syf-20221231

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, 2022


☐			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 $13,473,650,047,

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of February 3, 2023 was 437,035,160.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders, to be held May 18, 2023, 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	16
	Growth Organization	18
	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	57
	Critical Accounting Estimates	57


RISKS		59
	Risk Factors Summary	59
	Risk Factors Relating To Our Business	61
	Risk Management	80

REGULATION		86
	Regulation Relating to Our Business	86
	Risk Factors Relating to Regulation	95

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		101
	Report of Independent Registered Public Accounting Firm	101
	Consolidated Financial Statements	105
	Notes to Consolidated Financial Statements	110
	Controls and Procedures	142

OTHER KEY INFORMATION		143
	Properties	143
	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	144
	Exhibits and Financial Statement Schedules	146
	Signatures	156

FORM 10-K CROSS REFERENCE INDEX

____________________________________________________________________________________________


Part I		Page(s)

Item 1.	Business	7 - 26, 80 - 95

Item 1A.	Risk Factors	59 - 79, 95 - 100

Item 1B.	Unresolved Staff Comments	Not Applicable

Item 2.	Properties	143

Item 3.	Legal Proceedings	140 - 141

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	144 - 145

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 - 54

Item 8.	Financial Statements and Supplementary Data	101 - 141

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

Item 9A.	Controls and Procedures	142

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	146 - 155

Item 16.	Form 10-K Summary	Not Applicable

Signatures		156 - 158

______________________

(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 2023 Annual Meeting of Stockholders to be held on May 18, 2023, which will be filed within 120 days of the end our fiscal year ended December 31, 2022 (the “2023 Proxy Statement”).

(b)Incorporated by reference to “Compensation Discussion and Analysis,” “2022 Executive Compensation,” “Management Development and Compensation Committee Report” and “Management Development and Compensation Committee Interlocks and Insider Participation” and “CEO Pay Ratio” in the 2023 Proxy Statement.

(c)Incorporated by reference to “Beneficial Ownership” and “Equity Compensation Plan Information” in the 2023 Proxy Statement.

(d)Incorporated by reference to “Related Person Transactions,” “Election of Directors” and “Committees of the Board of Directors” in the 2023 Proxy Statement.

(e)Incorporated by reference to “Independent Auditor” in the 2023 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, 2022. “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.synchrony.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, telecommunications, home, auto, outdoor, pet 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 2022, we financed $180.2 billion of purchase volume, and at December 31, 2022, we had $92.5 billion of loan receivables and 70.8 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 57% of our consumer revolving applications in 2022 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. We 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, affinity relationships 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, savings accounts and sweep and affinity deposits. 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, 2022, we had $71.7 billion in deposits, which represented 84% 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 $4.7 billion, or 28%, of our total interest and fees on loans for the year ended December 31, 2022.

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, 2022, the length of our relationship with each of our five largest partners was over 10 years, and in the case of Lowe's, 43 years.


2022 Partner Agreements:
New partnerships:	• Bassett	• Furnitureland South
	• Floor & Decor
Program extensions:	• Broad River	• Mavis
	• Cardi's	• Metro Mattress
	• Dufresne Spencer Group	• Mitsubishi Electric Trane HVAC
	• Generac Power Systems	• NAPA AutoCare
	• Home Zone	• Nationwide Marketing Group
	• Ivan Smith Furniture	• New South Window Solutions
	• Knoxville Wholesale Furniture	• Regency Furniture Showrooms
	• Lowe's	• Rooms to Go
	• Mathis Brothers	• Sleep Number
	• Mattress Warehouse	• Sit 'N Sleep

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 partners to deepen consumer engagement by embedding payments and financing solutions, compelling value and rewards, and personalized offers within seamless experiences, as well as extend digital relationships to in-person commerce. In addition to our partner products, we also offer a Synchrony-branded general purpose credit card. Digital accounted for $4.6 billion, or 27%, of our total interest and fees on loans for the year ended December 31, 2022.

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 relationships that span decades, as well as through our more recent program launches with Verizon and Venmo. At December 31, 2022, the length of our relationship with each of our four largest partners was over 10 years, and in the case of PayPal, 18 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.


2022 Partner Agreements:
Program extensions:			• ShopHQ

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 $3.6 billion, or 21%, of our total interest and fees on loans for the year ended December 31, 2022.

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, 2022, the length of our relationship with each of these five partners was over 10 years, and in the case of Sam’s Club, 29 years.


2022 Partner Agreements:
Program extensions:			• Fleet Farm

Health & Wellness

Our Health & Wellness sales platform provides comprehensive healthcare payments and financing solutions, through a network of providers and health systems, for those seeking health and wellness care for themselves, their families and their pets, and includes key brands such as CareCredit and Pets Best, as well as partners such as Walgreens. Health & Wellness accounted for $2.7 billion, or 16%, of our total interest and fees on loans for the year ended December 31, 2022.

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 planned medical, 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, 2022, we had a network of Health & Wellness providers and health-focused retailers that collectively have over 266,000 locations. Excluding our program agreement with Walgreens, no single Health & Wellness partner accounted for more than 0.4% of our total interest and fees on loans for the year ended December 31, 2022. Dental providers accounted for 53% of Health & Wellness interest and fees on loans for the year ended December 31, 2022.

We believe our ability to attract new partners is aided by being able to provide partners access to our existing CareCredit accountholder base. During 2022 over 200,000 locations either processed a CareCredit application or made a sale on a CareCredit credit card and our CareCredit provider locator averaged over 1.6 million searches per month during the year ended December 31, 2022.


