syf-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2023


☐			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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of October 19, 2023 was 413,804,360.

Synchrony Financial


PART I - FINANCIAL INFORMATION			Page
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			6

Item 1. Financial Statements:
Condensed Consolidated Statements of Earnings – Nine months ended September 30, 2023 and 2022			32
Condensed Consolidated Statements of Comprehensive Income – Nine months ended September 30 , 2023 and 2022			33
Condensed Consolidated Statements of Financial Position – September 30, 2023 and December 31, 2022			34
Condensed Consolidated Statements of Changes in Equity – Nin e months ended September 30, 2023 and 2022			35
Condensed Consolidated Statements of Cash Flows – Nin e months ended September 30, 2023 and 2022			37
Notes to Condensed Consolidated Financial Statements			38
Item 3. Quantitative and Qualitative Disclosures About Market Risk			61
Item 4. Controls and Procedures			61

PART II - OTHER INFORMATION
Item 1. Legal Proceedings			62
Item 1A. Risk Factors			62
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			62
Item 3. Defaults Upon Senior Securities			62
Item 4. Mine Safety Disclosures			62
Item 5. Other Information			62
Item 6. Exhibits			63
Signatures			64

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.

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” in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Form 10-K”). There is no standard industry definition for many of these terms, and other companies may define them differently than we do.

“Synchrony” and its logos and other trademarks referred to in this report, including CareCredit®, Quickscreen®, Dual Card™, Synchrony Car Care™ and SyPI™, belong to us. Solely for convenience, we refer to our trademarks in this report without the ™ and ® symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.

On our website at www.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.

Cautionary Note Regarding Forward-Looking Statements:

Various statements in this Quarterly Report on Form 10-Q may contain “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “outlook,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements.

Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated, including the future impacts of the novel coronavirus disease (“COVID-19”) outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our and our outsourced partners' computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third-parties to provide various services that are important to our operations; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau's (the “CFPB”) regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit the Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this report and in our public filings, including under the heading “Risk Factors Relating to Our Business” and “Risk Factors Relating to Regulation” in our 2022 Form 10-K. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report and in our 2022 Form 10-K. The discussion below contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. See “Cautionary Note Regarding Forward-Looking Statements.”

Introduction and Business Overview

____________________________________________________________________________________________

We are a premier consumer financial services company delivering 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.” For the three and nine months ended September 30, 2023, we financed $47.0 billion and $135.8 billion of purchase volume, respectively, and had 70.3 million and 69.8 million average active accounts, respectively, and at September 30, 2023, we had $97.9 billion of loan receivables.

We offer our credit products primarily through our wholly-owned subsidiary, the Bank. In addition, through the Bank, we offer, directly to retail, 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 September 30, 2023, we had $78.1 billion in deposits, which represented 84% of our total funding sources.

Our Sales Platforms

_________________________________________________________________

We conduct our operations through a single business segment. Profitability and expenses, including funding costs, credit losses and operating expenses, are managed for the business as a whole. Substantially all of our 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.

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. 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.

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. 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.

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. Our Diversified & Value sales platform is comprised of five large retail partners: Belk, Fleet Farm, JCPenney, Sam's Club and TJX Companies, Inc.

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.

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. 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.

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. Prior year activity in Corp, Other primarily includes activity 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 Credit Products

____________________________________________________________________________________________

Through our sales platforms, we offer three principal types of credit products: credit cards, commercial credit products and consumer installment loans. We also offer a debt cancellation product.

The following table sets forth each credit product by type and indicates the percentage of our total loan receivables that are under standard terms only or pursuant to a promotional financing offer at September 30, 2023.


			Promotional Offer
Credit Product	Standard Terms Only		Deferred Interest		Other Promotional		Total
Credit cards	58.6	%	19.6	%	15.9	%	94.1	%
Commercial credit products	1.9		—		—		1.9
Consumer installment loans	0.1		0.1		3.7		3.9
Other	0.1		—		—		0.1
Total	60.7	%	19.7	%	19.6	%	100.0	%

Credit Cards

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 our private label credit cards typically is extended either on standard terms only or pursuant to a promotional financing offer.

•Dual Cards and General Purpose Co-Branded Cards. Our patented Dual Cards are credit cards that function as private label credit cards when used to purchase goods and services from our partners, and as general purpose credit cards when used to make purchases from other retailers wherever cards from those card networks are accepted or for cash advance transactions. We also offer general purpose co-branded credit cards that do not function as private label credit cards, as well as 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. We offer either Dual Cards or general purpose co-branded credit cards through over 15 of our large partners, of which the majority are Dual Cards, as well as our CareCredit Dual Card. Consumer Dual Cards and Co-Branded cards totaled 26% of our total loan receivables portfolio at September 30, 2023.

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 Later solutions, including pay in 4 and pay monthly options for short-term loans. Installment loans are closed-end credit accounts where the customer pays down the outstanding balance in installments. Installment loans are generally assessed periodic finance charges using fixed interest rates.

Business Trends and Conditions

____________________________________________________________________________________________

We believe our business and results of operations will be impacted in the future by various trends and conditions. For a discussion of certain trends and conditions, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Trends and Conditions” in our 2022 Form 10-K. For a discussion of how certain trends and conditions impacted the three and nine months ended September 30, 2023, see “—Results of Operations.”

Seasonality

____________________________________________________________________________________________

We experience fluctuations in transaction volumes and the level of loan receivables as a result of higher seasonal consumer spending and payment patterns that typically result in an increase of loan receivables from August through a peak in late December, with reductions in loan receivables 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.

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.

However, in addition to these seasonal trends, the elevated customer payment behavior we have experienced in recent years and more recently the subsequent moderation from these elevated levels, has also significantly impacted our key financial metrics and the fluctuations experienced between quarterly periods. The effects from these changes in customer payment behavior have resulted in either partial, or in some instances full, offset to the impact from the ongoing seasonal trends discussed above. For the three months ended September 30, 2023, this is most evident in our net charge-off rate which increased to 4.60% at September 30, 2023 from 3.48% at December 31, 2022 due to the impact from lower customer payment rates which exceeded the effects of the seasonal trends we experienced.

Results of Operations

____________________________________________________________________________________________

Highlights for the Three and Nine Months Ended September 30, 2023

Below are highlights of our performance for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, as applicable, except as otherwise noted.

•Net earnings decreased to $628 million from $703 million and to $1.8 billion from $2.4 billion for the three and nine months ended September 30, 2022. The decreases in the three and nine months ended September 30, 2023 were primarily driven by increases in provision for credit losses and higher interest expense, partially offset by higher interest income and lower retailer share arrangements.

•Loan receivables increased 13.8% to $97.9 billion at September 30, 2023 compared to $86.0 billion at September 30, 2022, driven by lower customer payment rates and purchase volume growth.

•Net interest income increased 11.0% to $4.4 billion and 8.8% to $12.5 billion for the three and nine months ended September 30, 2023, respectively. Interest and fees on loans increased 21.0% and 18.5% for the three and nine months ended September 30, 2023, respectively, primarily driven by growth in average loan receivables and higher benchmark rates. The increase in the nine months ended September 30, 2023 was partially offset by the impact of portfolios sold in the second quarter of 2022. For the three and nine months ended September 30, 2023, interest expense increased due to higher benchmark rates and higher funding liabilities.

•Retailer share arrangements decreased 7.4% to $979 million and 15.4% to $2.8 billion for the three and nine months ended September 30, 2023, primarily due to higher net charge-offs, partially offset by higher net interest income. The decrease in the nine months ended September 30, 2023 was also due to the impact of portfolios sold in the second quarter of 2022.

