syf-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021


☐			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)

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,	Connecticut	06902
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001 per share	SYF	New 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 A	SYFPrA	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:


Title of class
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 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, a smaller reporting company, or 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 Filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the outstanding common equity of the registrant held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $27,822,151,695,

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of February 4, 2022 was 521,271,848.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders, to be held May 20, 2022, is incorporated by reference into Part III to the extent described therein.

Synchrony Financial

Table of Contents

OUR ANNUAL REPORT ON FORM 10-K

To improve the readability of this document and better present both our financial results and how we manage our business, we present the content of our Annual Report on Form 10-K in the order listed in the table of contents below. See "Form 10-K Cross-Reference Index" on page 4 for a cross-reference index to the traditional U.S. Securities and Exchange Commission (SEC) Form 10-K format.


		Page
OUR BUSINESS		7
	Our Company	7
	Our Sales Platforms	8
	Our Partner Agreements	11
	Our Customers	14
	Our Credit Products	15
	Growth Organization	17
	Consumer Banking	20
	Credit Risk Management	20
	Customer Service	22
	Production Services	23
	Technology and Data Security	23
	Intellectual Property	24
	Human Capital	24
	Regulation	25
	Competition	26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		27
	Results of Operations	27
	Loan Receivables	45
	Funding, Liquidity and Capital Resources	47
	Liquidity	51
	Quantitative and Qualitative Disclosures About Market Risk	52
	Capital	54

	Off-Balance Sheet Arrangements and Unfunded Lending Commitments	56
	Critical Accounting Estimates	56


RISKS		59
	Risk Factors Summary	59
	Risk Factors Relating To Our Business	61
	Risk Management	81

REGULATION		87
	Regulation Relating to Our Business	87
	Risk Factors Relating to Regulation	97

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		103
	Report of Independent Registered Public Accounting Firm	103
	Consolidated Financial Statements	107
	Notes to Consolidated Financial Statements	112
	Controls and Procedures	144

OTHER KEY INFORMATION		145
	Properties	145
	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	146
	Exhibits and Financial Statement Schedules	149
	Signatures	159

FORM 10-K CROSS REFERENCE INDEX

____________________________________________________________________________________________


Part I		Page(s)

Item 1.	Business	7 - 26, 81 - 97

Item 1A.	Risk Factors	59 - 80, 97 - 102

Item 1B.	Unresolved Staff Comments	Not Applicable

Item 2.	Properties	145

Item 3.	Legal Proceedings	142 - 143

Item 4.	Mine Safety Disclosures	Not Applicable

Part II

Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	146 - 148

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27 - 52, 54 - 58

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52 - 53

Item 8.	Financial Statements and Supplementary Data	103 - 143

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	Not Applicable

Item 9A.	Controls and Procedures	144

Item 9B.	Other Information	Not Applicable

Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	Not Applicable

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	(a)

Item 11.	Executive Compensation	(b)

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	(c)

Item 13.	Certain Relationships and Related Transactions, and Director Independence	(d)

Item 14.	Principal Accounting Fees and Services	(e)

Part IV

Item 15.	Exhibits and Financial Statement Schedules	149 - 158

Item 16.	Form 10-K Summary	Not Applicable

Signatures		159 - 161

______________________

(a)Incorporated by reference to “Management”, “Election of Directors,” “Governance Principles,” “Code of Conduct” and “Committees of the Board of the Directors” in our definitive proxy statement for our 2022 Annual Meeting of Stockholders to be held on May 19, 2022, which will be filed within 120 days of the end our fiscal year ended December 31, 2021 (the “2022 Proxy Statement”).

(b)Incorporated by reference to “Compensation Discussion and Analysis,” “2021 Executive Compensation,” “Management Development and Compensation Committee Report” and “Management Development and Compensation Committee Interlocks and Insider Participation” and “CEO Pay Ratio” in the 2022 Proxy Statement.

(c)Incorporated by reference to “Beneficial Ownership” and “Equity Compensation Plan Information” in the 2022 Proxy Statement.

(d)Incorporated by reference to “Related Person Transactions,” “Election of Directors” and “Committees of the Board of Directors” in the 2022 Proxy Statement.

(e)Incorporated by reference to “Independent Auditor” in the 2022 Proxy Statement.

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. Information with respect to partner “locations” in this report is given at December 31, 2021. “Open accounts” represents credit card or installment loan accounts that are not closed, blocked or more than 60 days delinquent.

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 Analysis—Results of Operations—Other Financial and Statistical Data.” 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.

Industry and Market Data

This report contains various historical and projected financial information concerning our industry and market. Some of this information is from industry publications and other third-party sources, and other information is from our own data and market research that we commission. All of this information involves a variety of assumptions, limitations and methodologies and is inherently subject to uncertainties, and therefore you are cautioned not to give undue weight to it. Although we believe that those industry publications and other third-party sources are reliable, we have not independently verified the accuracy or completeness of any of the data from those publications or sources.

Cautionary Note Regarding Forward-Looking Statements:

Various statements in this Annual Report on Form 10-K 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 in “Risk Factors Relating to Our Business” and “Risk Factors Relating to Regulation.” 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.

OUR BUSINESS

Our Company

____________________________________________________________________________________________

We are a premier consumer financial services company delivering one of the industry's most complete, digitally-enabled product suites. Our experience, expertise and scale encompass a broad spectrum of industries, including digital, health and wellness, retail, home, auto, powersports, jewelry, pets and more. We have an established and 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.” We connect our partners and consumers through our dynamic financial ecosystem and provide them with a diverse set of financing solutions and innovative digital capabilities to address their specific needs and deliver seamless, omnichannel experiences. We utilize a broad set of distribution channels, including mobile apps and websites, as well as online marketplaces and business management solutions like Point-of-Sale platforms. Our offerings include private label, dual, co-brand and general purpose credit cards, as well as short- and long-term installment loans and consumer banking products. During 2021, we financed $165.9 billion of purchase volume, and at December 31, 2021, we had $80.7 billion of loan receivables and 72.4 million active accounts.

Our business benefits from longstanding and collaborative relationships with our partners, including some of the nation’s leading retailers and manufacturers with well-known consumer brands, such as Lowe’s and Sam's Club and also leading digital partners, such as Amazon and PayPal. We believe our business model has been successful because it aligns our interests with those of our partners and provides substantial value to both our partners and our customers. Our partners promote our credit products because they generate increased sales and strengthen customer loyalty. Our customers benefit from instant access to credit, discounts, or other benefits such as cash back rewards, and promotional offers. We seek to differentiate ourselves through our deep industry expertise, our long history of consumer lending, our innovative digital capabilities and our diverse product suite. We have omni-channel (in-store, online and mobile) technology and marketing capabilities, which allow us to offer and deliver our credit products instantly to customers across multiple channels. We continue to invest in, and develop, our digital assets to ensure our partners are well positioned for the rapidly evolving environment. We have been able to demonstrate our digital capabilities by providing solutions that meet the needs of our partners and customers, with approximately 55% of our consumer revolving applications in 2021 processed through a digital channel.

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 revenue activities 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.

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 December 31, 2021, we had $62.3 billion in deposits, which represented 81% of our total funding sources.

Our Sales Platforms

____________________________________________________________________________________________

We offer our credit products through five sales platforms: Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle.

Set forth below is a summary of certain information relating to our sales platforms:

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, as well as our Synchrony Car Care network and Synchrony HOME credit card offering. Home & Auto accounted for $4.2 billion, or 28%, of our total interest and fees on loans for the year ended December 31, 2021.

Home & Auto Partners

Our Home & Auto sales platform partners include a wide range of key retailers in the home improvement, furniture, bedding, appliance and electronics industry, such as Ashley HomeStores LTD, Lowe's, and Mattress Firm, as well as automotive merchandise and services, such as Chevron and Discount Tire. In addition, we also have program agreements with buying groups, manufacturers and industry associations, such as Nationwide Marketing Group and the Home Furnishings Association.

At December 31, 2021, the length of our relationship with each of our five largest partners was over 10 years, and in the case of Lowe's, 42 years.


2021 Partner Agreements:
New partnerships:	• Alarm.com	• Gardner White
	• BoxDrop
Program extensions:	• Abt Electronics	• Furniture Fair
	• American Signature Furniture	• Mitchell Gold Co.
	• Ashley HomeStores LTD	• Phillips 66
	• CITGO	• Sam Levitz Furniture
	• City Furniture	• WG&R Furniture

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. We enable our digital-first partners to deepen consumer engagement by embedding payments and financing solutions, compelling value and rewards, and personalized offers within seamless experiences and extending digital relationships into in-person commerce. In addition to our partner products, we also offer a Synchrony-branded general purpose credit card. Digital accounted for $3.8 billion, or 25%, of our total interest and fees on loans for the year ended December 31, 2021.

Digital Partners

Our Digital sales platform includes key partners delivering digital payment solutions, such as PayPal, including our Venmo program, online marketplaces, such as Amazon and eBay, and digital-first brands and merchants, such as Verizon, the Qurate brands, and Fanatics.

The Digital sales platform has strong alignment with its partners through partnerships that span decades, as well as through our more recent programs with Verizon and Venmo. At December 31, 2021, the length of our relationship with each of our four largest partners was over 10 years, and in the case of PayPal, 17 years. The Digital sales platform has highly engaged customers and can continue to drive penetration and everyday use by expanding products, channels, and deeper user experience integrations.


2021 Partner Agreements:
Program extensions:			• ShopHQ

In addition, we also expanded our strategic relationship with PayPal in 2021 and entered into an affinity deposit arrangement with PayPal in which the Bank will be offering PayPal-branded savings accounts through PayPal’s mobile application and website.

Diversified & Value

Our Diversified & Value sales platform provides comprehensive payments and financing solutions with integrated in-store and digital experiences through large retail partners who deliver everyday value to consumers shopping for daily needs or important life moments. Diversified & Value accounted for $3.1 billion, or 20%, of our total interest and fees on loans for the year ended December 31, 2021.

Diversified & Value Partners

Our Diversified & Value sales platform is comprised of five large retail partners: Belk, Fleet Farm, JCPenney, Sam's Club and TJX Companies, Inc. Through strong partner alignment, competitive value propositions, and embedding our products in the digital experience, we can continue to drive penetration and everyday use.

At December 31, 2021, the length of our relationship with each of these five partners was over 10 years, and in the case of Sam’s Club, 28 years.


2021 Partner Agreements:
Program extensions:			• TJX Companies

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, Pets Best as well as partners such as Walgreens. Health & Wellness accounted for $2.3 billion, or 15%, of our total interest and fees on loans for the year ended December 31, 2021.

We offer customers a CareCredit-branded private label credit card that may be used across our network of CareCredit providers and our CareCredit Dual Card offering, access to installment loans in select providers, our Walgreens private label and dual card, along with complementary products such as Pets Best pet insurance.

Health & Wellness Partners

The vast majority of our partners are individual and small groups of independent healthcare providers, which includes networks of healthcare practitioners that provide elective and other procedures that generally are not fully covered by insurance. The remainder are primarily national and regional healthcare providers, such as Aspen Dental and Mars Petcare and health-focused retailers, such as Rite Aid and Walgreens. In addition, we also have over 150 relationships with professional and other associations (including the American Dental Association and the American Veterinary Medical Association), manufacturers and buying groups, which endorse and promote our credit products to their members.

At December 31, 2021, we had a network of Health & Wellness providers and health-focused retailers that collectively have over 258,000 locations. Excluding our program agreement with Walgreens, no single Health & Wellness partner accounted for more than 0.2% of our total interest and fees on loans for the year ended December 31, 2021. Dental providers accounted for 56% of Health & Wellness interest and fees on loans for the year ended December 31, 2021.

During 2021 over 195,000 locations either processed a CareCredit application or made a sale on a CareCredit credit card and our CareCredit provider locator averaged over 1.5 million searches per month during the year ended December 31, 2021.


