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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to         
001-36560
(Commission File Number)
syf-20210930_g1.jpg
SYNCHRONY FINANCIAL
(Exact name of registrant as specified in its charter) 
Delaware 51-0483352
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
777 Long Ridge Road 
Stamford,Connecticut06902
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code) -  (203) 585-2400
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.001 per shareSYFNew York Stock Exchange
Depositary Shares Each Representing a 1/40th Interest in a Share of 5.625% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series ASYFPrANew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of October 14, 2021 was 547,259,177.



Synchrony Financial
PART I - FINANCIAL INFORMATIONPage
Item 1. Financial Statements:
PART II - OTHER INFORMATION
Item 6. Exhibits

3


Certain Defined Terms
Except as the context may otherwise require in this report, references to:
“we,” “us,” “our” and the “Company” are to SYNCHRONY FINANCIAL and its subsidiaries;
“Synchrony” are to SYNCHRONY FINANCIAL only;
the “Bank” are to Synchrony Bank (a subsidiary of Synchrony);
the “Board of Directors” or “Board” are to Synchrony's board of directors;
"CECL" are to the impairment model known as the Current Expected Credit Loss model, which is based on expected credit losses; and
“VantageScore” are to a credit score developed by the three major credit reporting agencies which is used as a means of evaluating the likelihood that credit users will pay their obligations.
We provide a range of credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers, which, in our business and in this report, we refer to as our “partners.” The terms of the programs all require cooperative efforts between us and our partners of varying natures and degrees to establish and operate the programs. Our use of the term “partners” to refer to these entities is not intended to, and does not, describe our legal relationship with them, imply that a legal partnership or other relationship exists between the parties or create any legal partnership or other relationship. The “average length of our relationship” with respect to a specified group of partners or programs is measured on a weighted average basis by interest and fees on loans for the year ended December 31, 2020 for those partners or for all partners participating in a program, based on the date each partner relationship or program, as applicable, started.
Unless otherwise indicated, references to “loan receivables” do not include loan receivables held for sale.
For a description of certain other terms we use, including “active account” and “purchase volume,” see the notes to “Management’s Discussion and AnalysisResults of OperationsOther Financial and Statistical Data” in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Form 10-K”). There is no standard industry definition for many of these terms, and other companies may define them differently than we do.

“Synchrony” and its logos and other trademarks referred to in this report, including CareCredit®, Quickscreen®, Dual Card™, Synchrony Car Care™ and SyPI™, belong to us. Solely for convenience, we refer to our trademarks in this report without the ™ and ® symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.
On our website at www.synchronyfinancial.com, we make available under the "Investors-SEC Filings" menu selection, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports or amendments are electronically filed with, or furnished to, the SEC. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.
4


Cautionary Note Regarding Forward-Looking Statements:
Various statements in this Quarterly Report on Form 10-Q may contain “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “outlook,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements.
Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated, including the future impacts of the novel coronavirus disease (“COVID-19”) outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our and our outsourced partners' computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third-parties to provide various services that are important to our operations; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau's (the “CFPB”) regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit the Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this report and in our public filings, including under the heading “Risk Factors Relating to Our Business” and “Risk Factors Relating to Regulation” in our 2020 Form 10-K. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
5


PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report and in our 2020 Form 10-K. The discussion below contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. See “Cautionary Note Regarding Forward-Looking Statements.”
Introduction and Business Overview
____________________________________________________________________________________________
We are a premier consumer financial services company delivering a wide range of specialized financing programs, as well as innovative consumer banking products, across key industries including digital, retail, home, auto, travel, health and pet. We provide a range of credit products through our financing programs which we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers, which we refer to as our “partners.” For the three and nine months ended September 30, 2021, we financed $41.9 billion and $118.8 billion of purchase volume, respectively, and had 67.2 million and 66.5 million average active accounts, respectively, and at September 30, 2021, we had $76.4 billion of loan receivables.
We offer our credit products primarily through our wholly-owned subsidiary, the Bank. In addition, through the Bank, we offer, directly to retail and commercial customers, a range of deposit products insured by the Federal Deposit Insurance Corporation (“FDIC”), including certificates of deposit, individual retirement accounts (“IRAs”), money market accounts and savings accounts. We also take deposits at the Bank through third-party securities brokerage firms that offer our FDIC-insured deposit products to their customers. We have significantly expanded our online direct banking operations in recent years and our deposit base serves as a source of stable and diversified low cost funding for our credit activities. At September 30, 2021, we had $60.3 billion in deposits, which represented 82% of our total funding sources.
Our Sales Platforms
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We conduct our operations through a single business segment. Profitability and expenses, including funding costs, credit losses and operating expenses, are managed for the business as a whole. Substantially all of our operations are within the United States. In June 2021, we announced organizational changes aimed to further align the company’s activities with its partners and evolving consumer expectations, while leveraging our innovation, data, expertise and scale to deliver products and capabilities to market faster. As part of these changes, we established a Growth Organization that includes our marketing, data, analytics, customer experience and product development teams in one cohesive group and we also combined our Technology and Operations teams. For our sales activities, we now primarily manage our credit products through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle). Those platforms are organized by the types of partners we work with, and are measured on interest and fees on loans, loan receivables, active accounts and other sales metrics.
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Home & Auto
Our Home & Auto sales platform provides comprehensive payments and financing solutions with integrated in-store and digital experiences through a broad network of partners and merchants providing home and automotive merchandise and services, and includes partners such as Ashley Homestores LTD and Lowe's, as well as our Synchrony Car Care network and Synchrony HOME credit card offering.
Digital
Our Digital sales platform provides comprehensive payments and financing solutions with integrated digital experiences through partners and merchants who primarily engage with their consumers through digital channels, including partners such as Amazon and PayPal.
Diversified & Value
Our Diversified & Value sales platform provides comprehensive payments and financing solutions with integrated in-store and digital experiences through partners and merchants who offer a wide assortment of merchandise, including partners such as JCPenney and Sam's Club.
Health & Wellness
Our Health & Wellness sales platform provides comprehensive healthcare payments and financing solutions, through a network of providers and health systems, for those seeking health and wellness care for themselves, their families and their pets, and includes key brands such as CareCredit and Pets Best, as well as the recently launched MyWalgreens co-branded program.
Lifestyle
Lifestyle provides comprehensive payments and financing solutions with integrated in-store and digital experiences through partners and merchants who offer merchandise in power sports, outdoor power equipment, and other industries such as sporting goods, apparel, jewelry and music.
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Corp, Other
Corp, Other includes activity and balances related to certain program agreements with retail partners and merchants that will not be renewed beyond their current expiry date and certain programs that were previously terminated, which are not managed within the five sales platforms discussed above, and includes amounts associated with our program agreement with Gap Inc. which is scheduled to expire in the second quarter of 2022. Corp, Other also includes amounts related to changes in the fair value of equity investments and realized gains or losses associated with the sale of investments.
Our Credit Products
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Through our sales platforms, we offer three principal types of credit products: credit cards, commercial credit products and consumer installment loans. We also offer a debt cancellation product.
The following table sets forth each credit product by type and indicates the percentage of our total loan receivables that are under standard terms only or pursuant to a promotional financing offer at September 30, 2021.
Promotional Offer
Credit ProductStandard Terms OnlyDeferred InterestOther PromotionalTotal
Credit cards57.7 %20.4 %16.5 %94.6 %
Commercial credit products1.8 — — 1.8 
Consumer installment loans0.1 0.1 3.3 3.5 
Other0.1 — — 0.1 
Total59.7 %20.5 %19.8 %100.0 %
Credit Cards
We typically offer the following principal types of credit cards:
Private Label Credit Cards. Private label credit cards are partner-branded credit cards (e.g., Lowe’s or Amazon) or program-branded credit cards (e.g., Synchrony Car Care or CareCredit) that are used primarily for the purchase of goods and services from the partner or within the program network. In addition, in some cases, cardholders may be permitted to access their credit card accounts for cash advances. Credit under our private label credit cards is extended either on standard terms or pursuant to a promotional financing offer.
Dual Cards and General Purpose Co-Branded Cards. Our patented Dual Cards are credit cards that function as private label credit cards when used to purchase goods and services from our partners, and as general purpose credit cards when used to make purchases from other retailers wherever cards from those card networks are accepted or for cash advance transactions. We also offer general purpose co-branded credit cards that do not function as private label credit cards, as well as, in limited circumstances, a Synchrony-branded general purpose credit card. Credit extended under our Dual Cards and general purpose co-branded credit cards typically is extended on standard terms only. We offer either Dual Cards or general purpose co-branded credit cards across all of our sales platforms, spanning 21 partners and our CareCredit Dual Card, of which the majority are Dual Cards. Consumer Dual Cards and Co-Branded cards totaled 24% of our total loan receivables portfolio, including held for sale, at September 30, 2021.
Commercial Credit Products
We offer private label cards and Dual Cards for commercial customers that are similar to our consumer offerings. We also offer a commercial pay-in-full accounts receivable product to a wide range of business customers.
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Installment Loans
We originate installment loans to consumers (and a limited number of commercial customers) in the United States, primarily in the power products market (motorcycles, ATVs and lawn and garden), as well as through our various SetPay installment products. Installment loans are closed-end credit accounts where the customer pays down the outstanding balance in installments. Installment loans are generally assessed periodic finance charges using fixed interest rates.
Business Trends and Conditions
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We believe our business and results of operations will be impacted in the future by various trends and conditions. For a discussion of certain trends and conditions, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Trends and Conditions” in our 2020 Form 10-K. For a discussion of how certain trends and conditions impacted the three and nine months ended September 30, 2021, see “—Results of Operations.
Seasonality
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We experience fluctuations in transaction volumes and the level of loan receivables as a result of higher seasonal consumer spending and payment patterns that typically result in an increase of loan receivables from August through a peak in late December, with reductions in loan receivables occurring over the first and second quarters of the following year as customers pay their balances down.
The seasonal impact to transaction volumes and the loan receivables balance typically results in fluctuations in our results of operations, delinquency metrics and the allowance for credit losses as a percentage of total loan receivables between quarterly periods.
In addition to the seasonal variance in loan receivables discussed above, we also typically experience a seasonal increase in delinquency rates and delinquent loan receivables balances during the third and fourth quarters of each year due to lower customer payment rates resulting in higher net charge-off rates in the first and second quarters. Our delinquency rates and delinquent loan receivables balances typically decrease during the subsequent first and second quarters as customers begin to pay down their loan balances and return to current status resulting in lower net charge-off rates in the third and fourth quarters. Because customers who were delinquent during the fourth quarter of a calendar year have a higher probability of returning to current status when compared to customers who are delinquent at the end of each of our interim reporting periods, we expect that a higher proportion of delinquent accounts outstanding at an interim period end will result in charge-offs, as compared to delinquent accounts outstanding at a year end. Consistent with this historical experience, we generally experience a higher allowance for credit losses as a percentage of total loan receivables at the end of an interim period, as compared to the end of a calendar year. In addition, despite improving credit metrics such as declining past due amounts, we may experience an increase in our allowance for credit losses at an interim period end compared to the prior year end, reflecting these same seasonal trends.
While the effects of the seasonal trends discussed above remain evident, we also continue to experience improvements in customer payment behavior, which include the effects of governmental stimulus actions and industry-wide forbearance measures. Customer payments as a percentage of beginning-of-period loan receivables for the three months ended September 30, 2021 were approximately 260 basis points higher than our prior five-year historical average for the third quarter. These higher payment rates have resulted in reductions in loan receivables and delinquency rates beyond our seasonal expectations.
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Results of Operations
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Highlights for the Three and Nine Months Ended September 30, 2021
Below are highlights of our performance for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, as applicable, except as otherwise noted.
Net earnings increased to $1.1 billion from $313 million and to $3.4 billion from $647 million for the three and nine months ended September 30, 2021, respectively, which included the impact of a reserve release related to the reclassification of the Gap portfolio to loan receivables held for sale of $187 million after-tax. The increases in the three and nine months ended September 30, 2021 were primarily driven by lower provision for credit losses.
Loan receivables decreased to $76.4 billion at September 30, 2021 compared to $78.5 billion at September 30, 2020, driven by the reclassification of $3.5 billion of loan receivables associated with the Gap portfolio to loan receivables held for sale. Excluding the impact of the reclassification, loan receivables increased 2% reflecting strong purchase volume growth, partially offset by higher payment rates.
Net interest income increased 5.8% to $3.7 billion and decreased 3.1% to $10.4 billion for the three and nine months ended September 30, 2021, respectively. Interest and fees on loans increased 1.7% for the three months ended September 30, 2021, driven by an increase in average loan receivables, and decreased 6.5% for the nine months ended September 30, 2021 reflecting the impact of elevated payment rates and lower delinquencies during the period. For both current year periods, interest expense decreased primarily due to lower benchmark interest rates.
Retailer share arrangements increased 40.8% to $1.3 billion and 25.5% to $3.3 billion for the three and nine months ended September 30, 2021, respectively, primarily due to the decreases in provision for credit losses, as well as program performance.
Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased 25 basis points to 2.42% at September 30, 2021. Excluding amounts related to the Gap Inc. portfolio from both periods, the decrease compared to the prior year was approximately 40 basis points. The net charge-off rate decreased 224 basis points to 2.18% and 194 basis points to 3.11% for the three and nine months ended September 30, 2021, respectively.
Provision for credit losses decreased by $1.2 billion, or 97.9%, and $4.4 billion, or 96.4% for the three and nine months ended September 30, 2021, respectively, primarily driven by lower reserves, including a $247 million reserve release following the reclassification of the Gap portfolio to loan receivables held for sale, and lower net charge-offs. Our allowance coverage ratio (allowance for credit losses as a percent of period-end loan receivables) decreased to 11.28% at September 30, 2021, as compared to 12.92% at September 30, 2020.
Other expense decreased by $106 million, or 9.9%, and $214 million, or 7.0%, for the three and nine months ended September 30, 2021, respectively, primarily driven by a prior year restructuring charge of $89 million and lower operational losses.
At September 30, 2021, deposits represented 82% of our total funding sources. Total deposits decreased by 3.9% to $60.3 billion at September 30, 2021, compared to December 31, 2020.
During the nine months ended September 30, 2021, we declared and paid cash dividends on our Series A 5.625% non-cumulative preferred stock of $42.18 per share, or $32 million.
During the nine months ended September 30, 2021, we repurchased $1.9 billion of our outstanding common stock, and declared and paid cash dividends of $0.66 per share, or $380 million. In May 2021 we announced that the Board of Directors approved a new share repurchase program of up to $2.9 billion for the period which commenced April 1, 2021 through June 30, 2022, subject to market conditions and other factors, including legal and regulatory restrictions and required approvals, if any.
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In February 2021 in our Health & Wellness sales platform, we completed our acquisition of Allegro Credit, a leading provider of point-of-sale consumer financing for audiology products and dental services.
2021 Partner Agreements
In our Home & Auto sales platform, we announced our new partnership with Alarm.com, BoxDrop and Gardner White and extended our program agreements with Abt Electronics, Ashley HomeStores LTD, CITGO, Mitchell Gold Co., Phillips 66 and WG&R Furniture.
In our Digital sales platform, we announced PayPal Savings, a new PayPal-branded savings account and extended our program agreement with Shop HQ.
In our Diversified & Value sales platform, we extended our program agreement with TJX Companies, Inc.
In our Health & Wellness sales platform, we launched our Walgreens credit card, expanded our network through our new partnerships with Emory Healthcare, Mercy Health, Ochsner Health, Prime Health, Southern Veterinary Partners and Sycle and extended our agreements with Heartland Dental, LCA Vision and Rite Aid. In addition, we also made our CareCredit patient financing app available in the Epic App Orchard, further expanding the availability of CareCredit to healthcare organizations using Epic.
In our Lifestyle sales platform, we announced our new partnerships with Family Farm & Home, and JCB and extended our program agreements with American Eagle, Daniels, Ricoma, Sutherlands, Tacony Corporation and The Container Store.
We announced our expanded strategic partnership with Fiserv to broaden our distribution network for Synchrony products and services via the Clover point-of-sale and business management platform.
During the third quarter of 2021, we entered into an agreement to sell loan receivables associated with our program agreement with Gap Inc. We expect to recognize a gain on sale of the portfolio, which, subject to customary closing conditions, is expected to be completed in the second quarter of 2022.
Excluding our program agreement with Gap Inc., our five largest programs based upon interest and fees on loans for the year ended December 31, 2020 were Amazon, JCPenney, Lowe’s, PayPal and Sam’s Club.
Summary Earnings
The following table sets forth our results of operations for the periods indicated.
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Interest income$3,898 $3,837 $11,218 $12,074 
Interest expense240 380 809 1,331 
Net interest income3,658 3,457 10,409 10,743 
Retailer share arrangements(1,266)(899)(3,261)(2,598)
Provision for credit losses25 1,210 165 4,560 
Net interest income, after retailer share arrangements and provision for credit losses2,367 1,348 6,983 3,585 
Other income94 131 314 323 
Other expense961 1,067 2,841 3,055 
Earnings before provision for income taxes1,500 412 4,456 853 
Provision for income taxes359 99 1,048 206 
Net earnings$1,141 $313 $3,408 $647 
Net earnings available to common stockholders$1,130 $303 $3,376 $615 
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Other Financial and Statistical Data
The following table sets forth certain other financial and statistical data for the periods indicated.    
At and for theAt and for the
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Financial Position Data (Average):
Loan receivables, including held for sale$78,714 $78,005 $77,965 $80,368 
Total assets$91,948 $96,340 $93,915 $98,333 
Deposits$59,633 $63,876 $61,258 $64,380 
Borrowings$13,522 $16,017 $14,528 $17,207 
Total equity$14,117 $12,139 $13,619 $12,303 
Selected Performance Metrics:
Purchase volume(1)(2)
$41,912 $36,013 $118,782 $99,210 
Home & Auto$11,765 $10,653 $33,889 $29,486 
Digital$10,980 $9,038 $31,250 $24,871 
Diversified & Value$12,006 $9,634 $32,844 $26,718 
Health & Wellness$3,024 $2,738 $8,660 $7,349 
Lifestyle$1,298 $1,267 $3,857 $3,550 
Corp, Other$2,839 $2,683 $8,282 $7,236 
Average active accounts (in thousands)(2)(3)
67,189 64,270 66,500 67,246 
Net interest margin(4)
15.45 %13.80 %14.40 %14.17 %
Net charge-offs$432 $866 $1,815 $3,037 
Net charge-offs as a % of average loan receivables, including held for sale2.18 %4.42 %3.11 %5.05 %
Allowance coverage ratio(5)
11.28 %12.92 %11.28 %12.92 %
Return on assets(6)
4.9 %1.3 %4.9 %0.9 %
Return on equity(7)
32.1 %10.3 %33.5 %7.0 %
Equity to assets(8)
15.35 %12.60 %14.50 %12.51 %
Other expense as a % of average loan receivables, including held for sale4.84 %5.44 %4.87 %5.08 %
Efficiency ratio(9)
38.7 %39.7 %38.1 %36.1 %
Effective income tax rate23.9 %24.0 %23.5 %24.2 %
Selected Period-End Data:
Loan receivables$76,388 $78,521 $76,388 $78,521 
Allowance for credit losses$8,616 $10,146 $8,616 $10,146 
30+ days past due as a % of period-end loan receivables(10)
2.42 %2.67 %2.42 %2.67 %
90+ days past due as a % of period-end loan receivables(10)
1.05 %1.24 %1.05 %1.24 %
Total active accounts (in thousands)(2)(3)
67,245 64,800 67,245 64,800 
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(1)Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(2)Includes activity and accounts associated with loan receivables held for sale.
(3)Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
(4)Net interest margin represents net interest income divided by average interest-earning assets.
(5)Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables.
(6)Return on assets represents net earnings as a percentage of average total assets.
(7)Return on equity represents net earnings as a percentage of average total equity.
(8)Equity to assets represents average total equity as a percentage of average total assets.
(9)Efficiency ratio represents (i) other expense, divided by (ii) sum of net interest income, plus other income, less retailer share arrangements.
(10)Based on customer statement-end balances extrapolated to the respective period-end date.
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Average Balance Sheet
The following tables set forth information for the periods indicated regarding average balance sheet data, which are used in the discussion of interest income, interest expense and net interest income that follows.
 20212020
Three months ended September 30 ($ in millions)Average
Balance
Interest
Income /
Expense
Average
Yield /
Rate(1)
Average
Balance
Interest
Income/
Expense
Average
Yield /
Rate(1)
Assets
Interest-earning assets:
Interest-earning cash and equivalents(2)
$9,559 $0.12 %$13,664 $0.12 %
Securities available for sale5,638 0.56 %7,984 12 0.60 %
Loan receivables, including held for sale(3):
Credit cards74,686 3,793 20.15 %74,798 3,752 19.96 %
Consumer installment loans2,555 64 9.94 %1,892 46 9.67 %
Commercial credit products1,407 29 8.18 %1,238 22 7.07 %
Other66 NM77 NM
Total loan receivables, including held for sale78,714 3,887 19.59 %78,005 3,821 19.49 %
Total interest-earning assets93,911 3,898 16.47 %99,653 3,837 15.32 %
Non-interest-earning assets:
Cash and due from banks1,588 1,489 
Allowance for credit losses(8,956)(9,823)
Other assets5,405 5,021 
Total non-interest-earning assets(1,963)(3,313)
Total assets$91,948 $96,340 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts$59,275 $131 0.88 %$63,569 $245 1.53 %
Borrowings of consolidated securitization entities7,051 41 2.31 %8,057 53 2.62 %
Senior unsecured notes6,471 68 4.17 %7,960 82 4.10 %
Total interest-bearing liabilities72,797 240 1.31 %79,586 380 1.90 %
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts358 307 
Other liabilities4,676 4,308 
Total non-interest-bearing liabilities5,034 4,615 
Total liabilities77,831 84,201 
Equity
Total equity14,117 12,139 
Total liabilities and equity$91,948 $96,340 
Interest rate spread(4)
15.16 %13.42 %
Net interest income$3,658 $3,457 
Net interest margin(5)
15.45 %13.80 %
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 20212020
Nine months ended September 30 ($ in millions)Average
Balance
Interest
Income /
Expense
Average
Yield /
Rate(1)
Average
Balance
Interest
Income/
Expense
Average
Yield /
Rate(1)
Assets
Interest-earning assets:
Interest-earning cash and equivalents(2)
$12,567 $11 0.12 %$13,992 $49 0.47 %
Securities available for sale6,128 21 0.46 %6,918 56 1.08 %
Loan receivables, including held for sale(3):
Credit cards74,179 10,934 19.71 %77,476 11,764 20.28 %
Consumer installment loans2,398 176 9.81 %1,624 118 9.71 %
Commercial credit products1,334 73 7.32 %1,210 85 9.38 %
Other54 7.43 %58 4.61 %
Total loan receivables, including held for sale77,965 11,186 19.18 %80,368 11,969 19.89 %
Total interest-earning assets96,660 11,218 15.52 %101,278 12,074 15.92 %
Non-interest-earning assets:
Cash and due from banks1,594 1,475 
Allowance for credit losses(9,656)(9,253)
Other assets5,317 4,833 
Total non-interest-earning assets(2,745)(2,945)
Total assets$93,915 $98,333 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts$60,907 $447 0.98 %$64,075 $894 1.86 %
Borrowings of consolidated securitization entities7,296 136 2.49 %8,966 185 2.76 %
Senior unsecured notes7,232 226 4.18 %8,241 252 4.08 %
Total interest-bearing liabilities75,435 809 1.43 %81,282 1,331 2.19 %
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts351 305 
Other liabilities4,510 4,443 
Total non-interest-bearing liabilities4,861 4,748 
Total liabilities80,296 86,030 
Equity
Total equity13,619 12,303 
Total liabilities and equity$93,915 $98,333 
Interest rate spread(4)
14.09 %13.73 %
Net interest income$10,409 $10,743 
Net interest margin(5)
14.40 %14.17 %
_______________________
(1)Average yields/rates are based on total interest income/expense over average balances.
(2)Includes average restricted cash balances of $745 million and $214 million for the three months ended September 30, 2021 and 2020, respectively, and $570 million and $612 million for the nine months ended September 30, 2021 and 2020, respectively.
(3)Interest income on loan receivables includes fees on loans of $610 million and $487 million for the three months ended September 30, 2021 and 2020, respectively, and $1.6 billion for both the nine months ended September 30, 2021 and 2020, respectively.
(4)Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(5)Net interest margin represents net interest income divided by average total interest-earning assets.
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For a summary description of the composition of our key line items included in our Statements of Earnings, see Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Form 10-K.
Interest Income
Interest income increased by $61 million, or 1.6%, and decreased by $856 million, or 7.1%, for the three and nine months ended September 30, 2021, respectively. The increase in the three months ended September 30, 2021 was primarily driven by increases in interest and fees on loans attributed to an increase in average loan receivables, including held for sale. The decrease in the nine months ended September 30, 2021 reflected the impact of improvements in customer payment behavior and lower delinquencies during the period, which resulted in lower average loan receivables.
Average interest-earning assets
Three months ended September 30 ($ in millions)2021%2020%
Loan receivables, including held for sale$78,714 83.8 %$78,005 78.3 %
Liquidity portfolio and other15,197 16.2 %21,648 21.7 %
Total average interest-earning assets$93,911 100.0 %$99,653 100.0 %
Nine months ended September 30 ($ in millions)2021%2020%
Loan receivables, including held for sale
$77,965 80.7 %$80,368 79.4 %
Liquidity portfolio and other
18,695 19.3 %20,910 20.6 %
Total average interest-earning assets
$96,660 100.0 %$101,278 100.0 %
Average loan receivables, including held for sale, increased slightly by 0.9% for the three months ended September 30, 2021, primarily driven by growth in purchase volume of 16.4%, largely offset by higher payment rates. Average loan receivables, including held for sale, decreased 3.0% for the nine months ended September 30, 2021, as the impact from the improvements in customer payment behavior was only partially offset by growth in purchase volume of 19.7%.
Yield on average interest-earning assets
The yield on average interest-earning assets increased for the three months ended September 30, 2021, primarily due to an increase in the percentage of interest-earning assets attributable to loan receivables and an increase in the yield on average loan receivables. The increase in loan receivable yield was 10 basis points to 19.59% for the three months ended September 30, 2021.
The yield on average interest-earning assets decreased for the nine months ended September 30, 2021, primarily due to a decrease in the yield on average loan receivables. The decrease in loan receivable yield was 71 basis points to 19.18% for the nine months ended September 30, 2021, reflecting the impact of higher payment rates and lower interest and fees.
Interest Expense
Interest expense decreased by $140 million, or 36.8%, and $522 million, or 39.2%, for the three and nine months ended September 30, 2021, respectively, primarily attributed to lower benchmark interest rates. Our cost of funds decreased to 1.31% and 1.43% for the three and nine months ended September 30, 2021, respectively, compared to 1.90% and 2.19% for the three and nine months ended September 30, 2020, respectively.
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Average interest-bearing liabilities
Three months ended September 30 ($ in millions)2021%2020%
Interest-bearing deposit accounts$59,275 81.4 %$63,569 79.9 %
Borrowings of consolidated securitization entities7,051 9.7 %8,057 10.1 %
Senior unsecured notes6,471 8.9 %7,960 10.0 %
Total average interest-bearing liabilities$72,797 100.0 %$79,586 100.0 %
Nine months ended September 30 ($ in millions)2021%2020%
Interest-bearing deposit accounts$60,907 80.7 %$64,075 78.9 %
Borrowings of consolidated securitization entities7,296 9.7 %8,966 11.0 %
Senior unsecured notes7,232 9.6 %8,241 10.1 %
Total average interest-bearing liabilities$75,435 100.0 %$81,282 100.0 %
Net Interest Income
Net interest income increased by $201 million, or 5.8%, and decreased by $334 million, or 3.1%, for the three and nine months ended September 30, 2021, respectively, resulting from the changes in interest income and interest expense discussed above.
Retailer Share Arrangements
Retailer share arrangements increased by $367 million, or 40.8%, and $663 million, or 25.5%, for the three and nine months ended September 30, 2021, respectively, primarily due to the decrease in provision for credit losses and program performance.
Provision for Credit Losses
Provision for credit losses decreased by $1.2 billion, or 97.9%, and $4.4 billion, or 96.4%, for the three and nine months ended September 30, 2021, respectively, primarily driven by lower reserves, including a $247 million reserve release following the reclassification of the Gap portfolio to loan receivables held for sale, and lower net charge-offs. The reductions in reserves for credit losses in the current year were $407 million and $1.6 billion for the three and nine months ended September 30, 2021, respectively.
Other Income
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Interchange revenue$232 $172 $626 $467 
Debt cancellation fees70 68 205 206 
Loyalty programs(256)(155)(682)(447)
Other48 46 165 97 
Total other income$94 $131 $314 $323 
Other income decreased by $37 million, or 28.2%, and $9 million, or 2.8%, for the three and nine months ended September 30, 2021, respectively, primarily driven by higher loyalty program costs during the period related to higher purchase volume, partially offset by an increase in interchange revenue.    
16


