourcing partners, and in August 2024 each of our Banks entered into an agreement with the FDIC to pay civil money penalties (CMPs) of $1 million per Bank, also related to the June 2022 transition.
−Removed: For additional information regarding these matters, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Legislative and
−Removed: Tabl e of Contents
−Removed: Regulatory Matters” below.
−Removed: Regulatory authorities have extensive discretion in their supervisory and enforcement actions.
+Added: For example, in late November 2023, the FDIC issued a consent order to one of our subsidiaries, Comenity Servicing LLC, arising out of the June 2022 transition of our credit card processing services to strategic outsourcing partners, and in August 2024 each of our Banks entered into an agreement with the FDIC to pay civil money penalties (CMPs) of $1 million per Bank, also related to the June 2022 transition.
+Added: For additional information regarding this consent order, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Legislative, Regulatory Matters and Capital Adequacy.” Regulatory authorities have extensive discretion in their supervisory and enforcement actions.
Supervisory actions could entail significant restrictions on our existing business, our ability to develop new business, our flexibility in conducting operations, and our ability to pay dividends or utilize capital.
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In addition, changes in the regulatory and supervisory environments could adversely affect us in substantial and unpredictable ways, including by limiting the types of financial services and products we may offer, enhancing the ability of others to offer more competitive financial services and products, restricting our ability to make acquisitions or pursue other profitable opportunities, and negatively impacting our results of operations and financial condition.
−Removed: Changes in the prevailing interpretations of federal or state laws and related regulations could also invalidate or call into question the legality of certain of our services and business practices.
+Added: Changes in the
+Added: Tabl e of Contents
+Added: prevailing interpretations of federal or state laws and related regulations could also invalidate or call into question the legality of certain of our services and business practices.
Our failure to comply with the laws, executive actions, regulations, and supervisory actions to which we are subject, even if the failure is inadvertent or reflects a difference in interpretation, could subject us to fines, other penalties, and restrictions on our business activities, any of which could adversely affect our business, results of operations, financial condition, cash flows, capital base, and the price of our securities.
Business — Supervision and Regulation” for more information about certain laws and regulations to which we are subject and their impacts on us.
−Removed: The CFPB has issued a final rule regarding credit card late fees, which represents a significant departure from the rules that are currently in effect.
−Removed: Absent a successful legal challenge or other invalidation of the rule, we expect the rule will have a significant adverse impact on our business, results of operations and financial condition for at least the short term and, depending on the effectiveness of our actions taken in response to the rule, potentially over the long term.
−Removed: In March 2024 the CFPB published a final rule that would significantly reduce the safe harbor amount for late fees that credit card issuers are authorized to charge.
−Removed: Absent a successful legal challenge or other invalidation of the rule, the rule will:
−Removed: (i) decrease the safe harbor amount for credit card late fees to $8 and eliminate a higher safe harbor dollar amount for subsequent late payments;
−Removed: and (ii) eliminate the annual inflation adjustments that currently exist for the late fee safe harbor dollar amounts.
−Removed: The “safe harbor” dollar amounts referenced in the CFPB’s rulemaking refer to the amounts that credit card issuers may charge as late fees under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) without reference to the issuer’s cost to collect.
−Removed: Under the CARD Act, these safe harbor amounts, since their initial implementation, have been subject to annual adjustment based on changes in the Consumer Price Index, and the safe harbor amounts are currently set at $30 for an initial late fee and $41 for subsequent late fees incurred in one of the next six billing cycles.
−Removed: Accordingly, the $8 safe harbor amount on late fees (and the elimination of the annual inflation-based adjustment thereto) would represent a significant decrease from the current safe harbor amounts.
−Removed: Shortly after the final rule was published, a lawsuit was filed in U.S.
−Removed: District Court for the Northern District of Texas (Ft.
−Removed: Worth Division) by the U.S.
−Removed: Chamber of Commerce, the American Bankers Association and various other parties, challenging the rule and seeking a preliminary injunction enjoining the rule from becoming effective during the pendency of the litigation.
−Removed: The lawsuit asserts that the rule would ultimately harm those consumers the CFPB is charged with protecting and seeks to have the rule vacated on various grounds, including that the CFPB (i) violated the CARD Act by preventing issuers from collecting reasonable and proportional late fees when cardholders do not pay their bills on time, (ii) violated the Administrative Procedure Act by promulgating a final rule that is arbitrary and capricious, relying on inappropriate, incomplete and non-public data;
−Removed: and (iii) issued the rulemaking with funds drawn in violation of the U.S.
−Removed: Constitution’s Appropriations Clause.
−Removed: While we are not a plaintiff in these actions, the presidents of our two subsidiary banks did each submit a declaration in connection with the plaintiffs’ motion for a preliminary injunction, and we support the positions taken by the plaintiffs in these matters.
−Removed: 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 granted remains in effect as of the date of this report.
−Removed: The outcome of this legal challenge, including the impact on the final rule, remains uncertain.
−Removed: Assuming these legal challenges are not successful and the CFPB’s final rule becomes effective, this rule will represent an approximately 75% reduction in the amount of late fees that may be charged under the CARD Act safe harbor, which we
−Removed: Tabl e of Contents
−Removed: expect will have a significant adverse impact on our revenue, results of operations and other financial metrics for at least the short term and, depending on the effectiveness of the mitigating actions that we take in response to the rule, potentially over the long term.
−Removed: We have already executed on a number of strategies designed to limit the impact of the final rule on us and we continue to evaluate various other mitigating strategies, but it may not be feasible for us to fully implement these strategies in the short term, and we cannot guarantee that these efforts will ultimately be successful even if and when fully implemented.
−Removed: Moreover, the final rule (and certain of our mitigating strategies) may present other risks and adverse impacts to our business, results of operations and financial condition, which could include, without limitation, the loss of customers due to tightened underwriting standards or negative customer response to higher rates and fees, impacts to customer payment behavior due to decreased incentives to pay, further regulatory action in response to mitigating strategies that may be employed by us or other credit card issuers, adverse impacts to or disputes with our brand partners, strategic non-renewals of certain brand partner relationships that cease to be profitable, and balance sheet impairments, including of goodwill, long-lived assets and other prepaid or intangible assets.
−Removed: Additional discussion regarding the CFPB’s final rule can be found in “Management’s Discussion & Analysis – Business Environment” below.
−Removed: See also “Business — Supervision and Regulation — Consumer Protection Regulation and Supervision” above for additional discussion regarding recent developments at the CFPB .
−Removed: The extent to which these recent or other future developments will ultimately impact the CFPB’s regulation of our business, including the CFPB’s credit card late fee rule and the associated litigation, remains uncertain.
Litigation and other actions and disputes could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business.
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Many of these actions have included claims for substantial compensatory or punitive damages;
+Added: for example, in November 2025, a jury found that we should be required to pay punitive damages in an action against us under the Fair Credit Reporting Act (FCRA), with the punitive damages amount far exceeding the actual damages awarded the plaintiff;
+Added: provided that the amount of any punitive damages in this case remains subject to determination by the trial court judge..
While we have historically relied on our arbitration clause (which includes a class action waiver) in agreements with customers to limit our exposure to class action litigation, there can be no assurance that we will always be successful in enforcing our arbitration clause in the future.
+Added: For instance, a plaintiff might prove that she/he did not accept our account terms and conditions (e.g., in an identity theft claim under the FCRA or in a claim under the Military Lending Act, which prohibits an arbitration requirement).
There may also be legislative, regulatory or other efforts to limit or eliminate the use of arbitration clauses or class action waivers, and if our arbitration provisions are found to be unenforceable or are otherwise limited or eliminated, our exposure to class action litigation could increase significantly.
Further, e ven if our arbitration clause remains enforceable, we may be subject to mass arbitrations in which large groups of consumers bring arbitrations against us simultaneously.
−Removed: The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions.
Given the inherent uncertainties involved in litigation, and the very large or indeterminate damages sought in some matters asserted against us, there is significant uncertainty as to the ultimate liability we may incur from litigation.
Claims and legal actions could involve significant defense costs and reputational damage, and the time-consuming nature of legal proceedings can divert senior management attention from the business.
