v3.26.1
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments
 6 Months Ended
Jun. 30, 2026
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments
NOTE 5—ALLOWANCE FOR CREDIT LOSSES AND RESERVE FOR UNFUNDED LENDING COMMITMENTS
Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance. Significant judgment is applied in our estimation of lifetime credit losses. When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering all available information relevant to assessing collectibility. This may include internal information, external information, or a combination of both relating to past events, current conditions and reasonable and supportable forecasts. Our estimate of expected credit losses includes a reasonable and supportable forecast period of one year and then reverts over a one-year period to historical losses at each relevant loss component of the estimate. Management will consider and may qualitatively adjust for conditions, changes and trends in loan portfolios that may not be captured in modeled results. These adjustments are referred to as qualitative factors and represent management’s judgment of the imprecision and risks inherent in the processes and assumptions used in establishing the allowance for credit losses.
We have unfunded lending commitments in our Commercial Banking business that are not unconditionally cancellable by us and for which we estimate expected credit losses in establishing a reserve. This reserve is measured using the same measurement objectives as the allowance for loans held for investment. We build or release the reserve for unfunded lending commitments through the provision for credit losses in our consolidated statements of income. The related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets.
See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2025 Form 10-K for further discussion of the methodology and policies for determining our allowance for credit losses, as well as information on our reserve for unfunded lending commitments.
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
The table below summarizes changes in the allowance for credit losses and reserve for unfunded lending commitments by segment for the three and six months ended June 30, 2026 and 2025. Our allowance for credit losses decreased by $443 million to $23.0 billion as of June 30, 2026 from December 31, 2025.
Table 5.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
Three Months Ended June 30, 2026
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of March 31, 2026$20,049 $2,047 $1,534 $23,630 
Charge-offs
(4,458)(702)(123)(5,283)
Recoveries(1)(2)
1,266 373 2 1,641 
Net charge-offs(3,192)(329)(121)(3,642)
Provision for credit losses2,474 444 62 2,980 
Allowance build (release) for credit losses(718)115 (59)(662)
Other changes(3)
(2)— — (2)
Balance as of June 30, 202619,329 2,162 1,475 22,966 
Reserve for unfunded lending commitments:
Balance as of March 31, 2026— — 133133
Provision (benefit) for losses on unfunded lending commitments— — 99
Balance as of June 30, 2026— — 142142
Combined allowance and reserve as of June 30, 2026$19,329 $2,162 $1,617 $23,108 
    
Six Months Ended June 30, 2026
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2025$20,066 $1,892 $1,451 $23,409 
Charge-offs
(9,099)(1,437)(192)(10,728)
Recoveries(1)(2)
2,488 744 7 3,239 
Net charge-offs(6,611)(693)(185)(7,489)
Provision for credit losses5,885 963 209 7,057 
Allowance build (release) for credit losses(726)270 24 (432)
Other changes(3)
(11)— — (11)
Balance as of June 30, 202619,329 2,162 1,475 22,966 
Reserve for unfunded lending commitments:
Balance as of December 31, 2025— — 142 142 
Provision (benefit) for losses on unfunded lending commitments— — — — 
Balance as of June 30, 2026— — 142 142 
Combined allowance and reserve as of June 30, 2026$19,329 $2,162 $1,617 $23,108 

Three Months Ended June 30, 2025
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of March 31, 2025$12,510 $1,872 $1,517 $15,899 
Charge-offs(4)
(3,590)(612)(81)(4,283)
Recoveries(1)(2)
862 352 9 1,223 
Net charge-offs(2,728)(260)(72)(3,060)
Initial allowance for purchased credit deteriorated loans
2,870 — — 2,870 
Benefit from expected recoveries of charged off loans(5)
(3,305)— — (3,305)
Provision for credit losses(6)
11,098 252 90 11,440 
Allowance build (release) for credit losses
7,935 (8)18 7,945 
Other changes(3)
29 — — 29 
Balance as of June 30, 202520,474 1,864 1,535 23,873 
Reserve for unfunded lending commitments:
Balance as of March 31, 2025— — 144 144 
Provision (benefit) for losses on unfunded lending commitments— — (9)(9)
Balance as of June 30, 2025— — 135 135 
Combined allowance and reserve as of June 30, 2025$20,474 $1,864 $1,670 $24,008 
Six Months Ended June 30, 2025
(Dollars in millions)Credit CardConsumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2024$12,974 $1,884 $1,400 $16,258 
Charge-offs(4)
(6,568)(1,288)(119)(7,975)
Recoveries(1)(2)
1,441 715 23 2,179 
Net charge-offs(5,127)(573)(96)(5,796)
Initial allowance for purchased credit deteriorated loans
2,870 — — 2,870 
Benefit from expected recoveries of charged off loans(5)
(3,305)— — (3,305)
Provision for credit losses(6)
13,024 553 231 13,808 
Allowance build (release) for credit losses
7,462 (20)135 7,577 
Other changes(3)
38 — — 38 
Balance as of June 30, 202520,474 1,864 1,535 23,873 
Reserve for unfunded lending commitments:
Balance as of December 31, 2024— — 143 143 
Provision (benefit) for losses on unfunded lending commitments— — (8)(8)
Balance as of June 30, 2025— — 135 135 
Combined allowance and reserve as of June 30, 2025$20,474 $1,864 $1,670 $24,008 
_________
(1)The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2)    Third-party collection expenses of $252 million and $496 million for the three and six months ended June 30, 2026, respectively, and $170 million and $278 million for the three and six months ended June 30, 2025, respectively, are included in other non-interest expense.