•Over-30 day loan delinquencies as a percentage of period-end loan receivables increased 112 basis points to 4.40% at September 30, 2023. The net charge-off rate increased 160 basis points to 4.60% and increased 180 basis points to 4.62% for the three and nine months ended September 30, 2023, respectively.

•Provision for credit losses increased to $1.5 billion from $929 million, and to $4.2 billion from $2.2 billion for the three and nine months ended September 30, 2023, respectively. The increases for the three and nine months ended September 30, 2023, were primarily driven by higher net charge-offs and higher reserve increases in the current year. The increases in reserves for credit losses were primarily driven by growth in loan receivables. Our allowance coverage ratio (allowance for credit losses as a percent of period-end loan receivables) decreased to 10.40% at September 30, 2023, as compared to 10.58% at September 30, 2022.

•Other expense increased by $90 million, or 8.5%, and $256 million, or 8.0%, for the three and nine months ended September 30, 2023, respectively. The increases for the three and nine months ended September 30, 2023 were primarily driven by growth related items as well as technology investments and higher operational losses.

•At September 30, 2023, deposits represented 84% of our total funding sources. Total deposits increased by 8.8% to $78.1 billion at September 30, 2023, compared to December 31, 2022.

•During the nine months ended September 30, 2023, we declared and paid cash dividends on our Series A 5.625% non-cumulative preferred stock of $42.18 per share, or $31 million.

•During the nine months ended September 30, 2023, we repurchased $850 million of our outstanding common stock, and declared and paid cash dividends of $0.71 per share, or $303 million. In April 2023, the Board of Directors approved an incremental share repurchase program of up to $1.0 billion, through June 30, 2024, and increased our quarterly dividend to $0.25 per common share commencing in the third quarter of 2023. At September 30, 2023 we have a total share repurchase authorization of $850 million remaining. For more information, see “Capital—Dividend and Share Repurchases.”

2023 Partner Agreements

During the nine months ended September 30, 2023, we continued to expand and diversify our portfolio with the addition or renewal of more than 40 partners, which included the following:

•In our Home & Auto sales platform, we announced our new partnerships with Big Brand Tire & Service, GreatWater 360 Auto Care, Installation Made Easy, LG Air Conditioning and Roto Rooter and extended our program agreements with CCA Global Partners, CertainPath, Conn's, Haverty's Furniture, Haynes, Horizon, Living Spaces, LoveSac and York.

•In our Digital sales platform, we extended our program agreement with Zulily.

•In our Diversified & Value sales platform, we extended our program agreement with Belk.

•In our Health & Wellness sales platform, we expanded our network through our new partnerships with AmeriVet Veterinary Partners, Destination Pet, Hand & Stone, Heart and Paw, Marquee Dental Partners, O'Brien Vet Group, Sonova, Specialty 1 Partners and Valley Veterinary, and also extended our endorsements with the American Dental Association, Academy of General Dentistry, The Aspen Group and NVA.

•In our Lifestyle sales platform, we extended our program agreement with Club Champion, Handi Quilter, JTV, Park West Gallery, Piaggio, Robbins Brothers, The Alliance of Independent Music Merchants and The Container Store and launched Synchrony’s Outdoor Card, enabling easy and affordable financing solutions to powersports customers.

Summary Earnings

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


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Interest income	$	5,354	$	4,342	$	15,161	$	12,438
Interest expense	992		414		2,628		919
Net interest income	4,362		3,928		12,533		11,519
Retailer share arrangements	(979)		(1,057)		(2,783)		(3,288)

Provision for credit losses	1,488		929		4,161		2,174
Net interest income, after retailer share arrangements and provision for credit losses	1,895		1,942		5,589		6,057
Other income	92		44		218		350
Other expense	1,154		1,064		3,442		3,186
Earnings before provision for income taxes	833		922		2,365		3,221
Provision for income taxes	205		219		567		782
Net earnings	$	628	$	703	$	1,798	$	2,439
Net earnings available to common stockholders	$	618	$	692	$	1,767	$	2,407

Other Financial and Statistical Data

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


	At and for the						At and for the
	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2023			2022			2023			2022
Financial Position Data (Average):
Loan receivables, including held for sale	$	96,230		$	84,038		$	93,198		$	83,404
Total assets	$	110,335		$	98,694		$	108,209		$	96,786
Deposits	$	76,353		$	67,158		$	74,750		$	64,751
Borrowings	$	14,806		$	13,360		$	14,683		$	13,645
Total equity	$	13,758		$	13,238		$	13,537		$	13,475
Selected Performance Metrics:
Purchase volume(1)(2)	$	47,006		$	44,557		$	135,839		$	132,264
Home & Auto	$	12,273		$	12,273		$	35,989		$	35,428
Digital	$	13,808		$	12,941		$	39,541		$	36,600
Diversified & Value	$	15,445		$	14,454		$	44,240		$	40,400
Health & Wellness	$	3,990		$	3,514		$	11,695		$	10,064
Lifestyle	$	1,490		$	1,374		$	4,372		$	4,000
Corp, Other	$	—		$	1		$	2		$	5,772
Average active accounts (in thousands)(2)(3)	70,308			66,266			69,842			68,517
Net interest margin(4)	15.36		%	15.52		%	15.17		%	15.64		%
Net charge-offs	$	1,116		$	635		$	3,218		$	1,760
Net charge-offs as a % of average loan receivables, including held for sale	4.60		%	3.00		%	4.62		%	2.82		%
Allowance coverage ratio(5)	10.40		%	10.58		%	10.40		%	10.58		%
Return on assets(6)	2.3		%	2.8		%	2.2		%	3.4		%
Return on equity(7)	18.1		%	21.1		%	17.8		%	24.2		%
Equity to assets(8)	12.47		%	13.41		%	12.51		%	13.92		%
Other expense as a % of average loan receivables, including held for sale	4.76		%	5.02		%	4.94		%	5.11		%
Efficiency ratio(9)	33.2		%	36.5		%	34.5		%	37.1		%
Effective income tax rate	24.6		%	23.8		%	24.0		%	24.3		%
Selected Period-End Data:
Loan receivables	$	97,873		$	86,012		$	97,873		$	86,012
Allowance for credit losses	$	10,176		$	9,102		$	10,176		$	9,102
30+ days past due as a % of period-end loan receivables(10)	4.40		%	3.28		%	4.40		%	3.28		%
90+ days past due as a % of period-end loan receivables(10)	2.06		%	1.43		%	2.06		%	1.43		%
Total active accounts (in thousands)(3)	70,137			66,503			70,137			66,503

______________________

(1)Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period.

(2)Includes activity and accounts associated with loan receivables held for sale.

(3)Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.

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

(5)Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables.

(6)Return on assets represents net earnings as a percentage of average total assets.

(7)Return on equity represents net earnings as a percentage of average total equity.

(8)Equity to assets represents average total equity as a percentage of average total assets.

(9)Efficiency ratio represents (i) other expense, divided by (ii) sum of net interest income, plus other income, less retailer share arrangements.

(10)Based on customer statement-end balances extrapolated to the respective period-end date.