2021 Partner Agreements:
New partnerships:	• Emory Healthcare	• Southern Veterinary Partners
	• Mercy Health	• Sycle
	• Ochsner Health	• Thrive Pet Healthcare
	• Prime Health
Extensions:	• Heartland Dental	• Rite Aid
	• LCA Vision

During the year ended December 31, 2021 we also launched our new program agreement with Walgreens to become the issuer of the first co-branded credit card program for a national health retailer in the United States. Additionally, we acquired Allegro Credit to complement our product capabilities and increase our presence in the audiology market and also made our CareCredit patient financing app available in the Epic App Orchard, further expanding the availability of CareCredit to healthcare organizations using Epic.

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. We create customized credit programs for national and regional retailers, manufacturers, and industry associations. Credit extended in this platform, other than our apparel and sporting goods retail partners, is primarily promotional financing. With our large retail partners, we continue to drive penetration and everyday use through strong partner alignment, competitive value propositions, and embedding our products in the digital experience. Lifestyle accounted for $744 million, or 5%, of our total interest and fees on loans for the year ended December 31, 2021.

Lifestyle Partners

Our Lifestyle sales platform partners includes a wide range of key retailers in the apparel, specialty retail, outdoor, music and luxury industry, such as American Eagle, Dick's Sporting Goods, Guitar Center, Polaris and Pandora.

At December 31, 2021, the length of our relationship with each of our five largest partners was over 5 years, and in the case of American Eagle, 25 years.


2021 Partner Agreements:
New partnerships:	• Family Farm & Home	• JCB
Program extensions:	• American Eagle	• Sutherlands
	• Daniels	• Tacony Corporation
	• Husqvarna	• The Container Store
	• Ricoma	• Vanderhall Motor Works

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 expiration date and certain programs that were previously terminated, which are not managed within the five sales platforms discussed above, and primarily includes amounts associated with our program agreements with Gap Inc. and BP which are 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 Partner Agreements

____________________________________________________________________________________________

Revenue

Our revenue we earn from our agreements with our partners primarily consists of interest and fees on our loan receivables, and in our program agreements that contain promotional financing, includes “merchant discounts,” which are fees paid to us by our partners in almost all cases to compensate us for all or part of the foregone interest income associated with promotional financing. We offer promotional financing across all five of our sales platforms.

The types of promotional financing we offer includes deferred interest (interest accrues during a promotional period and becomes payable if the full purchase amount is not paid off during the promotional period), no interest (no interest on a promotional purchase) and reduced interest (interest is assessed monthly at a promotional interest rate during the promotional period). As a result, during the promotional period we do not generate interest income or generate it at a lower rate, although we continue to generate fee income relating to late fees on required minimum payments. For these promotional financing offerings, we generally partner with sellers of “big-ticket” products or services or large basket transactions (generally priced from $500 to $25,000+) to consumers where our financing products and industry expertise provide strong incremental value to our partners and their customers. In addition to our revolving product we also offer secured installment loans for the big ticket items primarily in our Outdoor and Powersport industries. We also promote our programs to sellers through direct marketing activities such as industry trade publications, trade shows and sales efforts by dedicated internal and external sales teams, leveraging our existing partner network or through endorsements through manufacturers and industry associations. Our broad array of point-of-sale technologies and quick enrollment process allow us to quickly and effectively integrate new partners.

Our five largest programs based upon interest and fees on loans for the year ended December 31, 2021, excluding the Gap Inc. program, were Amazon, JCPenney, Lowe’s, PayPal and Sam’s Club. These programs accounted in aggregate for 50% of our total interest and fees on loans for the year ended December 31, 2021, and 51% of loan receivables at December 31, 2021. Our programs with Lowe's and PayPal, which includes our Venmo program, each accounted for more than 10% of our total interest and fees on loans for the year ended December 31, 2021. The length of our relationship with each of our five largest partners is over 14 years, and in the case of Lowe's, 42 years. The current expiration dates for these agreements range from 2026 through 2030.

In August 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.

Other income related to our program agreements primarily consists of interchange fees earned when our Dual Card or general purpose co-branded cards are used outside of our partners’ sales channels and fees paid to us by customers who purchase our debt cancellation products, less costs incurred related to partner loyalty program. In our Health & Wellness sales platform, Other income also includes commission fees earned by Pets Best.

Program Agreements

Our private label credit cards, Dual Cards and co-branded credit card programs for our retail and digital partners are typically governed by program agreements that are each negotiated separately with our partners. Although the terms of the agreements are partner-specific, and may be amended from time to time, under a typical program agreement, our partner agrees to support and promote the program to its customers, but we control credit criteria and issue products to customers who qualify under those criteria. We own the underlying accounts and all loan receivables generated under the program from the time of origination. Other key provisions in our program agreements include:

Term

Our program agreements typically have contract terms ranging from approximately three to ten years. Many program agreements have renewal clauses that provide for automatic renewal for one or more years until terminated by us or our partner. We typically seek to renew the program agreements well in advance of their termination dates. Some program agreements are subject to termination prior to the scheduled termination date by us or our partner for various reasons. See Termination below for additional information.

Exclusivity

Our program agreements are typically exclusive for the products we offer and limit our partners’ ability to originate or promote other private label or co-branded credit cards during the term of the agreement. The terms of our program agreements with national and regional retailers and manufacturers are typically similar to the terms of our program agreements in that we are the exclusive provider of financing for the products we offer, or in the case of some of our programs, may allow to have several primary lenders. Some program agreements, however, allow the merchant to use a second source lender after an application has been submitted to us and declined.

Retailer Share Arrangements

Most of our program agreements with large retail and certain other partners contain retailer share arrangements that provide for payments to our partner if the economic performance of the program exceeds a contractually-defined threshold. Economic performance for the purposes of these arrangements is typically measured based on agreed upon program revenues (including interest income and certain other income) less agreed upon program expenses (including interest expense, provision for credit losses, retailer payments and operating expenses). We may also provide other economic benefits to our partners such as royalties on purchase volume or payments for new accounts, in some cases instead of retailer share arrangements (for example, on our co-branded credit cards). All of these arrangements align our interests and provide an additional incentive to our partners to promote our credit products.

Certain program agreements set forth the program’s economic terms, including the merchant discount applicable to each promotional finance offering. We typically do not pay fees to these partners pursuant to any retailer share arrangements, but in some cases we pay a sign-up fee to a partner or provide volume-based rebates on the merchant discount paid by the partner.

Other Economic Terms

In addition to the retailer share arrangements, the program agreements typically provide that the parties will develop a marketing plan to support the program, and they set the terms by which a joint marketing budget is funded, the basic terms of the rewards program linked to the use of our product (such as opportunities to receive double rewards points for purchases made on a product), and the allocation of costs related to the rewards program.

Termination

The program agreements set forth the circumstances in which a party may terminate the agreement prior to expiration. Our program agreements generally permit us and our partner to terminate the agreement prior to its scheduled termination date for various reasons, including if the other party materially breaches its obligations. Some program agreements also permit our partner to terminate the program if we fail to meet certain service levels or change certain key cardholder terms or our credit criteria, we fail to achieve certain approval rate targets with respect to approvals of new customers, we elect not to increase the program size when the outstanding loan receivables under the program reach certain thresholds, we are not adequately capitalized, certain force majeure events occur or certain changes in our ownership occur. Certain program agreements are also subject to early termination by a party if the other party has a material adverse change in its financial condition. Historically, these rights have not typically been triggered or exercised. Some of our program agreements provide that, upon termination or expiration, our partner may purchase or designate a third party to purchase the accounts and loan receivables generated with respect to its program at fair market value or a stated price, including all related customer data.

Buying Groups, Manufacturers and Industry Associations

The programs we have established with buying groups, manufacturers and industry associations, such as the Home Furnishings Association, Jewelers of America, Kawasaki, Polaris and Nationwide Marketing Group, are governed by program agreements under which we make our credit products available to their respective members or dealers. Under the terms of the program agreements, manufacturers and industry associations generally agree to support and promote the respective programs. These arrangements may include sign-up fees and volume-based incentives paid by us to the groups and their members but these agreements generally do not require the members or dealers to offer our products to their customers. Under the terms of the program agreements, buying groups, manufacturers and industry associations generally agree to support and promote the respective programs.

Synchrony-Branded Networks

Our Synchrony-branded networks are focused on specific industries, where we create either company-branded or company and partner-branded private label credit cards that are usable across all participating locations within the industry-specific network. For example, our Synchrony Car Care network, comprised of merchants selling automotive parts, repair services and tires, covers over 1,000,000 locations across the United States, and cards issued may be dual branded with Synchrony Car Care and partners such as Chevron, Citgo, Napa, P66, Pep Boys or Summit Racing. Under the terms of these networks, we establish merchant discounts applicable to each financing offer. In addition, we also earn interchange fees through credit card transactions outside of the program network. The Synchrony Car Care network allows for expanded use outside of the program network at certain related merchants, such as gas stations. Similarly, the Synchrony HOME credit card is accepted at hundreds of thousands of home-related retail locations nationwide, including both partner locations and retailers outside of our program network. See Healthcare Provider Agreements for a discussion of our CareCredit branded network.

Dealer Agreements

For the programs we have established with manufacturers, buying groups, industry associations, industry specific programs and Synchrony-branded networks described above, we enter into individual agreements with the merchants and dealers that offer our credit products under these programs. These agreements generally are not exclusive and some parties who offer our financing products also offer financing from our competitors. Our agreements generally continue until terminated by either party, with termination typically available to either party at will upon 15 days’ written notice. Our dealer agreements set forth the economic terms associated with the program, including the fees charged to dealers to offer promotional financing, and in some cases, allow us to periodically change the fees we charge.

Healthcare Provider Agreements

We enter into provider agreements with individual healthcare providers who become part of our CareCredit network. These provider agreements are not exclusive and typically may be terminated at will upon 15 days’ notice. Multi-year agreements are in place for larger multi-location relationships across all markets. There are typically no retailer share arrangements with individual healthcare providers, national and regional healthcare providers and health-focused retailers in Health & Wellness.

We screen potential healthcare providers using a variety of criteria, including whether the potential provider specializes in one of our approved specialties, carries the appropriate licensing and certifications, and meets our underwriting criteria. We also screen potential partners for reputational issues. We work with professional and other associations, manufacturers, buying groups, industry associations and healthcare consultants to educate their constituents about the products and services we offer. We also approach individual healthcare service providers through direct mail, advertising, and at trade shows.

We believe our ability to attract new partners is aided by our CareCredit customer satisfaction rate, which our research in 2021 showed is 89%.

Our Customers

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Acquiring and Marketing to Our Customers

We work directly with our partners and providers to seamlessly integrate our product offerings through their distribution networks, communication channels and customer interactions to market to their existing and potential customers. We believe our presence at partners’ points of sale (both physical (in-store) and digital (online and mobile)), enables incremental purchases at our partners and providers, giving them greater conversion rates and higher overall sales. This dynamic also enables us to acquire new customer accounts at a discount compared to the traditional methods of acquiring new credit card customers.

To acquire new customers, we collaborate and deeply integrate with our partners and providers leveraging our marketing expertise to create programs promoting our products to creditworthy customers. Frequently, our partners and providers market the availability of credit as part of the advertising for their goods and services. Our marketing programs include marketing offers (e.g., 10% off the customer’s first purchase) and consumer communications delivered through a variety of channels, including in-store signage, online advertising, retailer website placement, associate communication, emails, text messages, direct mail campaigns, advertising circulars, and outside marketing via television, radio, print, digital marketing (search engine optimization, paid search and personalization), and product education. We also employ our proprietary Quickscreen acquisition method to make targeted pre-approved credit offers at the point-of-sale. Our Quickscreen technology allows us to process customer information obtained from our partners through our risk models such that when these customers seek to make payment for goods and services at our partners' points-of-sale, we can offer them credit instantly, if appropriate. Based on our experience, due to the personalized and immediate nature of the offer, Quickscreen significantly outperforms traditional direct-to-consumer channels, such as direct mail or email, in response rate and dollar spending.

Our marketing teams have expertise and experience in media strategy and planning and understand the best opportunities to reach and engage consumers, driving qualified traffic to apply efficiently, and enabling reach, new customer, and sales conversions. These capabilities also help to drive acquisitions, product usage and value proposition reinforcement.