2022 Partner Agreements:
New partnerships:	• Beacon Dental	• Service Corporation International
	• Buffalo Veterinary Group	• Smile Design Dentistry
	• Ligthwave Dental	• Suveto
	• Mission Veterinary Partners	• The Smilist
	• Mt Laurel Veterinary Services	• Veterinary Practice Partners
	• Rarebreed Veterinary Partners	• 100% Chiropractic
Extensions:	• Encore Vet Group	• Sage Dental
	• Interdent	• Sono Bello
	• Lucid	• VetCor
	• Nvision

During the year ended December 31, 2022 we also expanded our partnership with AdventHealth to offer CareCredit as the primary patient financing solution across a nationwide footprint. Additionally, we announced our integration with Sycle, to deliver a comprehensive financing solution suite.

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 $814 million, or 5%, of our total interest and fees on loans for the year ended December 31, 2022.

Lifestyle Partners

Our Lifestyle sales platform partners include 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, Sweetwater, Kawasaki, Polaris, Suzuki and Pandora.

At December 31, 2022, the length of our relationship with each of our five largest partners was over 10 years, and in the case of American Eagle, 26 years.


2022 Partner Agreements:
New partnerships:	• American Trailer World	• Mercury Ring
Program extensions:	• Brother	• Reeds
	• Guitar Center	• Sam Ash
	• Janome	• Sweetwater
	• Kevin Jewelers	• Suzuki
	• KTM	• Suzuki Marine
	• Kymco

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. Activity in Corp, Other primarily includes amounts associated with the Gap Inc. and BP portfolios, which were both sold 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 certain large purchases, primarily for power sports and outdoor power equipment, and also offer unsecured installment loans primarily in our Health and Wellness sales platform and through our other installment products, such as our Synchrony Pay in 4 product for short-term loans. 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 and providers.

Our five largest programs based upon interest and fees on loans for the year ended December 31, 2022, were Amazon, JCPenney, Lowe’s, PayPal and Sam’s Club. These programs accounted in aggregate for 53% of our total interest and fees on loans for the year ended December 31, 2022, and 52% of loan receivables at December 31, 2022. 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, 2022. The length of our relationship with each of our five largest partners is over 15 years, and in the case of Lowe's, 43 years. During the year ended December 31, 2022 we extended our program agreement with Lowe's. The current expiration dates for program agreements with our five largest partners range from 2026 through 2033.

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 programs. 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.

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 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, with our diverse product suite, including engaging with our existing over 70 million active accounts. These teams drive qualified traffic, attract new customers and increase sales conversions. These capabilities also help to increase product usage and drive 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 to deepen 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, 2022, approximately 60% 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, 2022.


			Promotional Offer
Credit Product	Standard Terms Only		Deferred Interest		Other Promotional		Total
Credit cards	58.4	%	20.1	%	16.3	%	94.8	%
Commercial credit products	1.8		—		—		1.8
Consumer installment loans	—		0.1		3.2		3.3
Other	0.1		—		—		0.1
Total	60.3	%	20.2	%	19.5	%	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.

Dual Cards and general purpose co-branded credit cards are offered across all of our sales platforms and credit is typically extended on standard terms only. At December 31, 2022, we offered either Dual Cards or general purpose co-branded credit cards through approximately 20 of our large 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 24% of our total loan receivables portfolio at December 31, 2022.

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 secured installment loans to consumers (and a limited number of commercial customers) in the United States, primarily for power products in our Outdoor market (motorcycles, ATVs and lawn and garden). We also offer unsecured installment loans primarily in our Health and Wellness sales platform and through our various other installment products, such as our Synchrony 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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Our Growth organization encompasses Synchrony’s marketing, data analytics, customer experience, product development, incubation, branding and communications, and commercialization teams in one cohesive group. This organizational structure helps 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.

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.

Go-to-Market

Our commercialization team was established in 2022, to capitalize on additional opportunities to accelerate consumer and partner adoption of Synchrony’s products and capabilities. This team is focused on delivering consistent, enterprise-wide, go-to-market capabilities and provides our sales platforms with the knowledge, tools, and marketing materials to help our partners more quickly adopt Synchrony’s suite of new and existing products and capabilities. We believe this team will help drive efficiencies as we scale our capabilities across our distribution channels, allow for better prioritization of investments across our sales platforms, help our partners better understand the benefits of our products and capabilities in a clear and consistent way, and more closely align our product marketing activities to our sales teams.

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 audiences for credit acquisition and utilization, and to analyze behaviors that drive insights to 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 focused exclusively 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 2022, we continued to focus on our investments 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 2022, approximately 57% of our consumers applied online and over 70% of our consumers with an outstanding balance on our credit products utilized a digital service channel, demonstrating the continued shift in consumer trends towards digital experiences.

In 2022 we launched our new cardholder service platform including a full suite of notification and alert capabilities across many of our largest portfolios. This new platform offers customers the ability to service their accounts in one dashboard as well as a broad suite of account notifications across every aspect of the credit lifecycle ranging from shipping of new cards to instant transaction alerts, all enhanced with enriched merchant data and a completely redesigned digital service experience. 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.