Average Balance Sheet

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


	2023						2022
Three months ended September 30 ($ in millions)	Average Balance		Interest Income / Expense		Average Yield / Rate(1)		Average Balance		Interest Income/ Expense		Average Yield / Rate(1)
Assets
Interest-earning assets:
Interest-earning cash and equivalents(2)	$	12,753	$	172	5.35	%	$	11,506	$	65	2.24	%
Securities available for sale	3,706		31		3.32	%	4,861		19		1.55	%
Loan receivables, including held for sale(3):
Credit cards	90,587		5,003		21.91	%	79,354		4,153		20.76	%
Consumer installment loans	3,656		108		11.72	%	2,884		74		10.18	%
Commercial credit products	1,861		38		8.10	%	1,720		30		6.92	%
Other	126		2		6.30	%	80		1		4.96	%
Total loan receivables, including held for sale	96,230		5,151		21.24	%	84,038		4,258		20.10	%
Total interest-earning assets	112,689		5,354		18.85	%	100,405		4,342		17.16	%
Non-interest-earning assets:
Cash and due from banks	964						1,580
Allowance for credit losses	(9,847)						(8,878)
Other assets	6,529						5,587
Total non-interest-earning assets	(2,354)						(1,711)
Total assets	$	110,335					$	98,694
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts	$	75,952	$	800	4.18	%	$	66,787	$	280	1.66	%
Borrowings of consolidated securitization entities	6,096		86		5.60	%	6,258		54		3.42	%

Senior and subordinated unsecured notes	8,710		106		4.83	%	7,102		80		4.47	%

Total interest-bearing liabilities	90,758		992		4.34	%	80,147		414		2.05	%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts	401						371
Other liabilities	5,418						4,938
Total non-interest-bearing liabilities	5,819						5,309
Total liabilities	96,577						85,456
Equity
Total equity	13,758						13,238
Total liabilities and equity	$	110,335					$	98,694
Interest rate spread(4)					14.51	%					15.11	%
Net interest income			$	4,362					$	3,928
Net interest margin(5)					15.36	%					15.52	%


	2023						2022
Nine months ended September 30 ($ in millions)	Average Balance		Interest Income / Expense		Average Yield / Rate(1)		Average Balance		Interest Income/ Expense		Average Yield / Rate(1)
Assets
Interest-earning assets:
Interest-earning cash and equivalents(2)	$	13,107	$	490	5.00	%	$	9,920	$	90	1.21	%
Securities available for sale	4,138		92		2.97	%	5,143		43		1.12	%
Loan receivables, including held for sale(3):
Credit cards	87,914		14,179		21.56	%	78,946		12,009		20.34	%
Consumer installment loans	3,375		285		11.29	%	2,781		209		10.05	%
Commercial credit products	1,789		108		8.07	%	1,604		83		6.92	%
Other	120		7		7.80	%	73		4		7.33	%
Total loan receivables, including held for sale	93,198		14,579		20.91	%	83,404		12,305		19.73	%
Total interest-earning assets	110,443		15,161		18.35	%	98,467		12,438		16.89	%
Non-interest-earning assets:
Cash and due from banks	987						1,607
Allowance for credit losses	(9,552)						(8,735)
Other assets	6,331						5,447
Total non-interest-earning assets	(2,234)						(1,681)
Total assets	$	108,209					$	96,786
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts	$	74,340	$	2,074	3.73	%	$	64,371	$	567	1.18	%
Borrowings of consolidated securitization entities	6,062		241		5.32	%	6,547		127		2.59	%

Senior and subordinated unsecured notes	8,621		313		4.85	%	7,098		225		4.24	%

Total interest-bearing liabilities	89,023		2,628		3.95	%	78,016		919		1.57	%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts	410						380
Other liabilities	5,239						4,915
Total non-interest-bearing liabilities	5,649						5,295
Total liabilities	94,672						83,311
Equity
Total equity	13,537						13,475
Total liabilities and equity	$	108,209					$	96,786
Interest rate spread(4)					14.41	%					15.32	%
Net interest income			$	12,533					$	11,519
Net interest margin(5)					15.17	%					15.64	%

________________________________________

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

(2)Includes average restricted cash balances of $151 million and $688 million for the three months ended September 30, 2023 and 2022, respectively, and $324 million and $647 million for the nine months ended September 30, 2023 and 2022, respectively.

(3)Interest income on loan receivables includes fees on loans, which primarily consist of late fees on our credit products, of $694 million and $676 million for the three months ended September 30, 2023 and 2022, respectively, and $2.0 billion for both the nine months ended September 30, 2023 and 2022, 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.

For a summary description of the composition of our key line items included in our Statements of Earnings, see Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K.

Interest Income

Interest income increased by $1.0 billion, or 23.3%, and $2.7 billion, or 21.9%, for the three and nine months ended September 30, 2023, respectively, primarily driven by increases in interest and fees on loans of 21.0% and 18.5%, respectively. The increases in interest and fees on loans were primarily driven by growth in average loan receivables and higher benchmark rates. The increase in the nine months ended September 30, 2023 was partially offset by the impact of portfolios sold in the second quarter of 2022.

Average interest-earning assets


Three months ended September 30 ($ in millions)	2023		%		2022		%
Loan receivables, including held for sale	$	96,230	85.4	%	$	84,038	83.7	%
Liquidity portfolio and other	16,459		14.6	%	16,367		16.3	%
Total average interest-earning assets	$	112,689	100.0	%	$	100,405	100.0	%


Nine months ended September 30 ($ in millions)	2023		%		2022		%
Loan receivables, including held for sale	$	93,198	84.4	%	$	83,404	84.7	%
Liquidity portfolio and other	17,245		15.6	%	15,063		15.3	%
Total average interest-earning assets	$	110,443	100.0	%	$	98,467	100.0	%

Average loan receivables, including held for sale, increased 14.5% and 11.7% for the three and nine months ended September 30, 2023, respectively, primarily driven by moderation in customer payment rates and growth in purchase volume. The increase in the nine months ended September 30, 2023 was partially offset by the impact from portfolios sold in the second quarter of 2022. Purchase volume increased by 5.5% and 2.7% for the three and nine months ended September 30, 2023, respectively.

Yield on average interest-earning assets

The yield on average interest-earning assets increased for the three and nine months ended September 30, 2023 primarily due to increases in the yield on average loan receivables. The increases in loan receivable yield were 114 basis points to 21.24% and 118 basis points to 20.91% for the three and nine months ended September 30, 2023, respectively.

Interest Expense

Interest expense increased by $578 million to $992 million, and $1.7 billion to $2.6 billion, for the three and nine months ended September 30, 2023, respectively, primarily attributed to higher benchmark interest rates and higher funding liabilities. Our cost of funds increased to 4.34% and 3.95% for the three and nine months ended September 30, 2023, respectively, compared to 2.05% and 1.57% for the three and nine months ended September 30, 2022, respectively.

Average interest-bearing liabilities


Three months ended September 30 ($ in millions)	2023		%		2022		%
Interest-bearing deposit accounts	$	75,952	83.7	%	$	66,787	83.3	%
Borrowings of consolidated securitization entities	6,096		6.7	%	6,258		7.8	%
Senior and subordinated unsecured notes	8,710		9.6	%	7,102		8.9	%

Total average interest-bearing liabilities	$	90,758	100.0	%	$	80,147	100.0	%


Nine months ended September 30 ($ in millions)	2023		%		2022		%
Interest-bearing deposit accounts	$	74,340	83.5	%	$	64,371	82.5	%
Borrowings of consolidated securitization entities	6,062		6.8	%	6,547		8.4	%
Senior and subordinated unsecured notes	8,621		9.7	%	7,098		9.1	%

Total average interest-bearing liabilities	$	89,023	100.0	%	$	78,016	100.0	%

Net Interest Income

Net interest income increased by $434 million, or 11.0%, and $1.0 billion, or 8.8%, for the three and nine months ended September 30, 2023, respectively, resulting from the changes in interest income and interest expense discussed above.