+Added: For additional detail regarding the litigation matters filed against us in connection with our spinoff of LVI in 2021, see “ Risk Factors—Risks Related to the LoyaltyOne Spinoff” and Note 20, “Commitments and Contingencies” to our audited Consolidated Financial Statements.
In addition to litigation and regulatory matters, from time to time, through our operational and compliance controls, we identify compliance issues that require us to make operational changes and, depending on the nature of the issue, result in financial remediation to impacted cardholders.
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Our Banks are subject to extensive federal and state regulation that may restrict their ability to make cash available to us and may require us to make capital contributions to them.
+Added: Although not a bank holding company as defined under the BHC Act, Bread Financial Holdings, Inc.
+Added: is our parent holding company and, as such, depends on dividends, distributions and other payments from subsidiaries, particularly our Banks, to fund dividend payments, any potential share repurchases, payment obligations, including debt obligations, and to provide funding and capital, as needed, to our other operating subsidiaries.
Federal and state laws and regulations extensively regulate the operations of our Banks, including to limit the ability of the Banks to pay dividends or make other distributions to us.
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Tabl e of Contents
−Removed: the capital requirements to which it is subject, we may be required to provide them with additional capital, which could also impair our ability to service our indebtedness.
+Added: the capital requirements to which it is subject, we may be required to provide them with additional capital, which could also impair our ability to fund dividend payments, any potential share repurchases and our payment obligations, including servicing our indebtedness.
In addition, under the “Source of Strength” doctrine, we are required to serve as a source of financial strength to our Banks and may not conduct our operations in an unsafe or unsound manner.
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If legislative attempts to amend the BHC Act to eliminate the exclusion of credit card banks or industrial loan companies from the definition of “bank” are successful, or if we voluntarily take such action that results in the Parent Company becoming a federally-regulated BHC, we would become subject to additional regulation applicable to BHCs, which could increase our compliance and regulatory costs and have other effects that could be materially adverse to our business.
−Removed: The Dodd-Frank Act mandates multiple studies, which could result in future legislative or regulatory action.
−Removed: In particular, the Government Accountability Office issued its study on whether it is necessary, in order to strengthen the safety and soundness of institutions or the stability of the financial system of the United States, to eliminate the exemptions to the definition of “bank” under the BHC Act for certain institutions including limited purpose credit card banks and industrial loan companies.
−Removed: The study did not recommend the elimination of these exemptions.
−Removed: However, legislation is periodically introduced that would eliminate this exception for industrial loan companies and other “non-bank banks”.
+Added: Legislation is periodically introduced that would eliminate the exception for industrial loan companies and other “non-bank banks” from the definition of “bank” in the BHC Act.
If such legislation were enacted without any grandfathering of or accommodations for existing institutions, we could be required to become a BHC.
−Removed: If we were required to become a BHC, or if we voluntarily take such action that results in the Parent Company becoming a federally-regulated BHC, we and our non-bank subsidiaries would be subject to supervision, regulation and examination by the Federal Reserve Board.
−Removed: We would be required to provide annual reports and such additional information as the Federal Reserve Board may require pursuant to the BHC Act, and applicable regulations.
+Added: If we were required to become a BHC, or if we voluntarily take such action that results in the Parent Company becoming a federally-regulated BHC, we and our non-bank subsidiaries would be subject to supervision, regulation and examination by the FRB.
+Added: We would be required to provide annual reports and such additional information as the FRB may require pursuant to the BHC Act, and applicable regulations.
In addition, we would be subject to consolidated regulatory capital requirements.
−Removed: Pursuant to provisions of the BHC Act and regulations promulgated by the Federal Reserve Board thereunder, a BHC may only engage in, or own companies that engage in, activities deemed by the Federal Reserve Board to be permissible for BHCs.
+Added: Pursuant to provisions of the BHC Act and regulations promulgated by the FRB thereunder, a BHC may only engage in, or own companies that engage in, activities deemed by the FRB to be permissible for BHCs.
Activities permissible for BHCs are those that are so closely related to the business of banking or managing or controlling banks as to be a proper incident thereto.
−Removed: If a BHC and its subsidiary insured depository institutions are well capitalized, well managed, and have satisfactory CRA ratings, it may submit an election to the Federal Reserve Board to become an FHC.
+Added: If a BHC and its subsidiary insured depository institutions are well capitalized, well managed, and have satisfactory CRA ratings, it may submit an election to the FRB to become an FHC.
Permissible activities for FHCs include those “so closely related to banking as to be a proper incident thereto” as well as certain additional activities deemed “financial in nature or incidental to such financial activity” or complementary to a financial activity and that do not pose a substantial risk to the safety and soundness of the depository institution or the financial system.
If we were required to become a BHC, we may be required to modify or discontinue certain of our business activities, which may materially adversely affect our results of operations and financial condition.
+Added: We may not realize the expected benefits of the pending merger of our subsidiary Banks.
+Added: Realization of the potential benefits contemplated by the planned internal merger of CCB and CB, with CCB as the surviving entity, depend on a number of factors, including regulatory approval of state and federal banking agencies, as well as our ability to timely and successfully integrate the operations of the merging subsidiaries into a single bank operation.
+Added: As a result, we may not be successful in realizing the expected operational and financial benefits of the pending merger of our subsidiary Banks, and we may experience other adverse consequences, including the diversion of management’s attention from other business concerns and unforeseen legal, regulatory or other challenges that we may not be able to manage effectively.
Increases in FDIC insurance premiums may have a material adverse effect on our results of operations.
2 unchanged sentences
Any future increases or required prepayments in FDIC insurance premiums may materially adversely affect our results of operations.
+Added: Tabl e of Contents
Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations could cause us material financial loss.
−Removed: The Bank Secrecy Act and the PATRIOT Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S.
+Added: The Bank Secrecy Act and the USA PATRIOT Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S.
financial system for money laundering and terrorist financing activities.
−Removed: The Bank Secrecy Act, as amended by the PATRIOT Act, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of partners and customers, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies.
−Removed: Tabl e of Contents
−Removed: Financial Crimes Enforcement Network (FinCEN), a unit of the Treasury Department that administers the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the Federal Banking Agencies , as well as the U.S.
+Added: The Bank Secrecy Act, as amended by the USA PATRIOT Act, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of partners and customers, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies.
+Added: The Financial Crimes Enforcement Network (FinCEN), a unit of the Treasury Department that administers the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the Federal Banking Agencies , as well as the U.S.
Department of Justice, Drug Enforcement Administration, and Internal Revenue Service (IRS).
−Removed: We are also subject to scrutiny of compliance with the
−Removed: rules enforced by the OFAC, which may require sanctions for dealing with certain persons or countries.
+Added: We are also subject to scrutiny of compliance with the rules enforced by the OFAC, which may require sanctions for dealing with certain persons or countries.
We cannot provide assurance that our programs and controls will be effective to ensure our compliance with all applicable anti-money laundering and anti-terrorism financing laws and regulations, and our failure to comply could subject us to significant sanctions, fines, penalties and reputational harm, all of which could have a material adverse effect on our business, results of operations and financial condition.
−Removed: Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use Personal Information, and any actual or perceived failure to comply with any of these new or existing laws could adversely affect our business, results of operations, or financial condition.
+Added: Regulation in the areas of privacy, data protection, data governance, and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use Personal Information, and any actual or perceived failure to comply with any of these new or existing laws could adversely affect our business, results of operations, or financial condition.
In connection with running our business, we receive, store, use and otherwise process information that relates to individuals and/or constitutes “personal data,” “personal information,” “personally identifiable information,” “nonpublic personal information” or similar terms under applicable data privacy laws (collectively, Personal Information), including from and about actual and prospective customers, as well as our employees and business contacts.
We are therefore subject to a variety of federal and state laws, regulations and other requirements relating to the privacy, security and handling of Personal Information.
−Removed: For example, the CCPA and related laws in other jurisdictions require us to adhere to certain disclosure restrictions and deletion obligations with respect to the Personal Information of their residents, and allow for penalties for violations and, in some cases, a private right of action.