Through our investments in our digital capabilities, we are enhancing our new products as well as enabling new distribution channels. For example, by leveraging our tokenization platform, we are able to offer the ability to display single-use virtual cards within our installment products, such as our Synchrony Pay in 4 product, allowing for a seamless in-store experience that requires zero integration work from the partner. With our Pay with Synchrony app available within the Clover point-of-sale platform, we are able to offer an entirely digital experience to apply for a new card or installment loan, and complete the transaction all within the Clover experience. 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 experienced team of 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 obtains deposits directly from retail, affinity relationships and commercial customers ("direct deposits") or through third-party brokerage firms that offer our FDIC-insured deposit products to their customers ("brokered deposits"). At December 31, 2022, we had $71.7 billion in deposits, $58.0 billion of which were direct deposits and $13.7 billion of which were brokered deposits. At December 31, 2022, deposits represented 84% of our total funding sources. Retail customers accounted for the substantial majority of our direct deposits at December 31, 2022. During 2022, retail deposits were received from approximately 506,000 customers that had a total of approximately 980,000 accounts. The Bank had a 87% retention rate on certificates of deposit balances up for renewal for the year ended December 31, 2022. FDIC insurance is provided for our deposit products up to applicable limits.

We continue to focus on expanding our online direct banking operations 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 believe we are well-positioned to continue to benefit from the consumer preference for direct banking. According to the 2022 American Bankers Association survey, approximately 77% of customers primarily use direct channels (internet, mail, phone and mobile) to manage their bank accounts.

During 2022 we continued to make investments in our servicing and digital platforms to expand features available for self-service and improve the user experience, as well as offering certificates of deposit with expanded 'bump-up' and 'no-penalty' features, which provide the ability, under certain conditions, for customers to request a single interest rate increase during the term or withdraw funds without penalty. In addition, the Bank began 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 may introduce new deposit products, enhancements to our existing products, and deliver new capabilities. This may include the introduction of transactional 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 124 million open accounts at December 31, 2022, 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 proprietary fraud models to identify new account fraud and deployed tools that help identify transaction purchase behavior outside a customer’s established pattern. Our proprietary models are 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. We care for our customers, value their opinions and work hard to do what we can to resolve their concerns swiftly. Our customers can contact us via phone, mail, email, eService, eChat and social media. 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 eight 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.

During the year ended December 31, 2022, we handled over 277 million inquiries. We attempt to resolve customer inquiries and concerns during the initial customer interaction. 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 2022);

•embossing and mailing credit cards (more than 50 million cards in 2022);

•printing and mailing and eService delivery of credit card statements (more than 700 million paper and electronic statements in 2022); and

•other letters mailed or sent electronically (more than 110 million in 2022).

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. Our digital channels also allow for our cardholders to receive statements and make payments electronically. We continue to encourage adoption of this option through regular communication with our customers.

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. 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. This 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. 91% of Synchrony employees participated in our employee engagement survey globally and 94% of the participants responded, “Taking all things into account, I would say this is a great place to work”. 95% of participants also told us the new way of working is providing the flexibility they need.

At December 31, 2022 we had over 18,500 full-time employees. At December 31, 2022, our global workforce was 61% female, 39% male and less than 1% that did not list gender. In the United States, ethnicity of our workforce was 52% White, 20% Black, 16% Hispanic, 7% Asian, 3% two or more races, 1% Native American, less than 1% Native Hawaiian or Pacific Islander and 1% that did not list ethnicity.

Equity, diversity and inclusion are core to our corporate culture at Synchrony. We have over 9,500 employees participating in at least one of our eight Diversity Networks and have integrated diversity and inclusion into our long-term business strategy. To drive progress over the long term, we treat equity, diversity and inclusion as important business priorities, with (i) new board-approved governance rules, imperatives, and accountability mechanisms to measure results and (ii) an annual incentive program that incorporates diversity factors when determining payouts. We also have 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 use data analytics to identify gaps in our hiring and promotion processes. As a result, we continue to 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, including providing a minimum wage of $20 per hour for all hourly employees in the U.S. and conduct a regular market pay analysis. We continue to provide total wellness benefits for all employees including generous time off and leave programs, diverse well-being coaches, financial counselors and fitness reimbursements. We also offer emergency backup childcare benefits for up to 60 days which includes enhanced childcare reimbursement where employees can use any caregiver.

Regulation

____________________________________________________________________________________________

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

____________________________________________________________________________________________

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 American Express, Bread Financial Holdings (formerly, Alliance Data Systems), 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, 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, including separately branded direct banking platforms of traditional banks, and 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, E-Trade 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. In addition, we compete for deposits with other consumer cash alternatives such as government money market funds offered by brokerages.

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 2021 vs. 2020, 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, 2021 (our “2021 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, 2022

____________________________________________________________________________________________

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 % of period-end loan receivables

Capital and Liquidity


Capital ratios Common equity Tier 1 - Basel III						Liquidity Liquid assets and undrawn credit facilities $ in billions

Highlights for the Year Ended December 31, 2022

Below are highlights of our performance for the year ended December 31, 2022 compared to the year ended December 31, 2021, as applicable, except as otherwise noted.

•Net earnings decreased 28.5% to $3.0 billion for the year ended December 31, 2022, primarily driven by increases in provision for credit losses, primarily due to reserve reductions in the prior year, partially offset by higher net interest income.

•Loan receivables increased 14.5% to $92.5 billion at December 31, 2022 compared to December 31, 2021, driven by strong purchase volume growth and moderation in customer payment rates.

•Net interest income increased 9.7% to $15.6 billion for the year ended December 31, 2022. Interest and fees on loans increased 10.9%, primarily driven by growth in average loan receivables, partially offset by the impacts of portfolios sold in the second quarter of 2022. Interest expense increased 47.4%, due to higher benchmark rates and higher funding liabilities.

•Retailer share arrangements decreased 4.4% to $4.3 billion for the year ended December 31, 2022, primarily due to the impact of portfolios sold in the second quarter of 2022 and higher net charge-offs, partially offset by higher net interest income.