Other Expense
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Employee costs$369 $382 $1,092 $1,033 
Professional fees196 187 575 573 
Marketing and business development110 107 319 309 
Information processing139 125 407 364 
Other147 266 448 776 
Total other expense$961 $1,067 $2,841 $3,055 
Other expense decreased by $106 million, or 9.9%, and $214 million, or 7.0%, for the three and nine months ended September 30, 2021, primarily driven by a prior year restructuring charge of $89 million and lower operational losses. The decrease in the nine months ended September 30, 2021 was partially offset by higher employee and information processing costs.
Provision for Income Taxes
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Effective tax rate23.9 %24.0 %23.5 %24.2 %
Provision for income taxes$359 $99 $1,048 $206 
The effective tax rate for the three months ended September 30, 2021 decreased slightly compared to the same period in the prior year. The effective tax rate for the nine months ended September 30, 2021 decreased compared to the same period in the prior year primarily due to the resolution of certain tax matters in the current year. For both periods presented, the effective tax rate differs from the applicable U.S. federal statutory tax rate primarily due to state income taxes.
Platform Analysis
As discussed above under “—Our Sales Platforms,” we now offer our credit products primarily through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle), which management measures based on their revenue-generating activities. The following is a discussion of certain supplemental information for the three and nine months ended September 30, 2021, for each of our five sales platforms and Corp, Other.
Home & Auto
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Purchase volume$11,765 $10,653 $33,889 $29,486 
Period-end loan receivables$26,723 $26,202 $26,723 $26,202 
Average loan receivables, including held for sale$26,317 $25,908 $25,911 $26,232 
Average active accounts (in thousands)18,169 18,127 17,981 18,354 
Interest and fees on loans$1,114 $1,114 $3,187 $3,364 
Other income$16 $14 $46 $46 
Home & Auto interest and fees on loans remained flat and decreased by $177 million, or 5.3%, for the three and nine months ended September 30, 2021, respectively. The decrease in the nine months ended September 30, 2021 was primarily driven by lower loan receivables yield.
17