+Added: For example, the CCPA and related laws in other jurisdictions require us, among other requirements, to adhere to certain disclosure restrictions and deletion obligations with respect to the Personal Information of their residents, and allow for penalties for violations and, in some cases, a private right of action.
The GLBA includes both a “Privacy Rule,” which imposes obligations on financial institutions relating to the use or disclosure of nonpublic personal information, and a “Safeguards Rule,” which imposes obligations on financial institutions to implement and maintain physical, administrative and technological measures to protect the security of non-public personal financial information.
−Removed: Failure to comply with the GLBA could result in substantial financial penalties.
+Added: Failure to comply with the GLBA could result in enforcement actions.
These laws also impose transparency and other obligations with respect to Personal Information and provide individuals with rights with respect to their Personal Information.
−Removed: Legislators and regulators in the United States are increasingly adopting or revising privacy, data protection, data governance, account access, and information and cyber security laws, including data localization, authentication and notification laws.
+Added: Legislators and regulators in the United States are increasingly adopting or revising privacy, data protection, data governance, account access, and information and cyber security laws.
As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate data governance, data protection, data transfer and account access mechanisms are in place.
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If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.
−Removed: For more information on regulatory and legislative activity in this area, see “Privacy, Information Security and Data Protection” above.
+Added: Tabl e of Contents
+Added: For more information on regulatory and legislative activity in this area, see “Item 1.
+Added: Business — Privacy, Information Security and Data Protection.”
Our failure to protect our intellectual property rights and use of open source software may harm our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly, any of which could negatively impact our business, results of operations and profitability.
1 unchanged sentence
The actions we take to protect our patents, copyrights, trademarks and other proprietary rights may not be adequate.
−Removed: Litigation may be necessary to enforce our intellectual property rights, protect our patents, copyrights, trademarks or trade secrets or determine the validity and scope of the
−Removed: Tabl e of Contents
−Removed: proprietary rights of others.
+Added: Litigation may be necessary to enforce our intellectual property rights, protect our patents, copyrights, trademarks or trade secrets or determine the validity and scope of the proprietary rights of others.
Any infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our intellectual property or other proprietary rights.
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These claims could result in litigation, damage our reputation in the open-source community, or require us to purchase costly software licenses, devote additional research or development resources to reengineer our platform, discontinue use of our platform if reengineering could not be accomplished on a timely or cost-effective basis, and/or make the source code of our proprietary software generally available, any of which could result in liability to us and negatively impact our business, results of operations, profitability and financial condition.
−Removed: In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software because open source software licensors generally do not provide
−Removed: any warranties or other contractual protections for the open source software, including contractual protections regarding infringement, misappropriation, security vulnerabilities, or defects or errors in the code, any of which could result in liability to us and negatively impact our business, results of operations, profitability and financial condition.
+Added: In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software because open source software licensors generally do not provide any warranties or other contractual protections for the open source software, including contractual protections regarding infringement, misappropriation, security vulnerabilities, or defects or errors in the code, any of which could result in liability to us and negatively impact our business, results of operations, profitability and financial condition.
We have international operations that subject us to various international risks as well as increased compliance and regulatory risks and costs.
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regulations, as well as the regulations in the countries and markets in which we or they operate, could result in fines, penalties, injunctions or other similar restrictions, any of which could have a material adverse effect on our business, results of operations and financial condition.
+Added: Tabl e of Contents
Tax legislation initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition .
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There can be no assurance that our historical tax positions will not be challenged by the relevant taxing authorities, or that we would be successful in defending our positions in connection with any such challenge.
−Removed: Tabl e of Contents
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent or delay change of control transactions or attempts by our stockholders to replace or remove our current management.
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Further, if our significant vendors are unable or unwilling to fulfill or renew our existing contracts on current terms, we might not be able to replace the related product or service at the same cost, in a timely fashion, or at all, any of which could negatively impact our profitability, business and operations, in some cases materially.
−Removed: Our 2022 transition of our credit card processing services to strategic outsourcing partners was a significant and complex undertaking, which resulted in unanticipated platform stability issues and related impacts that have adversely impacted, and may continue to adversely impact, our business, results of operations, reputation and brand.
−Removed: In late June 2022, we completed the transition of our credit card processing services to strategic outsourcing partners, including Fiserv for our core processing services and Microsoft for related cloud infrastructure services.
−Removed: As we described previously, transitioning these services from our legacy platforms to strategic partners with established systems and functionality presented significant risks, including, but not limited to, potential losses or corruption of data, changes in security processes, implementation delays and cost overruns, resistance from current partners and account holders, disruption to operations, loss of customization or functionality, reliability issues with legacy systems prior to cutover and incurrence of outsized consulting costs to complete the transition.
−Removed: In addition, as previously disclosed, the pursuit of multiple new product integrations and outsourcing transitions simultaneously increased the complexity and risk, as well as magnified the potential for the unintended consequences, including an inability to retain or replace key personnel during the transition as well as the incurrence of unexpected expenses as we adopted new processes for managing these service providers and established controls and procedures to ensure regulatory compliance.
−Removed: In connection with the transition, we experienced unanticipated issues with platform stability, which resulted in outages and interruptions in our call center operations and online customer service platforms.
−Removed: These outages and interruptions resulted in a number of adverse impacts, including customer complaints, negative social media postings, reputational damage, regulatory scrutiny, lost potential revenue, remediation costs, timing-related impacts to our Delinquency rate and Net loss rate data, and increased consulting and professional fees.
−Removed: Furthermore, in late November 2023, the FDIC issued a consent order to one of our subsidiaries arising out of the transition, and in August 2024 each of our Banks entered into an agreement with the FDIC to pay CMPs of $1 million per Bank, also related to the transition.
−Removed: For additional information regarding the consent order and the CMPs, see “Item 1.
−Removed: Business – Supervision and Regulation” above.
−Removed: These challenges associated with the transition have adversely impacted, and may continue to adversely impact, our business, results of operations, financial condition, and result in
−Removed: Tabl e of Contents
−Removed: damage to our reputation and our brand.
−Removed: Moreover, now that we have completed this transition, it would be difficult and disruptive for us to replace certain of these third-party vendors, particularly Fiserv, in a timely or seamless manner if they were unwilling or unable to continue to provide us with these services in the future (as a result of their financial or business conditions or otherwise), which could materially impact our business and operations.
If we, our third-party providers, or brand partners fail to safeguard our confidential information and/or experience a data security incident, there may be damage to our brand and reputation, material financial penalties and legal claims, which could materially adversely affect our business, results of operations, and financial condition.
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We and certain of our third-party providers collect, maintain and process data about customers, employees, business partners, brand partners, and others, including Personal Information, as well as proprietary information belonging to our business such as trade secrets (collectively, Confidential Information).
−Removed: Information security risks for large financial institutions have increased with the adoption of new technologies, including those used on mobile devices, to conduct financial and other business transactions, and the increased sophistication and activity level of threat actors.
+Added: Information security risks for large financial institutions have increased with the adoption of new technologies to conduct financial and other business transactions, including those used on mobile devices, and the increased sophistication and
+Added: Tabl e of Contents
+Added: activity level of threat actors.
These threat actors employ advanced techniques and tools, including AI, to circumvent security controls, evade detection and remove forensic evidence.
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We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information.
−Removed: Our ability, and that of our third-party service providers and brand partners, to protect our IT Systems and Confidential Information against damage, loss or performance degradation from power loss,
−Removed: Tabl e of Contents
−Removed: network failure, cyber-attacks, including ransomware or denial of service attacks, insider threats, state-sponsored threats, hardware and software defects or malfunctions, human error, computer viruses or other malware, public health crises, disruptions in telecommunications services, fraud, fires and other disasters and other events is critical.
+Added: Our ability, and that of our third-party service providers and brand partners, to protect our IT Systems and Confidential Information against damage, loss or performance degradation from power loss, network failure, cyber-attacks, including ransomware or denial of service attacks, social engineering/phishing, use of AI technologies by bad actors, deepfakes, insider threats, state-sponsored threats, hardware and software defects or malfunctions, human error, computer viruses or other malware, misconfigurations, bugs or other vulnerabilities, malicious code embedded in open-source software, disruptions in telecommunications services, fraud, fires and other disasters and other events, is critical.