Retailer Share Arrangements

Retailer share arrangements decreased by $78 million, or 7.4%, and $505 million, or 15.4%, for the three and nine months ended September 30, 2023, respectively, primarily due to higher net charge-offs, partially offset by higher net interest income. The decrease in the nine months ended September 30, 2023 was also driven by the impact of portfolios sold in the second quarter of 2022.

Provision for Credit Losses

Provision for credit losses increased to $1.5 billion from $929 million, and $4.2 billion from $2.2 billion for the three and nine months ended September 30, 2023, respectively, primarily driven by higher net charge-offs and higher reserve increases in the current year. The increases in reserves for credit losses were primarily driven by growth in loan receivables.

Other Income


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Interchange revenue	$	267	$	238	$	761	$	731
Debt cancellation fees	131		103		371		285
Loyalty programs	(358)		(326)		(1,001)		(906)
Other	52		29		87		240
Total other income	$	92	$	44	$	218	$	350

Other income increased by $48 million, or 109.1%, and decreased by $132 million, or 37.7%,for the three and nine months ended September 30, 2023. The increase for the three months ended September 30, 2023 was driven primarily by higher interchange revenue and debt cancellation fees, partially offset by higher loyalty costs. The decrease for the nine months ended September 30, 2023 was primarily driven by the recognition in the prior year of the gain on sale of $120 million from the portfolio sales in the second quarter of 2022.

Other Expense


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Employee costs	$	444	$	416	$	1,346	$	1,222
Professional fees	219		204		614		599
Marketing and business development	125		115		389		366
Information processing	177		150		522		458
Other	189		179		571		541
Total other expense	$	1,154	$	1,064	$	3,442	$	3,186

Other expense increased by $90 million, or 8.5% and by $256 million, or 8.0%, for the three and nine months ended September 30, 2023, respectively, primarily driven by growth related items as well as higher technology investments and operational losses. These increases were partially offset by additional marketing and other actions taken in the prior year related to reinvestment of the gain on sale proceeds.

Employee costs increased for the three and nine months ended September 30, 2023 primarily attributable to an increase in headcount driven by growth and higher benefit costs.

Professional fees and information processing costs increased for the three and nine months ended September 30, 2023 primarily due to increased technology investments.

Marketing and business development costs increased for the three and nine months ended September 30, 2023, due to higher marketing investments in the current year to support business growth.

Other increased for the three and nine months ended September 30, 2023, primarily due to higher operational losses, partially offset by lower charitable contributions.

Provision for Income Taxes


	Three months ended September 30,						Nine months ended September 30,
($ in millions)	2023			2022			2023			2022
Effective tax rate	24.6		%	23.8		%	24.0		%	24.3		%
Provision for income taxes	$	205		$	219		$	567		$	782

The effective tax rate for the three months ended September 30, 2023 increased compared to the same period in the prior year primarily due to the benefit recorded in the prior period for favorable state tax apportionment changes. The effective tax rate for the nine months ended September 30, 2023 decreased compared to the same period in the prior year primarily due to the impact of higher research and development credits and low income housing tax credits recorded in the current year. For both periods presented, the effective tax rate differs from the applicable U.S. federal statutory tax rate primarily due to state income taxes.

Platform Analysis

As discussed above under “—Our Sales Platforms,” we offer our credit products primarily through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle), which management measures based on their revenue-generating activities. The following is a discussion of certain supplemental information for the three and nine months ended September 30, 2023, for each of our five sales platforms and Corp, Other.

Home & Auto


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Purchase volume	$	12,273	$	12,273	$	35,989	$	35,428
Period-end loan receivables	$	31,648	$	29,017	$	31,648	$	29,017
Average loan receivables, including held for sale	$	31,239	$	28,387	$	30,386	$	27,307
Average active accounts (in thousands)	19,223		18,350		18,894		17,923

Interest and fees on loans	$	1,367	$	1,210	$	3,867	$	3,406
Other income	$	28	$	20	$	80	$	64

Home & Auto interest and fees on loans increased by $157 million, or 13.0%, and increased by $461 million, or 13.5%, for the three and nine months ended September 30, 2023, respectively, primarily driven by growth in average loan receivables and higher benchmark rates. The growth in average loan receivables for both periods primarily reflects the impact of lower customer payment rates, as well as purchase volume growth of 1.6% for the nine months ended September 30, 2023. Purchase volume remained flat for the three months ended September 30, 2023, as growth in commercial, Home Specialty and Auto were offset by lower retail traffic in Furniture and Electronics and the impact of lower gas and lumber prices.

Digital


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Purchase volume	$	13,808	$	12,941	$	39,541	$	36,600
Period-end loan receivables	$	26,685	$	22,925	$	26,685	$	22,925
Average loan receivables, including held for sale	$	26,266	$	22,361	$	25,484	$	21,596
Average active accounts (in thousands)	20,768		19,418		20,641		19,176

Interest and fees on loans	$	1,530	$	1,197	$	4,315	$	3,277
Other income	$	(6)	$	(22)	$	(7)	$	(47)

Digital interest and fees on loans increased by $333 million, or 27.8%, and $1.0 billion, or 31.7%, for the three and nine months ended September 30, 2023, respectively, primarily driven by growth in average loan receivables, higher benchmark rates and the maturation of newer programs. The growth in average loan receivables for both periods reflected lower customer payment rates, purchase volume growth of 6.7% and 8.0%, respectively, and average active account growth of 7.0% and 7.6%, respectively.

Diversified & Value


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Purchase volume	$	15,445	$	14,454	$	44,240	$	40,400
Period-end loan receivables	$	18,865	$	16,566	$	18,865	$	16,566
Average loan receivables, including held for sale	$	18,565	$	16,243	$	18,074	$	15,627
Average active accounts (in thousands)	20,410		19,411		20,571		19,258

Interest and fees on loans	$	1,168	$	935	$	3,329	$	2,587
Other income	$	(28)	$	(19)	$	(63)	$	(63)

Diversified & Value interest and fees on loans increased by $233 million, or 24.9%, and $742 million, or 28.7%, for the three and nine months ended September 30, 2023, respectively, primarily driven by growth in average loan receivables, and higher benchmark rates. The growth in average loan receivables for both periods reflected lower customer payment rates and purchase volume growth of 6.9% and 9.5%, respectively, reflecting higher out-of-partner spend, strong retailer performance and average active account growth of 5.1% and 6.8%, respectively.

Health & Wellness


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Purchase volume	$	3,990	$	3,514	$	11,695	$	10,064
Period-end loan receivables	$	14,019	$	11,590	$	14,019	$	11,590
Average loan receivables, including held for sale	$	13,600	$	11,187	$	12,927	$	10,681
Average active accounts (in thousands)	7,276		6,411		7,076		6,207

Interest and fees on loans	$	844	$	706	$	2,365	$	1,966
Other income	$	74	$	55	$	189	$	157

Health & Wellness interest and fees on loans increased by $138 million, or 19.5%, and $399 million, or 20.3% for the three and nine months ended September 30, 2023, respectively, primarily driven by growth in average loan receivables. The growth in average loan receivables for both periods reflected continued higher promotional purchase volume and lower customer payment rates. Purchase volume increased 13.5% and 16.2%, respectively, and average active accounts increased 13.5% and 14.0% for the three and nine months ended September 30, 2023, respectively, reflecting broad-based growth led by Dental, Pet and Cosmetic.

