在本报告中提到的“Synchrony”及其标识和其他商标，包括CareCredit®、Quickscreen®、Dual Card™、Synchrony Car Care™和SyPI™，归我们所有。仅出于方便起见，我们在本报告中提到我们的商标时，未使用™和®符号，但这并不意味着我们不会根据适用法律的规定，充分主张我们对商标的权利。本报告中提到的其他服务标记、商标和商业名称归其各自所有者所有。
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 our CareCredit brand, as well as partners such as Walgreens.
7
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, Kawasaki, Pandora, Polaris, Suzuki and Sweetwater.
•专属品牌信用卡。 专属品牌信用卡是与合作伙伴合作的信用卡（例如Lowe's或亚马逊）或计划品牌的信用卡（例如Synchrony Car Care或CareCredit），主要用于从合作伙伴或计划网络内购买商品和服务。此外，在某些情况下，持卡人可能被允许用于提取现金。我们的专属品牌信用卡通常是按照标准条款或促销融资优惠条件提供信用额度。
However, in addition to these seasonal trends, the moderation in customer payment behavior from the previously elevated levels we experienced in recent periods, has also significantly impacted our key financial metrics, such as our net charge-off rate, and also the fluctuations experienced between quarterly periods. The effects from these changes in customer payment behavior have resulted and may continue to result in either partial, or in some instances full, offset to the impact from the ongoing seasonal trends discussed above.
Highlights for the Three and Nine Months Ended September 30, 2024
Below are highlights of our performance for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, as applicable, except as otherwise noted.
•Net earnings increased to $789 million from $628 million and to $2.7 billion from $1.8 billion for the three and nine months ended September 30, 2024. The increase in the three months ended September 30, 2024 was primarily driven by higher net interest income and lower retailer share arrangements, partially offset by an increase in provision for credit losses. The increase in the nine months ended September 30, 2024 was primarily driven by the after-tax gain on sale related to Pets Best of $802 million, as well as the same trends experienced in the three months ended September 30, 2024.
•Loan receivables increased 4.4% to $102.2 billion at September 30, 2024 compared to $97.9 billion at September 30, 2023, primarily driven by lower customer payment rates and the completion of the Ally Lending acquisition, partially offset by lower purchase volume.
•Net interest income increased 5.7% to $4.6 billion and 7.1% to $13.4 billion for the three and nine months ended September 30, 2024, respectively. Interest and fees on loans increased 7.2% and 10.5% for the three and nine months ended September 30, 2024, respectively, primarily driven by growth in average loan receivables, the impact of our product, pricing and policy changes and lower payment rate, partially offset by higher reversals. For the three and nine months ended September 30, 2024, interest expense increased 18.5% and 33.8%, respectively, due to higher benchmark rates and higher interest-bearing liabilities.
•Retailer share arrangements decreased 6.6% to $914 million and 10.6% to $2.5 billion for the three and nine months ended September 30, 2024, respectively, primarily due to higher net charge-offs.
•Over-30 day loan delinquencies as a percentage of period-end loan receivables increased 38 basis points to 4.78% at September 30, 2024 compared to September 30, 2023. The net charge-off rate increased 146 basis points to 6.06% and increased 164 basis points to 6.26% for the three and nine months ended September 30, 2024, respectively.
•Provision for credit losses increased by $109 million, or 7.3%, and $1.0 billion, or 24.3%, for the three and nine months ended September 30, 2024, respectively, primarily driven by higher net charge-offs, partially offset by lower reserve builds. The reserve build in the nine months ended September 30, 2024 included $180 million related to the Ally Lending acquisition. Our allowance coverage ratio (allowance for credit losses as a percentage of period-end loan receivables) increased to 10.79% at September 30, 2024, as compared to 10.40% at September 30, 2023.
•Other income increased by $27 million to $119 million, and by $1.2 billion to $1.4 billion for the three and nine months ended September 30, 2024, respectively. The increase in the three months ended September 30, 2024 was primarily driven by the impact of our product, pricing and policy change related fees, partially offset by the impact of the Pets Best disposition and venture investment gains and losses. The increase in the nine months ended September 30, 2024 was primarily driven by the $1.1 billion gain on sale related to the Pets Best disposition.
•Other expense increased by $35 million, or 3.0%, and $130 million, or 3.8%, for the three and nine months ended September 30, 2024, respectively. The increase in the three and nine months ended September 30, 2024 was primarily driven by costs related to the Ally Lending acquisition, technology investments, and preparatory expenses related to the late fee rule change, partially offset by lower operational losses.
•At September 30, 2024, deposits represented 84% of our total funding sources. Total deposits increased by 1.4% to $82.3 billion at September 30, 2024, compared to December 31, 2023.
12
•During the nine months ended September 30, 2024, we declared and paid cash dividends totaling $51 million on our Series A 5.625% fixed rate non-cumulative perpetual preferred stock and our Series B 8.250% fixed rate reset non-cumulative perpetual preferred stock.