+Added: Because the tactics, techniques and procedures used to obtain unauthorized access, or to disable or degrade systems, change frequently, have become increasingly more complex and sophisticated, and may be difficult to detect for periods of time, we may not anticipate these acts or respond adequately or timely.
+Added: For example, cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as GenAI are being used by threat actors to create sophisticated attacks that are increasingly automated, targeted and more difficult to defend against.
To provide many of our services, we must be able to store, retrieve, process and manage large amounts of data, as well as periodically expand and upgrade our IT Systems.
−Removed: Any damage to our IT Systems, including those of our third-party service providers or brand partners, any failure of our network links that interrupts our operations or any impairment of our ability to use our software or the proprietary software of third-party vendors, including impairments due to cyber-attacks, could adversely affect our ability to meet our partners’ and customers’ needs and their confidence in utilizing us for future services.
−Removed: In addition, any failure to successfully implement new IT Systems, or improvements or upgrades to existing IT Systems in a timely manner could have an adverse impact on our business if we are not able to be competitive with other financial services companies and could also adversely impact our internal controls (including internal controls over financial reporting), results of operations, and financial condition.
+Added: Any damage to our IT Systems, including those of our third-party service providers or brand partners, any failure of our network links that interrupts our operations or any impairment of our ability to use our software or the proprietary software of third-party vendors, including impairments due to cyber-attacks, or our inability to execute effective disaster recovery plans could adversely affect our ability to meet our partners’ and customers’ needs and their confidence in utilizing us for future services, as well as other adverse impacts to our business, results of operations, and financial condition.
+Added: Moreover, due to the interconnectivity and complexity of information systems and their reliance on common systems, software and vendors, disruptions or degradations have had, and will likely continue to have,
+Added: Tabl e of Contents
+Added: wide-reaching consequences, including the potential to disrupt the overall financial system and other key systems in the global economy.
If we are not able to invest successfully in, and compete at the leading edge of, technological developments in our industry, our revenue and profitability could be materially adversely affected.
+Added: Moreover, technology transformation projects are complex undertakings, which may result in unanticipated consequences that may adversely impact our business, results of operations, reputation and brand.
Our industry is subject to rapid and significant technological changes.
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We expect that new technologies in the payments industry will continue to emerge, and these new technologies may be superior to, or render obsolete, our existing technology.
−Removed: The process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate partners’ and customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively.
−Removed: Partner and customer adoption is a key competitive factor, and our competitors may develop products, platforms or technologies that become more widely adopted than ours.
+Added: T he process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate partners’ and customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively.
+Added: Partner and customer adoption is a key competitive factor, and our competitors may develop products, platforms or tec hnologies that become more widely adopted than ours.
In addition, we may underestimate the time and expense we must invest in new products and services before they generate significant revenues, if at all.
+Added: Moreover, technology transformation projects are complex undertakings that may result in unanticipated and adverse impacts.
+Added: For example, as previously reported, in 2022 we completed the transition of our credit card processing services to strategic outsourcing partners.
+Added: In connection with the transition, we experienced unanticipated issues with platform stability, which resulted in outages and interruptions in our call center operations and online customer service platforms.
+Added: These outages and interruptions resulted in a number of adverse impacts, including the issuance of a consent order by the FDIC to one of our subsidiaries and the requirement that each of our Banks pay civil money penalties of $1 million to the FDIC.
+Added: More generally, technology transformation projects may present significant risks and unanticipated impacts, including, but not limited to, operational execution errors, platform stability issues, security vulnerabilities, potential losses or corruption of data, changes in security processes, implementation delays and cost overruns, resistance from current partners and account holders, disruption to operations and loss of customization or functionality.
+Added: These and other potential challenges may adversely impact our business, results of operations, financial condition, and result in regulatory actions and damage to our reputation and our brand .
Our ability to develop, acquire or access competitive technologies or business processes on acceptable terms may also be limited by intellectual property rights that third parties, including those that current and potential competitors, may assert.
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We or our third-party vendors, clients or counterparties have developed or incorporated, or may in the future develop or incorporate, AI technology in certain business processes, services or products.
−Removed: The development and use of AI presents a number of risks and challenges to our business.
−Removed: The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the United States and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.
+Added: For example, we have developed an AI powered knowledge management solution for our customer care associates designed to achieve the highest possible customer service standards and customer experience.
+Added: The development and use of AI, however, presents a number of risks and challenges to our business.
+Added: The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the United States and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer and data protection, employment and other laws applicable to the use of AI.
+Added: Several states have already adopted AI-specific frameworks or are considering applying existing consumer and data protection laws to regulate AI.
These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance.
−Removed: AI models, particularly generative AI models, may produce output or take action that is incorrect, that result in the release of private, confidential or proprietary information, that reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others or that is otherwise harmful.
−Removed: In addition, certain uses of AI technology may be subject to regulation, such as requirements to explain how the AI model works and why it generates a particular output, eliminate biases built into the AI model, reduce erroneous outputs, and comply with regulations requiring watermarking AI-generated content and disclosures when consumers are interacting with AI or when decisions are made by AI, as well as requiring documentation or explanation of the basis on which decisions are made.
−Removed: These additional requirements may impose increased costs on our technology and compliance functions, which could have an adverse effect on our results of operations and financial condition.
+Added: AI models, particularly generative AI models, may produce output or take actions that are incorrect, that result in the release of private, confidential or
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+Added: proprietary information, that reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others or that are otherwise harmful.
+Added: In addition, certain uses of AI technology may be subject to regulation, such as requirements to explain how the AI model works and why it generates a particular output, eliminate biases built into the AI model, reduce erroneous outputs, and comply with regulations requiring watermarking AI-generated content and disclosures when consumers are interacting with AI or when decisions are made by AI, as well as requiring documentation or explanation of the basis on which decisions are made.
+Added: These additional requirements may impose increased costs on our technology and compliance functions, which could put us at a competitive disadvantage and have an adverse effect on our results of operations and financial condition.
Further, we may rely on AI models developed by third parties, and would be dependent in part on the manner in which those third parties develop, train and deploy their models, including risks arising from the inclusion of any unauthorized material in the training data for their models, the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models and other matters over which we may have limited visibility.
Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.
+Added: Further, if we increase our reliance on AI, our relationships with our associates or their retention may be adversely impacted.
+Added: In addition, the adoption of agentic commerce, in which autonomous AI agents initiate and execute transactions on behalf of users, presents novel and complex regulatory, privacy and cybersecurity risks, as well as risks relating to potential integrations with other agentic commerce applications.
+Added: Legal frameworks governing such autonomous agents remain nascent, with limited direct guidance specific to payments.
+Added: The interplay between payments regulations, data privacy laws and evolving AI regulations may create uncertainty around compliance and disclosure obligations and potential liability exposure as more participants (including retailers, fintechs and AI developers) enter the agentic commerce ecosystem.
+Added: The market is still assessing how regulators may apply existing consumer protection and other laws in the context of AI.
+Added: As agentic commerce solutions scale, we may also see increased instances of erroneous or disputed payments and other adverse impacts.
We are also exposed to risks arising from the use of AI technology by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks (including sophisticated social engineering attacks and AI-powered hacking).
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Risks Related to the LoyaltyOne Spinoff
−Removed: The LoyaltyOne spinoff could result in substantial tax liability to us and our stockholders, and more generally, we may be adversely affected by LVI’s ongoing bankruptcy proceedings or pending or future litigation or other disputes involving or relating to LVI.
+Added: We may be adversely affected by LVI’s ongoing bankruptcy proceedings or pending or future litigation or other disputes involving or relating to LVI.
In November 2021, we completed the spinoff of our former LoyaltyOne segment, consisting of the Canadian AIR MILES® Reward Program and the Netherlands-based BrandLoyalty businesses, into an independent, publicly traded company, LVI.
As part of the spinoff, we retained 19% of the outstanding shares of common stock of LVI.
−Removed: We received a private letter ruling, or PLR, from the IRS and an opinion from our tax advisor to the effect that the spinoff of our former LoyaltyOne segment qualified as tax-free for U.S.