Other income increased by $19 million, or 34.5%, and $32 million, or 20.4%, for the three and nine months ended September 30, 2023, respectively, primarily due to higher debt cancellation fees.

Lifestyle


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Purchase volume	$	1,490	$	1,374	$	4,372	$	4,000
Period-end loan receivables	$	6,483	$	5,686	$	6,483	$	5,686
Average loan receivables, including held for sale	$	6,383	$	5,610	$	6,137	$	5,478
Average active accounts (in thousands)	2,556		2,524		2,572		2,546

Interest and fees on loans	$	249	$	208	$	704	$	593
Other income	$	8	$	8	$	22	$	21

Lifestyle interest and fees on loans increased by $41 million, or 19.7%, and $111 million, or 18.7%, for the three and nine months ended September 30, 2023, respectively, primarily driven by growth in average loan receivables and higher benchmark interest rates. The growth in average loan receivables for both periods reflected lower customer payment rates and purchase volume growth of 8.4% and 9.3% for the three and nine months ended September 30, 2023, respectively, which was driven by higher transaction values in Outdoor and Luxury.

Corp, Other


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Purchase volume	$	—	$	1	$	2	$	5,772
Period-end loan receivables	$	173	$	228	$	173	$	228
Average loan receivables, including held for sale	$	177	$	250	$	190	$	2,715
Average active accounts (in thousands)	75		152		88		3,407

Interest and fees on loans	$	(7)	$	2	$	(1)	$	476
Other income	$	16	$	2	$	(3)	$	218

The decreases shown above for the nine months ended September 30, 2023 for Corp, Other compared to the prior year period reflect the effects of the sale of the BP and Gap Inc. portfolios in May 2022 and June 2022, respectively.

Other income decreased by $221 million, or 101.4%, for the nine months ended September 30, 2023 primarily due to the gain on sale of $120 million recognized in the prior year and lower interchange revenue related to the portfolios sold 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 condensed consolidated financial statements for additional information related to our loan receivables.

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


($ in millions)	At September 30, 2023		(%)		At December 31, 2022		(%)
Loans
Credit cards	$	92,078	94.1	%	$	87,630	94.8	%
Consumer installment loans	3,784		3.9	%	3,056		3.3
Commercial credit products	1,879		1.9	%	1,682		1.8
Other	132		0.1	%	102		0.1
Total loans	$	97,873	100.0	%	$	92,470	100.0	%

Loan receivables increased 5.8% to $97.9 billion at September 30, 2023 compared to December 31, 2022, and increased 13.8% to $97.9 billion at September 30, 2023 compared to $86.0 billion at September 30, 2022. The increases in loan receivables were primarily driven by lower customer payment rates and purchase volume growth. The increase compared to December 31, 2022 was partially offset by the seasonality of our business.

Our loan receivables portfolio had the following geographic concentration at September 30, 2023.


($ in millions)	Loan Receivables Outstanding		% of Total Loan Receivables Outstanding
State
Texas	$	10,781	11.0	%
California	$	10,195	10.4	%
Florida	$	9,094	9.3	%
New York	$	4,778	4.9	%
North Carolina	$	4,035	4.1	%

Delinquencies

Over-30 day loan delinquencies as a percentage of period-end loan receivables increased to 4.40% at September 30, 2023 from 3.28% at September 30, 2022, and increased from 3.65% at December 31, 2022. These increases were primarily driven by lower 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 Condensed Consolidated Statements of Earnings.

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


	Three months ended September 30,
	2023				2022
($ in millions)	Amount		Rate		Amount		Rate
Credit cards	$	1,040	4.56	%	$	596	2.98	%
Consumer installment loans	49		5.32	%	21		2.89	%
Commercial credit products	26		5.54	%	17		3.92	%
Other	1		3.08	%	1		4.96	%
Total net charge-offs	$	1,116	4.60	%	$	635	3.00	%


	Nine months ended September 30,
	2023				2022
($ in millions)	Amount		Rate		Amount		Rate
Credit cards	$	3,003	4.57	%	$	1,667	2.82	%
Consumer installment loans	127		5.03	%	49		2.36	%
Commercial credit products	87		6.50	%	43		3.58	%
Other	1		1.10	%	1		1.83	%
Total net charge-offs	$	3,218	4.62	%	$	1,760	2.82	%

Allowance for Credit Losses

The allowance for credit losses totaled $10.2 billion at September 30, 2023, compared to $9.5 billion at December 31, 2022, respectively, and $9.1 billion at September 30, 2022, and reflects our estimate of expected credit losses for the life of the loan receivables on our Consolidated Statement of Financial Position. Our allowance for credit losses as a percentage of total loan receivables increased to 10.40% at September 30, 2023, from 10.30% at December 31, 2022 and decreased from 10.58% at September 30, 2022.

The increase in allowance for credit losses compared to September 30, 2022 and December 31, 2022 was primarily driven by growth in loan receivables. The increase compared to December 31, 2022 was partially offset by a $294 million reduction related to the adoption of ASU 2022-02 on January 1, 2023 which eliminated the separate recognition and measurement guidance for troubled debt restructurings (“TDRs”). See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 4. Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for additional information on the effects of adoption of the new accounting guidance.

Funding, Liquidity and Capital Resources

____________________________________________________________________________________________

We maintain a strong focus on liquidity and capital. Our funding, liquidity and capital policies are designed to ensure that our business has the liquidity and capital resources to support our daily operations, our business growth, our credit ratings and our regulatory and policy requirements, in a cost effective and prudent manner through expected and unexpected market environments.

Funding Sources

Our primary funding sources include cash from operations, deposits (direct and brokered deposits), securitized financings and senior and subordinated unsecured notes.

The following table summarizes information concerning our funding sources during the periods indicated:


	2023						2022
Three months ended September 30 ($ in millions)	Average Balance		%		Average Rate		Average Balance		%		Average Rate
Deposits(1)	$	75,952	83.7	%	4.2	%	$	66,787	83.3	%	1.7	%
Securitized financings	6,096		6.7		5.6		6,258		7.8		3.4
Senior and subordinated unsecured notes	8,710		9.6		4.8		7,102		8.9		4.5

Total	$	90,758	100.0	%	4.3	%	$	80,147	100.0	%	2.1	%

______________________

(1)Excludes $401 million and $371 million average balance of non-interest-bearing deposits for the three months ended September 30, 2023 and 2022, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the three months ended September 30, 2023 and 2022.


	2023						2022
Nine months ended September 30 ($ in millions)	Average Balance		%		Average Rate		Average Balance		%		Average Rate
Deposits(1)	$	74,340	83.5	%	3.7	%	$	64,371	82.5	%	1.2	%
Securitized financings	6,062		6.8		5.3		6,547		8.4		2.6
Senior and subordinated unsecured notes	8,621		9.7		4.9		7,098		9.1		4.2


Total	$	89,023	100.0	%	3.9	%	$	78,016	100.0	%	1.6	%

______________________

(1)Excludes $410 million and $380 million average balance of non-interest-bearing deposits for the nine months ended September 30, 2023 and 2022, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the nine months ended September 30, 2023 and 2022.

Deposits

We obtain deposits directly from retail, affinity relationships and commercial customers (“direct deposits”) or through third-party brokerage firms that offer our deposits to their customers (“brokered deposits”). At September 30, 2023, we had $64.1 billion in direct deposits and $14.0 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to utilize our direct deposit base as a source of stable and diversified low-cost funding.