Digital
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Purchase volume$10,980 $9,038 $31,250 $24,871 
Period-end loan receivables$19,636 $18,922 $19,636 $18,922 
Average loan receivables, including held for sale$19,286 $18,807 $19,168 $19,206 
Average active accounts (in thousands)17,655 16,440 17,426 16,461 
Interest and fees on loans$973 $915 $2,767 $2,825 
Other income$(19)$(16)$(59)$(28)
Digital interest and fees on loans increased by $58 million, or 6.3%, for the three months ended September 30, 2021, primarily driven by higher loan receivables yield and growth in average loan receivables.
Digital interest and fees on loans decreased by $58 million, or 2.1%, for the nine months ended September 30, 2021, primarily driven by lower loan receivables yield as a result of higher payment rates.
Other income decreased by $3 million, or 18.8%, and $31 million, or 110.7%, for the three and nine months ended September 30, 2021, primarily driven by higher program loyalty costs associated with the increase in purchase volume, partially offset by increases in interchange revenue.
Diversified & Value
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Purchase volume$12,006 $9,634 $32,844 $26,718 
Period-end loan receivables$14,415 $14,825 $14,415 $14,825 
Average loan receivables, including held for sale$14,328 $14,919 $14,333 $15,959 
Average active accounts (in thousands)17,903 16,307 17,591 18,118 
Interest and fees on loans$780 $809 $2,298 $2,706 
Other income$(8)$38 $(5)$70 
Diversified & Value interest and fees on loans decreased by $29 million, or 3.6%, and $408 million, or 15.1%, for the three and nine months ended September 30, 2021, primarily driven by lower average loan receivables.
Health & Wellness
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Purchase volume$3,024 $2,738 $8,660 $7,349 
Period-end loan receivables$9,879 $9,368 $9,879 $9,368 
Average loan receivables, including held for sale$9,654 $9,245 $9,477 $9,629 
Average active accounts (in thousands)5,707 5,708 5,673 6,018 
Interest and fees on loans$587 $552 $1,668 $1,684 
Other income$41 $32 $117 $80 
Health & Wellness interest and fees on loans increased by $35 million, or 6.3%, for the three months ended September 30, 2021, primarily driven by higher average loan receivables.
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Health & Wellness interest and fees on loans decreased $16 million, or 1.0%, for the nine months ended September 30, 2021, primarily driven by lower average loan receivables.
Other income increased by $9 million, or 28.1%, and $37 million, or 46.3%, for the three and nine months ended September 30, 2021, respectively, primarily due to commission fees earned by Pets Best.
Lifestyle
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Purchase volume$1,298 $1,267 $3,857 $3,550 
Period-end loan receivables$5,234 $4,842 $5,234 $4,842 
Average loan receivables, including held for sale$5,185 $4,771 $5,080 $4,662 
Average active accounts (in thousands)2,465 2,404 2,500 2,569 
Interest and fees on loans$187 $180 $550 $547 
Other income$$$17 $14 
Lifestyle interest and fees on loans increased by $7 million, or 3.9%, and $3 million, or 0.5%, for the three and nine months ended September 30, 2021, primarily driven by an increase in average loan receivables reflecting continued strength in power sports.
Corp, Other
Three months ended September 30,Nine months ended September 30,
($ in millions)2021202020212020
Purchase volume$2,839 $2,683 $8,282 $7,236 
Period-end loan receivables$501 $4,362 $501 $4,362 
Average loan receivables, including held for sale$3,944 $4,355 $3,996 $4,680 
Average active accounts (in thousands)5,290 5,284 5,329 5,726 
Interest and fees on loans$246 $251 $716 $843 
Other income$58 $58 $198 $141 
Corp, Other interest and fees on loans decreased by $5 million, or 2.0%, and $127 million, or 15.1%, for the three and nine months ended September 30, 2021, primarily driven by lower average loan receivables.
Other income remained flat, and increased by $57 million, or 40.4% for the three and nine months ended September 30, 2021, respectively. The increase in the nine months ended September 30, 2021 was primarily due to gains related to investment securities.
19