After a customer obtains one of our products, our marketing programs encourage ongoing card usage by communicating the benefits of our products’ value propositions or deepening the relationship with the customer. Examples of such programs include promotional financing offers, cardholder events, product and partner discounts, product upgrades, dollar-off certificates, account holder sales, reward points and offers, new product announcements and previews, and other specific partner value offerings. These programs are executed through our partners’ and our own (direct to consumer) distribution channels. These activities targeted to existing customers have yielded high levels of re-use of our credit products. For example, during the year ended December 31, 2021, 58% of purchase volume across our CareCredit network, resulted from repeat use at one or more providers.

Loyalty Programs

We operate loyalty programs designed to generate incremental purchase volume per customer, while reinforcing the value of the card to the customer and strengthening customer loyalty. Many of the credit rewards loyalty programs we manage provide rewards points, which are redeemable for a variety of products or awards, or merchandise discounts earned by achieving a pre-set spending level on their private label credit card, Dual Card or general purpose co-branded credit card. Other programs include statement credit or cash back rewards. The rewards can be mailed to the cardholder, accessed digitally or may be immediately redeemable at the partner’s store. We continue to support and integrate into our partners’ loyalty programs which are offered to customers who utilize non-credit payment types such as cash, debit or check. These multi-tender loyalty programs allow our partners to market to an expanded customer base and allow us access to additional prospective cardholders.

Commercial Customers

In addition to our efforts to acquire consumer cardholders, we continue to focus on acquiring small to mid-sized commercial customers. We offer these customers private label credit cards and Dual Cards that are similar to our consumer offerings and our approach to acquiring these customers is consistent with our consumer strategies. We are also continuing to focus on marketing our commercial pay-in-full accounts receivable product that supports a wide range of business customers.

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 December 31, 2021.


			Promotional Offer
Credit Product	Standard Terms Only		Deferred Interest		Other Promotional		Total
Credit cards	58.1	%	20.7	%	16.1	%	94.9	%
Commercial credit products	1.7		—		—		1.7
Consumer installment loans	0.1		0.1		3.2		3.4
Other	—		—		—		—
Total	59.9	%	20.8	%	19.3	%	100.0	%

Credit Cards

Our credit card products are loans we extend through open-ended revolving credit card accounts. We 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 a private label credit card typically is extended either on standard terms only, which means accounts are assessed periodic interest charges using an agreed non-promotional fixed and/or variable interest rate, or pursuant to a promotional financing offer, involving deferred interest, no interest or reduced interest during a set promotional period. Promotional periods typically range between six and 60 months, but we may agree to longer terms with the partner. In almost all cases, we receive a merchant discount from our partners to compensate us for all or part of the foregone interest income associated with promotional financing. The terms of these promotions vary by partner, but generally the longer the deferred interest, reduced interest or interest-free period, the greater the partner’s merchant discount. Some offers permit customers to pay for a purchase in equal monthly payments with no interest or at a reduced interest rate, rather than deferring or delaying interest charges. For our deferred interest products, approximately 80% of customer transactions are typically paid off before interest is assessed. In Health & Wellness, standard rate financing generally applies to charges under $200.

We typically do not charge interchange or other fees to our partners when a customer uses a private label credit card to purchase our partners’ goods and services through our payment system.

Most of our private label credit card business is in the United States. For some of our partners who have locations in Canada, we also support the issuance and acceptance of private label credit cards at their locations in Canada and from customers in Canada.

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 currently issue Dual Cards for use on the MasterCard and Visa networks and we have the potential capability to issue Dual Cards for use on the American Express and Discover networks.

We hold two U.S. patents relating to the process by which our Dual Cards function as a private label credit card when used to make purchases from our partners and function as a general purpose credit card when used on the systems of other credit card associations.

We also offer general purpose co-branded credit cards that do not function as private label credit cards, as well as, 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. Dual Cards and general purpose co-branded credit cards are offered across all of our sales platforms. At December 31, 2021, we offered either Dual Cards or general purpose co-branded credit cards through 21 credit partners, of which the majority are Dual Cards, as well as our CareCredit Dual Card. We intend to continue to increase the number of partner programs that offer Dual Cards or general purpose co-branded credit cards and seek to increase the portion of our loan receivables attributable to these products. Consumer Dual Cards and Co-branded cards totaled 25% of our total loan receivables portfolio, including held for sale at December 31, 2021.

Charges using a Dual Card or general purpose co-branded credit card generate interchange income for us in connection with purchases made by cardholders other than in-store or online from that partner.

We currently do not issue Dual Cards or general purpose co-branded credit cards in Canada.

Terms and Conditions

As a general matter, the financial terms and conditions governing our credit card products vary by program and product type and change over time, although we seek to standardize the non-financial provisions consistently across all products. The terms and conditions of our credit card products are governed by a cardholder agreement and applicable laws and regulations.

We assign each card account a credit limit when the account is initially opened. Thereafter, we may increase or decrease individual credit limits from time to time, at our discretion, based primarily on our evaluation of the customer’s creditworthiness and ability to pay.

For the vast majority of accounts, periodic interest charges are calculated using the daily balance method, which results in daily compounding of periodic interest charges, subject to, at times, a grace period on new purchases. Cash advances are not subject to a grace period, and some credit card programs do not provide a grace period for promotional purchases. In addition to periodic interest charges, we may impose other charges and fees on credit card accounts, including, as applicable and provided in the cardholder agreement, cash advance transaction fees and late fees where a customer has not paid at least the minimum payment due by the required due date.

Typically, each customer with an outstanding debit balance on his or her credit card account must make a minimum payment each month. A customer may pay the total amount due at any time without penalty. We also may enter into arrangements with delinquent customers to extend or otherwise change payment schedules and to waive interest charges and/or fees.

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.

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 (such as our SetPay Pay in 4 product for short-term loans). Installment loans are closed-end credit accounts where the customer pays down the outstanding balance in installments. The terms of our installment loans are governed by customer agreements and applicable laws and regulations.

Installment loans are generally assessed periodic finance charges using fixed interest rates. In addition to periodic finance charges, we may impose other charges and fees on loan accounts, including late fees where a customer has not made the required payment by the required due date and returned payment fees.

Debt Cancellation Products

We offer a debt cancellation product to our credit card customers via online, mobile and, on a limited basis, direct mail. Customers who choose to purchase this product are charged a monthly fee based on their ending balance on each billing statement. In return, the Bank will cancel all or a portion of a customer’s credit card balance in the event of certain qualifying life events.

Growth Organization

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On June 1, 2021 we made organizational changes aimed to further align the company’s resources with its partners and evolving consumer expectations, while leveraging its innovation, data, expertise, and scale to deliver products and capabilities to market faster. We believe these changes will help Synchrony drive continued growth, execute its strategy more quickly and deliver the right capabilities to partners and consumers through one of the industry’s most complete, digitally enabled consumer financing and payments product suite.

Our Growth organization brings together Synchrony’s marketing, data analytics, customer experience, product development, and incubation teams into one cohesive group. The Growth organization works to bring data-driven, consumer-focused offerings to market across partner portfolios, with a focus on seamless customer experiences. This team elevates Synchrony’s focus on digital products and capabilities, while driving commercialization strategies to proactively deliver for the company’s partners and consumers.

Products

Our Products team is focused on the development and delivery of new products and capabilities to enhance consumers' shopping journey and to anticipate the evolving needs of consumers and retailers. We work to ensure our products continuously meet the changing needs of our customers, partners and the competitive marketplace, while providing scalability of products across our sales platforms and partners.

The Product organization includes:

•An innovation team accountable for ideating and delivering scalable product and capability innovations that will produce a competitive advantage in the marketplace and provide opportunities for growth.

•Products and capability management to oversee the product lifecycle and prioritize ongoing enhancements to our suite of products and capabilities.

•Implementation of a product lifecycle approach to product management to ensure the most relevant products continue to be developed and prioritized.

In 2021 we also focused on expanding our product suite with our SetPay and SetPay Pay in 4 installment products. Our SetPay product for 3-84 month installment loans was enhanced with an entirely reimagined online servicing experience and are now building the ability for customers to access their revolving accounts and installment loans all in one place. We have also launched our SetPay Pay in 4 product for short-term loans, introducing an entirely digital experience that leverages all of our previous investments in our digital apply ("dApply") platform, as well as our investments in our credit underwriting platform.

Performance Marketing

The performance marketing organization brings expertise in media strategy and planning, channel innovation and execution, as well as in earned, paid and owned media. We work with our partners to understand the best opportunities to reach and engage consumers who are more likely to apply and use our financial products.

We are also well positioned to maximize our unique access to data and customer touchpoints to identify the strongest audiences for credit acquisition and utilization, and to analyze behaviors driving insights that fuel creative content and contextually relevant placements with platforms and publishers.

Recognizing organic search, content development, and personalized marketing are critical to online marketing strategy, we have built a team of experts who focus on working on our digital properties. We create a complete digital media strategy, using all channels to effectively drive qualified traffic and to bring prospects back to the site efficiently to apply. This team also offers support for our clients and partners to help drive increase in site usability, enhance brand awareness, and increase lead generation and sales conversions.

Digital and Mobile Capabilities

We remain focused on investing in our digital and mobile capabilities, bringing to market new features, channels and experiences for our customers and enhancing our existing digital design and user experience. Our approach continues to be focused on creating an exceptional digital experience through all aspects of the customer's journey, whether in-store or online. In 2021, our investments focused on continuing to launch new digital features to enhance the customer experience, expanding our product suite to offer more choice to our customers, and developing new distribution channels to make it easier for our partners and customers to leverage our capabilities. In 2021, digital applications represented approximately 55% of our consumer revolving applications received, demonstrating the continued shift in consumer trends towards digital experiences.

In 2021 we launched our new cardholder notifications and alerts platform across many of our largest portfolios. This new platform offers customers a broad suite of account notifications across every aspect of the credit lifecycle, from notifications that a new card has shipped to instant transaction alerts, all enhanced with enriched merchant data. In addition to text and email alerts, we are able to deliver these notifications and alerts directly within our partner’s iOS and Android apps by leveraging our patented SyPI platform, continuing to enhance the customer’s experience within our partner’s brands.

With the launch of the myWalgreens Credit Card program, we again displayed our focus on creating an exceptional digital experience by bringing together many of our newest digital capabilities. From leveraging our Direct to Device APIs and our new prequalification capability to bring a seamless digital apply experience at the point of sale, to deploying the capability to instantly load tokenized virtual cards to the customer’s Walgreen’s profile. In addition, our investments in contactless capabilities have continued to expand with the rollout of our digital card and activation via QR code. Leveraging our SyPI platform, we are now able to allow customers to provision their account to wallets such as Apple Pay directly from the Walgreens and other client apps. Taken together, these investments help create a holistic and seamless digital experience for the customer.

In addition, we have continued to introduce new distribution channels to make it easy for our partners to leverage our products, such as our app integrations with Epic App Orchard to enable health care providers to offer our CareCredit product, and our partnership with Fiserv to enable Synchrony products and capabilities via the Clover App Market. These digital capabilities offer a range of choices to our partners both in the products available to offer to customers, and in the flexibility of easy integration options.

Data Analytics

As our products, partnerships, and networks come together, the ultimate benefit is the ability to align the customers’ and Synchrony’s needs across our over 70 million active accounts. Through each step of the customer journey – even before acquisition – our customers expect personalized products, experiences, messaging, and service. These are all enabled through continuous comprehensive data analytics. Synchrony gathers thousands of customer data points curated through customer interactions with Synchrony, our partners, and third-party data providers. Through the combination of effective data management, curation of data products for internal use, performance tracking and measurement, and development of decision signals leveraging machine learning algorithms and other data science methods, our over 200 business analysts and data scientists support decision making throughout the business.

Our analytics teams help us expand and optimize customer relationships through the building of targeting tools and the deployment of detailed test-and-learn tracking of omni-channel marketing campaigns. This closed loop learning process uses a set of analytics tools and machine learning algorithms to read and react to the customer’s response to these treatments. This learning can be applied to decisions around ad placements, creatives, visuals, messaging, and offers to relevant customer segments. This example is repeated thousands of times a month across digital and non-digital use cases to constantly maximize campaign response, customer acquisition, customer share of wallet, and program profitability.