−Removed: federal income tax purposes for us and our stockholders (except for cash received in lieu of fractional shares).
−Removed: However, if the factual assumptions or representations made by us in connection with the delivery of the PLR and opinion are inaccurate or incomplete in any material respect, including those relating to the past and future conduct of our business, we may not be able to rely on the PLR or opinion.
−Removed: Furthermore, the PLR does not address all the issues that are relevant to determining whether the spinoff qualified for tax-free treatment, and the opinion from our tax advisor is not binding on the IRS or the courts.
−Removed: If, notwithstanding receipt of the PLR and the opinion from our tax advisor, the spinoff transaction and certain related transactions are determined to be taxable, we would be subject to a substantial tax liability.
−Removed: In addition, if the spinoff transaction is taxable, each holder of our common stock who received shares of LVI in connection with the spinoff would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares received.
−Removed: Even if the spinoff otherwise qualifies as a tax-free transaction, the distribution would be taxable to us (but not to our stockholders) in certain circumstances if post-spinoff significant acquisitions of our stock or the stock of LVI are deemed to be part of a plan or series of related transactions that included the spinoff.
−Removed: In this event, the resulting tax liability could be substantial, and could discourage, delay or prevent a change of control of us.
−Removed: In connection with the spinoff, we entered into a tax matters agreement with LVI, pursuant to which LVI agreed to not enter into any transaction that could cause any portion of the spinoff to be taxable to us without our consent and to indemnify us for any tax liability resulting from any such transaction.
−Removed: On March 1, 2023, LVI announced that it had entered into an agreement to sell its BrandLoyalty business.
−Removed: At LVI’s request to accommodate the sale, we agreed to not take action under the tax matters agreement to attempt to prevent the BrandLoyalty sale and, upon the closing, agreed to certain mutual releases with the buyer in the sale.
−Removed: Subsequently, on March 10, 2023, LVI and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code and in Canada under the Companies’ Creditors Arrangement Act (Canada) (collectively, the LVI Bankruptcy Proceedings).
−Removed: In the Canadian proceedings, LVI conducted an auction process and subsequently sold its AIR MILES business to Bank of Montreal in June 2023.
−Removed: While we believe these transactions should not affect the qualification of the spinoff as a tax-free transaction, it is possible the IRS could disagree and successfully assert that the spinoff should be taxable to us and our stockholders that received LVI shares in the spinoff.
−Removed: In addition, it is possible the IRS could view this disposition as inconsistent with the PLR and, as a result, the IRS could take the position that we cannot rely on the PLR.
−Removed: Furthermore, though we believe that our process and decision-making with respect to the spinoff transaction were entirely appropriate, we and certain members of our Board of Directors and executive management team have been named as defendants in various litigation matters relating to the spinoff.
−Removed: LoyaltyOne, Co.
+Added: On March 10, 2023, LVI and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code and in Canada under the Companies’ Creditors Arrangement Act (collectively, the LVI Bankruptcy Proceedings).
+Added: Pursuant to LVI’s Chapter 11 Plan, LVI and a liquidating trustee also established a liquidating trust to pursue claims, including against us and individuals and entities affiliated with us, in respect of the spinoff transaction.
+Added: Similarly, in the Canadian LVI Bankruptcy Proceeding, the Canadian subsidiary and/or the Court-appointed monitor have the authority to pursue claims against us and our affiliates.
+Added: Though we believe that our process and decision-making with respect to the spinoff transaction were entirely appropriate, we and certain members of our Board of Directors and executive management team have been named as defendants in various litigation matters relating to the spinoff, as follows.
+Added: In Canada, LoyaltyOne, Co.
(the LVI subsidiary that operated its Canadian AIR MILES business) filed suit against us and our general counsel in the Ontario Superior Court of Justice in Canada in October 2023.
The lawsuit asserts that our general counsel, in his capacity as a pre-spinoff director of LoyaltyOne, Co., breached various fiduciary duties owed to LoyaltyOne, Co.
−Removed: in connection with the LVI spinoff and
−Removed: Tabl e of Contents
−Removed: certain other transactions, and that Bread Financial assisted in and benefited from those breaches.
+Added: in connection with the LVI spinoff and certain other transactions, and that Bread Financial assisted in and benefited from those breaches.
The lawsuit seeks damages in the amount of $775 million.
−Removed: Pursuant to LVI’s Chapter 11 Plan, LVI and a liquidating trustee also established a liquidating trust to pursue claims, including against individuals and entities in respect of the spinoff transaction, and in February 2024 that liquidating trustee commenced certain actions against us.
+Added: In the U.S., the liquidating trustee commenced certain actions against us in February 2024.
Specifically:
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Chapter 11 case in the Bankruptcy Court for the Southern District of Texas, the liquidating trustee filed an adversary proceeding against us and our general counsel alleging actual and constructive fraudulent transfers, among other claims, in connection with the spinoff;
−Removed: and (ii) in Delaware Chancery Court, the liquidating trustee filed an action against us, each of the members of our Board of Directors at the time of the spinoff, and certain members of our executive management team alleging breaches of fiduciary duties (and aiding and abetting breaches of fiduciary duties) in connection with the spinoff.
+Added: and (ii) in Delaware Chancery Court, the liquidating trustee filed an action against us, each of the members of our Board of Directors at the time of the spinoff, and
+Added: Tabl e of Contents
+Added: certain members of our executive management team alleging breaches of fiduciary duties (and aiding and abetting breaches of fiduciary duties) in connection with the spinoff.
Among other things, in each of these actions the liquidating trustee seeks damages in the amount of approximately $750 million plus interest, fees and expenses.
−Removed: LoyaltyOne, Co.
−Removed: is also contesting our entitlement to certain potential tax refunds under the tax matters agreement, and we may also become involved in other disputes with respect to the spinoff agreements with LVI or incur other liabilities or obligations under contractual arrangements with LVI.
+Added: In the Texas action, certain of the claims proceeded past a motion to dismiss, and in January 2026 our motion for partial summary judgment was denied.
+Added: In connection with the spinoff, we entered into a tax matters agreement, and LoyaltyOne, Co.
+Added: is contesting our entitlement to certain potential tax refunds under the tax matters agreement, and we may also become involved in other disputes with respect to the spinoff agreements with LVI or incur other liabilities or obligations under contractual arrangements with LVI.
Finally, a putative federal securities class action complaint was filed in April 2023 against us and current and former members of our management team concerning disclosures made about LVI’s business;
+Added: although, this lawsuit has been dismissed, and the United States Court of Appeals for the Sixth Circuit affirmed the dismissal in January 2026.
For additional detail regarding these pending litigation matters, see Note 20 “Commitments and Contingencies” to our audited Consolidated Financial Statements.
−Removed: While we believe that each of these suits and any other claims in connection with the spinoff are without merit and we will defend ourselves vigorously, litigation is complex and the outcomes are inherently uncertain.
−Removed: Any litigation or dispute arising out of or relating to the spinoff could distract management, result in significant legal and other costs, and otherwise adversely impact our financial position, results of operations and financial condition.
+Added: While we believe that each of these suits and any other claims in connection with the spinoff are without merit and we will defend ourselves vigorously, the damages being sought are significant, and litigation is complex with inherently uncertain outcomes.
+Added: In the event we are found liable or reach a settlement in one or more of these actions, we may be required to pay significant awards or judgments, settlements, costs or fines, and/or we may lose entitlement to certain tax refunds that are currently recorded as other assets on our audited Consolidated Balance Sheets.
+Added: Moreover, any litigation or dispute arising out of or relating to the spinoff could distract management, result in significant legal and other costs, result in downgrades to our credit ratings and otherwise adversely impact our liquidity, capital resources, access to financing, results of operations and financial condition.
+Added: We cannot provide any assurance that the insurance coverage that we maintain would be adequate to cover any settlements or liabilities actually incurred in these matters or that our insurers would not seek to deny coverage as to any or all of any such amounts.
RISK MANAGEMENT
Our Enterprise Risk Management (ERM) program is designed to ensure that all significant risks are identified, measured, monitored and addressed.
+Added: Beginning in 2024, we expanded our ERM Framework to implement BHC-equivalent practices for the Company to supplement the risk management framework that was already in place at our Banks.
