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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 June 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-20210630_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 July 15, 2021 was 569,699,116.



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 six months ended June 30, 2021, we financed $42.1 billion and $76.9 billion of purchase volume, respectively, and had 65.8 million and 66.2 million average active accounts, respectively, and at June 30, 2021, we had $78.4 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 June 30, 2021, we had $59.8 billion in deposits, which represented 81% of our total funding sources.
Our Sales Platforms
_________________________________________________________________
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.
6


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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.
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 April 2022. Corp, Other also includes amounts related to changes in the fair value of equity investments and realized gains or losses associated with sale of investments.

Our Credit Products
____________________________________________________________________________________________
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 June 30, 2021.
Promotional Offer
Credit ProductStandard Terms OnlyDeferred InterestOther PromotionalTotal
Credit cards60.6 %18.6 %15.8 %95.0 %
Commercial credit products1.7 — — 1.7 
Consumer installment loans— 0.1 3.1 3.2 
Other0.1 — — 0.1 
Total62.4 %18.7 %18.9 %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 ongoing partners and our CareCredit Dual Card, of which the majority are Dual Cards. Consumer Dual Cards and Co-Branded cards totaled 23% of our total loan receivables portfolio at June 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). Installment loans are closed-end credit accounts where the customer pays down the outstanding balance in installments. Installment loans are 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 six months ended June 30, 2021, see “—Results of Operations.
Seasonality
____________________________________________________________________________________________
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 June 30, 2021 were approximately 280 basis points higher than our prior five-year historical average for the second 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 Six Months Ended June 30, 2021
Below are highlights of our performance for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, as applicable, except as otherwise noted.
Net earnings increased to $1.2 billion from $48 million and to $2.3 billion from $334 million for the three and six months ended June 30, 2021, respectively, primarily driven by lower provision for credit losses and decreases in other expense, partially offset by lower net interest income.
Loan receivables increased slightly to $78.4 billion at June 30, 2021 compared to $78.3 billion at June 30, 2020, primarily driven by higher purchase volume, largely offset by improvements in customer payment behavior reflecting the impact of government stimulus, industry-wide forbearance actions and lower discretionary spend during the prior year shutdowns.
Net interest income decreased 2.5% to $3.3 billion and 7.3% to $6.8 billion for the three and six months ended June 30, 2021, respectively, primarily due to decreases in interest and fees on loans driven by an increase in payment rates and lower delinquencies, partially offset by decreases in interest expense primarily attributed to lower benchmark interest rates.
Retailer share arrangements increased 30.1% to $1.0 billion and 17.4% to $2.0 billion for the three and six months ended June 30, 2021, respectively, primarily due to the decrease in the provision for credit losses, including lower net charge-offs, and program performance.
Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased 102 basis points to 2.11% at June 30, 2021, and the net charge-off rate decreased 178 basis points to 3.57% and 176 basis points to 3.59% for the three and six months ended June 30, 2021, respectively.
Provision for credit losses decreased by $1.9 billion, or 111.6%, and $3.2 billion, or 95.8% for the three and six months ended June 30, 2021, respectively, primarily driven by lower reserves and lower net charge-offs. Our allowance coverage ratio (allowance for credit losses as a percent of period-end loan receivables) decreased to 11.51% at June 30, 2021, as compared to 12.52% at June 30, 2020.
Other expense decreased by $38 million, or 3.9%, and $108 million, or 5.4%, for the three and six months ended June 30, 2021, respectively, primarily driven by lower operational losses, partially offset by increases in employee costs, marketing and business development and information processing.
At June 30, 2021, deposits represented 81% of our total funding sources. Total deposits decreased by 4.7% to $59.8 billion at June 30, 2021, compared to December 31, 2020.
During the six months ended June 30, 2021, we declared and paid cash dividends on our Series A 5.625% non-cumulative preferred stock of $28.12 per share, or $21 million.
During the six months ended June 30, 2021, we repurchased $593 million of our outstanding common stock, and declared and paid cash dividends of $0.44 per share, or $256 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.
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 BoxDrop and extended our program agreements with Ashley HomeStores LTD, CITGO, Mitchell Gold Co. and Phillips 66.
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In our Digital sales platform, we 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 expanded our network through our new partnerships with Emory Healthcare, Mercy Health, Ochsner Health, Prime Health, Southern Veterinary Partners and Sycle. 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, Sutherlands and Tacony Corporation.
In April 2021, we announced that we will not be renewing our program agreement with Gap Inc. when it expires on April 30, 2022. We expect our strategic options will be accretive to dilutive earnings per share relative to renewal terms and if the portfolio is sold we expect to recognize a gain on sale of the portfolio and redeploy approximately $1 billion of capital.