Our direct deposits are primarily from retail customers and include a range of FDIC-insured deposit products, including certificates of deposit, IRAs, money market accounts, savings accounts, sweep and affinity deposits.

Brokered deposits are primarily from retail customers of large brokerage firms. We have relationships with 10 brokers that offer our deposits through their networks. Our brokered deposits consist primarily of certificates of deposit that bear interest at a fixed rate. These deposits generally are not subject to early withdrawal.

Our ability to attract deposits is sensitive to, among other things, the interest rates we pay, and therefore, we bear funding risk if we fail to pay higher rates, or interest rate risk if we are required to pay higher rates, to retain existing deposits or attract new deposits. To mitigate these risks, our funding strategy includes a range of deposit products, and we seek to maintain access to multiple other funding sources, including securitized financings (including our undrawn committed capacity) and unsecured debt.

The following table summarizes certain information regarding our interest-bearing deposits by type (all of which constitute U.S. deposits) for the periods indicated:


Three months ended September 30 ($ in millions)	2023						2022
	Average Balance		%		Average Rate		Average Balance		%		Average Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)	$	34,436	45.3	%	4.1	%	$	22,789	34.1	%	1.3	%
Savings, money market, and demand accounts	28,746		37.9		4.4		31,005		46.4		1.7
Brokered deposits	12,770		16.8		4.0		12,993		19.5		2.2
Total interest-bearing deposits	$	75,952	100.0	%	4.2	%	$	66,787	100.0	%	1.7	%


Nine months ended September 30 ($ in millions)	2023						2022
	Average Balance		%		Average Rate		Average Balance		%		Average Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)	$	32,115	43.2	%	3.5	%	$	21,552	33.5	%	1.1	%
Savings, money market, and demand accounts	29,180		39.3		3.9		30,990		48.1		1.0
Brokered deposits	13,045		17.5		3.8		11,829		18.4		1.7
Total interest-bearing deposits	$	74,340	100.0	%	3.7	%	$	64,371	100.0	%	1.2	%

Our deposit liabilities provide funding with maturities ranging from one day to ten years. At September 30, 2023, the weighted average maturity of our interest-bearing time deposits was 1.0 years. See Note 7. Deposits to our condensed consolidated financial statements for more information on the maturities of our time deposits.

The following table summarizes deposits by contractual maturity at September 30, 2023:


($ in millions)	3 Months or Less		Over 3 Months but within 6 Months		Over 6 Months but within 12 Months		Over 12 Months		Total
U.S. deposits (less than FDIC insurance limit)(1)(2)	$	31,666	$	8,002	$	12,944	$	10,147	$	62,759
U.S. deposits (in excess of FDIC insurance limit)(2)
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)	1,279		2,485		3,460		1,637		8,861
Savings, money market, and demand accounts	6,446		—		—		—		6,446


Total	$	39,391	$	10,487	$	16,404	$	11,784	$	78,066

______________________

(1)Includes brokered certificates of deposit for which underlying individual deposit balances are assumed to be less than $250,000.

(2)The standard deposit insurance amount is $250,000 per depositor, for each account ownership category. Deposits in excess of FDIC insurance limit presented above include partially insured accounts. Our estimate of the uninsured portion of these deposit balances at September 30, 2023 was approximately $5.2 billion.

Securitized Financings

We access the asset-backed securitization market using the Synchrony Card Issuance Trust (“SYNIT”) through which we may issue asset-backed securities through both public transactions and private transactions funded by financial institutions and commercial paper conduits. In addition, we issue asset-backed securities in private transactions through the Synchrony Credit Card Master Note Trust (“SYNCT”) and the Synchrony Sales Finance Master Trust (“SFT”).

The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at September 30, 2023.


($ in millions)	Less Than One Year		One Year Through Three Years		Four Years Through Five Years		After Five Years		Total
Scheduled maturities of long-term borrowings—owed to securitization investors:
SYNCT	$	1,350	$	950	$	—	$	—	$	2,300
SFT	300		1,250		—		—		1,550
SYNIT(1)	—		2,675		—		—		2,675
Total long-term borrowings—owed to securitization investors	$	1,650	$	4,875	$	—	$	—	$	6,525

______________________

(1)Excludes any subordinated classes of SYNIT notes that we owned at September 30, 2023.

We retain exposure to the performance of trust assets through: (i) in the case of SYNCT, SFT and SYNIT, subordinated retained interests in the loan receivables transferred to the trust in excess of the principal amount of the notes for a given series that provide credit enhancement for a particular series, as well as a pari passu seller’s interest in each trust and (ii) in the case of SYNIT, any subordinated classes of notes that we own.

All of our securitized financings include early repayment triggers, referred to as early amortization events, including events related to material breaches of representations, warranties or covenants, inability or failure of the Bank to transfer loan receivables to the trusts as required under the securitization documents, failure to make required payments or deposits pursuant to the securitization documents, and certain insolvency-related events with respect to the related securitization depositor, Synchrony (solely with respect to SYNCT) or the Bank. In addition, an early amortization event will occur with respect to a series if the excess spread as it relates to a particular series or for the trust, as applicable, falls below zero. Following an early amortization event, principal collections on the loan receivables in the applicable trust are applied to repay principal of the trust's asset-backed securities rather than being available on a revolving basis to fund the origination activities of our business. The occurrence of an early amortization event also would limit or terminate our ability to issue future series out of the trust in which the early amortization event occurred. No early amortization event has occurred with respect to any of the securitized financings in SYNCT, SFT or SYNIT.

The following table summarizes for each of our trusts the three-month rolling average excess spread at September 30, 2023.


	Note Principal Balance ($ in millions)		# of Series Outstanding	Three-Month Rolling Average Excess Spread(1)
SYNCT	$	2,300	4	~ 14.6% to 15.3%
SFT	$	1,550	6	13.0	%
SYNIT	$	2,675	1	17.7	%

______________________

(1)Represents the excess spread (generally calculated as interest income collected from the applicable pool of loan receivables less applicable net charge-offs, interest expense and servicing costs, divided by the aggregate principal amount of loan receivables in the applicable pool) for SFT or, in the case of SYNCT, a range of the excess spreads relating to the particular series issued within such trust or, in the case of SYNIT, the excess spread relating to the one outstanding series issued within such trust, in all cases omitting any series that have not been outstanding for at least three full monthly periods and calculated in accordance with the applicable trust or series documentation, for the three securitization monthly periods ended September 30, 2023.

Senior and Subordinated Unsecured Notes

The following table provides a summary of our outstanding fixed rate senior and subordinated unsecured notes at September 30, 2023, which includes $750 million of subordinated unsecured notes issued by Synchrony Financial in February 2023.


Issuance Date	Interest Rate(1)	Maturity	Principal Amount Outstanding(2)
($ in millions)
Fixed rate senior unsecured notes:
Synchrony Financial
August 2014	4.250%	August 2024	1,250
July 2015	4.500%	July 2025	1,000
August 2016	3.700%	August 2026	500
December 2017	3.950%	December 2027	1,000
March 2019	4.375%	March 2024	600
March 2019	5.150%	March 2029	650
October 2021	2.875%	October 2031	750
June 2022	4.875%	June 2025	750
Synchrony Bank
August 2022	5.400%	August 2025	900
August 2022	5.625%	August 2027	600

Fixed rate subordinated unsecured notes:
Synchrony Financial
February 2023	7.250%	February 2033	750
Total fixed rate senior and subordinated unsecured notes			$	8,750

______________________

(1)Weighted average interest rate of all senior and subordinated unsecured notes at September 30, 2023 was 4.69%.