In addition, our understanding of our Dual Card and general purpose co-branded credit card programs are further enhanced by the collection and analysis of data on customers' spending patterns (merchant category code, online spend, etc.) at other retailers. These additional data help drive incremental volume for our programs while maximizing return on investment.

Consumer Banking

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Through the Bank, we offer our customers a range of FDIC-insured deposit products. The Bank also takes brokered deposits through third-party securities brokerage firms that offer our FDIC-insured deposit products to their customers. At December 31, 2021, we had $62.3 billion in deposits, $50.1 billion of which were direct deposits and $12.2 billion of which were brokered deposits. At December 31, 2021, deposits represented 81% of our total funding sources. During 2021, retail deposits were received from approximately 450,000 customers that had a total of approximately 800,000 accounts. Retail customers accounted for substantially all of our direct deposits at December 31, 2021. The Bank had a 82% retention rate on certificates of deposit balances up for renewal for the year ended December 31, 2021. FDIC insurance is provided for our deposit products up to applicable limits.

We have 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. Our online platform is highly scalable allowing us to expand without having to rely on a traditional “brick and mortar” branch network. We continue to focus on growing our direct banking operations and believe we are well-positioned to continue to benefit from the consumer-driven shift from branch banking to direct banking. According to the 2021 American Bankers Association survey, approximately 80% of customers primarily use direct channels (internet, mail, phone and mobile) to manage their bank accounts.

During 2021 we continued to make investments in our servicing and digital platforms to expand features available for self-service and improve the user experience including allowing digital applications for the Synchrony Mastercard product. In addition, the Bank entered into an affinity deposit arrangement with PayPal in which the Bank will be offering PayPal-branded savings accounts through PayPal’s mobile application and website.

Our deposit products include certificates of deposit, IRAs, money market accounts and savings accounts. We market our deposit products through multiple channels including digital and print. Customers can apply for, fund, and service their deposit accounts online, mobile or via phone. We have dedicated banking representatives within our call centers to service deposit accounts. Fiserv, Inc. (“Fiserv”) provides the core banking platform for our online retail deposits including a customer-facing account opening and servicing platform.

To attract new deposits and retain existing ones, we intend to introduce new deposit products, enhancements to our existing products, and deliver new capabilities. This may include the introduction of checking accounts, overdraft protection lines of credit, bill payment and person-to-person payment features, affinity relationships, and Synchrony-branded debit cards. Our focus on deposit-taking and related branding efforts will also enable us to offer other branded direct-banking products more efficiently in the future.

We seek to differentiate our deposit product offerings from our competitors on the basis of brand, reputation, convenience, customer service and value. Our deposit products emphasize reliability, trust, security, convenience and attractive rates. We offer rewards to customers based on their tenure or balance amounts, including reduced fees, travel offers and concierge telephone support.

Credit Risk Management

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Credit risk management is a critical component of our management and growth strategy. Credit risk refers to the risk of loss arising from customer default when customers are unable or unwilling to meet their financial obligations to us. Our credit risk arising from credit products is generally highly diversified across approximately 136 million open accounts at December 31, 2021, without significant individual exposures. We manage credit risk primarily according to customer segments and product types.

We have developed proprietary credit tools which we call Synchrony PRISM. Through Synchrony PRISM we leverage a broad spectrum of data to yield powerful, proprietary insights to enable a more holistic view of our applications and customers.

Customer Account Acquisition

We have developed programs to promote credit with each of our partners and apply a consistent underwriting approach using our Synchrony PRISM tools that have varying results across our client portfolios based on underlying credit characteristics. We originate credit accounts through several different channels, including in-store, mail, internet, mobile, telephone and pre-approved solicitations. In addition, we have, and may in the future, acquire accounts that were originated by third parties in connection with establishing programs with new partners.

Regardless of the channel, in making the initial credit approval decision to open a credit card or other account or otherwise grant credit, we follow a series of credit risk and underwriting procedures. In most cases, when applications are made in-store or digitally, the process is fully automated and applicants are notified of our credit decision immediately. We generally obtain certain information provided by the applicant and obtain a credit bureau report from one of the major credit bureaus. The credit report information we obtain is electronically transmitted into industry scoring models and our proprietary scoring models developed to calculate a credit score. The credit risk management team determines in advance the qualifying credit scores and initial credit line assignments for each portfolio and product type. We periodically analyze performance trends of accounts originated at different score levels as compared to projected performance and adjust the minimum score or the opening credit limit to manage credit risk.

We also apply additional application screens based on various inputs, including credit bureau information, alternative data, our previous experience with the customer and information provided by our partner, to help identify additional factors, such as potential fraud and prior bankruptcies, before qualifying the application for approval. We compare applicants’ names against the Specially Designated Nationals list maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), as well as screens that account for adherence to USA PATRIOT Act of 2001 (the “Patriot Act”) and Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”) requirements, including ability to pay requirements for our revolving products.

We also use pre-approved account solicitations for certain programs. Potential applicants are pre-screened using information provided by our partner or obtained from outside lists, and qualified individuals receive a pre-approved credit offer by mail or email.

Acquired Portfolio Evaluation

Our risk management team evaluates each portfolio that we acquire in connection with establishing programs with new partners to ensure the portfolio satisfies our credit risk guidelines. As part of this review, we receive data on the third-party accounts and loans, which allows us to assess the portfolio on the basis of certain core characteristics, such as historical performance of the assets and distributions of credit and loss information. In addition, we benchmark potential portfolio acquisitions against our existing programs to assess relative current and projected risks. Finally, our risk management team must approve the acquisition, taking into account the results of our risk assessment process. Once assets are migrated to our systems, our account management protocols will apply immediately as described below under “—Customer Account Management,” “—Credit Authorizations of Individual Transactions” and “—Collections.”

Customer Account Management

We regularly assess the credit risk exposure of our customer accounts. This ongoing assessment includes information relating to the customer’s performance with respect to their account with us, as well as information from credit bureaus relating to the customer’s broader credit performance. To monitor and control the quality of our loan portfolio (including the portion of the portfolio originated by third parties), we use behavioral scoring models that we have developed to score each active account on its monthly cycle date. Proprietary risk models, together with the credit scores obtained on each active account no less than quarterly, are an integral part of our credit decision-making process. Depending on the duration of the customer’s account, risk profile and other performance metrics, the account may be subject to a range of account actions, including limits on transaction authorization and increases or decreases in purchase and cash credit limits.

Credit Authorizations of Individual Transactions

Once an account has been opened, when a credit card is used to make a purchase in-store at one of our partners’ locations or online, point-of-sale terminals or online sites have an online connection with our credit authorization system, which allows for real-time updating of accounts. Each potential sales transaction is passed through a transaction authorization system, which considers a variety of behavior and risk factors to determine whether the transaction should be approved or declined, and whether a credit limit adjustment is warranted.

Fraud Investigation

We provide follow up and research with respect to different types of fraud such as fraud rings, new account fraud and transactional fraud. We have developed a proprietary fraud model to identify new account fraud and deployed tools that help identify transaction purchase behavior outside a customer’s established pattern. Our proprietary model is also complemented by externally sourced models and tools used across the industry to better identify fraud and protect our customers. We also are continuously implementing new and improved technologies to detect and prevent fraud.

Collections and Recovery

All monthly billing statements of accounts with past due amounts include a request for payment of these amounts. Collections personnel generally initiate contact with customers within 30 days after any portion of their balance becomes past due. The nature and the timing of the initial contact, typically a personal call, email, text message or letter, are determined by a review of the customer’s prior account activity and payment habits.

We re-evaluate our collection and recovery efforts and consider the implementation of other techniques, including internal collection activities, use of external vendors and the sale of debt to third-party buyers, as a customer becomes increasingly delinquent. We limit our exposure to delinquencies through controls within the transaction authorization processes, the imposition of credit limits and criteria-based account suspension and revocation processes. In certain situations, we may enter into arrangements to extend or otherwise change payment schedules, decrease interest rates and/or waive fees to aid customers experiencing financial difficulties in their efforts to become current on their obligations to us.

Customer Service

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Customer service is an important feature of our relationship with our partners. Our customers can contact us via phone, mail, email, eService and eChat. During the year ended December 31, 2021, we handled over 281 million inquiries. For certain programs, credit products and our deposit business, we assign dedicated toll-free customer service phone numbers. For other programs, customers access customer service through one general purpose toll-free customer service phone number.

We service all programs through our nine domestic geographic hubs and three off-shore call centers. We blend domestic and off-shore locations as an important part of our servicing strategy, to maintain service availability beyond normal work hours in the United States and to seek optimal costs. Customer service for cards issued to customers in Canada is supported through agents based in the United States.

Given the nature of our business and the high volume of calls, we maintain several centers of excellence to ensure the quality of our customer service across all of our sites. Examples of these centers of excellence include back office, quality assurance, customer experience, training, workforce and capacity planning, surveillance and process control.

Production Services

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Our production services organization oversees a number of services, including:

•payment processing (more than 600 million paper and electronic payments in 2021);

•embossing and mailing credit cards (more than 45 million cards in 2021);

•printing and mailing and eService delivery of credit card statements (more than 700 million paper and electronic statements in 2021); and

•other letters mailed or sent electronically (more than 95 million in 2021).

We utilize third-party providers for certain production services. Credit card statement printing, card embossing, letter production and mailing services for U.S. customers are provided through outsourced services with Fiserv. Fiserv also produces our statements and other mailings for deposit customers. We also utilize a third-party provider for our paper payment processing services. While these services are outsourced, we monitor and maintain oversight of these other activities.

Card production embossing, statement printing and mailing services related to cards issued to customers in Canada are outsourced to Canadian suppliers.

Technology and Data Security

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Products and Services

We leverage information technology to deliver products and services that meet the needs of our customers and partners and enables us to operate our business efficiently. The integration of our technology with our partners is at the core of our value proposition, enabling, among other things, customers to “apply and buy” at the point of sale, and many of our partners to settle transactions directly with us without an interchange fee. A key part of our strategic focus is the continued development of innovative, efficient, flexible technology and operational platforms to support marketing, risk management, account acquisition and account management, customer service, and new product innovation and development. We believe that the continued investment in and development of these platforms is an important part of our efforts to increase our competitive capabilities, reduce costs, improve quality and provide faster, more flexible technology services. Therefore, we continuously review capabilities and develop or acquire systems, processes and competencies to meet our business needs.

As part of our continuous efforts to enhance our technological capabilities, we may either develop these capabilities internally or in partnership with third-party providers. Our internal approach involves deployment of cross-functional product teams, often in collaboration with our partners, focused on driving rapid delivery of in-house product innovation and development, and the commercialization of new products. In addition, at times we also partner with third-party providers to help us deliver systems and operational infrastructure based on strategies and, in some cases, architecture, designed by us. We leverage Fiserv for our credit card transaction processing and production and our retail banking operations.

Data Security

The protection and security of financial and personal information of consumers is one of our highest priorities. We have implemented a comprehensive information security program that includes administrative, technical and physical safeguards that we believe provide an appropriate level of protection to maintain the confidentiality, integrity, and availability of our Company's and our customers’ information. This includes protecting against any known or evolving threats to the security or integrity of customer records and information, and against unauthorized access to or use of customer records or information.

Our information security program is continuously adapting to an evolving landscape of emerging threats and available technology. Through data gathering and evaluation of emerging threats from internal and external incidents and technology investments, security controls are adjusted on a continuous basis. We work directly with our partners on an ongoing basis by sharing cyber intelligence and facilitating awareness and communications of events outside of the Company.

We have developed a security strategy and implemented multiple layers of controls embedded throughout our technology environment that establish multiple control points between threats and our assets. Our security program is designed to provide oversight of third parties who store, process or have access to sensitive data, and we require the same level of protection from such third-party service providers. We evaluate the effectiveness of the key security controls through ongoing assessment and measurement.