Excluding our program agreement with Gap Inc., our five largest programs based upon interest and fees on loans for the year ended December 31, 2020 were Amazon, JCPenney, Lowe’s, PayPal and Sam’s Club.
Information About Our Executive Officers and Board of Directors
The following events were effective April 1, 2021:
Margaret Keane, 61, Synchrony’s Chief Executive Officer (“CEO”), transitioned roles from CEO to Executive Chair of the Board.
Brian Doubles, 45, Synchrony’s President, succeeded Ms. Keane to become President and CEO, and joined the Board as a director.
Rick Hartnack, 75, Non-Executive Chair of the Board, retired.
Jeffrey Naylor, 62, became Lead Independent Director of the Board.
The following appointments were effective June 14, 2021:
Mike Bopp, 48, now leads the Growth organization as EVP, Chief Growth Officer.
Carol Juel, 48, now leads the Technology and Operations organization as EVP, Chief Technology and Operating Officer.
Alberto Casellas, 54, now leads the Health & Wellness sales platform as EVP, CEO Health & Wellness.
Curtis Howse, 57, now leads the Home & Auto sales platform as EVP, CEO Home & Auto.
Tom Quindlen, 58, now leads the Diversified & Value sales platform and the Lifestyle sales platform as EVP, CEO Diversified & Value and Lifestyle.
Bart Schaller, 52, now leads the Digital sales platform as EVP, CEO Digital.
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Summary Earnings
The following table sets forth our results of operations for the periods indicated.
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Interest income$3,578 $3,830 $7,320 $8,237 
Interest expense266 434 569 951 
Net interest income3,312 3,396 6,751 7,286 
Retailer share arrangements(1,006)(773)(1,995)(1,699)
Provision for credit losses(194)1,673 140 3,350 
Net interest income, after retailer share arrangements and provision for credit losses2,500 950 4,616 2,237 
Other income89 95 220 192 
Other expense948 986 1,880 1,988 
Earnings before provision for income taxes1,641 59 2,956 441 
Provision for income taxes399 11 689 107 
Net earnings$1,242 $48 $2,267 $334 
Net earnings available to common stockholders$1,232 $37 $2,246 $312 
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Other Financial and Statistical Data
The following table sets forth certain other financial and statistical data for the periods indicated.    
At and for theAt and for the
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Financial Position Data (Average):
Loan receivables, including held for sale$76,821 $78,697 $77,585 $81,563 
Total assets$93,389 $97,958 $94,914 $99,340 
Deposits$61,110 $64,607 $62,085 $64,636 
Borrowings$14,425 $16,821 $15,039 $17,807 
Total equity$13,655 $12,181 $13,365 $12,386 
Selected Performance Metrics:
Purchase volume(1)(2)
$42,121 $31,155 $76,870 $63,197 
Home & Auto$12,209 $9,729 $22,124 $18,833 
Digital$10,930 $8,439 $20,270 $15,833 
Diversified & Value$11,618 $7,683 $20,838 $17,084 
Health & Wellness$2,988 $1,952 $5,636 $4,611 
Lifestyle$1,405 $1,286 $2,559 $2,283 
Corp, Other$2,971 $2,066 $5,443 $4,553 
Average active accounts (in thousands)(2)(3)
65,810 64,836 66,163 68,401 
Net interest margin(4)
13.78 %13.53 %13.88 %14.35 %
Net charge-offs$684 $1,046 $1,383 $2,171 
Net charge-offs as a % of average loan receivables, including held for sale3.57 %5.35 %3.59 %5.35 %
Allowance coverage ratio(5)
11.51 %12.52 %11.51 %12.52 %
Return on assets(6)
5.3 %0.2 %4.8 %0.7 %
Return on equity(7)
36.5 %1.6 %34.2 %5.4 %
Equity to assets(8)
14.62 %12.43 %14.08 %12.47 %
Other expense as a % of average loan receivables, including held for sale4.95 %5.04 %4.89 %4.90 %
Efficiency ratio(9)
39.6 %36.3 %37.8 %34.4 %
Effective income tax rate24.3 %18.6 %23.3 %24.3 %
Selected Period-End Data:
Loan receivables$78,374 $78,313 $78,374 $78,313 
Allowance for credit losses$9,023 $9,802 $9,023 $9,802 
30+ days past due as a % of period-end loan receivables(10)
2.11 %3.13 %2.11 %3.13 %
90+ days past due as a % of period-end loan receivables(10)
1.00 %1.77 %1.00 %1.77 %
Total active accounts (in thousands)(2)(3)
66,892 63,430 66,892 63,430 
______________________
(1)Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.
(2)Includes activity and accounts associated with loan receivables held for sale.