Our ERM program reflects our risk appetite, governance, culture and reporting.
−Removed: We manage enterprise risk using our Board-approved Enterprise Risk Management Framework, which includes Board-level oversight, risk management committees, and a dedicated risk management team led by our Chief Risk Officer (CRO).
+Added: We manage enterprise risk using our Board-approved Risk Appetite Statements and ERM Framework, which includes Board-level oversight, risk management committees, and a dedicated risk management team led by our Chief Risk Officer (CRO).
Our Board and executive management determine the level of risk we are willing to accept in pursuit of our objectives, through the ERM program and the well-defined risk appetite statements developed thereunder.
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Our Board of Directors, as a whole and through its committees, maintains responsibilities for the oversight of risk management, including monitoring the “tone at the top” and our risk culture, and overseeing emerging and strategic risks.
−Removed: While our Board’s Risk & Technology Committee has primary responsibility for oversight of enterprise risk management, the Audit, Compensation & Human Capital and Nominating & Corporate Governance Committees also oversee risks within their respective areas of responsibilities.
+Added: While our Board’s Risk & Technology Committee has primary responsibility for ERM oversight, the Audit, Compensation & Human Capital and Nominating & Corporate Governance Committees also oversee risks within their respective areas of responsibilities.
Each of these Board Committees consists entirely of independent directors and provides regular reports to the full Board regarding matters reviewed at their Committee meetings.
−Removed: Each of our Banks also has a comprehensive Enterprise Risk Management Framework, approved by the board of directors of the respective Bank, which includes governance, compliance, reporting and other requirements.
+Added: Each of our Banks also has a comprehensive ERM Framework, approved by the board of directors of each Bank, which includes governance, compliance, reporting and other requirements.
Risk Management Roles and Responsibilities
−Removed: In addition to our Board and Board Committees, responsibility for risk management also flows to other individuals and legal entities throughout the Company, including, the Board of Directors of each of our Banks and committees thereof, various management committees and executive management.
+Added: In addition to our Board and Board Committees, responsibility for risk management also rests with other individuals and committees throughout the Company, including, the Board of Directors of each of our Banks and committees thereof, various management committees and executive management.
Our “three lines of defense” risk management model is defined within our ERM Framework and includes the following:
−Removed: • The “first line of defense” is comprised of the business areas that engage in activities that generate revenue or provide operational support or services that introduce risk to us.
−Removed: As the business owner, the first line of defense is responsible for, among other things, identifying, owning, managing and controlling key risks associated with their activities, timely addressing issues and remediation, and implementing processes and procedures to strengthen the risk and control environment.
−Removed: The first line of defense identifies and manages key risk indicators and risks and controls consistent with our risk appetite.
−Removed: The executive officers who serve as leaders in the “first line of defense,” are responsible for ensuring that their respective functions operate within established risk limits, in accordance
+Added: • The “first line of defense” is comprised of the business areas that engage in activities that generate revenue or provide operational support or services that introduce risk to the Company.
+Added: As the business owner, the first line of
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−Removed: with our risk appetite.
+Added: defense is responsible for, among other things, identifying, owning, managing and controlling key risks associated with their activities, timely addressing issues and remediation, and implementing processes and procedures to strengthen the risk and control environment.
+Added: The first line of defense identifies and manages key risk indicators, and risks and controls consistent with our risk appetite.
+Added: The executive officers who serve as leaders in the “first line of defense,” are responsible for ensuring that their respective functions operate within established risk limits, in accordance with our risk appetite.
These leaders are also responsible for identifying risks, considering risk when developing strategic plans, budgets and new products, and implementing appropriate risk controls when pursuing business strategies and objectives.
In addition, these leaders are responsible for deploying sufficient financial resources and qualified personnel to manage the risks inherent in our business activities.
−Removed: • The “second line of defense” consists of an independent risk management team charged with oversight and monitoring of risk within the business.
+Added: • The “second line of defense” consists of an independent ERM team charged with oversight and monitoring of risk within the business.
The second line of defense is responsible for, among other things, formulating and overseeing our ERM Framework and related policies and procedures, effectively challenging the first line of defense and identifying, monitoring and reporting on aggregate risks of the business and support functions.
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The CRO manages our risk management team and is responsible for establishing and implementing standards for the identification, management, measurement, monitoring and reporting of risk on an Enterprise-wide basis.
−Removed: The CRO is responsible for developing an appropriate risk appetite with corresponding limits that aligns with supervisory expectations, along with proposing our risk appetite to the Board of Directors.
−Removed: The CRO regularly reports to the Risk & Technology Committee as well as the Banks’ Risk and Compliance Committees on risk management matters.
+Added: In collaboration with the first line of defense, the CRO is responsible for developing an appropriate risk appetite with corresponding limits that aligns with supervisory expectations, along with proposing our risk appetite to the Board of Directors.
+Added: The CRO regularly reports to the Risk & Technology Committee on risk management matters.
• The “third line of defense” is comprised of our Global Audit organization.
The third line of defense provides an independent review and objective assessment of the design and operating effectiveness of the first and second lines of defense, governance, policies, procedures, processes and internal controls, and reports its findings to executive management and the Board, through the Audit Committee.
−Removed: Global Audit is responsible for performing periodic, independent reviews and testing compliance with our and the Banks’ risk management policies and standards, as well as with regulatory guidance and industry best practices.
−Removed: Global Audit also assesses the design of our and the Banks’ policies and standards and validates the effectiveness of risk management controls, and reports the results of such reviews to the Audit Committee.
+Added: Global Audit is responsible for performing periodic, independent reviews and testing compliance with our risk management policies and standards, as well as with regulatory guidance and industry best practices.
+Added: Global Audit also assesses the design of our policies and standards and validates the effectiveness of risk management controls, reporting the results of such reviews to the Audit Committee.
Management Committees
−Removed: We operate several internal management committees, including at each of our Banks, a Bank Risk Management Committee (BRMC).
−Removed: The BRMCs are the highest-level management committees at the Banks to oversee risks and are responsible for risk governance, risk oversight and making recommendations on the Banks’ risk appetite.
−Removed: The BRMCs monitor compliance with limits and related escalation requirements, and oversee implementation of risk policies.
−Removed: In addition to the BRMCs, we maintain the following risk management committees at each of our Banks to oversee the risks listed below:
−Removed: the Credit Risk Management Committee;
−Removed: Compliance Risk Management Committee;
−Removed: Operational Risk Management Committee;
−Removed: Model Risk Management Committee;
−Removed: and the Asset & Liability Management Committee;
−Removed: we also maintain a Parent Company Asset & Liability Management Committee and a Capital Management Committee.
−Removed: Each of these Committees is responsible for one or more of the eight risk categories, which are described in detail below under the heading “Risk Categories”.
−Removed: For its risk category(ies) of responsibility, each Committee provides risk governance, risk oversight and monitoring.
−Removed: Each Committee reviews key risk exposures, trends and significant compliance matters, and provides guidance on steps to monitor, control and escalate significant risks.
−Removed: We include the risk information provided by the BRMCs and these risk management committees, along with additional risk information that is identified at the Parent Company level, in our determination and assessment of the risks that are presented to and discussed with our Board and Board Committees.
−Removed: Risk Categories
−Removed: We evaluate the potential impact of a risk event on us (including our subsidiaries) by assessing the customer, partner, financial, reputational and legal and regulatory impacts, and have divided risk into the following categories.
−Removed: During 2024, we made various enhancements to our risk management practices, particularly within the Market, Liquidity and Capital risk categories, and we will continue to evaluate the structure of risk pillars and other potential enhancements going forward.
+Added: We operate several internal management committees to oversee risk governance and management across the enterprise.
+Added: The Enterprise Risk Management Committee (ERMC), established in 2025 as part of our initiatives to enhance our enterprise-level risk oversight, is the highest-level risk management committee at the enterprise level.
+Added: The ERMC is chaired by our CRO and is responsible for overseeing the design and implementation of the ERM Framework, as well as reviewing and monitoring our enterprise risk profile against the defined risk appetite, including making recommendations on such risk appetite and reviewing or escalating matters from, or referred to by, other management-level risk committees.