In addition, we identify risks that may threaten customer information and utilize both internal and external resources to perform a variety of vulnerability and penetration testing on the platforms, systems and applications used to provide our products and services. We employ backup and disaster recovery procedures for all the systems that are used for storing, processing and transferring customer information, and we periodically test and validate our disaster recovery plans to validate our resilience capabilities. Further, we regularly utilize independent assessors to evaluate the appropriateness of our overall program. We are compliant with the Payment Card Industry (PCI) Data Security Standard (DSS) and Gramm-Leach-Bliley Act (GLBA).

We have a program to comply with applicable privacy, information security, and data protection requirements imposed by federal, state, and foreign laws. However, if we experience a significant cybersecurity incident or our regulators deemed our information security controls to be inadequate, we could be subject to supervisory criticism or penalties, and/or suffer reputational harm.

See also “Risk Factors Relating to Our Business—Cyber-attacks or other security breaches could have a material adverse effect on our business.”

Intellectual Property

____________________________________________________________________________________________

We use a variety of methods, such as trademarks, patents, copyrights and trade secrets, to protect our intellectual property, including our brand, “Synchrony.” We also place appropriate restrictions on our proprietary information to control access and prevent unauthorized disclosures. Our brands are important assets, and we take steps to protect the value of these assets and our reputation.

Human Capital

____________________________________________________________________________________________

At Synchrony, people power our business, and our success depends, in large part, on our ability to recruit, develop, motivate and retain employees with the skills to execute our long-term strategy. In 2021, we significantly revised our approach to human capital management in response to the COVID-19 pandemic. We transformed how we work, how we support our people and how we connect and engage, with a focus on being nimble and agile. We have also changed our overall approach to getting work done by adopting a “hub” model that will enable employees across job roles and levels to work from home when they want (or full-time) and visit a hub — e.g. a co-working space, Synchrony office, university space or other gathering spots — when they need to meet face-to-face. Once the pandemic is over, physical hubs will be used as cultural and innovation centers by hosting events, collaboration days, town halls, agile sprints, networking and other important business activities, allowing us to retain the human, personal connection of a traditional workplace while providing employees greater flexibility.

At Synchrony, we are so proud of the many new benefits and programs that we have created for our employees. But we believe we are never done. It is why we will continue to listen to our employees and adapt to their needs. Through ongoing, multichannel communications such as all-employee town halls where questions are submitted to our CEO and other senior leaders or through more targeted pulse surveys of our employee base, their feedback is included in our decision-making process. Once a year, Synchrony partners with Great Place to Work® to conduct our annual employee engagement survey. The results help us better understand what our employees think we’re doing right and identify areas for positive change. 89% of Synchrony employee participated in our employee engagement survey globally and 93% of the participants responded, “Taking all things into account, I would say this is a great place to work”. 93% of participants also told us the new way of working is providing the flexibility they need.

At December 31, 2021 we had over 18,000 full-time employees. Our global workforce increased compared to the prior year as we have begun to emerge from the COVID-19 pandemic. At December 31, 2021, our global workforce was 59.4% female, 40.5% male and 0.1% that did not list gender. In the United States, ethnicity of our workforce was 53.2% White, 19.6% Black, 15.6% Hispanic, 6.8% Asian, 3.4% two or more races, 0.6% Native American, 0.1% Native Hawaiian or Pacific Islander and 0.7% that did not list ethnicity.

At Synchrony, diversity and inclusion are core to our corporate culture. We have over 10,000 employees participating in at least one of our eight Diversity Networks. In 2021, we embraced our responsibility to further integrate diversity and inclusion into our long-term business strategy. To drive progress over the long term, we treat diversity and inclusion as important business priorities, with (i) new board-approved governance rules, imperatives, and accountability mechanisms to measure results and (ii) a revised annual incentive program for 2021 that incorporated diversity factors when determining payouts. We also created a senior-level committee led by our President and Chief Executive Officer, Chief Diversity Officer, and others, charged with developing an enterprise-wide strategy, setting measurable goals, and providing progress reports to our board and employees across all areas of the business. We used data analytics to identify gaps in our hiring and promotion processes. As a result, we are putting more focus on the hiring, development, and progression of underrepresented minorities, with an emphasis on Black and Hispanic talent. Among other actions, we have tied leaders’ performance metrics to diversity factors, provided for diverse candidate slates for senior roles, and launched a new leadership development program designed to advance diverse employees.

At Synchrony, we are focused on supporting and responding to employees' needs. In 2021, we raised the minimum wage to $20 per hour for all hourly employees in the U.S. and Puerto Rico and conduct a regular market pay analysis. We continued providing total wellness benefits for all employees including generous time off and leave programs, diverse well-being coaches, financial counselors and fitness reimbursements. In 2020 and through 2021, we extended our emergency backup childcare benefits for up to 60 days (increased from 10 days). This includes enhanced childcare reimbursement where employees can use any caregiver.

Regulation

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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 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 Office of the Comptroller of the Currency of the U.S. Treasury (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. For a discussion of the specific regulations related to our business see “Regulation—Regulation Relating to Our Business” of this Form 10-K Report.

Competition

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Our industry continues to be highly competitive. We compete for relationships with partners in connection with retaining existing or establishing new consumer credit programs. Our primary competitors for partners include major financial institutions such as Alliance Data Systems, American Express, Capital One, JPMorgan Chase, Citibank, TD Bank and Wells Fargo, and to a lesser extent, financial technology companies and potential partners’ own in-house financing capabilities. We compete for partners on the basis of a number of factors, including program financial and other terms, underwriting capabilities, marketing expertise, service levels, product and service offerings (including incentive and loyalty programs), technological capabilities and integration, brand and reputation. In addition, some of our competitors for partners have a business model that allows for their partners to manage underwriting (e.g., new account approval), customer service and collections, and other core banking responsibilities that we retain.

We also compete for customer usage of our credit products. Consumer credit provided, and credit card payments made, using our cards constitute only a small percentage of overall consumer credit provided and credit card payments in the United States. Consumers have numerous financing and payment options available to them. As a form of payment, our products compete with cash, checks, debit cards, general purpose credit cards (Visa and MasterCard, American Express and Discover Card), various forms of consumer installment loans, other private-label card brands, and, to a certain extent, prepaid cards. In the future, we expect our products may face increased competitive pressure to the extent that our products are not, or do not continue to be, accepted in, or compatible with digital wallet technologies such as Apple Pay, Samsung Pay, Android Pay and other similar technologies. We may also face increased competition from current competitors or others who introduce or embrace disruptive technology that significantly changes the consumer credit and payment industry. We compete for customers and their usage of our deposit products, and to minimize transfers to competitors of our customers’ outstanding balances, based on a number of factors, including pricing (interest rates and fees), product offerings, credit limits, incentives (including loyalty programs) and customer service. Some of our competitors provide a broader selection of services, including home and automobile loans, debit cards and bank branch ATM access, which may position them better among customers who prefer to use a single financial institution to meet all of their financial needs. In addition, some of our competitors are substantially larger than we are, may have substantially greater resources than we do or may offer a broader range of products and services than we do. Moreover, some of our competitors, including new and emerging competitors in the digital and mobile payments space, are not subject to the same regulatory requirements or legislative scrutiny to which we are subject. Non-bank providers of pay-over-time solutions, such as Affirm, Afterpay and others, extend consumer credit-like offerings but do not face the same restrictions, such as capital requirements and other regulatory requirements, as banks which also could place us at a competitive disadvantage.

In our retail deposits business, we have acquisition and servicing capabilities similar to other direct-banking competitors. We compete for deposits with traditional banks, and in seeking to grow our direct-banking business, we compete with other banks that have direct-banking models similar to ours, such as Ally Financial, American Express, Barclays, Capital One 360, CIT, Citi, Citizens Bank, Discover and Marcus by Goldman Sachs. Competition among direct banks is intense because online banking provides customers the ability to quickly and easily deposit and withdraw funds and open and close accounts in favor of products and services offered by competitors.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. For a discussion and analysis of our financial condition and results of operations comparing 2020 vs. 2019, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020 (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.”

Results of Operations for the Three Years Ended December 31, 2021

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Key Earnings Metrics


Net earnings $ in millions						Net interest income $ in millions


Net interest margin % of average interest-earning assets						Efficiency Ratio “Other expense” as a % of “NII, after RSA” plus “Other income”

Growth Metrics


Purchase volume $ in billions						Loan receivables $ in billions


Average active accounts in millions						Interest and fees on loans $ in millions

Asset Quality Metrics


30+ days past due % of period-end loan receivables						Net charge-offs % of average loan receivables including held for sale


90+ days past due % of period-end loan receivables						Allowance for credit losses(1) % of period-end loan receivables

_____________________

(1)Allowance for credit losses reflects adoption of CECL on January 1, 2020, which included a $3.0 billion increase in reserves upon adoption.

Capital and Liquidity


Capital ratios Common equity Tier1 - Basel III						Liquidity Liquid assets and undrawn credit facilities $ in billions

Highlights for the Year Ended December 31, 2021

Below are highlights of our performance for the year ended December 31, 2021 compared to the year ended December 31, 2020, as applicable, except as otherwise noted.

•Net earnings increased 204.8% to $4.2 billion for the year ended December 31, 2021, primarily driven by lower provision for credit losses, partially offset by higher retailer share arrangements and lower net interest income. Net earnings included the impact of reserve reductions related to held for sale portfolios of $261 million after-tax.

•Loan receivables decreased 1.4% to $80.7 billion at December 31, 2021 compared to December 31, 2020, primarily driven by the reclassification of loan receivables to loan receivables held for sale. Loan receivables held for sale at December 31, 2021 were comprised of $3.9 billion and $0.5 billion of loan receivables associated with our Gap Inc. and BP portfolios, respectively. Excluding the impact of the reclassifications, loan receivables increased 4% reflecting strong purchase volume growth, largely offset by higher payment rates.

•Net interest income decreased 1.1% to $14.2 billion for the year ended December 31, 2021, primarily due to a decrease in interest and fees on loans of 4.5%, reflecting the impact of elevated payment rates and lower delinquencies during the period, partially offset by a decrease in interest expense primarily reflecting lower benchmark interest rates.

•Retailer share arrangements increased 24.2% to $4.5 billion for the year ended December 31, 2021, primarily due to the decrease in provision for credit losses.

•Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased 45 basis points to 2.62% at December 31, 2021 from 3.07% at December 31, 2020. Excluding amounts related to the held for sale portfolios from both periods, the decrease compared to the prior year was approximately 60 basis points. The net charge-off rate decreased 166 basis points to 2.92% for the year ended December 31, 2021.

•Provision for credit losses decreased by $4.6 billion, or 86.3%, for the year ended December 31, 2021, primarily driven by lower reserves, which included $345 million of reserve reductions related to the held for sale portfolios, and lower net charge-offs. Our allowance coverage ratio (allowance for credit losses as a percentage of period-end loan receivables) decreased to 10.76% at December 31, 2021, as compared to 12.54% at December 31, 2020.

•Other expense decreased by $92 million, or 2.3%, for the year ended December 31, 2021, primarily driven by lower operational losses, partially offset by higher employee costs.

•At December 31, 2021, deposits represented 81% of our total funding sources. Total deposits decreased 0.8% to $62.3 billion at December 31, 2021, compared to December 31, 2020.

•During the year ended December 31, 2021, we declared and paid cash dividends on our Series A 5.625% non-cumulative preferred stock of $56.24 per share, or $42 million.

•During the year ended December 31, 2021, we repurchased $2.9 billion of our outstanding common stock, and declared and paid cash dividends of $0.88 per common share, or $500 million. At December 31, 2021, we had $1.2 billion of remaining authorized share repurchase capacity under our existing share repurchase program. For more information, see “Capital—Dividend and Share Repurchases.”