(3)Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
(4)Net interest margin represents net interest income divided by average interest-earning assets.
(5)Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables.
(6)Return on assets represents net earnings as a percentage of average total assets.
(7)Return on equity represents net earnings as a percentage of average total equity.
(8)Equity to assets represents average total equity as a percentage of average total assets.
(9)Efficiency ratio represents (i) other expense, divided by (ii) sum of net interest income, plus other income, less retailer share arrangements.
(10)Based on customer statement-end balances extrapolated to the respective period-end date.
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Average Balance Sheet
The following tables set forth information for the periods indicated regarding average balance sheet data, which are used in the discussion of interest income, interest expense and net interest income that follows.
 20212020
Three months ended June 30 ($ 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)
$13,584 $0.12 %$15,413 $0.08 %
Securities available for sale5,988 0.47 %6,804 19 1.12 %
Loan receivables, including held for sale(3):
Credit cards72,989 3,484 19.15 %75,942 3,740 19.81 %
Consumer installment loans2,417 59 9.79 %1,546 37 9.63 %
Commercial credit products1,363 23 6.77 %1,150 30 10.49 %
Other52 NM59 NM
Total loan receivables, including held for sale76,821 3,567 18.62 %78,697 3,808 19.46 %
Total interest-earning assets96,393 3,578 14.89 %100,914 3,830 15.26 %
Non-interest-earning assets:
Cash and due from banks1,559 1,486 
Allowance for credit losses(9,801)(9,221)
Other assets5,238 4,779 
Total non-interest-earning assets(3,004)(2,956)
Total assets$93,389 $97,958 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts$60,761 $146 0.96 %$64,298 $293 1.83 %
Borrowings of consolidated securitization entities7,149 44 2.47 %8,863 59 2.68 %
Senior unsecured notes7,276 76 4.19 %7,958 82 4.14 %
Total interest-bearing liabilities75,186 266 1.42 %81,119 434 2.15 %
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts349 309 
Other liabilities4,199 4,349 
Total non-interest-bearing liabilities4,548 4,658 
Total liabilities79,734 85,777 
Equity
Total equity13,655 12,181 
Total liabilities and equity$93,389 $97,958 
Interest rate spread(4)
13.47 %13.11 %
Net interest income$3,312 $3,396 
Net interest margin(5)
13.78 %13.53 %
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 20212020
Six months ended June 30 ($ 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)
$14,094 $0.11 %$14,158 $45 0.64 %
Securities available for sale6,378 13 0.41 %6,379 44 1.39 %
Loan receivables, including held for sale(3):
Credit cards73,921 7,141 19.48 %78,830 8,012 20.44 %
Consumer installment loans2,319 112 9.74 %1,489 72 9.72 %
Commercial credit products1,297 44 6.84 %1,196 63 10.59 %
Other48 8.40 %48 4.19 %
Total loan receivables, including held for sale77,585 7,299 18.97 %81,563 8,148 20.09 %
Total interest-earning assets98,057 7,320 15.05 %102,100 8,237 16.22 %
Non-interest-earning assets:
Cash and due from banks1,597 1,468 
Allowance for credit losses(10,012)(8,965)
Other assets5,272 4,737 
Total non-interest-earning assets(3,143)(2,760)
Total assets$94,914 $99,340 
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts$61,737 $316 1.03 %$64,332 $649 2.03 %
Borrowings of consolidated securitization entities7,420 95 2.58 %9,425 132 2.82 %
Senior unsecured notes7,619 158 4.18 %8,382 170 4.08 %
Total interest-bearing liabilities76,776 569 1.49 %82,139 951 2.33 %
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts348 304 
Other liabilities4,425 4,511 
Total non-interest-bearing liabilities4,773 4,815 
Total liabilities81,549 86,954 
Equity
Total equity13,365 12,386 
Total liabilities and equity$94,914 $99,340 
Interest rate spread(4)
13.56 %13.89 %
Net interest income$6,751 $7,286 
Net interest margin(5)
13.88 %14.35 %
_______________________
(1)Average yields/rates are based on total interest income/expense over average balances.
(2)Includes average restricted cash balances of $538 million and $645 million for the three months ended June 30, 2021 and 2020, respectively, and $481 million and $813 million for the six months ended June 30, 2021 and 2020, respectively.
(3)Interest income on loan receivables includes fees on loans of $489 million and $448 million for the three months ended June 30, 2021 and 2020, respectively, and $1.0 billion and $1.1 billion for the six months ended June 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 decreased by $252 million, or 6.6%, and $917 million, or 11.1%, for the three and six months ended June 30, 2021, respectively, primarily driven by decreases in interest and fees on loans attributed to improvements in customer payment behavior and lower delinquencies.