+Added: At each of our Banks, we also operate an equivalent risk management committee, along with other management committees for oversight of specific risk categories.
+Added: At the enterprise level, we also maintain an Operating Committee (OC), Asset & Liability Management Committee (ALCO) and Capital Management Committee (CMC).
+Added: The OC is a management committee composed of senior officers and is chaired by the Senior Vice President of Business Strategy.
+Added: The OC is responsible for assisting our executive leadership team in overseeing the strategic direction, operational performance and risk management of the Company.
+Added: With respect to risk management, the OC’s responsibilities include monitoring and evaluating the Company’s operational performance, key financial metrics and risk profile, setting an appropriate risk culture, seeking to resolve risks impacting the achievement of organizational goals and improving risk management discipline.
+Added: The ALCO is a management committee comprised of senior officers and is chaired by the Treasurer.
+Added: The ALCO is responsible for assisting our Board of Directors and our executive leadership team in overseeing, reviewing and monitoring consolidated funding and liquidity, capital, market and investment risks.
+Added: The ALCO’s responsibilities also include assisting
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+Added: our executive leadership team in its management of our capital, funding and liquidity resources, interest rate sensitivity and our balance sheet more broadly.
+Added: The CMC is a management committee comprised of senior officers and is chaired by the Head of Corporate & Capital Planning.
+Added: The CMC is responsible for assisting our Board of Directors and our executive leadership team with capital planning and oversight by monitoring our capital and providing guidance and recommendations on the use and distribution of capital.
+Added: The CMC’s responsibilities also include review of the capital plan, annual budget and long-range plan, stress testing and making recommendations for capital thresholds and tolerances, capital buffers, capital targets and significant capital decisions.
+Added: Risk Categories
+Added: During 2025 we made various enhancements to our risk management practices, completing the establishment of eight enterprise-level risk pillars equivalent to the risk pillars that historically have already been in place at our Banks.
+Added: Each risk pillar includes Board of Directors approved risk appetites, regular management monitoring and oversight, and at a minimum quarterly, and more frequently as appropriate, reporting to the Risk & Technology Committee.
+Added: We evaluate the potential impact of a risk event on the Company by assessing the customer, partner, financial, reputational and legal and regulatory impacts, and have divided risk into the following eight pillars:
+Added: Credit Risk, Market Risk, Capital Risk, Liquidity Risk, Operational Risk, Compliance Risk, Strategic Risk, and Reputational Risk.
Credit risk is the risk arising from an obligor’s failure to meet the terms of any contract or otherwise perform as agreed.
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We are exposed to credit risk primarily relating to the credit card and other loans we make to our customers.
−Removed: Our credit risk relates to the risk that consumers using the private label, co-brand, general purpose or DTC credit cards, or other loans that we issue will not repay their loan balances.
−Removed: As part of our efforts to minimize our risk of credit card or other loan write-offs, we have developed automated proprietary scoring technology and verification procedures to make risk-based origination decisions when approving new account holders, establishing or adjusting account holder credit limits and applying our risk-based pricing.
+Added: Our credit risk relates to the risk that consumers who use the co-brand, private label, DTC credit cards, or other loan products that we issue will not repay their loan balances.
+Added: As part of our efforts to minimize our risk of credit card or other loan charge-offs, we have developed automated proprietary scoring technology and verification procedures to make risk-based underwriting decisions when approving new account holders, establishing or adjusting account holder credit limits and applying our risk-based pricing.
The credit risk on our Credit card and other loans balances is quantified through our Allowance for credit losses which is recorded net with Credit card and other loans on our Consolidated Balance Sheets.
−Removed: Credit risk is overseen and monitored by the Credit Risk Management Committee at each Bank.
−Removed: Market risk is the risk to current or anticipated earnings, capital or economic value arising from changes in the market
−Removed: value of portfolios, securities or other financial instruments.
+Added: Market risk is the risk to current or anticipated earnings, capital or economic value arising from changes in the market value of portfolios, securities or other financial instruments.
Market risk includes interest rate risk, which is the risk arising from movements in interest rates.
5 unchanged sentences
Our principal market risk exposures arise from volatility in interest rates and their impact on economic value, capitalization levels and earnings.
−Removed: Historically, we have not used interest rate derivative contracts to manage interest rate risk;
−Removed: however, as part of our ongoing evolution of interest rate risk mitigation tools, we established interest rate risk hedging capabilities in 2024, employing interest rate swaps on our credit card loans portfolio to reduce interest rate risk sensitivity.
To the extent we are unable to effectively match the interest rate sensitivity of our assets and liabilities, our net earnings could be materially adversely affected.
−Removed: We use various industry standard market risk measurement techniques and sensitivity analyses to estimate, assess and manage the impact of positive or negative changes in interest rates on our Net interest income and economic value of equity under various interest rate scenarios.
+Added: Beginning in 2024, as part of the ongoing enhancement of our interest rate risk mitigation tools, we established interest rate risk hedging capabilities, employing interest rate swaps on our credit card loans portfolio to reduce interest rate risk sensitivity.
+Added: We also use various industry standard market risk measurement techniques and sensitivity analyses to estimate, assess and manage the impact of increases or decreases in interest rates on our Net interest income and economic value of equity under various interest rate scenarios.
We believe these approaches provide useful insights into the interest rate risk inherent in our business, and how to effectively manage such risk.
−Removed: As of December 31, 2024, based on the composition of our fixed rate and floating rate assets and liabilities on our Consolidated Balance Sheets, our net interest income and economic value of equity are expected to increase in higher rate scenarios and decrease in lower rate scenarios.
+Added: As of December 31, 2025, based on the composition of
+Added: Tabl e of Contents
+Added: our fixed rate and floating rate assets and liabilities on our Consolidated Balance Sheets, our Net interest income and economic value of equity are expected to increase in higher rate scenarios and decrease in lower rate scenarios.
One standard sensitivity measure we use calculates the impact on Net interest income from a hypothetical instantaneous and sustained 100 basis point increase or decrease in interest rates.
1 unchanged sentence
Actual changes in our net interest income will depend on many factors, and therefore may differ from our estimated risk to changes in interest rates.
−Removed: In addition to this industry standard measure, we also consider the potential impact of alternative interest rate scenarios in our internal interest rate risk management decisions, such as larger rate shocks (higher than +/- 100 basis points), or steepening and flattening yield curve scenarios.
+Added: In addition to this industry standard measure, we also consider the potential impact of alternative interest rate scenarios in our internal interest rate risk management decisions, such as larger rate shocks (higher than plus-or-minus 100 basis points), or steepening and flattening yield curve scenarios.
We also regularly review the sensitivity of our interest rate risk metrics to changes in our key modeling assumptions.
−Removed: In 2023 and 2024, we implemented a new and improved asset liability management model that is capable of assessing a broader array of interest rate risk scenarios, including a wider range of interest rate and balance sheet assumptions.
+Added: In recent years, we have implemented a new and improved asset liability management model that is capable of assessing a broader array of interest rate risk scenarios, including a wider range of interest rate and balance sheet assumptions.
The interest rate risk model that we use in deriving these measures incorporates contractual information, behavioral assumptions and modeling methodologies, which project borrower and deposit behavior patterns.
2 unchanged sentences
There are inherent limitations, however, in any methodology used to estimate the exposure to changes in market interest rates.
−Removed: Tabl e of Contents
−Removed: sensitivity analysis described above contemplates only certain movements in interest rates and is performed at a particular point in time based on our existing Consolidated Balance Sheet.
+Added: For example, this sensitivity analysis contemplates only certain movements in interest rates and is performed at a particular point in time based on our existing Consolidated Balance Sheet.
Accordingly, changes in customer behavior and strategic actions that management may take in the future may cause the composition of our assets and liabilities to change from the assumptions and projections previously used in scenarios considered, and could cause our actual Net interest income and economic value of equity to differ from previous sensitivity analysis outcomes.
−Removed: The Board of Directors of the Parent Company and each Bank approve our market risk management policies, risk appetites, and associated risk limits which guide our market risk management activities.