•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

During the year ended December 31, 2021, we signed 36 agreements with new partners and renewed 38 program agreements which included the following:


Home & Auto:
New partnerships:	• Alarm.com	• Gardner White
	• BoxDrop
Program extensions:	• Abt Electronics	• Furniture Fair
	• American Signature Furniture	• Mitchell Gold Co.
	• Ashley HomeStores LTD	• Phillips 66
	• CITGO	• Sam Levitz Furniture
	• City Furniture	• WG&R Furniture


Digital:
Program extensions:			• ShopHQ


Diversified & Value:
Program extensions:			• TJX Companies


Health & Wellness:
New partnerships:	• Emory Healthcare	• Southern Veterinary Partners
	• Mercy Health	• Sycle
	• Ochsner Health	• Thrive Pet Healthcare
	• Prime Health
Extensions:	• Heartland Dental	• Rite Aid
	• LCA Vision


Lifestyle:
New partnerships:	• Family Farm & Home	• JCB
Program extensions:	• American Eagle	• Sutherlands
	• Daniels	• Tacony Corporation
	• Husqvarna	• The Container Store
	• Ricoma	• Vanderhall Motor Works

•In our Health & Wellness sales platform, we also launched our Walgreens credit card and also made our CareCredit patient financing app available in the Epic App Orchard, further expanding the availability of CareCredit to healthcare organizations using Epic.

•We expanded our strategic relationship with PayPal in 2021 and entered into an affinity deposit arrangement with PayPal in which Synchrony will be offering PayPal-branded savings accounts through PayPal’s mobile application and website.

•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.

•In August 2021, we entered into an agreement to sell loan receivables associated with our program agreement with Gap Inc. In addition, in December 2021, we entered into an agreement to sell loan receivables associated with our program agreement with BP. We expect to complete the sale of both portfolios, subject to customary closing conditions, in the second quarter of 2022 and expect to recognize a gain on sale of the Gap Inc. portfolio upon disposition.

Other Financial and Statistical Data

The following table sets forth certain other financial and statistical data for the periods indicated.


At and for the years ended December 31 ($ in millions)	2021			2020			2019
Financial Position Data (Average):
Loan receivables, including held for sale	$	78,928		$	80,138		$	88,649
Total assets	$	94,114		$	97,738		$	105,677
Deposits	$	61,302		$	64,061		$	65,036
Borrowings	$	14,421		$	16,846		$	21,251
Total equity	$	13,723		$	12,333		$	14,917
Selected Performance Metrics:
Purchase volume(1)(2)	$	165,854		$	139,084		$	149,411
Home & Auto	$	42,848		$	37,422		$	37,333
Digital	$	44,701		$	35,876		$	29,505
Diversified & Value	$	46,998		$	37,985		$	43,937
Health & Wellness	$	11,715		$	10,025		$	11,091
Lifestyle	$	5,319		$	4,933		$	4,787
Corp, Other	$	14,273		$	12,843		$	22,758
Average active accounts (in thousands)(2)(3)	67,334			67,131			75,721
Net interest margin(4)	14.74		%	14.29		%	15.78		%
Net charge-offs	$	2,304		$	3,668		$	5,005
Net charge-offs as a % of average loan receivables, including held for sale	2.92		%	4.58		%	5.65		%
Allowance coverage ratio(5)	10.76		%	12.54		%	6.42		%
Return on assets(6)	4.5		%	1.4		%	3.5		%
Return on equity(7)	30.8		%	11.2		%	25.1		%
Equity to assets(8)	14.58		%	12.62		%	14.12		%
Other expense as a % of average loan receivables, including held for sale	5.02		%	5.06		%	4.79		%
Efficiency ratio(9)	38.9		%	36.3		%	31.9		%
Effective income tax rate	23.3		%	22.9		%	23.3		%
Selected Period End Data:
Loan receivables	$	80,740		$	81,867		$	87,215
Allowance for credit losses	$	8,688		$	10,265		$	5,602
30+ days past due as a % of period-end loan receivables(10)	2.62		%	3.07		%	4.44		%
90+ days past due as a % of period-end loan receivables(10)	1.17		%	1.40		%	2.15		%
Total active accounts (in thousands)(2)(3)	72,420			68,540			75,471

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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 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.

Average Balance Sheet

The following table sets forth information for the periods indicated regarding average balance sheet data, which are used in the discussion of interest income, interest expense and net interest income that follows.


	2021						2020						2019
Years ended December 31 ($ in millions)	Average Balance		Interest Income / Expense		Average Yield / Rate(1)		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)	$	11,673	$	15	0.13	%	$	13,301	$	53	0.40	%		$	12,320	$	258	2.09	%
Securities available for sale	5,975		28		0.47	%	7,367		64		0.87	%		5,464		127		2.32	%

Loan receivables, including held for sale(3):
Credit cards	75,052		14,880		19.83	%	77,115		15,672		20.32	%		85,334		18,384		21.54	%
Consumer installment loans	2,460		241		9.80	%	1,733		168		9.69	%		1,963		182		9.27	%
Commercial credit products	1,359		103		7.58	%	1,231		108		8.77	%		1,306		137		10.49	%
Other	57		4		7.02	%	59		2		3.39	%		46		2		4.35	%
Total loan receivables, including held for sale	78,928		15,228		19.29	%	80,138		15,950		19.90	%		88,649		18,705		21.10	%
Total interest-earning assets	96,576		15,271		15.81	%	100,806		16,067		15.94	%		106,433		19,090		17.94	%
Non-interest-earning assets:
Cash and due from banks	1,597						1,488							1,327
Allowance for credit losses	(9,402)						(9,488)							(5,902)
Other assets	5,343						4,932							3,819
Total non-interest-earning assets	(2,462)						(3,068)							(756)
Total assets	$	94,114					$	97,738						$	105,677
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts	$	60,953	$	566	0.93	%	$	63,755	$	1,094	1.72	%		$	64,756	$	1,566	2.42	%
Borrowings of consolidated securitization entities	7,248		169		2.33	%	8,675		237		2.73	%		11,941		358		3.00	%

Senior unsecured notes	7,173		297		4.14	%	8,171		334		4.09	%		9,310		367		3.94	%

Total interest-bearing liabilities	75,374		1,032		1.37	%	80,601		1,665		2.07	%		86,007		2,291		2.66	%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts	349						306							280
Other liabilities	4,668						4,498							4,473
Total non-interest-bearing liabilities	5,017						4,804							4,753
Total liabilities	80,391						85,405							90,760
Equity
Total equity	13,723						12,333							14,917
Total liabilities and equity	$	94,114					$	97,738						$	105,677
Interest rate spread(4)					14.44	%					13.87	%						15.28	%
Net interest income			$	14,239					$	14,402						$	16,799
Net interest margin(5)					14.74	%					14.29	%						15.78	%

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(1)Average yields/rates are based on total interest income/expense over average balances.

(2)Includes average restricted cash balances of $459 million, $475 million and $754 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(3)Interest income on loan receivables includes fees on loans of $2.3 billion, $2.2 billion and $2.8 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

(4)Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.

(5)Net interest margin represents net interest income divided by average total interest-earning assets.

The following table sets forth the amount of changes in interest income and interest expense due to changes in average volume and average yield/rate. Variances due to changes in both average volume and average yield/rate have been allocated between the average volume and average yield/rate variances on a consistent basis based upon the respective percentage changes in average volume and average yield/rate.


	2021 vs. 2020						2020 vs. 2019
	Increase (decrease) due to change in:						Increase (decrease) due to change in:
($ in millions)	Average Volume		Average Yield / Rate		Net Change		Average Volume		Average Yield / Rate		Net Change
Interest-earning assets:
Interest-earning cash and equivalents	$	(6)	$	(32)	$	(38)	$	19	$	(224)	$	(205)
Securities available for sale	(11)		(25)		(36)		34		(97)		(63)
Loan receivables, including held for sale:
Credit cards	(416)		(376)		(792)		(1,708)		(1,004)		(2,712)
Consumer installment loans	71		2		73		(22)		8		(14)
Commercial credit products	11		(16)		(5)		(8)		(21)		(29)
Other	—		2		2		—		—		—
Total loan receivables, including held for sale	(334)		(388)		(722)		(1,738)		(1,017)		(2,755)
Change in interest income from total interest-earning assets	$	(351)	$	(445)	$	(796)	$	(1,685)	$	(1,338)	$	(3,023)

Interest-bearing liabilities:
Interest-bearing deposit accounts	$	(46)	$	(482)	$	(528)	$	(24)	$	(448)	$	(472)
Borrowings of consolidated securitization entities	(36)		(32)		(68)		(91)		(30)		(121)

Senior unsecured notes	(41)		4		(37)		(47)		14		(33)

Change in interest expense from total interest-bearing liabilities	(123)		(510)		(633)		(162)		(464)		(626)
Total change in net interest income	$	(228)	$	65	$	(163)	$	(1,523)	$	(874)	$	(2,397)

Business Trends and Conditions

We believe our business and results of operations will be impacted in the future by various trends and conditions, including the following:

•Growth in loan receivables and interest income. During 2021, accumulated savings by consumers resulting from economic stimulus, forbearance and lower discretionary spending, has led to elevated payment rates that were approximately 260 basis points higher than our five-year historical average. While we have experienced improvements in consumer purchase activity in 2021, the elevated payment rates contributed to a reduction in interest and fees and slower receivable growth in 2021. We expect purchase volume to continue to increase in 2022 as compared to the prior year, and also expect to see payment rates moderate over the course of 2022, which we expect will contribute to increases in both loan receivables and interest income for our ongoing program agreements. The amount of the increases however will be dependent on various factors. These factors include the timing and extent of slowing payment rates, as well as the nature of and duration for which any preventative or governmental measures are taken, including responses to increases in COVID-19 infections nationally or additional variants that may occur. In addition to the above, we anticipate conveyance of our Gap Inc. and BP portfolios to be completed in the second quarter of 2022, which will contribute to reductions in total interest and fees on loans when compared to 2021.

•Asset quality. During 2021, the effects of the COVID-19 pandemic have driven significant improvement in customer payment behavior such that our asset quality metrics have seen historic lows during 2021. Our over-30 day loan delinquencies as a percentage of period-end loan receivables decreased to 2.62% at December 31, 2021 from 3.07% at December 31, 2020. We anticipate that the elevated payment trend we have experienced in 2021 will begin to moderate in 2022, such that we expect to incur increases to both delinquencies and net charge-offs as compared to current levels. We have also experienced decreases to both our allowance for credit losses and provision for credit losses during the year ended December 31, 2021 primarily attributable to the elevated payment rate trends, and our allowance coverage ratio at December 31, 2021 was 10.76%. As the economic environment develops during 2022, we anticipate that our credit loss reserve builds and provision for credit losses will be higher than those experienced in 2021.

•Retailer share arrangement payments under our program agreements. Retailer share arrangements increased 24.2% to $4.5 billion for the year ended December 31, 2021, reflecting the decrease in provision for credit losses discussed above. We believe that the payments we make to our partners under our retailer share arrangements, in the aggregate, in 2022 are likely to decrease in absolute terms compared to the year ended December 31, 2021, primarily as a result of the expected credit trends discussed above, as well as the impact from the disposition of our held for sale portfolios. This decrease will be partially offset by growth of the programs for which we have retailer share arrangements. The magnitude of the decrease in retailer share arrangements will be dependent in part on the precise timing and extent of the anticipated trends in payment rates and asset quality discussed above. See Management’s Discussion and Analysis—Retailer Share Arrangements for additional information on these agreements.

•Extended duration of our credit card program agreements. Our credit card program agreements typically have contract terms ranging from approximately five to ten years, and the length of our relationship with each of our five largest partners is over 14 years, and in the case of Lowe's, 42 years. We expect to continue to benefit from these and our other ongoing programs on a long-term basis.

The current expiration dates of our program agreements with our five largest partners range from 2026 through 2030. In addition, a total of 20 of our 25 largest ongoing program agreements have an expiration date in 2025 or beyond, which represented in the aggregate 96% of our interest and fees on loans for the year ended December 31, 2021 and 93% of our loan receivables at December 31, 2021, attributable to our 25 largest ongoing programs.

•Growth in interchange revenues and loyalty program costs. We believe that as a result of the overall growth in Dual Card and general purpose co-branded credit card transactions occurring outside of our credit card partners’ locations, interchange revenues will increase in excess of the growth of our credit card loan receivables. The expected growth in these transactions is driven, in part, by both existing and new loyalty programs with our credit card partners, partially offset by the impact from the disposition of our held for sale portfolios. In addition, we continue to offer and add new loyalty programs for our private label credit cards, for which we typically do not receive interchange fees. The growth in these existing and new loyalty programs will result in an increase in costs associated with these programs. For the year ended December 31, 2021, our loyalty program costs were largely offset by our interchange revenues, although the increase in loyalty program costs exceeded the increase in interchange revenues. Overall, we expect these trends for our loyalty program costs and interchange revenues to continue in 2022. These changes have been contemplated in our program agreements with our partners and are a component of the calculation of our payments due under our retailer share arrangements.