Loan Receivables
____________________________________________________________________________________________
Loan receivables are our largest category of assets and represent our primary source of revenue. The following discussion provides supplemental information regarding our loan receivables portfolio. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 4. Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for additional information related to our Loan Receivables, including troubled debt restructurings (“TDR’s”).
The following table sets forth the composition of our loan receivables portfolio by product type at the dates indicated.
($ in millions)At September 30, 2021(%)At December 31, 2020(%)
Loans
Credit cards$72,289 94.6 %$78,455 95.9 %
Consumer installment loans2,614 3.5 %2,125 2.6 
Commercial credit products1,401 1.8 %1,250 1.5 
Other84 0.1 %37 — 
Total loans$76,388 100.0 %$81,867 100.0 %
Loan receivables decreased 6.7% to $76.4 billion at September 30, 2021 compared to December 31, 2020, primarily driven by the reclassification of $3.5 billion of loan receivables associated with the Gap portfolio to loan receivables held for sale and improvements in customer payment behavior, resulting in part from governmental stimulus actions, as well as the seasonality of our business. Customer payments as a percentage of beginning-of-period loan receivables for the three months ended September 30, 2021 were approximately 260 basis points higher than our prior five-year historical average for the third quarter.
Loan receivables decreased to $76.4 billion at September 30, 2021 compared to $78.5 billion at September 30, 2020, due to the reclassification of $3.5 billion of loan receivables associated with the Gap portfolio to loan receivables held for sale. Excluding the impact of the reclassification, loan receivables increased 2% reflecting strong purchase volume growth, partially offset by higher payment rates.
Our loan receivables portfolio had the following geographic concentration at September 30, 2021.
($ in millions)Loan Receivables
Outstanding
% of Total Loan
Receivables
Outstanding
State
Texas$8,113 10.6 %
California$7,779 10.2 %
Florida$6,876 9.0 %
New York$3,952 5.2 %
North Carolina$3,184 4.2 %
Delinquencies
Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased to 2.42% at September 30, 2021 from 2.67% at September 30, 2020, and decreased from 3.07% at December 31, 2020. The decrease compared to the prior year period was primarily driven by an improvement in customer payment behavior, partially offset by the effects of the reclassification of loan receivables related to the Gap Inc. portfolio to loan receivables held for sale. When excluding amounts related to the Gap Inc. portfolio from both current year and prior year periods, over-30 day loan delinquencies at September 30, 2021 declined approximately 40 basis points compared to September 30, 2020. The current quarter decrease as compared to December 31, 2020 reflects these same trends.
20


Net Charge-Offs
Net charge-offs consist of the unpaid principal balance of loans held for investment that we determine are uncollectible, net of recovered amounts. We exclude accrued and unpaid finance charges and fees and third-party fraud losses from charge-offs. Charged-off and recovered finance charges and fees are included in interest and fees on loans while third-party fraud losses are included in other expense. Charge-offs are recorded as a reduction to the allowance for credit losses and subsequent recoveries of previously charged-off amounts are credited to the allowance for credit losses. Costs incurred to recover charged-off loans are recorded as collection expense and included in other expense in our Condensed Consolidated Statements of Earnings.
The table below sets forth the ratio of net charge-offs to average loan receivables, including held for sale, (“net charge-off rate”) for the periods indicated.
Three months ended September 30,Nine months ended September 30,
 2021202020212020
Net charge-off rate2.18 %4.42 %3.11 %5.05 %
Allowance for Credit Losses
The allowance for credit losses totaled $8.6 billion at September 30, 2021, compared to $10.3 billion at December 31, 2020 and $10.1 billion at September 30, 2020, and reflects our estimate of expected credit losses for the life of the loan receivables on our consolidated statement of financial position.
Our allowance for credit losses as a percentage of total loan receivables decreased to 11.28% at September 30, 2021, from 12.54% at December 31, 2020 and from 12.92% at September 30, 2020.
The decrease compared to September 30, 2020 is primarily driven by improvements in customer payment behavior, which resulted in a reduction in our estimate of expected credit losses. The decrease compared to December 31, 2020 reflects these same trends, partially offset by the seasonality of our business.