−Removed: The Asset & Liability Management Committee of the Parent Company and each of the Banks assists the Board of Directors of the Parent Company and each of the Banks, as well as management, in overseeing, reviewing, and monitoring market risk.
−Removed: Capital risk refers to the potential threat to an institution's financial stability or safety due to inadequate capital resources to support business operations and safeguard against unexpected losses.
+Added: Capital risk refers to the potential threat to an institution’s financial stability or safety and soundness due to inadequate capital resources to support business operations and safeguard against unexpected losses.
These risks can arise from various stressed operating conditions, including macroeconomic, credit, liquidity, market, and regulatory factors.
−Removed: We manage capital in alignment with the risk characteristics of our business, the economic environment, and the expectations of regulators and shareholders.
+Added: We manage capital in alignment with the risk characteristics of our business, the economic environment, and the expectations of regulators and stockholders.
This includes considering the impact of capital stress testing in our assessment of capital adequacy.
1 unchanged sentence
Our policies, risk appetite limits, and capital ratio operating targets ensure that we and the Banks maintain sufficient capital to withstand capital stress events over a specified period.
−Removed: The Capital Planning Committee and Asset & Liability Management Committees of the Parent Company and each of the Banks assist the Board of Directors and management in overseeing, reviewing, and monitoring capital risk.
+Added: The CPC and ALCO assist the Board of Directors and management in overseeing, reviewing, and monitoring capital risk.
Liquidity Risk
1 unchanged sentence
Liquidity risk includes the inability to access funding sources or manage fluctuations in funding levels.
−Removed: Liquidity Risk also results from an organization’s failure to recognize or address changes in market conditions.
−Removed: Our primary liquidity objective is to maintain a liquidity profile that will enable us, even in times of stress or market disruption, to fund our existing assets and meet liabilities in a timely manner and at an acceptable cost.
+Added: Liquidity risk also results from an organization’s failure to recognize or address changes in market conditions, or failure to prepare for anticipated growth with appropriate levels of liquidity.
+Added: Our primary liquidity objective is to maintain a liquidity profile that will enable us, even in times of stress or market disruption, to fund our existing assets and pay liabilities when due at an acceptable cost.
Policy and risk appetite limits require us and the Banks to ensure that sufficient liquid assets are available to survive liquidity stresses over a specified time period.
−Removed: The Asset & Liability Management Committee of the Parent Company and each of the Banks assists the Board of Directors of the Parent Company and each of the Banks, as well as management, in overseeing, reviewing, and monitoring liquidity risk.
+Added: In accordance with our contingency funding plan, we also maintain access to funding markets to provide liquidity to satisfy additional contingency needs.
+Added: The ALCO assists the Board of Directors and management in overseeing, reviewing, and monitoring liquidity risk.
+Added: Tabl e of Contents
Operational Risk
1 unchanged sentence
Operational losses result from internal or external fraud, inadequate or inappropriate employment practices and workplace safety, failure to meet obligations involving customers, partners, products and business practices, damage to physical assets, business disruption and systems failures, and/or failures in execution, delivery and process management.
−Removed: Operational risk is inherent in all business activities and can impact us through direct or indirect financial loss, brand damage, customer dissatisfaction and legal and regulatory penalties.
+Added: Operational risk is inherent in all business activities and can impact us through direct or indirect financial loss, damage to our brand, customer dissatisfaction and legal and regulatory penalties.
We have implemented an operational risk framework that is defined in our Operational Risk Management Policy.
−Removed: The Operational Risk Management Committee of each Bank, chaired by our Chief Operational Risk Officer (CORO), oversees and monitors operational risk exposures, including escalating issues and recommending policies, procedures and practices to manage operational risks.
As part of our Operational Risk Program, we maintain an information and cybersecurity risk management program, which is led by our Chief Information Security Officer (CISO) and is designed to protect the confidentiality, integrity, and availability of critical information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction.
−Removed: The Program leverages security technology, a team of internal and external experts, and operations based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) consisting
−Removed: Tabl e of Contents
−Removed: of controls designed to govern, protect, detect, identify, respond and recover from cybersecurity incidents.
+Added: The Program leverages security technology, a team of internal and external experts, and operations based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) 2.0 consisting of controls designed to govern, protect, detect, identify, respond and recover from cybersecurity incidents.
We continue to invest in enhancements to cybersecurity capabilities and engage in industry and government forums to promote advancements to the broader financial services cybersecurity ecosystem.
2 unchanged sentences
Compliance risk is the risk arising from violations of laws or regulations, or from nonconformance with prescribed practices, internal policies and procedures, or ethical standards.
−Removed: This risk exposes organizations to a variety of adverse impacts, including enforcement or other supervisory actions, fines, penalties, payment of damages, restrictions on business activities and the voiding of contracts.
−Removed: Our Compliance organization is responsible for establishing and maintaining our Compliance Risk Management Program.
−Removed: Pursuant to this Program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed.
−Removed: The Compliance Risk Management Committee of each Bank, chaired by the Chief Compliance Officer, oversees the implementation and execution of the Compliance Management System and monitors compliance exposures to manage compliance risks.
−Removed: Model Risk is the risk arising from decisions based on incorrect or misused model outputs and reports.
−Removed: Model risk occurs primarily for three reasons:
−Removed: • a model may have fundamental errors, including with respect to the model’s construction, or interpretation, and produce inaccurate outputs when viewed against its design objective and intended business uses;
−Removed: • a model may be used incorrectly or inappropriately, or there may be a misunderstanding about its limitations and assumptions, including models being calibrated on historical cycles and correlations which may not be predictive of the future, or failures to update assumptions appropriately or in a timely manner ;
−Removed: • the model produces results that are not compliant with fair lending or other laws and regulations.
−Removed: We manage model risk through a comprehensive model governance framework, including policies and procedures for model development, maintenance and performance monitoring activities, independent model testing and validation and change management capabilities.
−Removed: We also assess model performance on an ongoing basis.
−Removed: Model Risk oversight and monitoring is conducted by the Model Risk Management Committee of each Bank.
+Added: This risk exposes an organization to a variety of adverse impacts, including enforcement or other supervisory actions, fines, penalties, payment of damages, restrictions on business activities and the voiding of contracts.
+Added: Our Compliance organization is responsible for establishing and maintaining our Compliance Risk Management Program, pursuant to which we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed.
Strategic Risk
1 unchanged sentence
This risk is a function of an organization’s strategic goals, business strategies, resources and quality of implementation.
−Removed: Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with our policies.
−Removed: We seek to manage strategic and business risks through risk controls embedded in these processes, as well as overall risk management oversight over business goals.
+Added: We seek to manage strategic and business risks through risk controls embedded in these processes, as well as risk management oversight over business goals.
Existing product performance is reviewed periodically by various of our Committees and executive management.
3 unchanged sentences
Reputational risk is inherent in all activities and requires us to exercise caution in dealing with stakeholders, such as customers, brand partners, other contractual counterparties, investors, regulators, employees and the community.
−Removed: Executive management is responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged as needed.
+Added: Executive management is responsible for considering the reputational risk implications of business activities and strategies and ensuring the relevant subject matter experts are engaged.
Tabl e of Contents
+Added: Beginning in 2025 we removed model risk as a unique, stand-alone risk pillar and have instead allocated model risk across the eight other risk pillars.
+Added: Model Risk is the risk arising from decisions based on incorrect or misused model outputs and reports.
+Added: Model risk occurs primarily for three reasons:
+Added: • a model may have fundamental errors, including with respect to the model’s construction, or interpretation, and produce inaccurate outputs when viewed against its design objective and intended business uses;
+Added: • a model may be used incorrectly or inappropriately, or there may be a misunderstanding about its limitations and assumptions, including models being calibrated on historical cycles and correlations which may not be predictive of the future, or failures to update assumptions appropriately or in a timely manner ;
+Added: • the model produces results that are not compliant with fair lending or other laws and regulations.
+Added: We manage model risk through a comprehensive model governance framework, including policies and procedures for model development, maintenance and performance monitoring activities, independent model testing and validation, and change management capabilities.
+Added: We assess model performance on an ongoing basis and model risk is assessed across business processes, weighted by risk pillars and managed through our Model Lifecycle Management Process.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.