•Over-30 day loan delinquencies as a percentage of period-end loan receivables increased 103 basis points to 3.65% at December 31, 2022 from 2.62% at December 31, 2021. The net charge-off rate increased 8 basis points to 3.00% for the year ended December 31, 2022.

•Provision for credit losses increased by $2.6 billion to $3.4 billion, for the year ended December 31, 2022, primarily driven by reserve increases in the current year versus reserve reductions in the prior year. The increase in reserves for credit losses was $839 million for the year ended December 31, 2022 primarily driven by portfolio growth, compared to the reserve reductions in the prior year totaling $1.6 billion. Our allowance coverage ratio (allowance for credit losses as a percentage of period-end loan receivables) decreased to 10.30% at December 31, 2022, as compared to 10.76% at December 31, 2021.

•Other expense increased by $374 million, or 9.4%, for the year ended December 31, 2022, primarily driven by higher employee costs, other expense, information processing and professional fees.

•At December 31, 2022, deposits represented 84% of our total funding sources. Total deposits increased 15.2% to $71.7 billion at December 31, 2022, compared to December 31, 2021.

•During the year ended December 31, 2022, we declared and paid cash dividends on our Series A 5.625% non-cumulative preferred stock of $56.24 per share, or $42 million.

•In April 2022, we announced that our Board approved an incremental share repurchase authorization of $2.8 billion through June 2023 and increased our quarterly dividend by 5% to $0.23 per common share commencing in the third quarter of 2022. During the year ended December 31, 2022, we repurchased $3.3 billion of our outstanding common stock, and declared and paid cash dividends of $0.90 per common share, or $434 million. At December 31, 2022, we have a total share repurchase authorization of $700 million remaining. For more information, see “Capital—Dividend and Share Repurchases.”

2022 Partner Agreements

During the year ended December 31, 2022, we continued to expand and diversify our portfolios with the addition or renewal of more than 80 partners, which included the following:


Home & Auto:
New partnerships:	• Bassett	• Furnitureland South
	• Floor & Decor
Program extensions:	• Broad River	• Mavis
	• Cardi's	• Metro Mattress
	• Dufresne Spencer Group	• Mitsubishi Electric Trane HVAC
	• Generac Power Systems	• NAPA AutoCare
	• Home Zone	• Nationwide Marketing Group
	• Ivan Smith Furniture	• New South Window Solutions
	• Knoxville Wholesale Furniture	• Regency Furniture Showrooms
	• Lowe's	• Rooms to Go
	• Mathis Brothers	• Sleep Number
	• Mattress Warehouse	• Sit 'N Sleep


Digital:
Program extensions:			• ShopHQ


Diversified & Value:
Program extensions:			• Fleet Farm


Health & Wellness:
New partnerships:	• Beacon Dental	• Service Corporation International
	• Buffalo Veterinary Group	• Smile Design Dentistry
	• Ligthwave Dental	• Suveto
	• Mission Veterinary Partners	• The Smilist
	• Mt Laurel Veterinary Services	• Veterinary Practice Partners
	• Rarebreed Veterinary Partners	• 100% Chiropractic
Extensions:	• Encore Vet Group	• Sage Dental
	• Interdent	• Sono Bello
	• Lucid	• VetCor
	• Nvision


Lifestyle:
New partnerships:	• American Trailer World	• Mercury Ring
Program extensions:	• Brother	• Reeds
	• Guitar Center	• Sam Ash
	• Janome	• Sweetwater
	• Kevin Jewelers	• Suzuki
	• KTM	• Suzuki Marine
	• Kymco

•In our Health & Wellness sales platform:

◦We expanded our partnership with AdventHealth to offer CareCredit as the primary patient financing solution across a nationwide footprint.

◦We announced our integration with Sycle, to deliver a comprehensive financing solution suite.

•We launched Synchrony's buy now, pay later products at various partners, including Belk and Discount Tire, and also made them available on the Clover point-of-sale and business management platform from Fiserv.

•We completed the sales of a total of $3.8 billion of loan receivables associated with our program agreements with Gap Inc. and BP during the second quarter of 2022, and recognized a gain on sale of $120 million included within other income in our consolidated statement of earnings.

Summary Earnings

The following table sets forth our results of operations for the periods indicated.


	Years ended December 31,
($ in millions)	2022		2021		2020
Interest income	$	17,146	$	15,271	$	16,067
Interest expense	1,521		1,032		1,665
Net interest income	15,625		14,239		14,402
Retailer share arrangements	(4,331)		(4,528)		(3,645)

Provision for credit losses	3,375		726		5,310
Net interest income, after retailer share arrangements and provision for credit losses	7,919		8,985		5,447
Other income	380		481		405
Other expense	4,337		3,963		4,055
Earnings before provision for income taxes	3,962		5,503		1,797
Provision for income taxes	946		1,282		412
Net earnings	$	3,016	$	4,221	$	1,385
Net earnings available to common stockholders	$	2,974	$	4,179	$	1,343