(3)     Primarily represents foreign currency translation adjustments.
(4)    Charge-offs exclude $19.4 billion of Discover loans acquired in the second quarter of 2025 that were fully charged-off, with expected recoveries of $3.3 billion included as a benefit to the allowance for credit losses.
(5)    Represents contractual rights to collect on recoveries of acquired Discover loans that were charged off.
(6)    Amount includes the initial allowance for credit losses of $8.8 billion for non-purchased credit deteriorated (“non-PCD”) loans acquired in the Transaction.
We charge off loans when we determine that the loan is uncollectible. The amortized cost basis, excluding accrued interest, is charged off as a reduction to the allowance for credit losses in accordance with our accounting policies. For more information, see “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2025 Form 10-K.
Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance, with a corresponding reduction to our provision for credit losses.
The table below presents gross charge-offs for loans held for investment by vintage year during the six months ended June 30, 2026.
Table 5.2: Gross Charge-Offs by Vintage Year
Six Months Ended June 30, 2026
Term Loans by Vintage Year
(Dollars in millions)20262025202420232022PriorTotal Term LoansRevolving LoansRevolving Loans Converted to TermTotal
Credit Card
Domestic credit cardN/AN/AN/AN/AN/AN/AN/A$8,331 $221 $8,552 
Personal loans
$— $55 $81 $63 $27 $11 $237 N/AN/A237 
International card businessN/AN/AN/AN/AN/AN/AN/A305 5 310 
Total credit card— 55 81 63 27 11 237 8,636 226 9,099 
Consumer Banking
Auto29 447 370 232 183 133 1,394 — — 1,394 
Retail banking— — 1 — — 1 2 41 — 43 
Total consumer banking29 447 371 232 183 134 1,396 41 — 1,437 
Commercial Banking
Commercial and multifamily real estate— — — — — 11 11 — — 11 
Commercial and industrial— — — — 53 85 138 43 — 181 
Total commercial banking— — — — 53 96 149 43 — 192 
Total$29 $502 $452 $295 $263 $241 $1,782 $8,720 $226 $10,728 
Credit Card Partnership Loss Sharing Arrangements
We have certain credit card partnership agreements that are presented within our consolidated financial statements on a net basis, in which our partner agrees to share a portion of the credit losses on the underlying loan portfolio. The expected reimbursements from these partners are netted against our allowance for credit losses. Our methodology for estimating reimbursements is consistent with the methodology we use to estimate the allowance for credit losses on our credit card loan receivables. These expected reimbursements result in reductions in net charge-offs and the provision for credit losses. See “Part II—Item 8. Financial Statements and Supplementary Data—Note 1—Summary of Significant Accounting Policies” in our 2025 Form 10-K for further discussion of our credit card partnership agreements.
The table below summarizes the changes in the estimated reimbursements from these partners for the three and six months ended June 30, 2026 and 2025.
Table 5.3: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts
Three Months Ended June 30,
(Dollars in millions)20262025
Estimated reimbursements from partners, beginning of period$1,267 $1,090 
Amounts due from partners for charged off loans(155)(166)
Change in estimated partner reimbursements that decreased provision for credit losses124 267 
Estimated reimbursements from partners, end of period$1,236 $1,191 
Six Months Ended June 30,
(Dollars in millions)20262025
Estimated reimbursements from partners, beginning of period$1,103 $1,010 
Amounts due from partners for charged off loans(328)(337)
Change in estimated partner reimbursements that decreased provision for credit losses461 518 
Estimated reimbursements from partners, end of period$1,236 $1,191