Funding, Liquidity and Capital Resources
____________________________________________________________________________________________
We maintain a strong focus on liquidity and capital. Our funding, liquidity and capital policies are designed to ensure that our business has the liquidity and capital resources to support our daily operations, our business growth, our credit ratings and our regulatory and policy requirements, in a cost effective and prudent manner through expected and unexpected market environments.
Funding Sources
Our primary funding sources include cash from operations, deposits (direct and brokered deposits), securitized financings and senior unsecured notes.
The following table summarizes information concerning our funding sources during the periods indicated:
 20212020
Three months ended September 30 ($ in millions)Average
Balance
%Average
Rate
Average
Balance
%Average
Rate
Deposits(1)
$59,275 81.4 %0.9 %$63,569 79.9 %1.5 %
Securitized financings7,051 9.7 2.3 8,057 10.1 2.6 
Senior unsecured notes6,471 8.9 4.2 7,960 10.0 4.1 
Total$72,797 100.0 %1.3 %$79,586 100.0 %1.9 %
______________________
(1)Excludes $358 million and $307 million average balance of non-interest-bearing deposits for the three months ended September 30, 2021 and 2020, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the three months ended September 30, 2021 and 2020.
21


 20212020
Nine months ended September 30 ($ in millions)Average
Balance
%Average
Rate
Average
Balance
%Average
Rate
Deposits(1)
$60,907 80.7 %1.0 %$64,075 78.9 %1.9 %
Securitized financings7,296 9.7 2.5 8,966 11.0 2.8 
Senior unsecured notes7,232 9.6 4.2 8,241 10.1 4.1 
Total$75,435 100.0 %1.4 %$81,282 100.0 %2.2 %
______________________
(1)Excludes $351 million and $305 million average balance of non-interest-bearing deposits for the nine months ended September 30, 2021 and 2020, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the nine months ended September 30, 2021 and 2020.
Deposits
We obtain deposits directly from retail and commercial customers (“direct deposits”) or through third-party brokerage firms that offer our deposits to their customers (“brokered deposits”). At September 30, 2021, we had $49.9 billion in direct deposits and $10.4 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to utilize our direct deposits base as a source of stable and diversified low-cost funding.
Our direct deposits include a range of FDIC-insured deposit products, including certificates of deposit, IRAs, money market accounts and savings accounts.
Brokered deposits are primarily from retail customers of large brokerage firms. We have relationships with 11 brokers that offer our deposits through their networks. Our brokered deposits consist primarily of certificates of deposit that bear interest at a fixed rate and at September 30, 2021, had a weighted average remaining life of 2.2 years. These deposits generally are not subject to early withdrawal.
Our ability to attract deposits is sensitive to, among other things, the interest rates we pay, and therefore, we bear funding risk if we fail to pay higher rates, or interest rate risk if we are required to pay higher rates, to retain existing deposits or attract new deposits. To mitigate these risks, our funding strategy includes a range of deposit products, and we seek to maintain access to multiple other funding sources, including securitized financings (including our undrawn committed capacity) and unsecured debt.
The following table summarizes certain information regarding our interest-bearing deposits by type (all of which constitute U.S. deposits) for the periods indicated:
Three months ended September 30 ($ in millions)20212020
Average
Balance
%Average
Rate
Average
Balance
%Average
Rate
Direct deposits:
Certificates of deposit
(including IRA certificates of deposit)
$20,795 35.1 %1.1 %$29,810 46.9 %2.0 %
Savings accounts
(including money market accounts)
28,929 48.8 0.5 22,680 35.7 0.8 
Brokered deposits9,551 16.1 1.5 11,079 17.4 1.7 
Total interest-bearing deposits$59,275 100.0 %0.9 %$63,569 100.0 %1.5 %
22


Nine months ended September 30 ($ in millions)20212020
Average
Balance
% of
Total
Average
Rate
Average
Balance
% of
Total
Average
Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)$22,796 37.4 %1.3 %$31,871 49.7 %2.2 %
Savings accounts (including money market accounts)28,050 46.1 0.5 21,121 33.0 1.2 
Brokered deposits10,061 16.5 1.5 11,084 17.3 1.9 
Total interest-bearing deposits$60,907 100.0 %1.0 %$64,076 100.0 %1.9 %
Our deposit liabilities provide funding with maturities ranging from one day to ten years. At September 30, 2021, the weighted average maturity of our interest-bearing time deposits was 1.1 years. See Note 7. Deposits to our condensed consolidated financial statements for more information on the maturities of our time deposits.
The following table summarizes deposits by contractual maturity at September 30, 2021:
($ in millions)3 Months or
Less
Over
3 Months
but within
6 Months
Over
6 Months
but within
12 Months
Over
12 Months
Total
U.S. deposits (less than FDIC insurance limit)(1)(2)
$29,531 $3,953 $6,795 $7,173 $47,452 
U.S. deposits (in excess of FDIC insurance limit)(2)
Direct deposits:
Certificates of deposit
(including IRA certificates of deposit)
759 1,261 1,718 1,178 4,916 
Savings accounts
(including money market accounts)
7,957 — — — 7,957 
Brokered deposits:
Sweep accounts28 — — — 28 
Total$38,275 $5,214 $8,513 $8,351 $60,353 
______________________
(1)Includes brokered certificates of deposit for which underlying individual deposit balances are assumed to be less than $250,000.
(2)The standard deposit insurance amount is $250,000 per depositor, for each account ownership category. Deposits in excess of FDIC insurance limit presented above include partially uninsured accounts.
Securitized Financings
We access the asset-backed securitization market using the Synchrony Credit Card Master Note Trust (“SYNCT”) and the Synchrony Card Issuance Trust (“SYNIT”) through which we may issue asset-backed securities through both public transactions and private transactions funded by financial institutions and commercial paper conduits. In addition, we issue asset-backed securities in private transactions through the Synchrony Sales Finance Master Trust (“SFT”).
23