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)	2022			2021			2020
Financial Position Data (Average):
Loan receivables, including held for sale	$	84,672		$	78,928		$	80,138
Total assets	$	98,152		$	94,114		$	97,738
Deposits	$	66,006		$	61,302		$	64,061
Borrowings	$	13,783		$	14,421		$	16,846
Total equity	$	13,372		$	13,723		$	12,333
Selected Performance Metrics:
Purchase volume(1)(2)	$	180,187		$	165,854		$	139,084
Home & Auto	$	47,288		$	42,848		$	37,422
Digital	$	51,394		$	44,701		$	35,876
Diversified & Value	$	56,666		$	46,998		$	37,985
Health & Wellness	$	13,569		$	11,715		$	10,025
Lifestyle	$	5,498		$	5,319		$	4,933
Corp, Other	$	5,772		$	14,273		$	12,843
Average active accounts (in thousands)(2)(3)	68,627			67,334			67,131
Net interest margin(4)	15.63		%	14.74		%	14.29		%
Net charge-offs	$	2,536		$	2,304		$	3,668
Net charge-offs as a % of average loan receivables, including held for sale	3.00		%	2.92		%	4.58		%
Allowance coverage ratio(5)	10.30		%	10.76		%	12.54		%
Return on assets(6)	3.1		%	4.5		%	1.4		%
Return on equity(7)	22.6		%	30.8		%	11.2		%
Equity to assets(8)	13.62		%	14.58		%	12.62		%
Other expense as a % of average loan receivables, including held for sale	5.12		%	5.02		%	5.06		%
Efficiency ratio(9)	37.2		%	38.9		%	36.3		%
Effective income tax rate	23.9		%	23.3		%	22.9		%
Selected Period End Data:
Loan receivables	$	92,470		$	80,740		$	81,867
Allowance for credit losses	$	9,527		$	8,688		$	10,265
30+ days past due as a % of period-end loan receivables(10)	3.65		%	2.62		%	3.07		%
90+ days past due as a % of period-end loan receivables(10)	1.69		%	1.17		%	1.40		%
Total active accounts (in thousands)(2)(3)	70,763			72,420			68,540

__________________

(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.


	2022						2021						2020
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)	$	10,215	$	194	1.90	%	$	11,673	$	15	0.13	%		$	13,301	$	53	0.40	%
Securities available for sale	5,108		71		1.39	%	5,975		28		0.47	%		7,367		64		0.87	%

Loan receivables, including held for sale(3):
Credit cards	80,119		16,471		20.56	%	75,052		14,880		19.83	%		77,115		15,672		20.32	%
Consumer installment loans	2,834		287		10.13	%	2,460		241		9.80	%		1,733		168		9.69	%
Commercial credit products	1,642		117		7.13	%	1,359		103		7.58	%		1,231		108		8.77	%
Other	77		6		7.79	%	57		4		7.02	%		59		2		3.39	%
Total loan receivables, including held for sale	84,672		16,881		19.94	%	78,928		15,228		19.29	%		80,138		15,950		19.90	%
Total interest-earning assets	99,995		17,146		17.15	%	96,576		15,271		15.81	%		100,806		16,067		15.94	%
Non-interest-earning assets:
Cash and due from banks	1,472						1,597							1,488
Allowance for credit losses	(8,844)						(9,402)							(9,488)
Other assets	5,529						5,343							4,932
Total non-interest-earning assets	(1,843)						(2,462)							(3,068)
Total assets	$	98,152					$	94,114						$	97,738
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts	$	65,624	$	1,008	1.54	%	$	60,953	$	566	0.93	%		$	63,755	$	1,094	1.72	%
Borrowings of consolidated securitization entities	6,468		196		3.03	%	7,248		169		2.33	%		8,675		237		2.73	%

Senior unsecured notes	7,315		317		4.33	%	7,173		297		4.14	%		8,171		334		4.09	%

Total interest-bearing liabilities	79,407		1,521		1.92	%	75,374		1,032		1.37	%		80,601		1,665		2.07	%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts	382						349							306
Other liabilities	4,991						4,668							4,498
Total non-interest-bearing liabilities	5,373						5,017							4,804
Total liabilities	84,780						80,391							85,405
Equity
Total equity	13,372						13,723							12,333
Total liabilities and equity	$	98,152					$	94,114						$	97,738
Interest rate spread(4)					15.23	%					14.44	%						13.87	%
Net interest income			$	15,625					$	14,239						$	14,402
Net interest margin(5)					15.63	%					14.74	%						14.29	%

____________________

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

(2)Includes average restricted cash balances of $558 million, $459 million and $475 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(3)Interest income on loan receivables includes fees on loans of $2.7 billion, $2.3 billion and $2.2 billion for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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

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.


	2022 vs. 2021						2021 vs. 2020
	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	$	(2)	$	181	$	179	$	(6)	$	(32)	$	(38)
Securities available for sale	(5)		48		43		(11)		(25)		(36)
Loan receivables, including held for sale:
Credit cards	1,030		561		1,591		(416)		(376)		(792)
Consumer installment loans	38		8		46		71		2		73
Commercial credit products	20		(6)		14		11		(16)		(5)
Other	2		—		2		—		2		2
Total loan receivables, including held for sale	1,090		563		1,653		(334)		(388)		(722)
Change in interest income from total interest-earning assets	$	1,083	$	792	$	1,875	$	(351)	$	(445)	$	(796)

Interest-bearing liabilities:
Interest-bearing deposit accounts	$	46	$	396	$	442	$	(46)	$	(482)	$	(528)
Borrowings of consolidated securitization entities	(20)		47		27		(36)		(32)		(68)

Senior unsecured notes	6		14		20		(41)		4		(37)

Change in interest expense from total interest-bearing liabilities	32		457		489		(123)		(510)		(633)
Total change in net interest income	$	1,051	$	335	$	1,386	$	(228)	$	65	$	(163)

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 2022 we experienced purchase volume growth that reflected the continued strength of the consumer. Purchase volume for the year ended December 31, 2022 increased 9% compared to the prior year, and increased 15% when excluding the impact of the portfolio sales in the second quarter of 2022. In addition, customer payments as a percentage of beginning-of-period loan receivables remain significantly elevated compared to historical averages. However, we have experienced some moderation in payment rates in the second half of 2022 that, in addition to the strong purchase volume growth discussed above, have contributed to increases in both loan receivables and interest income for the year ended December 31, 2022. We expect interest income and loan receivables to increase in 2023, primarily reflecting both the continued moderation of customer payment behavior and the impact of higher benchmark interest rates, as well as from purchase volume growth. The amount of the increases however will be dependent on various factors. These factors include the timing and extent of continued payment rate moderation and changes in benchmark interest rates.