•Capital and liquidity levels. We continue to expect to maintain sufficient capital and liquidity resources to support our daily operations, our business growth, and our credit ratings as well as regulatory and compliance requirements in a cost effective and prudent manner through expected and unexpected market environments. During the year ended December 31, 2021, we declared and paid dividends of $500 million and repurchased $2.9 billion of our outstanding common stock. We plan to continue to deploy capital through both dividends and share repurchases, subject to regulatory restrictions, as well as to support business growth. At December 31, 2021 we had $1.2 billion remaining in share repurchase authorization. We continue to expect to maintain capital ratios well in excess of minimum regulatory requirements. At December 31, 2021, the Company had a Basel III common equity Tier 1 ratio of 15.6%, which reflects our election to defer the impact of CECL on our regulatory capital, which will now be phased-in over a three-year transitional period through December 31, 2024 and effects fully phased-in beginning in the first quarter of 2025. As a result of this phase-in our common equity Tier 1 ratio will be reduced by 62 basis points in 2022.

We expect that our liquidity portfolio will continue to be sufficient to support all of our business objectives and to meet all regulatory requirements for the foreseeable future. As a result of lower growth in loan receivables primarily due to elevated payment rates, and strength in our deposit platform, we have generally been carrying a higher level of liquidity during 2021. We also expect to carry some excess liquidity in the second and third quarters of 2022 following the conveyance of our held for sale portfolios.

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. These fluctuations are generally most evident between the fourth quarter and the first quarter of the following year.

In addition to the seasonal variance in loan receivables discussed above, we also typically experience a seasonal increase in delinquency rates and delinquent loan receivables balances during the third and fourth quarters of each year due to lower customer payment rates resulting in higher net charge-off rates in the first 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, industry-wide forbearance measures and elevated consumer savings. Customer payments as a percentage of beginning-of-period loan receivables for the year ended December 31, 2021 were approximately 260 basis points higher than our prior five-year historical average. These higher payment rates have resulted in reductions in loan receivables and delinquency rates beyond our seasonal expectations.

Interest Income

Interest income is comprised of interest and fees on loans, which includes merchant discounts provided by partners to compensate us in almost all cases for all or part of the promotional financing provided to their customers, and interest on cash and equivalents and investment securities. We include in interest and fees on loans any past due interest and fees deemed to be collectible. Direct loan origination costs on credit card loans are deferred and amortized on a straight-line basis over a one-year period and recorded in interest and fees on loans. For non-credit card receivables, direct loan origination costs are deferred and amortized over the life of the loan and recorded in interest and fees on loans.

We analyze interest income as a function of two principal components: average interest-earning assets and yield on average interest-earning assets. Key drivers of average interest-earning assets include:

•purchase volumes, which are influenced by a number of factors including macroeconomic conditions and consumer confidence generally, our partners’ sales and our ability to increase our share of those sales;

•payment rates, reflecting the extent to which customers maintain a credit balance;

•charge-offs, reflecting the receivables that are deemed not to be collectible;

•the size of our liquidity portfolio; and

•portfolio acquisitions when we enter into new partner relationships.

Key drivers of yield on average interest-earning assets include:

•pricing (contractual rates of interest, movement in prime rates, late fees and merchant discount rates);

•changes to our mix of loans (e.g., the number of loans bearing promotional rates as compared to standard rates);

•frequency of late fees incurred when account holders fail to make their minimum payment by the required due date;

•credit performance and accrual status of our loans; and

•yield earned on our liquidity portfolio.

Interest income decreased by $796 million, or 5.0%, for the year ended December 31, 2021. The decrease reflected the impact of improvements in customer payment behavior and lower delinquencies during the period, which resulted in lower loan receivable yield and lower average loan receivables.

Average interest-earning assets


Years ended December 31 ($ in millions)	2021		2020
Loan receivables, including held for sale	$	78,928	$	80,138
Liquidity portfolio and other	17,648		20,668
Total average interest-earning assets	$	96,576	$	100,806

Average loan receivables, including held for sale, decreased 1.5% for the year ended December 31, 2021, as the impact from the improvements in customer payment behavior was partially offset by purchase volume growth of 19.2%.

Yield on average interest-earning assets

The yield on average interest-earning assets decreased for the year ended December 31, 2021 primarily due to a decrease in the yield on average loan receivables. The decrease in loan receivables yield was 61 basis points to 19.29% for the year ended December 31, 2021, reflecting the impact of higher payment rates and lower interest and fees.

Interest Expense

Interest expense is incurred on our interest-bearing liabilities, which consisted of interest-bearing deposit accounts, borrowings of consolidated securitization entities and senior unsecured notes.

Key drivers of interest expense include:

•the amounts outstanding of our deposits and borrowings;

•the interest rate environment and its effect on interest rates paid on our funding sources; and

•the changing mix in our funding sources.

Interest expense decreased by $633 million, or 38.0%, for the year ended December 31, 2021, primarily driven by lower benchmark interest rates. Our cost of funds decreased to 1.37% for the year ended December 31, 2021 compared to 2.07% for the year ended December 31, 2020.

Average interest-bearing liabilities


Years ended December 31 ($ in millions)	2021		2020
Interest-bearing deposit accounts	$	60,953	$	63,755
Borrowings of consolidated securitization entities	7,248		8,675
Senior unsecured notes	7,173		8,171

Total average interest-bearing liabilities	$	75,374	$	80,601

The decrease in average interest-bearing liabilities for the year ended December 31, 2021 was primarily driven by our efforts to mitigate excess liquidity in our business which resulted in decreases in our deposits, borrowings of our consolidated securitization entities, and senior unsecured notes.

Net Interest Income

Net interest income represents the difference between interest income and interest expense.

Net interest income decreased by $163 million, or 1.1%, for the year ended December 31, 2021, resulting from the changes in interest income and interest expense discussed above.

Retailer Share Arrangements

Most of our program agreements with large retail and certain other partners contain retailer share arrangements that provide for payments to our partners if the economic performance of the program exceeds a contractually defined threshold. We also provide other economic benefits to our partners such as royalties on purchase volume or payments for new accounts, in some cases instead of retailer share arrangements (for example, on our co-branded credit cards). All of these arrangements are designed to align our interests and provide an additional incentive to our partners to promote our credit products. Although the retailer share arrangements vary by partner, these arrangements are generally structured to measure the economic performance of the program, based typically on agreed upon program revenues (including interest income and certain other income) less agreed upon program expenses (including interest expense, provision for credit losses, retailer payments and operating expenses), and share portions of this amount above a negotiated threshold. The threshold and economic performance of a program that are used to calculate payments to our partners may be based on, among other things, agreed upon measures of program expenses rather than our actual expenses, and therefore increases in our actual expenses (such as funding costs or operating expenses) may not necessarily result in reduced payments under our retailer share arrangements. These arrangements are typically designed to permit us to achieve an economic return before we are required to make payments to our partners based on the agreed contractually defined threshold. Our payments to partners pursuant to these retailer share arrangements have generally increased in recent years, primarily as a result of the growth and performance of the programs in which we have retailer share arrangements, as well as changes to the terms of certain program agreements that have been renegotiated in the past few years.

We believe that our retailer share arrangements have been effective in helping us to grow our business by aligning our partners’ interests with ours. We also believe that the changes to the terms of certain program agreements in recent years will help us to grow our business by providing an additional incentive to the relevant partners to promote our credit products going forward. Payments to partners pursuant to these retailer share arrangements would generally decrease, and mitigate the impact on our profitability, in the event of declines in the performance of the programs or the occurrence of other unfavorable developments that impact the calculation of payments to our partners pursuant to our retailer share arrangements.

Retailer share arrangements increased by $883 million, or 24.2%, for the year ended December 31, 2021, primarily due to the decrease in provision for credit losses.

Provision for Credit Losses

Provision for credit losses is the expense related to maintaining the allowance for credit losses at an appropriate level to absorb the expected credit losses for the life of the loan balance as of the period end date. Provision for credit losses in each period is a function of net charge-offs (gross charge-offs net of recoveries) and the required level of the allowance for credit losses. Our process to determine our allowance for credit losses is based upon our estimate of expected credit losses for the life of the loan balance as of the period end date. See “Critical Accounting Estimates - Allowance for Credit Losses” and Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our consolidated financial statements for additional information on our allowance for credit loss methodology.

Provision for credit losses decreased by $4.6 billion, or 86.3%, for the year ended December 31, 2021, primarily driven by lower reserves, which included $345 million of reserve reductions related to the held for sale portfolios, and lower net charge-offs.

Other Income


Years ended December 31 ($ in millions)	2021		2020
Interchange revenue	$	880	$	652
Debt cancellation fees	284		278
Loyalty programs	(992)		(649)
Other	309		124
Total other income	$	481	$	405

Interchange revenue

We earn interchange fees on Dual Card and other co-branded credit card transactions outside of our partners’ sales channels, based on a flat fee plus a percentage of the purchase amount. Interchange revenue has been, and is expected to continue to be, driven primarily by growth in our Dual Card and general purpose co-branded credit card products.

Interchange revenue increased by $228 million, or 35.0%, for the year ended December 31, 2021, driven by an increase in purchase volume outside of our retail partners' sales channels.

Debt cancellation fees

Debt cancellation fees relate to payment protection products purchased by our credit card customers. Customers who choose to purchase these products are charged a monthly fee based on their account balance. In return, we will cancel all or a portion of a customer’s credit card balance in the event of certain qualifying life events. We offer our debt cancellation product to our credit card customers via online, mobile and, on a limited basis, direct mail.

Debt cancellation fees increased by $6 million, or 2.2%, for the year ended December 31, 2021, primarily as a result of increases in customer enrollment.

Loyalty programs

We operate a number of loyalty programs that are designed to generate incremental purchase volume per customer, while reinforcing the value of the card and strengthening cardholder loyalty. These programs typically provide cardholders with statement credit or cash back rewards. Other programs include rewards points, which are redeemable for a variety of products or awards, or merchandise discounts that are earned by achieving a pre-set spending level on their private label credit card, Dual Card or general purpose co-branded credit card. Growth in loyalty program payments has been, and is expected to continue to be, driven by growth in purchase volume related to existing loyalty programs and the rollout of new loyalty programs.

Loyalty programs cost increased by $343 million, or 52.9%, for the year ended December 31, 2021, primarily as a result of growth in purchase volume associated with existing loyalty programs.

Other

Other includes a variety of items including ancillary fees, commission fees related to Pets Best, changes in the fair value of equity investments, realized gains or losses associated with the sale of investments or other assets and changes in contingent consideration obligations.

Other increased by $185 million, or 149.2%, for the year ended December 31, 2021 primarily due to investment gains and higher commission fees related to Pets Best.

Other Expense


Years ended December 31 ($ in millions)	2021		2020
Employee costs	$	1,501	$	1,380
Professional fees	782		759
Marketing and business development	486		448
Information processing	550		492
Other	644		976
Total other expense	$	3,963	$	4,055

Employee costs

Employee costs primarily consist of employee compensation and benefit costs.

Employee costs increased by $121 million, or 8.8%, for the year ended December 31, 2021, primarily driven by higher stock-based compensation expense and higher incentive compensation, partially offset by the prior year restructuring charge of $41 million.

Professional fees

Professional fees consist primarily of outsourced provider fees (e.g., collection agencies and call centers), legal, accounting, consulting, and recruiting expenses.

Professional fees increased by $23 million, or 3.0%, for the year ended December 31, 2021, primarily due to an increase in third-party expenses related to strategic technology investments.

Marketing and business development

Marketing and business development costs consist primarily of our contractual and discretionary marketing and business development spend, as well as amortization expense associated with retail partner contract acquisitions and extensions.

Marketing and business development costs increased by $38 million, or 8.5%, for the year ended December 31, 2021, primarily due to strategic investments in our sales platforms.