(2)The amounts shown exclude unamortized debt discounts, premiums and issuance costs.

Short-Term Borrowings

Except as described above, there were no material short-term borrowings for the periods presented.

Other

At September 30, 2023, we had more than $25.0 billion of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window.

Covenants

The indenture pursuant to which our senior and subordinated unsecured notes have been issued includes various covenants. If we do not satisfy any of these covenants, the maturity of amounts outstanding thereunder may be accelerated and become payable. We were in compliance with all of these covenants at September 30, 2023.

At September 30, 2023, we were not in default under any of our credit facilities.

Credit Ratings

Our borrowing costs and capacity in certain funding markets, including securitizations and senior and subordinated debt, may be affected by the credit ratings of the Company, the Bank and the ratings of our asset-backed securities.

The table below reflects our current credit ratings and outlooks:


	S&P	Fitch Ratings
Synchrony Financial
Senior unsecured debt	BBB-	BBB-
Subordinated unsecured debt	BB+	BB+
Preferred stock	BB-	B+
Outlook for Synchrony Financial	Stable	Positive
Synchrony Bank
Senior unsecured debt	BBB	BBB-
Outlook for Synchrony Bank	Stable	Positive

In addition, certain of the asset-backed securities issued by SYNCT and SYNIT are rated by Fitch, S&P and/or Moody’s. A credit rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. Downgrades in these credit ratings could materially increase the cost of our funding from, and restrict our access to, the capital markets.

Liquidity

____________________________________________________________________________________________

We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth, satisfy debt obligations and to meet regulatory expectations under normal and stress conditions.

We maintain policies outlining the overall framework and general principles for managing liquidity risk across our business, which is the responsibility of our Asset and Liability Management Committee, a subcommittee of the Risk Committee of our Board of Directors. We employ a variety of metrics to monitor and manage liquidity. We perform regular liquidity stress testing and contingency planning as part of our liquidity management process. We evaluate a range of stress scenarios including Company specific and systemic events that could impact funding sources and our ability to meet liquidity needs.

We maintain a liquidity portfolio, which at September 30, 2023 had $17.6 billion of liquid assets, primarily consisting of cash and equivalents and short-term obligations of the U.S. Treasury, less cash in transit which is not considered to be liquid, compared to $14.2 billion of liquid assets at December 31, 2022. The increase in liquid assets was primarily due to deposit growth and the issuance of secured and unsecured notes, partially offset by loan receivables growth in the nine months ended September 30, 2023. We believe our liquidity position at September 30, 2023 remains strong as we continue to operate in a period of uncertain economic conditions and we will continue to closely monitor our liquidity as economic conditions change.

As additional sources of liquidity, at September 30, 2023, we had an aggregate of $2.5 billion of undrawn committed capacity on our securitized financings, subject to customary borrowing conditions, from private lenders under our securitization programs and $0.5 billion of undrawn committed capacity under our unsecured revolving credit facility with private lenders, and we had more than $25.0 billion of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window.

As a general matter, investments included in our liquidity portfolio are expected to be highly liquid, giving us the ability to readily convert them to cash. The level and composition of our liquidity portfolio may fluctuate based upon the level of expected maturities of our funding sources as well as operational requirements and market conditions.

We rely significantly on dividends and other distributions and payments from the Bank for liquidity; however, bank regulations, contractual restrictions and other factors limit the amount of dividends and other distributions and payments that the Bank may pay to us. For a discussion of regulatory restrictions on the Bank’s ability to pay dividends, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” and “Regulation—Regulation Relating to Our Business—Savings Association Regulation—Dividends and Stock Repurchases” in our 2022 Form 10-K.

Capital

____________________________________________________________________________________________

Our primary sources of capital have been earnings generated by our business and existing equity capital. We seek to manage capital to a level and composition sufficient to support the risks of our business, meet regulatory requirements, adhere to rating agency targets and support future business growth. The level, composition and utilization of capital are influenced by changes in the economic environment, strategic initiatives and legislative and regulatory developments. Within these constraints, we are focused on deploying capital in a manner that will provide attractive returns to our stockholders.

While we have not been subject to the Federal Reserve Board's formal capital plan submission requirements to-date, we submitted a capital plan to the Federal Reserve Board in 2023. While not currently required, our capital plan process does include certain internal stress testing.

In 2023, our average total consolidated assets exceeded $100 billion and we will now become subject to existing enhanced prudential standards following applicable transition periods. We will be subject to the Federal Reserve Board's formal capital plan submission requirements in 2024 and will be required to conduct stress tests beginning in 2026. See “Regulation—Regulation Relating to Our Business—Recent Legislative and Regulatory Developments” in our 2022 Form 10-K for additional information on regulations that are currently applicable to us, as well as these enhanced prudential standards.

Dividend and Share Repurchases


Common Stock Cash Dividends Declared	Month of Payment	Amount per Common Share		Amount
($ in millions, except per share data)
Three months ended March 31, 2023	February 2023	$	0.23	$	100
Three months ended June 30, 2023	May 2023	0.23		99
Three months ended September 30, 2023	August 2023	0.25		104
Total dividends declared		$	0.71	$	303


Preferred Stock Cash Dividends Declared	Month of Payment	Amount per Preferred Share		Amount
($ in millions, except per share data)
Three months ended March 31, 2023	February 2023	$	14.06	$	11
Three months ended June 30, 2023	May 2023	14.06		10
Three months ended September 30, 2023	August 2023	14.06		10
Total dividends declared		$	42.18	$	31

The declaration and payment of future dividends to holders of our common and preferred stock will be at the discretion of the Board and will depend on many factors. For a discussion of regulatory and other restrictions on our ability to pay dividends and repurchase stock, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” in our 2022 Form 10-K.


Common Shares Repurchased Under Publicly Announced Programs	Total Number of Shares Purchased	Dollar Value of Shares Purchased
($ and shares in millions)
Three months ended March 31, 2023	11.3	$	400
Three months ended June 30, 2023	10.5	300
Three months ended September 30, 2023	4.5	150
Total	26.3	$	850

In April 2023 the Board of Directors approved an incremental share repurchase program of up to $1.0 billion, through June 30, 2024. Repurchases under this program are subject to market conditions and other factors, including legal and regulatory restrictions and required approvals, if any. During the nine months ended September 30, 2023, we repurchased $850 million of common stock as part of our share repurchase programs, with remaining authorized share repurchase capacity of $850 million through June 2024.

Regulatory Capital Requirements - Synchrony Financial

As a savings and loan holding company, we are required to maintain minimum capital ratios, under the applicable U.S. Basel III capital rules. For more information, see “Regulation—Savings and Loan Holding Company Regulation” in our 2022 Form 10-K.

For Synchrony Financial to be a well-capitalized savings and loan holding company, Synchrony Bank must be well-capitalized and Synchrony Financial must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve Board to meet and maintain a specific capital level for any capital measure. At September 30, 2023, Synchrony Financial met all the requirements to be deemed well-capitalized.

The following table sets forth the composition of our capital ratios for the Company calculated under the Basel III Standardized Approach rules at September 30, 2023 and December 31, 2022, respectively.