•Asset quality. As a result of the continued elevated customer payment behavior, our asset quality metrics continue to be lower than our historical averages. However, as discussed above, we have experienced some moderation in payment behavior in the second half of 2022, which has resulted in increases in our credit metrics compared to prior year. Our over-30 day loan delinquencies as a percentage of period-end loan receivables increased to 3.65% at December 31, 2022 from 2.62% at December 31, 2021. We anticipate that the elevated payment levels will continue to moderate in 2023, such that we expect increases in both delinquencies and net charge-offs as compared to current levels and for these metrics to trend towards our historical averages. We have also experienced increases to both our allowance for credit losses and provision for credit losses during the year ended December 31, 2022 primarily attributable to growth in our loan receivables and reserve reductions in the prior year. Our allowance coverage ratio at December 31, 2022 was 10.30%. We anticipate that our allowance for credit losses and provision for credit losses in 2023 will be higher than the current year period primarily due to the anticipated increase in net charge-offs and growth in loan receivables.

•Funding costs. During 2022 benchmark interest rates increased significantly and our average funding liabilities have also increased to support the growth in our loan receivables. As a result, interest expense for the year ended December 31, 2022 increased by $489 million or 47.4%, compared to the prior year, and our cost of funds increased by 55 basis points to 1.92%. We expect interest expense and our cost of funds to continue to increase in 2023, reflecting the continuing impact of higher benchmark rates and growth in our funding liabilities to support the expected growth in loan receivables. The amount of the increases however will be dependent on further benchmark rate changes, competition for our deposit product offerings and the extent of the growth in our loan receivables.

•Retailer share arrangement payments under our program agreements. Retailer share arrangements decreased 4.4% to $4.3 billion for the year ended December 31, 2022, primarily reflecting the impact of the portfolio sales in the second quarter of 2022 and higher net charge-offs, partially offset by higher net interest income. We believe that the payments we make to our partners under our retailer share arrangements, in the aggregate, in 2023 are likely to continue to decrease in absolute terms compared to the year ended December 31, 2022, primarily as a result of the impact of the expected credit trends discussed above. We expect 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 credit trends 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 15 years, and in the case of Lowe's, 43 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 2033. In addition, a total of 15 of our 25 largest ongoing program agreements have an expiration date in 2026 or beyond, which represented in the aggregate 92% of our interest and fees on loans for the year ended December 31, 2022 and 90% of our loan receivables at December 31, 2022, 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 continue to increase. The expected growth in these transactions is driven, in part, by both existing and new loyalty programs with our credit card partners. 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, 2022, our loyalty program costs were partially 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 2023. 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, 2022, we declared and paid common stock dividends of $434 million and repurchased $3.3 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, 2022 we had $700 million remaining in share repurchase authorization. We continue to expect to maintain capital ratios well in excess of minimum regulatory requirements. At December 31, 2022, the Company had a Basel III common equity Tier 1 ratio of 12.8%, which reflects our election to defer the impact of CECL on our regulatory capital and the current year phase-in of 25% of the impact. The effects of CECL are being phased-in over a three-year transitional period through December 31, 2024 and will be fully phased-in beginning in the first quarter of 2025. As a result of the second year of the phase-in, our common equity Tier 1 ratio will be reduced by approximately 60 additional basis points in 2023.

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. At December 31, 2022 our liquid assets were $14.2 billion, an increase of 9% compared to the prior year, primarily as a result of deposit growth, the proceeds from portfolio sales in the second quarter of 2022 and retention of excess cash flows from operations, partially offset by loan receivables growth and share repurchase activity.

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 typically 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, even in instances of 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, the elevated customer payment behavior we have experienced in recent years discussed within Business Trends and Conditions, including subsequent moderation, has also significantly impacted our key financial metrics, including the fluctuations experienced between quarterly periods.

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 increased by $1.9 billion, or 12.3%, for the year ended December 31, 2022, primarily driven by the increase in interest and fees on loans of 10.9%. The increase in interest and fees on loans were primarily driven by growth in average loan receivables, partially offset by the impacts of portfolios sold in the second quarter of 2022. Excluding the impact of the portfolio sales, interest and fees on loans increased 15.7% for the year ended December 31, 2022.

Average interest-earning assets


Years ended December 31 ($ in millions)	2022		2021
Loan receivables, including held for sale	$	84,672	$	78,928
Liquidity portfolio and other	15,323		17,648
Total average interest-earning assets	$	99,995	$	96,576

Average loan receivables, including held for sale, increased 7.3% for the year ended December 31, 2022, primarily driven by growth in purchase volume growth and moderation in customer payment rates, partially offset by the impacts from portfolios sold in the second quarter of 2022. Purchase volume increased 9% for the year ended December 31, 2022, and excluding the impact of portfolios sold during the second quarter, purchase volume increased by 15%.

Yield on average interest-earning assets

The yield on average interest-earning assets increased for the year ended December 31, 2022 primarily due to an increase in the percentage of interest-earning assets attributable to loan receivables as well as an increase in the yield on average loan receivables. The increase in loan receivables yield was 65 basis points to 19.94% for the year ended December 31, 2022.