The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at September 30, 2021.
($ in millions)Less Than
One Year
One Year
Through
Three
Years
Four Years
Through
Five
Years
After Five
Years
Total
Scheduled maturities of long-term borrowings—owed to securitization investors:
SYNCT(1)
$625 $3,765 $— $— $4,390 
SFT300 — — — 300 
SYNIT(1)
1,600 — — — 1,600 
Total long-term borrowings—owed to securitization investors$2,525 $3,765 $— $— $6,290 
______________________
(1)Excludes any subordinated classes of SYNCT notes and SYNIT notes that we owned at September 30, 2021.
We retain exposure to the performance of trust assets through: (i) in the case of SYNCT, SFT and SYNIT, subordinated retained interests in the loan receivables transferred to the trust in excess of the principal amount of the notes for a given series that provide credit enhancement for a particular series, as well as a pari passu seller’s interest in each trust and (ii) in the case of SYNCT and SYNIT, any subordinated classes of notes that we own.
All of our securitized financings include early repayment triggers, referred to as early amortization events, including events related to material breaches of representations, warranties or covenants, inability or failure of the Bank to transfer loan receivables to the trusts as required under the securitization documents, failure to make required payments or deposits pursuant to the securitization documents, and certain insolvency-related events with respect to the related securitization depositor, Synchrony (solely with respect to SYNCT) or the Bank. In addition, an early amortization event will occur with respect to a series if the excess spread as it relates to a particular series or for the trust, as applicable, falls below zero. Following an early amortization event, principal collections on the loan receivables in the applicable trust are applied to repay principal of the trust's asset-backed securities rather than being available on a revolving basis to fund the origination activities of our business. The occurrence of an early amortization event also would limit or terminate our ability to issue future series out of the trust in which the early amortization event occurred. No early amortization event has occurred with respect to any of the securitized financings in SYNCT, SFT or SYNIT.
The following table summarizes for each of our trusts the three-month rolling average excess spread at September 30, 2021.
Note Principal Balance
($ in millions)
# of Series
Outstanding
Three-Month Rolling
Average Excess
Spread(1)
SYNCT$4,552 ~18.6% to 21%
SFT$300 19.0 %
SYNIT$1,600 15.9 %
______________________
(1)Represents the excess spread (generally calculated as interest income collected from the applicable pool of loan receivables less applicable net charge-offs, interest expense and servicing costs, divided by the aggregate principal amount of loan receivables in the applicable pool) for SFT or, in the case of SYNCT, a range of the excess spreads relating to the particular series issued within such trust or, in the case of SYNIT, the excess spread relating to the one outstanding series issued within such trust, in all cases omitting any series that have not been outstanding for at least three full monthly periods and calculated in accordance with the applicable trust or series documentation, for the three securitization monthly periods ended September 30, 2021.
24


Senior Unsecured Notes
During the nine months ended September 30, 2021 we made repayments of $1.5 billion.
The following table provides a summary of our outstanding fixed rate senior unsecured notes at September 30, 2021.
Issuance Date
Interest Rate(1)
Maturity
Principal Amount Outstanding(2)
($ in millions)
Fixed rate senior unsecured notes:
Synchrony Financial
August 20144.250%August 20241,250 
July 20154.500%July 20251,000 
August 20163.700%August 2026500 
December 20173.950%December 20271,000 
March 20194.375%March 2024600 
March 20195.150%March 2029650 
July 20192.850%July 2022750 
Synchrony Bank
June 20173.000%June 2022750 
Total fixed rate senior unsecured notes$6,500 
______________________
(1)Weighted average interest rate of all senior unsecured notes at September 30, 2021 was 4.00%.
(2)The amounts shown exclude unamortized debt discounts, premiums and issuance costs.
Short-Term Borrowings
Except as described above, there were no material short-term borrowings for the periods presented.
Other
At September 30, 2021, we had more than $25.0 billion of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window.
Covenants
The indenture pursuant to which our senior unsecured notes have been issued includes various covenants. If we do not satisfy any of these covenants, the maturity of amounts outstanding thereunder may be accelerated and become payable. We were in compliance with all of these covenants at September 30, 2021.
At September 30, 2021, we were not in default under any of our credit facilities.
Credit Ratings
Our borrowing costs and capacity in certain funding markets, including securitizations and senior and subordinated debt, may be affected by the credit ratings of the Company, the Bank and the ratings of our asset-backed securities.
25


The table below reflects our current credit ratings and outlooks:
S&PFitch Ratings
Synchrony Financial
Senior unsecured debtBBB-BBB-
Preferred stockBB-B+
Outlook for Synchrony Financial senior unsecured debtStableStable
Synchrony Bank
Senior unsecured debtBBBBBB-
Outlook for Synchrony Bank senior unsecured debtStableStable
In addition, certain of the asset-backed securities issued by SYNCT and SYNIT are rated by Fitch, S&P and/or Moody’s. A credit rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. Downgrades in these credit ratings could materially increase the cost of our funding from, and restrict our access to, the capital markets.
Liquidity
____________________________________________________________________________________________
We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth, satisfy debt obligations and to meet regulatory expectations under normal and stress conditions.
We maintain policies outlining the overall framework and general principles for managing liquidity risk across our business, which is the responsibility of our Asset and Liability Management Committee, a subcommittee of the Risk Committee of our Board of Directors. We employ a variety of metrics to monitor and manage liquidity. We perform regular liquidity stress testing and contingency planning as part of our liquidity management process. We evaluate a range of stress scenarios including Company specific and systemic events that could impact funding sources and our ability to meet liquidity needs.
We maintain a liquidity portfolio, which at September 30, 2021 had $14.7 billion of liquid assets, primarily consisting of cash and equivalents and short-term obligations of the U.S. Treasury, less cash in transit which is not considered to be liquid, compared to $18.3 billion of liquid assets at December 31, 2020. The decrease in liquid assets was primarily due to the reduction in funding liabilities and share repurchase activity, partially offset by the reduction in our loan receivables and the seasonality of our business. We believe our liquidity position at September 30, 2021 remains strong as we continue to operate in a period of uncertain economic conditions related to COVID-19 and we will continue to closely monitor our liquidity as economic conditions change.
As additional sources of liquidity, at September 30, 2021, we had an aggregate of $3.2 billion of undrawn committed capacity on our securitized financings, subject to customary borrowing conditions, from private lenders under our securitization programs and $0.5 billion of undrawn committed capacity under our unsecured revolving credit facility with private lenders, and we had more than $25.0 billion of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window.
As a general matter, investments included in our liquidity portfolio are expected to be highly liquid, giving us the ability to readily convert them to cash. The level and composition of our liquidity portfolio may fluctuate based upon the level of expected maturities of our funding sources as well as operational requirements and market conditions.
We rely significantly on dividends and other distributions and payments from the Bank for liquidity; however, bank regulations, contractual restrictions and other factors limit the amount of dividends and other distributions and payments that the Bank may pay to us. For a discussion of regulatory restrictions on the Bank’s ability to pay dividends, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” and “Regulation—Regulation Relating to Our Business—Savings Association Regulation—Dividends and Stock Repurchases” in our 2020 Form 10-K.
26