•During the nine months ended September 30, 2024, we repurchased $900 million of our outstanding common stock, and declared and paid cash dividends of $0.75 per share, or $301 million in the aggregate. In April 2024, the Board of Directors approved an incremental share repurchase program of up to $1.0 billion, through June 30, 2025, and maintained the quarterly dividend at its current amount of $0.25 per common share. At September 30, 2024 we had a total share repurchase authorization of $700 million remaining. For more information, see “Capital—Dividend and Share Repurchases.”
•In March 2024, we sold our wholly-owned subsidiary, Pets Best, for consideration comprising a combination of cash and an equity interest in Independence Pet Holdings, Inc. The sale resulted in the recognition of a gain on sale of $1.1 billion, or $802 million net of tax.
•In March 2024, we acquired Ally Lending for cash consideration of $2.0 billion. The assets and liabilities of Ally Lending primarily included loan receivables with an unpaid principal balance of $2.2 billion. See Note 3. Acquisitions and Dispositions to our condensed consolidated financial statements for additional information.
2024 Partner Agreements
During the nine months ended September 30, 2024, we continued to expand and diversify our portfolio with the addition or renewal of more than 55 partners, as well as enter new strategic relationships, which included the following:
•In our Home & Auto sales platform, we announced our new partnerships with Bel Furniture and The Carpet Guys and extended our program agreements with Associated Materials, BrandsMart and Jerome's Furniture Warehouse.
•In our Digital sales platform, we announced our new partnership with Virgin Red and extended our program agreement with Cathay Pacific and Verizon.
•In our Health & Wellness sales platform, we expanded our network through our new partnerships with Bond Veterinary, Lakefield Veterinary Group, LaserAway and Western Veterinary and extended our program agreements with Bosley, Innovetive, LCA Vision and SCI. We also launched the integration of our CareCredit card with Pets Best to enable direct insurance claim reimbursement for customers.
•In our Lifestyle sales platform, we announced our new partnerships with BRP and Gibson and extended our program agreements with CF Moto, Daniel's, Dick's Sporting Goods, and EC Barton and Reeds.
•We added two new strategic technology partnerships with Adit Practice Management Software and ServiceTitan, both of which expand access for customers to our suite of credit products.
•We entered into a relationship with Atlanticus Holdings Corporation to deliver a preferred second look financing solution for private label credit cards and installment loan products across our business.
13
Summary Earnings
The following table sets forth our results of operations for the periods indicated.
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Interest income
$
5,785
$
5,354
$
16,935
$
15,161
Interest expense
1,176
992
3,516
2,628
Net interest income
4,609
4,362
13,419
12,533
Retailer share arrangements
(914)
(979)
(2,488)
(2,783)
Provision for credit losses
1,597
1,488
5,172
4,161
Net interest income, after retailer share arrangements and provision for credit losses
2,098
1,895
5,759
5,589
Other income
119
92
1,393
218
Other expense
1,189
1,154
3,572
3,442
Earnings before provision for income taxes
1,028
833
3,580
2,365
Provision for income taxes
239
205
855
567
Net earnings
$
789
$
628
$
2,725
$
1,798
Net earnings available to common stockholders
$
768
$
618
$
2,674
$
1,767
14
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)
2024
2023
2024
2023
Financial Position Data (Average):
Loan receivables, including held for sale
$
102,009
$
96,230
$
101,484
$
93,198
Total assets
$
119,389
$
110,335
$
119,429
$
108,209
Deposits
$
82,487
$
76,353
$
82,872
$
74,750
Borrowings
$
15,785
$
14,806
$
15,924
$
14,683
Total equity
$
15,815
$
13,758
$
15,318
$
13,537
Selected Performance Metrics:
Purchase volume(1)(2)
$
44,985
$
47,006
$
134,218
$
135,839
Home & Auto
$
11,361
$
12,273
$
34,369
$
35,989
Digital
$
13,352
$
13,808
$
39,383
$
39,541
Diversified & Value
$
14,992
$
15,445
$
44,348
$
44,240
Health & Wellness
$
3,867
$
3,990
$
11,936
$
11,695
Lifestyle
$
1,411
$
1,490
$
4,180
$
4,372
Corp, Other
$
2
$
—
$
2
$
2
Average active accounts (in thousands)(2)(3)
70,424
70,308
71,052
69,842
Net interest margin(4)
15.04
%
15.36
%
14.68
%
15.17
%
Net charge-offs
$
1,553
$
1,116
$
4,759
$
3,218
Net charge-offs (annualized) as a % of average loan receivables, including held for sale
6.06
%
4.60
%
6.26
%
4.62
%
Allowance coverage ratio(5)
10.79
%
10.40
%
10.79
%
10.40
%
Return on assets(6)
2.6
%
2.3
%
3.0
%
2.2
%
Return on equity(7)
19.8
%
18.1
%
23.8
%
17.8
%
Equity to assets(8)
13.25
%
12.47
%
12.83
%
12.51
%
Other expense (annualized) as a % of average loan receivables, including held for sale
4.64
%
4.76
%
4.70
%
4.94
%
Efficiency ratio(9)
31.2
%
33.2
%
29.0
%
34.5
%
Effective income tax rate
23.2
%
24.6
%
23.9
%
24.0
%
Selected Period-End Data:
Loan receivables
$
102,193
$
97,873
$
102,193
$
97,873
Allowance for credit losses
$
11,029
$
10,176
$
11,029
$
10,176
30+ days past due as a % of period-end loan receivables(10)
4.78
%
4.40
%
4.78
%
4.40
%
90+ days past due as a % of period-end loan receivables(10)
2.33
%
2.06
%
2.33
%
2.06
%
Total active accounts (in thousands)(3)
69,965
70,137
69,965
70,137
______________________
(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 annualized net interest income divided by average total interest-earning assets.