Interest Expense

Interest expense is incurred on our interest-bearing liabilities, which consists 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 increased by $489 million, or 47.4%, for the year ended December 31, 2022, primarily attributed to increases in benchmark interest rates and higher funding liabilities. Our cost of funds increased to 1.92% for the year ended December 31, 2022 compared to 1.37% for the year ended December 31, 2021.

Average interest-bearing liabilities


Years ended December 31 ($ in millions)	2022		2021
Interest-bearing deposit accounts	$	65,624	$	60,953
Borrowings of consolidated securitization entities	6,468		7,248
Senior unsecured notes	7,315		7,173

Total average interest-bearing liabilities	$	79,407	$	75,374

Net Interest Income

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

Net interest income increased by $1.4 billion, or 9.7%, for the year ended December 31, 2022, 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, higher provision for credit losses 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 ongoing 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. However, as noted above in Business Trends and Conditions, we believe that the payments we make to our partners under our retailer share arrangements, in the aggregate, in 2023 are likely to decrease in absolute terms compared to the year ended December 31, 2022, primarily as a result of the impact of the expected increase in our credit metrics.

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 decreased by $197 million, or 4.4%, for the year ended December 31, 2022, primarily due to the impact of portfolios sold in the second quarter of 2022 and higher net charge-offs, partially offset by higher net interest income.

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 increased by $2.6 billion to $3.4 billion, for the year ended December 31, 2022, primarily driven by reserve increases in the current year versus reserve reductions in the prior year. The increase in reserves for credit losses was $839 million for the year ended December 31, 2022 primarily driven by portfolio growth, compared to reserve reductions in the prior year of $1.6 billion.

Other Income


Years ended December 31 ($ in millions)	2022		2021
Interchange revenue	$	982	$	880
Debt cancellation fees	387		284
Loyalty programs	(1,257)		(992)
Other	268		309
Total other income	$	380	$	481

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 $102 million, or 11.6%, for the year ended December 31, 2022, driven by an increase in purchase volume outside of our retail partners' sales channels, partially offset by the impacts of portfolios sold in the second quarter of 2022.

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 $103 million, or 36.3%, for the year ended December 31, 2022, 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 $265 million, or 26.7%, for the year ended December 31, 2022, 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, loan receivables or other assets and changes in contingent consideration obligations.

Other decreased by $41 million, or 13.3%, for the year ended December 31, 2022 primarily due to lower investment gains, partially offset by the recognition of the gain on sale of $120 million from portfolio sales in the second quarter of 2022 and higher commission fees related to Pets Best.

Other Expense


Years ended December 31 ($ in millions)	2022		2021
Employee costs	$	1,681	$	1,501
Professional fees	832		782
Marketing and business development	487		486
Information processing	623		550
Other	714		644
Total other expense	$	4,337	$	3,963

Employee costs

Employee costs primarily consist of employee compensation and benefit costs.

Employee costs increased by $180 million, or 12.0%, for the year ended December 31, 2022, primarily attributable to an increase in headcount driven by growth and insourcing, higher hourly wages and other compensation adjustments.

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 $50 million, or 6.4%, for the year ended December 31, 2022, 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 remained relatively flat for the year ended December 31, 2022, as additional marketing and growth investments resulting from the reinvestment of the proceeds from the gain on sale of loan receivables were offset by strategic investments in our sales platforms in the prior year.

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 $73 million, or 13.3%, for the year ended December 31, 2022, primarily driven by technology investments and the growth in purchase volume.

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 increased by $70 million, or 10.9%, for the year ended December 31, 2022, primarily due to higher operational losses.

Provision for Income Taxes


Years ended December 31 ($ in millions)	2022			2021
Effective tax rate	23.9		%	23.3		%
Provision for income taxes	$	946		$	1,282

The effective tax rate for the year ended December 31, 2022, increased compared to the prior year primarily due to the resolution of certain tax matters in the prior period. 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,” we 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, 2022 and 2021, for each of our five sales platforms and Corp, Other information.

Home & Auto


Years ended December 31 ($ in millions)	2022		2021
Purchase volume	$	47,288	$	42,848
Period-end loan receivables	$	29,978	$	26,781
Average loan receivables, including held for sale	$	27,835	$	25,663
Average active accounts (in thousands)	18,080		17,414

Interest and fees on loans	$	4,670	$	4,247
Other income	$	87	$	69

Home & Auto interest and fees on loans increased by $423 million, or 10.0%, for the year ended December 31, 2022, primarily driven by growth in average loan receivables. The growth in average loan receivables reflected purchase volume growth of 10.4%, reflecting the continued strength in Home and higher Auto-related spend.

Other income increased by $18 million, or 26.1%, for the year ended December 31, 2022 primarily driven by debt cancellation fees.

Digital


Years ended December 31 ($ in millions)	2022		2021
Purchase volume	$	51,394	$	44,701
Period-end loan receivables	$	25,522	$	21,751
Average loan receivables, including held for sale	$	22,185	$	19,475
Average active accounts (in thousands)	19,421		17,685

Interest and fees on loans	$	4,599	$	3,792
Other income	$	(61)	$	(87)

Digital interest and fees on loans increased by $807 million, or 21.3%, for the year ended December 31, 2022, primarily driven by growth in average loan receivables. The growth in average loan receivables reflected purchase volume growth of 15.0%, and average active account growth of 9.8%, reflecting strong engagement across both new and established programs.

Other income increased by $26 million for the years ended December 31, 2022, primarily driven by increases in interchange revenue and debt cancellation fees, partially offset by higher program loyalty costs associated with the increases in purchase volume.