Average interest-earning assets
Three months ended June 30 ($ in millions)2021%2020%
Loan receivables, including held for sale$76,821 79.7 %$78,697 78.0 %
Liquidity portfolio and other19,572 20.3 %22,217 22.0 %
Total average interest-earning assets$96,393 100.0 %$100,914 100.0 %
Six months ended June 30 ($ in millions)2021%2020%
Loan receivables, including held for sale
$77,585 79.1 %$81,563 79.9 %
Liquidity portfolio and other
20,472 20.9 %20,537 20.1 %
Total average interest-earning assets
$98,057 100.0 %$102,100 100.0 %
The decreases in average loan receivables, including held for sale, of 2.4% and 4.9% for the three and six months ended June 30, 2021, respectively, were primarily driven by improvements in customer payment behavior. These decreases were partially offset by growth in purchase volume of 35.2% and 21.6% for the three and six months ended June 30, 2021, respectively, reflecting the impacts of stimulus, the lifting of remaining government restrictions and increased consumer confidence.
Yield on average interest-earning assets
The yield on average interest-earning assets decreased for the three and six months ended June 30, 2021, primarily due to decreases in the yield on average loan receivables. The decrease in loan receivable yield was 84 basis points to 18.62% and 112 basis points to 18.97% for the three and six months ended June 30, 2021, respectively, primarily driven by higher payment rates and lower delinquencies.
Interest Expense
Interest expense decreased by $168 million, or 38.7%, and $382 million, or 40.2%, for the three and six months ended June 30, 2021, respectively, primarily attributed to lower benchmark interest rates. Our cost of funds decreased to 1.42% and 1.49% for the three and six months ended June 30, 2021, respectively, compared to 2.15% and 2.33% for the three and six months ended June 30, 2020, respectively.
Average interest-bearing liabilities
Three months ended June 30 ($ in millions)2021%2020%
Interest-bearing deposit accounts$60,761 80.8 %$64,298 79.3 %
Borrowings of consolidated securitization entities7,149 9.5 %8,863 10.9 %
Senior unsecured notes7,276 9.7 %7,958 9.8 %
Total average interest-bearing liabilities$75,186 100.0 %$81,119 100.0 %
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Six months ended June 30 ($ in millions)2021%2020%
Interest-bearing deposit accounts$61,737 80.4 %$64,332 78.3 %
Borrowings of consolidated securitization entities7,420 9.7 %9,425 11.5 %
Senior unsecured notes7,619 9.9 %8,382 10.2 %
Total average interest-bearing liabilities$76,776 100.0 %$82,139 100.0 %
Net Interest Income
Net interest income decreased by $84 million, or 2.5%, and $535 million, or 7.3%, for the three and six months ended June 30, 2021, respectively, primarily driven by the decreases in interest and fees on loans discussed above, partially offset by the decreases in interest expense.
Retailer Share Arrangements
Retailer share arrangements increased by $233 million, or 30.1%, and $296 million, or 17.4%, for the three and six months ended June 30, 2021, respectively, primarily due to the decrease in provision for credit losses, including lower net charge-offs, and program performance.
Provision for Credit Losses
Provision for credit losses decreased by $1.9 billion, or 111.6%, and $3.2 billion, or 95.8%, for the three and six months ended June 30, 2021, respectively, primarily driven by lower reserves in the current year and lower net charge-offs. The reduction in reserves for credit losses were $878 million and $1.2 billion for the three and six months ended June 30, 2021, respectively.
Other Income
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Interchange revenue$223 $134 $394 $295 
Debt cancellation fees66 69 135 138 
Loyalty programs(247)(134)(426)(292)
Other47 26 117 51 
Total other income$89 $95 $220 $192 
Other income decreased by $6 million, or 6.3%, for the three months ended June 30, 2021, primarily driven by higher loyalty program costs during the period related to higher purchase volume, partially offset by an increase in interchange revenue. Other income increased by $28 million, or 14.6%, for the six months ended June 30, 2021, primarily driven by an increase in interchange revenue and gains related to investment securities, partially offset by higher loyalty costs.    
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Other Expense
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Employee costs$359 $327 $723 $651 
Professional fees189 189 379 386 
Marketing and business development114 91 209 202 
Information processing137 116 268 239 
Other149 263 301 510 
Total other expense$948 $986 $1,880 $1,988 
Other expense decreased by $38 million, or 3.9%, and $108 million, or 5.4%, for the three and six months ended June 30, 2021, primarily driven by lower other expense, partially offset by increases in employee costs, marketing and business development and information processing.