(5)Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables.
(6)Return on assets represents annualized net earnings as a percentage of average total assets.
(7)Return on equity represents annualized 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.
15
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.
2024
2023
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)
$
17,316
$
235
5.40
%
$
12,753
$
172
5.35
%
Securities available for sale
2,587
28
4.31
%
3,706
31
3.32
%
Loan receivables, including held for sale(3):
Credit cards
93,785
5,236
22.21
%
90,587
5,003
21.91
%
Consumer installment loans
6,107
238
15.50
%
3,656
108
11.72
%
Commercial credit products
1,992
46
9.19
%
1,861
38
8.10
%
Other
125
2
6.37
%
126
2
6.30
%
Total loan receivables, including held for sale
102,009
5,522
21.54
%
96,230
5,151
21.24
%
Total interest-earning assets
121,912
5,785
18.88
%
112,689
5,354
18.85
%
Non-interest-earning assets:
Cash and due from banks
847
964
Allowance for credit losses
(10,994)
(9,847)
Other assets
7,624
6,529
Total non-interest-earning assets
(2,523)
(2,354)
Total assets
$
119,389
$
110,335
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts
$
82,100
$
968
4.69
%
$
75,952
$
800
4.18
%
Borrowings of consolidated securitization entities
7,817
108
5.50
%
6,096
86
5.60
%
Senior and subordinated unsecured notes
7,968
100
4.99
%
8,710
106
4.83
%
Total interest-bearing liabilities
97,885
1,176
4.78
%
90,758
992
4.34
%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts
387
401
Other liabilities
5,302
5,418
Total non-interest-bearing liabilities
5,689
5,819
Total liabilities
103,574
96,577
Equity
Total equity
15,815
13,758
Total liabilities and equity
$
119,389
$
110,335
Interest rate spread(4)
14.10
%
14.51
%
Net interest income
$
4,609
$
4,362
Net interest margin(5)
15.04
%
15.36
%
16
2024
2023
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)
$
17,685
$
720
5.44
%
$
13,107
$
490
5.00
%
Securities available for sale
2,915
99
4.54
%
4,138
92
2.97
%
Loan receivables, including held for sale(3):
Credit cards
93,757
15,345
21.86
%
87,914
14,179
21.56
%
Consumer installment loans
5,644
630
14.91
%
3,375
285
11.29
%
Commercial credit products
1,957
134
9.15
%
1,789
108
8.07
%
Other
126
7
7.42
%
120
7
7.80
%
Total loan receivables, including held for sale
101,484
16,116
21.21
%
93,198
14,579
20.91
%
Total interest-earning assets
122,084
16,935
18.53
%
110,443
15,161
18.35
%
Non-interest-earning assets:
Cash and due from banks
892
987
Allowance for credit losses
(10,850)
(9,552)
Other assets
7,303
6,331
Total non-interest-earning assets
(2,655)
(2,234)
Total assets
$
119,429
$
108,209
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts
$
82,481
$
2,889
4.68
%
$
74,340
$
2,074
3.73
%
Borrowings of consolidated securitization entities
7,686
323
5.61
%
6,062
241
5.32
%
Senior and subordinated unsecured notes
8,238
304
4.93
%
8,621
313
4.85
%
Total interest-bearing liabilities
98,405
3,516
4.77
%
89,023
2,628
3.95
%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts
391
410
Other liabilities
5,315
5,239
Total non-interest-bearing liabilities
5,706
5,649
Total liabilities
104,111
94,672
Equity
Total equity
15,318
13,537
Total liabilities and equity
$
119,429
$
108,209
Interest rate spread(4)
13.76
%
14.41
%
Net interest income
$
13,419
$
12,533
Net interest margin(5)
14.68
%
15.17
%
________________________________________
(1)Average yields/rates are based on annualized total interest income/expense divided by average balances.
(2)Includes average restricted cash balances of $57 million and $151 million for the three months ended September 30, 2024 and 2023, respectively, and $76 million and $324 million for the nine months ended September 30, 2024 and 2023, respectively.
(3)Interest income on loan receivables includes fees on loans, which primarily consist of late fees on our credit products, of $652 million and $694 million for the three months ended September 30, 2024 and 2023, respectively, and $1.9 billion and $2.0 billion for the nine months ended September 30, 2024 and 2023, 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 annualized net interest income divided by average total interest-earning assets.
17
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 2023 Form 10-K.
Interest Income
Interest income increased by $431 million, or 8.1%, and $1.8 billion, or 11.7%, for the three and nine months ended September 30, 2024, respectively, primarily driven by increases in interest and fees on loans of 7.2% and 10.5%, respectively. The increases in the three and nine months ended September 30, 2024 in interest and fees on loans were primarily driven by growth in average loan receivables, the impact of our product, pricing and policy changes and lower customer payment rates, partially offset by higher reversals.