Diversified & Value



Years ended December 31 ($ in millions)	2022		2021
Purchase volume	$	56,666	$	46,998
Period-end loan receivables	$	18,617	$	16,075
Average loan receivables	$	16,042	$	14,501
Average active accounts (in thousands)	19,594		17,953

Interest and fees on loans	$	3,610	$	3,115
Other income	$	(105)	$	(28)

Diversified & Value interest and fees on loans increased by $495 million, or 15.9%, for the year ended December 31, 2022, primarily driven by growth in average loan receivables. The growth in average loan receivables reflected purchase volume growth of 20.6%, driven by strong retailer performance and customer engagement and average active account growth of 9.1%.

Other income decreased by $77 million for the year ended December 31, 2022 primarily driven by higher program loyalty costs, partially offset by higher interchange revenue.

Health & Wellness


Years ended December 31 ($ in millions)	2022		2021
Purchase volume	$	13,569	$	11,715
Period-end loan receivables	$	12,179	$	10,244
Average loan receivables, including held for sale	$	10,975	$	9,623
Average active accounts (in thousands)	6,326		5,739

Interest and fees on loans	$	2,710	$	2,271
Other income	$	217	$	159

Health & Wellness interest and fees on loans increased by $439 million, or 19.3%. for the year ended December 31, 2022, primarily driven by growth in average loan receivables. The growth in average loan receivables reflected strength across the network, particularly in Dental and Pet categories. Purchase volume increased 15.8%, and average active accounts increased 10.2%.

Other income increased by $58 million for the years ended December 31, 2022. This increase was primarily driven by higher debt cancellation fees and higher commission fees earned by Pets Best.

Lifestyle


Years ended December 31 ($ in millions)	2022		2021
Purchase volume	$	5,498	$	5,319
Period-end loan receivables	$	5,970	$	5,479
Average loan receivables, including held for sale	$	5,552	$	5,135
Average active accounts (in thousands)	2,559		2,515

Interest and fees on loans	$	814	$	744
Other income	$	28	$	23

Lifestyle interest and fees on loans increased by $70 million, or 9.4%, for the year ended December 31, 2022, primarily driven by growth in average loan receivables reflecting purchase volume growth of 3.4%, which was driven by higher retailer sales in Music and Specialty, an industry-specific rebound within our Luxury retail partners and higher out-of-partner spend more broadly, partially offset by the ongoing impact of inventory constraints in Outdoor by comparison to strong growth in the prior year.

Corp, Other


Years ended December 31 ($ in millions)	2022		2021
Purchase volume	$	5,772	$	14,273
Period-end loan receivables	$	204	$	410
Loan receivables held for sale	$	—	$	4,361
Average loan receivables, including held for sale	$	2,083	$	4,531
Average active accounts (in thousands)	2,647		6,028

Interest and fees on loans	$	478	$	1,059
Other income	$	214	$	345

Corp, Other interest and fees on loans decreased by $581 million, or 54.9%, for the year ended December 31, 2022, primarily driven by the effects of the sale of the BP and Gap Inc. portfolios in May 2022 and June 2022, respectively.

Other income decreased by $131 million, or 38.0%, for the year ended December 31, 2022, primarily due to lower investment gains and interchange revenue, partially offset by the gain on sale of $120 million recognized related to the portfolio sales in the second quarter of 2022.

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 (“TDRs”).

The following table sets forth the composition of our loan receivables portfolio by product type at the dates indicated.


($ in millions)	At December 31, 2022		(%)		At December 31, 2021		(%)
Loans
Credit cards	$	87,630	94.8	%	$	76,628	94.9	%
Consumer installment loans	3,056		3.3	%	2,675		3.3
Commercial credit products	1,682		1.8	%	1,372		1.7
Other	102		0.1	%	65		0.1
Total loans	$	92,470	100.0	%	$	80,740	100.0	%

Loan receivables increased 14.5% to $92.5 billion at December 31, 2022 compared to December 31, 2021, primarily driven by strong purchase volume growth and some moderation in customer payment rates.

Our loan receivables portfolio, excluding held for sale, had the following maturity distribution at December 31, 2022.


($ in millions)	Within 1 Year(1)		1-5 Years(2)		5-15 Years		After 15 Years		Total
Loans
Credit cards	$	86,790	$	840	$	—	$	—	$	87,630
Consumer installment loans(3)	1,046		1,988		22		—		3,056
Commercial credit products	1,680		2		—		—		1,682
Other	45		45		9		3		102
Total loans	$	89,561	$	2,875	$	31	$	3	$	92,470
Loans due after one year at fixed interest rates	N/A		$	2,875	$	31	$	3	$	2,909
Loans due after one year at variable interest rates	N/A		—		—		—		—
Total loans due after one year	N/A		$	2,875	$	31	$	3	$	2,909

______________________

(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, 2022.

(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, 2022.


($ in millions)	Loan Receivables Outstanding		% of Total Loan Receivables Outstanding
State
Texas	$	9,976	10.8	%
California	$	9,577	10.4	%
Florida	$	8,474	9.2	%
New York	$	4,639	5.0	%
North Carolina	$	3,795	4.1	%

Delinquencies

Over-30 day loan delinquencies as a percentage of period-end loan receivables increased to 3.65% at December 31, 2022, as compared to 2.62% at December 31, 2021. The 103 basis point increase in 2022 was primarily driven by the moderation in customer payment rates.

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	2022				2021				2020
($ in millions)	Amount		Rate		Amount		Rate		Amount		Rate
Credit cards	$	2,392	2.99	%	$	2,235	2.98	%	$	3,590	4.66	%
Consumer installment loans	80		2.82	%	38		1.54	%	37		2.08	%