Capital
____________________________________________________________________________________________
Our primary sources of capital have been earnings generated by our business and existing equity capital. We seek to manage capital to a level and composition sufficient to support the risks of our business, meet regulatory requirements, adhere to rating agency targets and support future business growth. The level, composition and utilization of capital are influenced by changes in the economic environment, strategic initiatives and legislative and regulatory developments. Within these constraints, we are focused on deploying capital in a manner that will provide attractive returns to our stockholders.
Synchrony is not currently required to conduct stress tests. See “Regulation—Regulation Relating to Our Business—Recent Legislative and Regulatory Developments” in our 2020 Form 10-K. In addition, while we have not been subject to the Federal Reserve Board's formal capital plan submission requirements to-date, we submitted a capital plan to the Federal Reserve Board in 2021. While not required, our capital plan process does include certain internal stress testing.
Dividend and Share Repurchases
Common Stock Cash Dividends DeclaredMonth of PaymentAmount per Common ShareAmount
($ in millions, except per share data)
Three months ended March 31, 2021
February 2021
$0.22 $128 
Three months ended June 30, 2021
May 2021
0.22 128 
Three months ended September 30, 2021
August, 2021
0.22 124 
Total dividends declared$0.66 $380 
Preferred Stock Cash Dividends DeclaredMonth of PaymentAmount per Preferred ShareAmount
($ in millions, except per share data)
Three months ended March 31, 2021
February 2021
$14.06 $11 
Three months ended June 30, 2021
May 2021
14.06 10 
Three months ended September 30, 2021
August, 2021
14.06 11 
Total dividends declared$42.18 $32 
The declaration and payment of future dividends to holders of our common and preferred stock will be at the discretion of the Board and will depend on many factors. For a discussion of regulatory and other restrictions on our ability to pay dividends and repurchase stock, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” in our 2020 Form 10-K.
Common Shares Repurchased Under Publicly Announced ProgramsTotal Number of Shares
Purchased
Dollar Value of Shares
Purchased
($ and shares in millions)
Three months ended March 31, 2021
5.1 $200 
Three months ended June 30, 2021
8.7 393 
Three months ended September 30, 2021
26.7 1,300 
Total 40.5 $1,893 
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In January 2021, we announced our Board's approval of a share repurchase program of up to $1.6 billion through December 31, 2021 (the “January 2021 Share Repurchase Program”), subject to the Company’s capital plan, market conditions and other factors, including regulatory restrictions and required approvals, if any. In May 2021 we announced that the Board of Directors approved a new share repurchase program of up to $2.9 billion for the period which commenced April 1, 2021 through June 30, 2022 (the “May 2021 Share Repurchase Program”), subject to market conditions and other factors, including legal and regulatory restrictions and required approvals, if any. This share repurchase program supersedes the program previously announced in January 2021, and does not include the impact of any capital related to the sale of the loan receivables associated with the Gap Inc. program.
Through the end of the third quarter of 2021, we have repurchased $1.9 billion of common stock as part of the January 2021 Share Repurchase Program and May 2021 Share Repurchase Program and have $1.2 billion of remaining authorized share repurchase capacity under the May 2021 Share Repurchase Program at September 30, 2021.
Regulatory Capital Requirements - Synchrony Financial
As a savings and loan holding company, we are required to maintain minimum capital ratios, under the applicable U.S. Basel III capital rules. For more information, see “Regulation—Savings and Loan Holding Company Regulation” in our 2020 Form 10-K.
For Synchrony Financial to be a well-capitalized savings and loan holding company, Synchrony Bank must be well-capitalized and Synchrony Financial must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve Board to meet and maintain a specific capital level for any capital measure. As of September 30, 2021, Synchrony Financial met all the requirements to be deemed well-capitalized.
The following table sets forth the composition of our capital ratios for the Company calculated under the Basel III Standardized Approach rules at September 30, 2021 and December 31, 2020, respectively.
Basel III
 At September 30, 2021At December 31, 2020
($ in millions)Amount
Ratio(1)
Amount
Ratio(1)
Total risk-based capital$15,366 19.3 %$14,604 18.1 %
Tier 1 risk-based capital$14,314 18.0 %$13,525 16.8 %
Tier 1 leverage$14,314 15.5 %$13,525 14.0 %
Common equity Tier 1 capital$13,580 17.1 %$12,791 15.9 %
Risk-weighted assets$79,597 $80,561 
______________________
(1)Tier 1 leverage ratio represents total Tier 1 capital as a percentage of total average assets, after certain adjustments. All other ratios presented above represent the applicable capital measure as a percentage of risk-weighted assets.
In March 2020 the joint federal bank regulatory agencies issued an interim final rule that allows banking organizations to mitigate the effects of the CECL accounting standard in their regulatory capital. Banking organizations that adopted CECL in 2020 can elect to mitigate the estimated cumulative regulatory capital effects of CECL for two years. The Company has elected to adopt the option provided by the interim final rule, which will largely delay the effects of CECL on its regulatory capital through the end of 2021, after which the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024, collectively the “CECL regulatory capital transition adjustment”. For more information, see “Capital—Regulatory Capital Requirements - Synchrony Financial” in our 2020 Form 10-K.
Capital amounts and ratios at September 30, 2021 in the above table all reflect the application of the CECL regulatory capital transition adjustment. The increase in our common equity Tier 1 capital ratio compared to December 31, 2020 was primarily due to the retention of net earnings in the current year, partially offset by share repurchase activity, as well as a decrease in loan receivables and a corresponding reduction in risk-weighted assets in the nine months ended September 30, 2021.
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Regulatory Capital Requirements - Synchrony Bank
At September 30, 2021 and December 31, 2020, the Bank met all applicable requirements to be deemed well-capitalized pursuant to OCC regulations and for purposes of the Federal Deposit Insurance Act. The following table sets forth the composition of the Bank’s capital ratios calculated under the Basel III Standardized Approach rules at September 30, 2021 and December 31, 2020, and also reflects the CECL regulatory capital transition adjustment in the September 30, 2021 amounts and ratios.
 At September 30, 2021At December 31, 2020Minimum to be Well-Capitalized under Prompt Corrective Action Provisions
($ in millions)AmountRatioAmountRatioRatio
Total risk-based capital$14,341 19.9 %$12,784 17.8 %10.0%
Tier 1 risk-based capital$13,391 18.6 %$11,821 16.5 %8.0%
Tier 1 leverage$13,391 16.1 %$11,821 13.6 %5.0%
Common equity Tier 1 capital$13,391 18.6 %$11,821 16.5 %6.5%
Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit our business activities and have a material adverse effect on our business, results of operations and financial condition. See “Regulation—Risk Factors Relating to Regulation—Failure by Synchrony and the Bank to meet applicable capital adequacy and liquidity requirements could have a material adverse effect on us” in our 2020 Form 10-K.
Off-Balance Sheet Arrangements and Unfunded Lending Commitments
____________________________________________________________________________________________
We do not have any material off-balance sheet arrangements, including guarantees of third-party obligations. Guarantees are contracts or indemnification agreements that contingently require us to make a guaranteed payment or perform an obligation to a third-party based on certain trigger events. At September 30, 2021, we had not recorded any contingent liabilities in our Condensed Consolidated Statement of Financial Position related to any guarantees. See Note 5 - Variable Interest Entities to our condensed consolidated financial statements for more information on our investment commitments for unconsolidated VIE's.
We extend credit, primarily arising from agreements with customers for unused lines of credit on our credit cards, in the ordinary course of business. Each unused credit card line is unconditionally cancellable by us. See Note 4 - Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for more information on our unfunded lending commitments.
Critical Accounting Estimates
____________________________________________________________________________________________
In preparing our condensed consolidated financial statements, we have identified certain accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. The critical accounting estimates we have identified relate to allowance for credit losses and fair value measurements. These estimates reflect our best judgment about current, and for some estimates future, economic and market conditions and their effects based on information available as of the date of these financial statements. If these conditions change from those expected, it is reasonably possible that these judgments and estimates could change, which may result in incremental losses on loan receivables, or material changes to our Condensed Consolidated Statement of Financial Position, among other effects. See “Management's Discussion and Analysis—Critical Accounting Estimates” in our 2020 Form 10-K, for a detailed discussion of these critical accounting estimates.
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Regulation and Supervision
____________________________________________________________________________________________
Our business, including our relationships with our customers, is subject to regulation, supervision and examination under U.S. federal, state and foreign laws and regulations. These laws and regulations cover all aspects of our business, including lending and collection practices, treatment of our customers, safeguarding deposits, customer privacy and information security, capital structure, liquidity, dividends and other capital distributions, transactions with affiliates, and conduct and qualifications of personnel. Such laws and regulations directly and indirectly affect key drivers of our profitability, including, for example, capital and liquidity, product offerings, risk management, and costs of compliance.
As a savings and loan holding company and a financial holding company, Synchrony is subject to regulation, supervision and examination by the Federal Reserve Board. As a large provider of consumer financial services, we are also subject to regulation, supervision and examination by the CFPB.
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