Average interest-earning assets
Three months ended September 30 ($ in millions)
2024
%
2023
%
Loan receivables, including held for sale
$
102,009
83.7
%
$
96,230
85.4
%
Liquidity portfolio and other
19,903
16.3
%
16,459
14.6
%
Total average interest-earning assets
$
121,912
100.0
%
$
112,689
100.0
%
Nine months ended September 30 ($ in millions)
2024
%
2023
%
Loan receivables, including held for sale
$
101,484
83.1
%
$
93,198
84.4
%
Liquidity portfolio and other
20,600
16.9
%
17,245
15.6
%
Total average interest-earning assets
$
122,084
100.0
%
$
110,443
100.0
%
Average loan receivables, including held for sale, increased 6.0% and 8.9% for the three and nine months ended September 30, 2024, respectively, primarily driven by lower customer payment rates and the impact of the Ally Lending acquisition, partially offset by lower purchase volume. Purchase volume decreased by 4.3% and 1.2% for the three and nine months ended September 30, 2024, respectively, reflecting lower consumer spend as well as the impact of credit actions, partially offset by the Ally Lending acquisition. The decrease for the nine months ended September 30, 2024 was also partially offset by growth in average active accounts of 1.7%.
Yield on average interest-earning assets
The yield on average interest-earning assets increased for the three and nine months ended September 30, 2024 primarily due to increases in the yield on average loan receivables. The loan receivable yield increased 30 basis points for both the three and nine months ended September 30, 2024 to 21.54% and 21.21%, respectively.
Interest Expense
Interest expense increased by $184 million to $1.2 billion, and $888 million to $3.5 billion, for the three and nine months ended September 30, 2024, respectively, due to higher benchmark rates and higher interest-bearing liabilities. Our cost of funds increased to 4.78% and 4.77% for the three and nine months ended September 30, 2024, respectively, compared to 4.34% and 3.95% for the three and nine months ended September 30, 2023, respectively.
Average interest-bearing liabilities
Three months ended September 30 ($ in millions)
2024
%
2023
%
Interest-bearing deposit accounts
$
82,100
83.9
%
$
75,952
83.7
%
Borrowings of consolidated securitization entities
7,817
8.0
%
6,096
6.7
%
Senior and subordinated unsecured notes
7,968
8.1
%
8,710
9.6
%
Total average interest-bearing liabilities
$
97,885
100.0
%
$
90,758
100.0
%
18
Nine months ended September 30 ($ in millions)
2024
%
2023
%
Interest-bearing deposit accounts
$
82,481
83.8
%
$
74,340
83.5
%
Borrowings of consolidated securitization entities
7,686
7.8
%
6,062
6.8
%
Senior and subordinated unsecured notes
8,238
8.4
%
8,621
9.7
%
Total average interest-bearing liabilities
$
98,405
100.0
%
$
89,023
100.0
%
Net Interest Income
Net interest income increased by $247 million, or 5.7%, and $886 million, or 7.1%, for the three and nine months ended September 30, 2024, respectively, resulting from the changes in interest income and interest expense discussed above.
Retailer Share Arrangements
Retailer share arrangements decreased by $65 million, or 6.6%, and $295 million, or 10.6%, for the three and nine months ended September 30, 2024, respectively, primarily due to higher net charge-offs.
Provision for Credit Losses
Provision for credit losses increased by $109 million, or 7.3%, and $1.0 billion, or 24.3%, for the three and nine months ended September 30, 2024, respectively, primarily driven by higher net charge-offs, partially offset by lower reserve builds in the current year. The net charge-off rate for the three months ended September 30, 2024 increased by 146 basis points to 6.06%, as compared to the prior year period, and was 97 basis points above the average of the third quarters of 2017 through 2019. The reserve build in the nine months ended September 30, 2024 included $180 million related to the Ally Lending acquisition.
Other Income
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Interchange revenue
$
256
$
267
$
760
$
761
Protection product revenue
145
131
411
371
Loyalty programs
(346)
(358)
(1,011)
(1,001)
Other
64
52
1,233
87
Total other income
$
119
$
92
$
1,393
$
218
Other income increased by $27 million to $119 million, and $1.2 billion to $1.4 billion, for the three and nine months ended September 30, 2024, respectively. The increase in other income for the three months ended September 30, 2024 was primarily driven by the impact of our product, pricing and policy change related fees across all five of our sales platforms. This impact was partially offset by lower commission fees following the Pets Best disposition in March 2024 and venture investment losses in the three months ended September 30, 2024 as compared to net investment gains recognized in the prior year period.
The increase for the nine months ended September 30, 2024 was primarily driven by the gain on sale related to the Pets Best disposition. The pre-tax gain amount of $1.1 billion is included within the Other component of Other Income in our Condensed Consolidated Statements of Earnings for the nine months ended September 30, 2024.