	Basel III
	At September 30, 2023				At December 31, 2022
($ in millions)	Amount		Ratio(1)		Amount		Ratio(1)
Total risk-based capital	$	14,964	15.3	%	$	13,713	15.0	%
Tier 1 risk-based capital	$	12,906	13.2	%	$	12,493	13.6	%
Tier 1 leverage	$	12,906	11.8	%	$	12,493	12.3	%
Common equity Tier 1 capital	$	12,172	12.4	%	$	11,759	12.8	%
Risk-weighted assets	$	97,987			$	91,596

______________________

(1)Tier 1 leverage ratio represents total Tier 1 capital as a percentage of total average assets, after certain adjustments. All other ratios presented above represent the applicable capital measure as a percentage of risk-weighted assets.

The Company elected to adopt the option provided by the interim final rule issued by joint federal bank regulatory agencies, which largely delayed the effects of CECL on our regulatory capital. Beginning in the first quarter of 2022, the effects are being phased-in over a three-year transitional period through 2024, collectively the “CECL regulatory capital transition adjustment”. The effects of CECL on our regulatory capital will be fully phased-in beginning in the first quarter of 2025. For more information, see “Capital—Regulatory Capital Requirements - Synchrony Financial” in our 2022 Form 10-K.

Capital amounts and ratios in the above table all reflect the applicable CECL regulatory capital transition adjustment for each period. The decrease in our common equity Tier 1 capital ratio compared to December 31, 2022 was primarily due to an increase in risk-weighted assets during the nine months ended September 30, 2023 and the second year phase-in of the impact of CECL on our regulatory capital, partially offset by the retention of net earnings during the same period and the impact from the adoption of the new accounting standard for TDRs. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for additional information on the new accounting standard.

Regulatory Capital Requirements - Synchrony Bank

At September 30, 2023 and December 31, 2022, the Bank met all applicable requirements to be deemed well-capitalized pursuant to OCC regulations and for purposes of the Federal Deposit Insurance Act. The following table sets forth the composition of the Bank’s capital ratios calculated under the Basel III Standardized Approach rules at September 30, 2023 and December 31, 2022, and also reflects the applicable CECL regulatory capital transition adjustment for each period.


	At September 30, 2023				At December 31, 2022				Minimum to be Well-Capitalized under Prompt Corrective Action Provisions
($ in millions)	Amount		Ratio		Amount		Ratio		Ratio
Total risk-based capital	$	14,401	15.6	%	$	13,313	15.6	%	10.0%
Tier 1 risk-based capital	$	12,408	13.4	%	$	12,174	14.2	%	8.0%
Tier 1 leverage	$	12,408	12.1	%	$	12,174	12.8	%	5.0%
Common equity Tier 1 capital	$	12,408	13.4	%	$	12,174	14.2	%	6.5%

Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit our business activities and have a material adverse effect on our business, results of operations and financial condition. See “Regulation—Risk Factors Relating to Regulation—Failure by Synchrony and the Bank to meet applicable capital adequacy and liquidity requirements could have a material adverse effect on us” in our 2022 Form 10-K.

Off-Balance Sheet Arrangements and Unfunded Lending Commitments

____________________________________________________________________________________________

We do not have any material off-balance sheet arrangements, including guarantees of third-party obligations. Guarantees are contracts or indemnification agreements that contingently require us to make a guaranteed payment or perform an obligation to a third-party based on certain trigger events. At September 30, 2023, we had not recorded any contingent liabilities in our Condensed Consolidated Statement of Financial Position related to any guarantees. See Note 5 - Variable Interest Entities to our condensed consolidated financial statements for more information on our investment commitments for unconsolidated variable interest entities (“VIE's”).

We extend credit, primarily arising from agreements with customers for unused lines of credit on our credit cards, in the ordinary course of business. Each unused credit card line is unconditionally cancellable by us. See Note 4 - Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for more information on our unfunded lending commitments.

Critical Accounting Estimates

____________________________________________________________________________________________

In preparing our condensed consolidated financial statements, we have identified certain accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. The critical accounting estimates we have identified relate to allowance for credit losses and fair value measurements. These estimates reflect our best judgment about current, and for some estimates future, economic and market conditions and their effects based on information available as of the date of these financial statements. If these conditions change from those expected, it is reasonably possible that these judgments and estimates could change, which may result in incremental losses on loan receivables, or material changes to our Condensed Consolidated Statement of Financial Position, among other effects. See “Management's Discussion and Analysis—Critical Accounting Estimates” in our 2022 Form 10-K, for a detailed discussion of these critical accounting estimates.

Regulation and Supervision

____________________________________________________________________________________________

Our business, including our relationships with our customers, is subject to regulation, supervision and examination under U.S. federal, state and foreign laws and regulations. These laws and regulations cover all aspects of our business, including lending and collection practices, treatment of our customers, safeguarding deposits, customer privacy and information security, capital structure, liquidity, dividends and other capital distributions, transactions with affiliates, and conduct and qualifications of personnel. Such laws and regulations directly and indirectly affect key drivers of our profitability, including, for example, capital and liquidity, product offerings, risk management, and costs of compliance.

As a savings and loan holding company and a financial holding company, Synchrony is subject to regulation, supervision and examination by the Federal Reserve Board. As a large provider of consumer financial services, we are also subject to regulation, supervision and examination by the CFPB.

The Bank is a federally chartered savings association. As such, the Bank is subject to regulation, supervision and examination by the OCC, which is its primary regulator, and by the CFPB. In addition, the Bank, as an insured depository institution, is supervised by the FDIC.

In 2023, our average total consolidated assets exceeded $100 billion and we will now become subject to existing enhanced prudential standards following applicable transition periods. See “Regulation—Regulation Relating to Our Business—Recent Legislative and Regulatory Developments” in our 2022 Form 10-K for additional information on regulations that are currently applicable to us, as well as these enhanced prudential standards. See also “—Capital” above, for discussion of the impact of regulations and supervision on our capital and liquidity, including our ability to pay dividends and repurchase stock.

In July 2023, the federal banking agencies issued a notice of proposed rulemaking that would change the regulatory capital requirements for U.S. banking organizations with at least $100 billion in total assets. We are currently assessing the impact of the proposed rule to our business. However, to the extent the proposed changes are finalized and adopted, they would likely increase our regulatory capital requirements, which may decrease our return on equity and could result in limitations on our ability to pay dividends or repurchase our stock.

Additionally, the federal banking agencies have recently released several proposals intended to facilitate the orderly resolution of large banking organizations. For instance, an August 2023 interagency notice of proposed rulemaking would require depository institution holding companies with $100 billion or more in assets to issue minimum amounts of long-term debt and to maintain “clean” holding companies without certain types of liabilities, and, relatedly, would require insured depository institution subsidiaries with $100 billion or more in assets to issue minimum amounts of long-term debt to a holding company. While we are assessing the impact of the proposed rule to our business, if the proposed changes are finalized and adopted, they may require changes to our funding strategy and/or increase our cost of funding.

ITEM 1. FINANCIAL STATEMENTS

Synchrony Financial and subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

____________________________________________________________________________________________


	Three months ended September 30,				Nine months ended September 30,
($ in millions, except per share data)	2023		2022		2023		2022
Interest income:
Interest and fees on loans (Note 4)	$	5,151	$	4,258	$	14,579	$	12,305
Interest on cash and debt securities	203		84		582		133
Total interest income	5,354		4,342		15,161		12,438
Interest expense:
Interest on deposits	800		280		2,074		567
Interest on borrowings of consolidated securitization entities	86		54		241		127
Interest on senior and subordinated unsecured notes	106		80		313		225

Total interest expense	992		414		2,628		919
Net interest income	4,362		3,928		12,533		11,519
Retailer share arrangements	(979)		(1,057)		(2,783)		(3,288)

Provision for credit losses (Note 4)	1,488