The "other" component decreased primarily due to lower operational losses. The increases in employee costs was primarily due to higher stock-based compensation expense. The increases in marketing and business development was primarily due to the timing of program spend aligned with the lifting of remaining government restrictions on in-person retail experiences. The increases in information processing was primarily due to higher software costs.
Provision for Income Taxes
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Effective tax rate24.3 %18.6 %23.3 %24.3 %
Provision for income taxes$399 $11 $689 $107 
The effective tax rate for the three months ended June 30, 2021 increased compared to the same period in the prior year primarily due to significantly lower pre-tax income in the prior year, which led to a larger impact related to discrete tax benefits. The effective tax rate for the six months ended June 30, 2021 decreased compared to the same period in the prior year primarily due to the resolution of certain tax matters in the current year. For both periods presented, the effective tax rate differs from the applicable U.S. federal statutory tax rate primarily due to state income taxes.
Platform Analysis
As discussed above under “—Our Sales Platforms,” we now offer our credit products primarily through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle), which management measures based on their revenue-generating activities. The following is a discussion of certain supplemental information for the three and six months ended June 30, 2021, for each of our five sales platforms and Corp, Other.
Home & Auto
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Purchase volume$12,209 $9,729 $22,124 $18,833 
Period-end loan receivables$26,111 $25,875 $26,111 $25,875 
Average loan receivables, including held for sale$25,624 $25,792 $25,704 $26,396 
Average active accounts (in thousands)17,958 18,213 17,906 18,465 
Interest and fees on loans$1,014 $1,079 $2,073 $2,250 
Other income$15 $20 $30 $32 
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Home & Auto interest and fees on loans decreased by $65 million, or 6.0%, and $177 million, or 7.9%, for the three and six months ended June 30, 2021, primarily driven by lower loan receivables yield as a result of higher payment rates.
Digital
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Purchase volume$10,930 $8,439 $20,270 $15,833 
Period-end loan receivables$19,233 $18,945 $19,233 $18,945 
Average loan receivables, including held for sale$18,783 $19,062 $19,108 $19,408 
Average active accounts (in thousands)17,258 16,414 17,298 16,462 
Interest and fees on loans$891 $913 $1,794 $1,910 
Other income$(28)$(8)$(40)$(12)
Digital interest and fees on loans decreased by $22 million, or 2.4%, and $116 million, or 6.1%, for the three and six months ended June 30, 2021, primarily driven by lower loan receivables yield as a result of higher payment rates.
Other income decreased by $20 million, or 250.0%, and $28 million, or 233.3%, for the three and six months ended June 30, 2021, primarily driven by higher program loyalty costs associated with the increase in purchase volume.
Diversified & Value
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Purchase volume$11,618 $7,683 $20,838 $17,084 
Period-end loan receivables$14,357 $15,177 $14,357 $15,177 
Average loan receivables, including held for sale$14,101 $15,425 $14,336 $16,485 
Average active accounts (in thousands)17,301 16,626 17,446 18,806 
Interest and fees on loans$729 $849 $1,518 $1,897 
Other income$(2)$17 $$32 
Diversified & Value interest and fees on loans decreased by $120 million, or 14.1%, and $379 million, or 20.0%, for the three and six months ended June 30, 2021, primarily driven by lower average loan receivables reflecting the impact of store closures in 2020, as well as prior year government restrictions and higher payment rates.
Health & Wellness
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Purchase volume$2,988 $1,952 $5,636 $4,611 
Period-end loan receivables$9,515 $9,222 $9,515 $9,222 
Average loan receivables, including held for sale$9,334 $9,387 $9,387 $9,823 
Average active accounts (in thousands)5,585 5,966 5,642 6,153 
Interest and fees on loans$523 $535 $1,081 $1,132 
Other income$36 $23 $76 $48 
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Health & Wellness interest and fees on loans decreased by $12 million, or 2.2%, for the three months ended June 30, 2021, primarily driven by lower loan receivables yield as a result of higher payment rates. Interest and fees on loans decreased $51 million, or 4.5%, for the six months ended June 30, 2021, primarily driven by lower average loan receivables.
Other income increased by $13 million, or 56.5%, and $28 million, or 58.3%, for the three and six months ended June 30, 2021, respectively, primarily due to commission fees earned by Pets Best.
Lifestyle
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Purchase volume$1,405 $1,286 $2,559 $2,283 
Period-end loan receivables$5,158 $4,718 $5,158 $4,718 
Average loan receivables, including held for sale$5,050 $4,551 $5,027 $4,607 
Average active accounts (in thousands)2,442 2,462 2,510 2,634 
Interest and fees on loans$182 $172 $363 $367 
Other income$$$11 $
Lifestyle interest and fees on loans increased by $10 million, or 5.8%, for the three months ended June 30, 2021, primarily driven by an increase in average loan receivables reflecting continued strength in power sports. Interest and fees on loans decreased slightly by $4 million, or 1.1%, for the six months ended June 30, 2021, primarily driven by lower late fees and lower merchant discount, largely offset by an increase in average loan receivables.