19
Other Expense
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Employee costs
$
464
$
444
$
1,394
$
1,346
Professional fees
231
219
687
614
Marketing and business development
123
125
377
389
Information processing
203
177
596
522
Other
168
189
518
571
Total other expense
$
1,189
$
1,154
$
3,572
$
3,442
Other expense increased by $35 million, or 3.0% and by $130 million, or 3.8%, for the three and nine months ended September 30, 2024, respectively.
The increase in the three and nine months ended September 30, 2024 were primarily driven by costs related to the Ally Lending acquisition, technology investments, and preparatory expenses related to the late fee rule change, partially offset by lower operational losses. Technology investments primarily reflect higher amortization of capitalized software expenditures.
Provision for Income Taxes
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Effective tax rate
23.2
%
24.6
%
23.9
%
24.0
%
Provision for income taxes
$
239
$
205
$
855
$
567
The effective tax rate for the three months ended September 30, 2024 decreased compared to the same period in the prior year primarily due to the resolution of certain tax matters in the current period. The effective tax rate for the nine months ended September 30, 2024 decreased slightly compared to the same period in the prior 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.
20
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, 2024, for each of our five sales platforms and Corp, Other.
Home & Auto
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Purchase volume
$
11,361
$
12,273
$
34,369
$
35,989
Period-end loan receivables
$
32,542
$
31,648
$
32,542
$
31,648
Average loan receivables, including held for sale
$
32,613
$
31,239
$
32,358
$
30,386
Average active accounts (in thousands)
19,157
19,223
19,136
18,894
Interest and fees on loans
$
1,489
$
1,367
$
4,290
$
3,867
Other income
$
56
$
28
$
127
$
80
Home & Auto interest and fees on loans increased by $122 million, or 8.9%, and increased by $423 million, or 10.9%, for the three and nine months ended September 30, 2024, respectively, primarily driven by higher average loan receivables and higher benchmark rates. The increase in average loan receivables for both periods primarily reflects the completion of the Ally Lending acquisition as well as the impact of lower customer payment rates, partially offset by lower purchase volume. Purchase volume decreased 7.4% and 4.5% for the three and nine months ended September 30, 2024, as the impact of the Ally Lending acquisition was more than offset by a combination of lower consumer traffic, fewer large ticket purchases and the impact of credit actions.
Other income increased by $28 million, or 100.0%, and $47 million, or 58.8%, for the three and nine months ended September 30, 2024, respectively. The increases for the three and nine months ended September 30, 2024 were primarily due to the impact of product, pricing and policy change related fees, lower loyalty costs and higher protection product revenue.
Digital
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Purchase volume
$
13,352
$
13,808
$
39,383
$
39,541
Period-end loan receivables
$
27,771
$
26,685
$
27,771
$
26,685
Average loan receivables, including held for sale
$
27,704
$
26,266
$
27,776
$
25,484
Average active accounts (in thousands)
20,787
20,768
21,033
20,641
Interest and fees on loans
$
1,593
$
1,530
$
4,704
$
4,315
Other income
$
4
$
(6)
$
10
$
(7)
Digital interest and fees on loans increased by $63 million, or 4.1%, and $389 million, or 9.0%, for the three and nine months ended September 30, 2024, respectively, primarily driven by higher average loan receivables, lower payment rates and higher benchmark rates. Purchase volume decreased by 3.3% and 0.4% for the three and nine months ended September 30, 2024, primarily driven by lower consumer spend per account and the impact of credit actions. Average active accounts remained flat and increased by 1.9%, for the three and nine months ended September 30, 2024, respectively.
21
Diversified & Value
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Purchase volume
$
14,992
$
15,445
$
44,348
$
44,240
Period-end loan receivables
$
19,466
$
18,865
$
19,466
$
18,865
Average loan receivables, including held for sale
$
19,413
$
18,565
$
19,455
$
18,074
Average active accounts (in thousands)
19,960
20,410
20,448
20,571
Interest and fees on loans
$
1,209
$
1,168
$
3,588
$
3,329
Other income
$
(11)
$
(28)
$
(50)
$
(63)
Diversified & Value interest and fees on loans increased by $41 million, or 3.5%, and $259 million, or 7.8%, for the three and nine months ended September 30, 2024, respectively, primarily driven by growth in average loan receivables, lower payment rates and higher benchmark rates. Purchase volume decreased by 2.9% for the three months ended September 30, 2024 primarily driven by lower consumer spend per account and the impact of credit actions. Purchase volume remained flat for the nine months ended September 30, 2024. Average active accounts decreased by 2.2% and 0.6%, for the three and nine months ended September 30, 2024, respectively.
Health & Wellness
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Purchase volume
$
3,867
$
3,990
$
11,936
$
11,695
Period-end loan receivables
$
15,439
$
14,019
$
15,439
$
14,019
Average loan receivables, including held for sale
$
15,311
$
13,600
$
15,041
$
12,927
Average active accounts (in thousands)
7,801
7,276
7,713
7,076
Interest and fees on loans
$
956
$
844
$
2,736
$
2,365
Other income
$
68
$
74
$
182
$
189
Health & Wellness interest and fees on loans increased by $112 million, or 13.3%, and $371 million, or 15.7%, for the three and nine months ended September 30, 2024, respectively, primarily driven by higher average loan receivables. The growth in average loan receivables for both periods reflected higher purchase volume over the last 12 months and lower customer payment rates, as well as the completion of the Ally Lending acquisition. Purchase volume decreased 3.1%, and average active accounts increased 7.2% for the three months ended September 30, 2024, as lower spend in Dental, Cosmetic and Vision, combined with the impact of credit actions, was partially offset by growth in Pet and Audiology. Purchase volume increased 2.1%, and average active accounts increased 9.0% for the nine months ended September 30, 2024, reflecting growth in Pet and Audiology, partially offset by lower spend in Vision and Dental.