Information processing

Information processing costs primarily consist of fees related to outsourced information processing providers, credit card associations and software licensing agreements.

Information processing costs increased by $58 million, or 11.8%, for the year ended December 31, 2021, primarily due to higher software licensing costs and other technology investments, as well as an increase in association fees resulting from higher purchase volume in 2021.

Other

Other primarily consists of postage, operational losses, litigation and regulatory matters expense and various other corporate overhead items such as facilities' costs and telephone charges. Postage is driven primarily by the number of our active accounts and the percentage of customers that utilize our electronic billing option. Fraud, or operational losses, are driven primarily by the number of our active Dual Card and general purpose co-branded credit card accounts.

The “other” component decreased by $332 million, or 34.0%, for the year ended December 31, 2021, primarily due to lower operational losses and a reduction in corporate overhead expenses.

Provision for Income Taxes


Years ended December 31 ($ in millions)	2021			2020
Effective tax rate	23.3		%	22.9		%
Provision for income taxes	$	1,282		$	412

The effective tax rate for the year ended December 31, 2021, increased compared to 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 differs from the U.S. federal statutory tax rate primarily due to state income taxes.

Platform Analysis

As discussed above under “Our Business—Our Sales Platforms,” beginning in June 2021, we now offer our credit products 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 years ended December 31, 2021 and 2020, for each of our five sales platforms and Corp, Other information.

In December 2021, we entered into an agreement to sell $0.5 billion of loan receivables associated with our program agreement with BP. In connection with this agreement, revenue activities for the BP portfolio are no longer managed within our Home & Auto sales platform. All metrics for the BP portfolio previously reported within our Home & Auto sales platform, are now reported within our Corp, Other information in the tables below. We have recast all prior-period metrics for our Home & Auto sales platform and Corp, Other to conform to the current-period presentation.

Home & Auto


Years ended December 31 ($ in millions)	2021		2020		2019
Purchase volume	$	42,848	$	37,422	$	37,333
Period-end loan receivables	$	26,781	$	25,935	$	26,868
Average loan receivables, including held for sale	$	25,663	$	25,663	$	25,662
Average active accounts (in thousands)	17,414		17,578		17,917

Interest and fees on loans	$	4,247	$	4,402	$	4,504
Other income	$	69	$	60	$	43

Home & Auto interest and fees on loans decreased by $155 million, or 3.5%, and $102 million, or 2.3%, for the years ended December 31, 2021 and 2020, respectively, primarily driven by lower loan receivables yield as a result of higher payment rates.

Other income increased by $9 million, or 15.0%, for the year ended December 31, 2021 primarily driven by higher interchange fees. Other income increased $17 million, or 39.5%, for the year ended December 31, 2020 primarily driven by higher debt cancellation fees and lower loyalty costs.

Digital


Years ended December 31 ($ in millions)	2021		2020		2019
Purchase volume	$	44,701	$	35,876	$	29,505
Period-end loan receivables	$	21,751	$	20,427	$	20,325
Average loan receivables, including held for sale	$	19,475	$	19,253	$	18,300
Average active accounts (in thousands)	17,685		16,593		14,871

Interest and fees on loans	$	3,792	$	3,801	$	3,910
Other income	$	(87)	$	(54)	$	(15)

Digital interest and fees on loans remained relatively flat for the year ended December 31, 2021, as the effect of higher loan receivables was largely offset by the impact of higher payment rates. Digital interest and fees on loans decreased by $109 million, or 2.8%, for the year ended December 31, 2020 primarily driven by lower yield on loan receivables.

Other income decreased by $33 million and $39 million, for the years ended December 31, 2021 and 2020, respectively, primarily driven by higher program loyalty costs associated with the increases in purchase volume, partially offset by increases in interchange revenue.

Diversified & Value



Years ended December 31 ($ in millions)	2021		2020		2019
Purchase volume	$	46,998	$	37,985	$	43,937
Period-end loan receivables	$	16,075	$	15,761	$	18,719
Average loan receivables	$	14,501	$	15,724	$	17,201
Average active accounts (in thousands)	17,953		17,987		20,848

Interest and fees on loans	$	3,115	$	3,528	$	4,090
Other income	$	(28)	$	90	$	62

Diversified & Value interest and fees on loans decreased by $413 million, or 11.7%, and $562 million, or 13.7%, for the years ended December 31, 2021 and 2020, respectively, primarily driven by lower average loan receivables.

Other income decreased by $118 million for the year ended December 31, 2021 primarily driven by higher loyalty costs associated with the increase in purchase volume. Other income increased by $28 million for the year ended December 31, 2020 primarily driven by lower loyalty costs.

Health & Wellness


Years ended December 31 ($ in millions)	2021		2020		2019
Purchase volume	$	11,715	$	10,025	$	11,091
Period-end loan receivables	$	10,244	$	9,580	$	10,295
Average loan receivables, including held for sale	$	9,623	$	9,591	$	9,742
Average active accounts (in thousands)	5,739		5,952		6,197

Interest and fees on loans	$	2,271	$	2,273	$	2,319
Other income	$	159	$	107	$	78

Health & Wellness interest and fees on loans remained relatively flat for the year ended December 31, 2021, as the effect of higher loan receivables was largely offset by the impact of higher payment rates. Health & Wellness interest and fees on loans decreased by $46 million, or 2.0%, for the year ended December 31, 2020 primarily driven by lower merchant discount as a result of the decline in purchase volume and a reduction in average loan receivables.

Other income increased by $52 million and by $29 million, for the years ended December 31, 2021 and 2020, respectively. These increases were primarily driven by commission fees earned by Pets Best.

Lifestyle


Years ended December 31 ($ in millions)	2021		2020		2019
Purchase volume	$	5,319	$	4,933	$	4,787
Period-end loan receivables	$	5,479	$	5,098	$	4,782
Average loan receivables, including held for sale	$	5,135	$	4,727	$	4,447
Average active accounts (in thousands)	2,515		2,568		2,747

Interest and fees on loans	$	744	$	734	$	760
Other income	$	23	$	20	$	23

Lifestyle interest and fees on loans increased by $10 million, or 1.4%, for the year ended December 31, 2021, primarily driven by an increase in average loan receivables reflecting continued strength in power sports and music. Lifestyle interest and fees on loans decreased by $26 million, or 3.4%, for the year ended December 31, 2020 primarily driven by lower yield on loan receivables.

Corp, Other


Years ended December 31 ($ in millions)	2021		2020		2019
Purchase volume	$	14,273	$	12,843	$	22,758
Period-end loan receivables	$	410	$	5,066	$	6,226
Loan receivables held for sale	$	4,361	$	5	$	725
Average loan receivables, including held for sale	$	4,531	$	5,180	$	13,297
Average active accounts (in thousands)	6,028		6,453		13,141

Interest and fees on loans	$	1,059	$	1,212	$	3,122
Other income	$	345	$	182	$	180

Loan receivables held for sale at December 31, 2021 were comprised of $3.9 billion and $0.5 billion of loan receivables associated with our Gap Inc. and BP portfolios, respectively.

Corp, Other interest and fees on loans decreased by $153 million, or 12.6%, for the year ended December 31, 2021, primarily driven by lower average loan receivables.

Corp, Other interest and fees on loans decreased by $1.9 billion, or 61.2%, for the year ended December 31, 2020, primarily driven by the sale of the Walmart consumer portfolio in October 2019.

Other income increased by $163 million, or 89.6%, for the year ended December 31, 2021, primarily driven by investment gains. Other income remained relatively flat for the year ended December 31, 2020.

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 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 December 31, 2021		(%)		At December 31, 2020		(%)
Loans
Credit cards	$	76,628	94.9	%	$	78,455	95.9	%
Consumer installment loans	2,675		3.4	%	2,125		2.6
Commercial credit products	1,372		1.7	%	1,250		1.5
Other	65		—	%	37		—
Total loans	$	80,740	100.0	%	$	81,867	100.0	%

Loan receivables decreased 1.4% to $80.7 billion at December 31, 2021 compared to December 31, 2020, primarily driven by the reclassification of loan receivables associated with the Gap Inc. and BP portfolios, to loan receivables held for sale. Loan receivables held for sale totaled $4.4 billion at December 31, 2021, and we expect conveyance of both portfolios to occur, subject to customary closing conditions, in the second quarter of 2022.

Excluding the impact of the reclassification of the Gap Inc. and BP portfolios, loan receivables increased 4% reflecting strong purchase volume growth, largely offset by higher payment rates. Customer payments as a percentage of beginning-of-period loan receivables for the year ended December 31, 2021 were approximately 260 basis points higher than our prior five-year historical average for the year.

Our loan receivables portfolio, excluding held for sale, had the following maturity distribution at December 31, 2021.


($ in millions)	Within 1 Year(1)		1-5 Years(2)		5-15 Years		After 15 Years		Total
Loans
Credit cards	$	75,899	$	729	$	—	$	—	$	76,628
Consumer installment loans(3)	866		1,789		20		—		2,675
Commercial credit products	1,370		2		—		—		1,372
Other	10		37		13		5		65
Total loans	$	78,145	$	2,557	$	33	$	5	$	80,740
Loans due after one year at fixed interest rates	N/A		$	2,557	$	33	$	5	$	2,595
Loans due after one year at variable interest rates	N/A		—		—		—		—
Total loans due after one year	N/A		$	2,557	$	33	$	5	$	2,595

______________________

(1)Credit card loans have minimum payment requirements but no stated maturity and therefore are included in the due within one year category. However, many of our credit card holders will revolve their balances, which may extend their repayment period beyond one year for balances at December 31, 2021.

(2)Credit card and commercial loans due after one year relate to TDR assets.

(3)Reflects scheduled repayments up to the final contractual maturity of our installment loans.

Our loan receivables portfolio had the following geographic concentration at December 31, 2021.


($ in millions)	Loan Receivables Outstanding		% of Total Loan Receivables Outstanding
State
Texas	$	8,615	10.7	%
California	$	8,287	10.3	%
Florida	$	7,274	9.0	%
New York	$	4,171	5.2	%
North Carolina	$	3,328	4.1	%

Delinquencies

Over-30 day loan delinquencies as a percentage of period-end loan receivables decreased to 2.62% at December 31, 2021, as compared to 3.07% at December 31, 2020. The 45 basis point decrease in 2021 was primarily driven by an improvement in customer payment behavior, partially offset by the effects of the reclassification of loan receivables associated with the Gap Inc. and BP portfolios to loan receivables held for sale. When excluding amounts related to held for sale portfolios from both periods, the decrease compared to the prior year was approximately 60 basis points.

Net Charge-Offs

Net charge-offs consist of the unpaid principal balance of loans held for investment that we determine are uncollectible, net of recovered amounts. We exclude accrued and unpaid finance charges and fees and third-party fraud losses from charge-offs. Charged-off and recovered finance charges and fees are included in interest and fees on loans while third-party fraud losses are included in other expense. Charge-offs are recorded as a reduction to the allowance for credit losses and subsequent recoveries of previously charged-off amounts are credited to the allowance for credit losses. Costs incurred to recover charged-off loans are recorded as collection expense and included in other expense in our Consolidated Statements of Earnings.

The table below sets forth net charge-offs and the ratio of net charge-offs to average loan receivables, including held for sale, (“net charge-off rate”) for the periods indicated.


Years ended December 31	2021				2020				2019
($ in millions)	Amount		Rate		Amount		Rate		Amount		Rate
Credit cards	$	2,235	2.98	%	$	3,590	4.66	%	$	4,903	5.75	%
Consumer installment loans	38		1.54	%	37		2.08	%	50		2.55	%
Commercial credit products	30		2.28	%	41		3.33	%	51		3.91	%
Other	1		1.75	%	—		—	%	1		2.17	%
Total net charge-offs	$	2,304	2.92	%	$	3,668	4.58	%	$	5,005	5.65	%

Allowance for Credit Losses

The allowance for credit losses totaled $8.7 billion at December 31, 2021, compared to $10.3 billion at December 31, 2020, and reflects our estimate of expected credit losses for the life of the loan receivables on our consolidated statement of financial position. Similarly, our allowance for credit losses as a percentage