Corp, Other
Three months ended June 30,Six months ended June 30,
($ in millions)2021202020212020
Purchase volume$2,971 $2,066 $5,443 $4,553 
Period-end loan receivables$4,000 $4,376 $4,000 $4,376 
Average loan receivables, including held for sale$3,929 $4,480 $4,023 $4,844 
Average active accounts (in thousands)5,266 5,155 5,361 5,881 
Interest and fees on loans$228 $260 $470 $592 
Other income$62 $39 $140 $83 
Corp, Other interest and fees on loans decreased by $32 million, or 12.3%, and $122 million, or 20.6%, for the three and six months ended June 30, 2021, primarily driven by lower average loan receivables.
Other income increased by $23 million, or 59.0%, and $57 million, or 68.7% for the three and six months ended June 30, 2021, primarily due to gains related to investment securities.
Loan Receivables
____________________________________________________________________________________________
Loan receivables are our largest category of assets and represent our primary source of revenue. The following discussion provides supplemental information regarding our loan receivables portfolio. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 4. Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for additional information related to our Loan Receivables, including troubled debt restructurings (“TDR’s”).
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The following table sets forth the composition of our loan receivables portfolio by product type at the dates indicated.
($ in millions)At June 30, 2021(%)At December 31, 2020(%)
Loans
Credit cards$74,429 95.0 %$78,455 95.9 %
Consumer installment loans2,507 3.2 %2,125 2.6 
Commercial credit products1,379 1.7 %1,250 1.5 
Other59 0.1 %37 — 
Total loans$78,374 100.0 %$81,867 100.0 %
Loan receivables decreased 4.3% to $78.4 billion at June 30, 2021 compared to December 31, 2020, primarily driven by 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 June 30, 2021 were approximately 280 basis points higher than our prior five-year historical average for the second quarter.
Loan receivables increased slightly to $78.4 billion at June 30, 2021 compared to $78.3 billion at June 30, 2020, primarily driven by higher purchase volume, offset by the impacts of improvements in customer payment behavior.
Our loan receivables portfolio had the following geographic concentration at June 30, 2021.
($ in millions)Loan Receivables
Outstanding
% of Total Loan
Receivables
Outstanding
State
Texas$8,124 10.4 %
California$8,036 10.3 %
Florida$6,849 8.7 %
New York$4,260 5.4 %
North Carolina$3,237 4.1 %
Delinquencies
Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased to 2.11% at June 30, 2021 from 3.13% at June 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. The current quarter decrease as compared to December 31, 2020 reflects these same improvements as well as the seasonality of our business.
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 June 30,Six months ended June 30,
 2021202020212020
Net charge-off rate3.57 %5.35 %3.59 %5.35 %
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Allowance for Credit Losses
The allowance for credit losses totaled $9.0 billion at June 30, 2021, compared to $10.3 billion at December 31, 2020 and $9.8 billion at June 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 11.51% at June 30, 2021, from 12.54% at December 31, 2020 and from 12.52% at June 30, 2020.
The decrease compared to June 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 the lower reserves, 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 June 30 ($ in millions)Average
Balance
%Average
Rate
Average
Balance
%Average
Rate
Deposits(1)
$60,761 80.8 %1.0 %$64,298 79.3 %1.8 %
Securitized financings7,149 9.5 2.5 8,863 10.9 2.7 
Senior unsecured notes7,276 9.7 4.2 7,958 9.8 4.1 
Total$75,186 100.0 %1.4 %$81,119 100.0 %2.2 %
______________________
(1)Excludes $349 million and $309 million average balance of non-interest-bearing deposits for the three months ended June 30, 2021 and 2020, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the three months ended June 30, 2021 and 2020.
 20212020
Six months ended June 30 ($ in millions)Average
Balance
%Average
Rate
Average
Balance
%Average
Rate
Deposits(1)
$61,737 80.4 %1.0 %$64,332 78.3 %2.0 %
Securitized financings7,420 9.7 2.6 9,425 11.5 2.8 
Senior unsecured notes7,619 9.9 4.2 8,382 10.2 4.1 
Total$76,776 100.0 %1.5 %$82,139 100.0 %2.3 %
______________________
(1)Excludes $348 million and $304 million average balance of non-interest-bearing deposits for the six months ended June 30, 2021 and 2020, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the six months ended June 30, 2021 and 2020.
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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 June 30, 2021, we had $50.3 billion in direct deposits and $9.5 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to utilize our direct deposits base as a source of stable and diversified low-cost funding.