Other income decreased by $6 million, or 8.1%, and $7 million, or 3.7%, for the three and nine months ended September 30, 2024, respectively. The decreases for the three and nine months ended September 30, 2024 were primarily due to lower commission fees following the Pets Best disposition, partially offset by higher protection product revenue and the impact of product, pricing and policy change related fees.
22
Lifestyle
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Purchase volume
$
1,411
$
1,490
$
4,180
$
4,372
Period-end loan receivables
$
6,831
$
6,483
$
6,831
$
6,483
Average loan receivables, including held for sale
$
6,823
$
6,383
$
6,726
$
6,137
Average active accounts (in thousands)
2,677
2,556
2,668
2,572
Interest and fees on loans
$
270
$
249
$
783
$
704
Other income
$
9
$
8
$
23
$
22
Lifestyle interest and fees on loans increased by $21 million, or 8.4%, and $79 million, or 11.2%, for the three and nine months ended September 30, 2024, respectively, primarily driven by growth in average loan receivables and higher benchmark rates. The growth in average loan receivables for both periods reflected lower customer payment rates. Purchase volume decreased by 5.3% and 4.4% for the three and nine months ended September 30, 2024, respectively, reflecting lower transaction values and the impact of credit actions.
Corp, Other
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Purchase volume
$
2
$
—
$
2
$
2
Period-end loan receivables
$
144
$
173
$
144
$
173
Average loan receivables, including held for sale
$
145
$
177
$
128
$
190
Average active accounts (in thousands)
42
75
54
88
Interest and fees on loans
$
5
$
(7)
$
15
$
(1)
Other income
$
(7)
$
16
$
1,101
$
(3)
Other income for the nine months ended September 30, 2024 in Corp, Other primarily included the gain on sale related to the Pets Best disposition of $1.1 billion.
Loan receivables are our largest category of assets and represent our primary source of revenue. The following discussion provides supplemental information regarding our loan receivables portfolio. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 5. Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for additional information related to our loan receivables.
The following table sets forth the composition of our loan receivables portfolio by product type at the dates indicated.
($ in millions)
At September 30, 2024
%
At December 31, 2023
%
Loan receivables
Credit cards
$
94,008
92.0
%
$
97,043
94.2
%
Consumer installment loans
6,125
6.0
3,977
3.9
Commercial credit products
1,936
1.9
1,839
1.8
Other
124
0.1
129
0.1
Total loan receivables
$
102,193
100.0
%
$
102,988
100.0
%
Loan receivables decreased 0.8% to $102.2 billion at September 30, 2024 compared to $103.0 billion at December 31, 2023, primarily driven by the seasonality of our business and lower purchase volume, partially offset by the Ally Lending acquisition and lower customer payment rates. Loan receivables related to the Ally Lending acquisition are included within Consumer installment loans at September 30, 2024 in the table above.
Loan receivables increased 4.4% to $102.2 billion at September 30, 2024 compared to $97.9 billion at September 30, 2023 driven by lower customer payment rates and the completion of the Ally Lending acquisition, partially offset by lower purchase volume.
Our loan receivables portfolio had the following geographic concentration at September 30, 2024.
($ in millions)
Loan Receivables Outstanding
% of Total Loan Receivables Outstanding
State
Texas
$
11,273
11.0
%
California
$
10,513
10.3
%
Florida
$
9,521
9.3
%
New York
$
4,865
4.8
%
North Carolina
$
4,300
4.2
%
Delinquencies
Over-30 day loan delinquencies as a percentage of period-end loan receivables increased to 4.78% at September 30, 2024 from 4.40% at September 30, 2023, and increased from 4.74% at December 31, 2023. 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.
24
The table below sets forth the net charge-offs and ratio of annualized net charge-offs to average loan receivables, including held for sale, (“net charge-off rate”) for the periods indicated.
Three months ended September 30,
2024
2023
($ in millions)
Amount
Rate
Amount
Rate
Credit cards
$
1,429
6.06
%
$
1,040
4.56
%
Consumer installment loans
89
5.80
%
49
5.32
%
Commercial credit products
35
6.99
%
26
5.54
%
Other
—
—
%
1
3.08
%
Total net charge-offs
$
1,553
6.06
%
$
1,116
4.60
%
Nine months ended September 30,
2024
2023
($ in millions)
Amount
Rate
Amount
Rate
Credit cards
$
4,392
6.26
%
$
3,003
4.57
%
Consumer installment loans
263
6.22
%
127
5.03
%
Commercial credit products
103
7.03
%
87
6.50
%
Other
1
1.06
%
1
1.10
%
Total net charge-offs
$
4,759
6.26
%
$
3,218
4.62
%
Allowance for Credit Losses
The allowance for credit losses totaled $11.0 billion at September 30, 2024, compared to $10.6 billion at December 31, 2023, respectively, and $10.2 billion at September 30, 2023, and reflects our estimate of expected credit losses for the life of the loan receivables on our Condensed Consolidated Statement of Financial Position. Our allowance for credit losses as a percentage of total period end loan receivables increased to 10.79% at September 30, 2024, from 10.26% at December 31, 2023 and increased from 10.40% at September 30, 2023.