Our direct deposits include a range of FDIC-insured deposit products, including certificates of deposit, IRAs, money market accounts and savings accounts.
Brokered deposits are primarily from retail customers of large brokerage firms. We have relationships with 11 brokers that offer our deposits through their networks. Our brokered deposits consist primarily of certificates of deposit that bear interest at a fixed rate and at June 30, 2021, had a weighted average remaining life of 2.4 years. These deposits generally are not subject to early withdrawal.
Our ability to attract deposits is sensitive to, among other things, the interest rates we pay, and therefore, we bear funding risk if we fail to pay higher rates, or interest rate risk if we are required to pay higher rates, to retain existing deposits or attract new deposits. To mitigate these risks, our funding strategy includes a range of deposit products, and we seek to maintain access to multiple other funding sources, including securitized financings (including our undrawn committed capacity) and unsecured debt.
The following table summarizes certain information regarding our interest-bearing deposits by type (all of which constitute U.S. deposits) for the periods indicated:
Three months ended June 30 ($ in millions)20212020
Average
Balance
%Average
Rate
Average
Balance
%Average
Rate
Direct deposits:
Certificates of deposit
(including IRA certificates of deposit)
$22,352 36.8 %1.3 %$31,806 49.5 %2.2 %
Savings accounts
(including money market accounts)
28,391 46.7 0.5 21,023 32.7 1.3 
Brokered deposits10,018 16.5 1.6 11,469 17.8 1.8 
Total interest-bearing deposits$60,761 100.0 %1.0 %$64,298 100.0 %1.8 %
Six months ended June 30 ($ 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)$23,813 38.6 %1.4 %$32,913 51.2 %2.4 %
Savings accounts (including money market accounts)27,603 44.7 0.5 20,333 31.6 1.5 
Brokered deposits10,321 16.7 1.6 11,086 17.2 2.1 
Total interest-bearing deposits$61,737 100.0 %0.5 %$64,332 100.0 %2.0 %
Our deposit liabilities provide funding with maturities ranging from one day to ten years. At June 30, 2021, the weighted average maturity of our interest-bearing time deposits was 1.1 years. See Note 7. Deposits to our condensed consolidated financial statements for more information on the maturities of our time deposits.
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The following table summarizes deposits by contractual maturity at June 30, 2021:
($ 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)
$29,955 $2,674 $7,465 $6,964 $47,058 
U.S. deposits (in excess of FDIC insurance limit)(2)
Direct deposits:
Certificates of deposit
(including IRA certificates of deposit)
1,107 745 2,091 1,253 5,196 
Savings accounts
(including money market accounts)
7,560 — — — 7,560 
Brokered deposits:
Sweep accounts27 — — — 27 
Total$38,649 $3,419 $9,556 $8,217 $59,841 
______________________
(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 $250,000 per depositor, for each account ownership category. Deposits in excess of FDIC insurance limit presented above include partially uninsured accounts.
Securitized Financings
We access the asset-backed securitization market using the Synchrony Credit Card Master Note Trust (“SYNCT”) and the Synchrony Card Issuance Trust (“SYNIT”) through which we may issue asset-backed securities through both public transactions and private transactions funded by financial institutions and commercial paper conduits. In addition, we issue asset-backed securities in private transactions through the Synchrony Sales Finance Master Trust (“SFT”).
The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at June 30, 2021.
($ 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)
$1,050 $3,040 $— $— $4,090 
SFT300 — — — 300 
SYNIT(1)
2,600 — — — 2,600 
Total long-term borrowings—owed to securitization investors$3,950 $3,040 $— $— $6,990 
______________________
(1)Excludes any subordinated classes of SYNCT notes and SYNIT notes that we owned at June 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.
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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 June 30, 2021.
Note Principal Balance
($ in millions)
# of Series
Outstanding
Three-Month Rolling
Average Excess
Spread(1)
SYNCT$4,244 ~18.2% to 20.5%
SFT$300 18.5 %
SYNIT$2,600 17.2 %
______________________
(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 June 30, 2021.
Senior Unsecured Notes
During the six months ended June 30, 2021 we made repayments of $1.5 billion.
The following table provides a summary of our outstanding fixed rate senior unsecured notes at June 30, 2021.
Issuance Date
Interest Rate(1)
Maturity
Principal Amount Outstanding(2)
($ 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 June 30, 2021 was 4.00%.
(2)The amounts shown exclude unamortized debt discounts, premiums and issuance costs.
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Short-Term Borrowings
Except as described above, there were no material short-term borrowings for the periods presented.
Other
At June 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 June 30, 2021.
At June 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.
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.
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We maintain a liquidity portfolio, which at June 30, 2021 had $16.3 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, partially offset by the reduction in our loan receivables and the seasonality of our business. We believe our liquidity position at June 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 June 30, 2021, we had an aggregate of $4.4 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.
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 
Total dividends declared$0.44 $256 
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Preferred Stock Cash Dividends DeclaredMonth of PaymentAmount per Preferred ShareAmount
($ 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 
Total dividends declared$28.12 $21 
The declaration and payment of future dividends to holders of our common and preferred stock will be at the discretion of the Board and will depend on many factors. For a discussion of regulatory and other restrictions on our ability to pay dividends and repurchase stock, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” in our 2020 Form 10-K.
Common Shares Repurchased Under Publicly Announced ProgramsTotal Number of Shares
Purchased
Dollar Value of Shares
Purchased
($ and shares in millions)
Three months ended March 31, 2021
5.1 $200 
Three months ended June 30, 2021
8.7 393 
Total 13.8 $593 
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 which would be released if the loan receivables associated with the Gap Inc. program are sold at expiration of the existing program agreement.
Through the end of the second quarter of 2021, we have repurchased $593 million of common stock as part of the January 2021 Share Repurchase Program and May 2021 Share Repurchase Program and have $2.5 billion of remaining authorized share repurchase capacity under the May 2021 Share Repurchase Program at June 30, 2021.
Regulatory Capital Requirements - Synchrony Financial
As a savings and loan holding company, we are required to maintain minimum capital ratios, under the applicable U.S. Basel III capital rules. For more information, see “Regulation—Savings and Loan Holding Company Regulation” in our 2020 Form 10-K.
For Synchrony Financial to be a well-capitalized savings and loan holding company, Synchrony Bank must be well-capitalized and Synchrony Financial must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve Board to meet and maintain a specific capital level for any capital measure. As of June 30, 2021, Synchrony Financial met all the requirements to be deemed well-capitalized.
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The following table sets forth the composition of our capital ratios for the Company calculated under the Basel III Standardized Approach rules at June 30, 2021 and December 31, 2020, respectively.
Basel III
 At June 30, 2021At December 31, 2020
($ in millions)Amount
Ratio(1)
Amount
Ratio(1)
Total risk-based capital$15,710 20.1 %$14,604 18.1 %
Tier 1 risk-based capital$14,671 18.7 %$13,525 16.8 %
Tier 1 leverage$14,671 15.6 %$13,525 14.0 %
Common equity Tier 1 capital$13,937 17.8 %$12,791 15.9 %
Risk-weighted assets$78,281 $80,561 
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(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 June 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, as well as a decrease in loan receivables and a corresponding reduction in risk-weighted assets in the six months ended June 30, 2021.
Regulatory Capital Requirements - Synchrony Bank
At June 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 June 30, 2021 and December 31, 2020, and also reflects the CECL regulatory capital transition adjustment in the June 30, 2021 amounts and ratios.
 At June 30, 2021At December 31, 2020Minimum to be Well-Capitalized under Prompt Corrective Action Provisions
($ in millions)AmountRatioAmountRatioRatio
Total risk-based capital$14,460 20.6 %$12,784 17.8 %10.0%
Tier 1 risk-based capital$13,526 19.2 %$11,821 16.5 %8.0%
Tier 1 leverage$13,526 16.0 %$11,821 13.6 %5.0%
Common equity Tier 1 capital$13,526 19.2 %$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.
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Off-Balance Sheet Arrangements and Unfunded Lending Commitments
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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 June 30, 2021, we had not recorded any contingent liabilities in our Condensed Consolidated Statement of Financial Position related to any guarantees.
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
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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.
Regulation and Supervision
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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.
The Bank is a federally chartered savings association. As such, the Bank is subject to regulation, supervision and examination by the OCC, which is its primary regulator, and by the CFPB. In addition, the Bank, as an insured depository institution, is supervised by the FDIC.
See “Regulation” in our 2020 Form 10-K for additional information on regulations that are currently applicable to us. See also “—Capital above, for discussion of the impact of regulations and supervision on our capital and liquidity, including our ability to pay dividends and repurchase stock.
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ITEM 1. FINANCIAL STATEMENTS
Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
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Three months ended June 30,Six months ended June 30,
($ in millions, except per share data)2021202020212020
Interest income:
Interest and fees on loans (Note 4)$3,567 $3,808 $7,299 $8,148 
Interest on cash and debt securities11 22 21 89 
Total interest income3,578 3,830 7,320 8,237 
Interest expense:
Interest on deposits146 293 316 649 
Interest on borrowings of consolidated securitization entities44 59 95 132 
Interest on senior unsecured notes76 82 158 170 
Total interest expense