The increase in allowance for credit losses compared to December 31, 2023 and September 30, 2023 includes the addition of the Ally Lending portfolio. See Note 5. Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for additional information.
We maintain a strong focus on liquidity and capital. Our funding, liquidity and capital policies are designed to ensure that our business has the liquidity and capital resources to support our daily operations, our business growth, our credit ratings and our regulatory and policy requirements, in a cost effective and prudent manner through expected and unexpected market environments.
Funding Sources
Our primary funding sources include cash from operations, deposits (direct and brokered deposits), securitized financings and senior and subordinated unsecured notes.
The following table summarizes information concerning our funding sources during the periods indicated:
2024
2023
Three months ended September 30 ($ in millions)
Average Balance
%
Average Rate
Average Balance
%
Average Rate
Deposits(1)
$
82,100
83.9
%
4.7
%
$
75,952
83.7
%
4.2
%
Securitized financings
7,817
8.0
5.5
%
6,096
6.7
5.6
%
Senior and subordinated unsecured notes
7,968
8.1
5.0
%
8,710
9.6
4.8
%
Total
$
97,885
100.0
%
4.8
%
$
90,758
100.0
%
4.3
%
______________________
(1)Excludes $387 million and $401 million average balance of non-interest-bearing deposits for the three months ended September 30, 2024 and 2023, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the three months ended September 30, 2024 and 2023.
2024
2023
Nine months ended September 30 ($ in millions)
Average Balance
%
Average Rate
Average Balance
%
Average Rate
Deposits(1)
$
82,481
83.8
%
4.7
%
$
74,340
83.5
%
3.7
%
Securitized financings
7,686
7.8
5.6
%
6,062
6.8
5.3
%
Senior and subordinated unsecured notes
8,238
8.4
4.9
%
8,621
9.7
4.9
%
Total
$
98,405
100.0
%
4.8
%
$
89,023
100.0
%
3.9
%
______________________
(1)Excludes $391 million and $410 million average balance of non-interest-bearing deposits for the nine months ended September 30, 2024 and 2023, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the nine months ended September 30, 2024 and 2023.
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, 2024, we had $71.6 billion in direct deposits and $10.7 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to utilize our direct deposit base as a source of stable and diversified low-cost funding.
Our direct deposits are primarily from retail customers and include a range of FDIC-insured deposit products, including certificates of deposit, IRAs, money market accounts, savings accounts, sweep and affinity deposits.
Brokered deposits are primarily from retail customers of large brokerage firms. We have relationships with 10 brokers that offer our deposits through their networks. Our brokered deposits consist primarily of certificates of deposit that bear interest at a fixed rate. These deposits generally are not subject to early withdrawal.
26
Our ability to attract deposits is sensitive to, among other things, the interest rates we pay, and therefore, we bear funding risk if we fail to pay higher rates, or interest rate risk if we are required to pay higher rates, to retain existing deposits or attract new deposits. To mitigate these risks, our funding strategy includes a range of deposit products, and we seek to maintain access to multiple other funding sources, including securitized financings (including our undrawn committed and uncommitted capacity) and unsecured debt.
The following table summarizes certain information regarding our interest-bearing deposits by type (all of which constitute U.S. deposits) for the periods indicated:
Three months ended September 30 ($ in millions)
2024
2023
Average Balance
%
Average Rate
Average Balance
%
Average Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)
$
40,454
49.3
%
4.9
%
$
34,436
45.3
%
4.1
%
Savings, money market, and demand accounts
30,281
36.9
4.5
%
28,746
37.9
4.4
%
Brokered deposits
11,365
13.8
4.6
%
12,770
16.8
4.0
%
Total interest-bearing deposits
$
82,100
100.0
%
4.7
%
$
75,952
100.0
%
4.2
%
Nine months ended September 30 ($ in millions)
2024
2023
Average Balance
%
Average Rate
Average Balance
%
Average Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)
$
40,614
49.3
%
4.8
%
$
32,115
43.2
%
3.5
%
Savings, money market, and demand accounts
29,467
35.7
4.6
%
29,180
39.3
3.9
%
Brokered deposits
12,400
15.0
4.5
%
13,045
17.5
3.8
%
Total interest-bearing deposits
$
82,481
100.0
%
4.7
%
$
74,340
100.0
%
3.7
%
Our deposit liabilities provide funding with maturities ranging from one day to ten years. At September 30, 2024, the weighted average maturity of our interest-bearing time deposits was one year. See Note 8. 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, 2024:
($ 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)
$
32,972
$
6,572
$
17,483
$
7,745
$
64,772
U.S. deposits (in excess of FDIC insurance limit)(2)
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)
1,485
2,322
5,620
1,587
11,014
Savings, money market, and demand accounts
6,498
—
—
—
6,498
Total
$
40,955
$
8,894
$
23,103
$
9,332
$
82,284
______________________
(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, 2024 was approximately $6.0 billion.
27
Securitized Financings
We access the asset-backed securitization market using the Synchrony Card Issuance Trust (“SYNIT”) through which we may issue asset-backed securities through both public transactions and private transactions funded by financial institutions and commercial paper conduits. In addition, we issue asset-backed securities in private transactions through the Synchrony Credit Card Master Note Trust (“SYNCT”) and the Synchrony Sales Finance Master Trust (“SFT”).
The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at September 30, 2024.
($ 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
$
550
$
1,100
$
—
$
—
$
1,650
SFT
450
1,000
—
—
1,450
SYNIT(1)
1,675
3,250
—
—
4,925
Total long-term borrowings—owed to securitization investors
$
2,675
$
5,350
$
—
$
—
$
8,025
______________________
(1)Excludes any subordinated classes of SYNIT notes that we owned at September 30, 2024.
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.
28
The following table summarizes for each of our trusts the three-month rolling average excess spread at September 30, 2024.
Note Principal Balance ($ in millions)
# of Series Outstanding
Three-Month Rolling
Average Excess
Spread(1)
SYNCT
$
1,650
3
~ 14.8 - 15.6%
SFT
$
1,450
5
12.5
%
SYNIT
$
4,925
1
17.2
%
______________________
(1)Represents the excess spread (generally calculated as interest income collected from the applicable pool of loan receivables less applicable net charge-offs, interest expense and servicing costs, divided by the aggregate principal amount of loan receivables in the applicable pool) for SFT or, in the case of SYNCT, a range of the excess spreads relating to the particular series issued within such trust or, in the case of SYNIT, the excess spread relating to the one outstanding series issued within such trust, in all cases omitting any series that have not been outstanding for at least three full monthly periods and calculated in accordance with the applicable trust or series documentation, for the three securitization monthly periods ended September 30, 2024.
Senior and Subordinated Unsecured Notes
During the nine months ended September 30, 2024, we made repayments totaling $1.85 billion of senior unsecured notes issued by Synchrony Financial.
The following table provides a summary of our outstanding fixed rate senior and subordinated unsecured notes at September 30, 2024, which includes $750 million of senior unsecured notes issued by Synchrony Financial in August 2024.
Issuance Date
Interest Rate(1)
Maturity
Principal Amount Outstanding(2)
($ in millions)
Fixed rate senior unsecured notes:
Synchrony Financial
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
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 to floating rate senior unsecured notes:
Synchrony Financial
August 2024
5.935%(3)
August 2030
750
Fixed rate subordinated unsecured notes:
Synchrony Financial
February 2023
7.250%
February 2033
750
Total fixed rate and fixed to floating rate senior and subordinated unsecured notes
$
7,650
______________________
(1)Weighted average interest rate of all senior and subordinated unsecured notes at September 30, 2024 was 4.91%.
(3)Interest rate fixed through August 1, 2029; resets August 2, 2029 to floating rate based on compounded Secured Overnight Financing Rate ("SOFR") plus 213 basis points.
29
Short-Term Borrowings
Except as described above, there were no material short-term borrowings for the periods presented.
Covenants
The indentures pursuant to which our senior and subordinated unsecured notes have been issued include 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, 2024.
At September 30, 2024, 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 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.
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 management committee under the oversight 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, 2024 had $19.7 billion of liquid assets, primarily consisting of cash and equivalents, less cash in transit which is not considered to be liquid, compared to $16.8 billion of liquid assets at December 31, 2023. The increase in liquid assets was primarily due to deposit growth and the issuances of securitized debt and preferred stock, as well as the proceeds from the Pets Best disposition. We believe our liquidity position at September 30, 2024 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.
30
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 also have access to several additional sources of liquidity beyond our liquidity portfolio. At September 30, 2024, we had an aggregate of $11.4 billion of available borrowing capacity through the Federal Reserve’s discount window. In addition, we had $2.7 billion of undrawn capacity on our securitized financings, subject to customary borrowing conditions, from private lenders under our securitization programs, of which $2.2 billion was committed and $450 million was uncommitted, as well as $500 million of undrawn committed capacity under our unsecured revolving credit facility with private lenders. We also have other 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.
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 2023 Form 10-K.
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.
Beginning in 2024, we are now subject to the Federal Reserve Board's formal capital plan submission requirements and have submitted our capital plan to the Federal Reserve Board.
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, 2024
February 2024
$
0.25
$
102
Three months ended June 30, 2024
May 2024
0.25
100
Three months ended September 30, 2024
August 2024
0.25
99
Total dividends declared
$
0.75
$
301
Series A Preferred Stock Cash Dividends Declared
Month of Payment
Amount per Preferred Share
Amount
($ in millions, except per share data)
Three months ended March 31, 2024
February 2024
$
14.06
$
11
Three months ended June 30, 2024
May 2024
14.06
10
Three months ended September 30, 2024
August 2024
14.06
11
Total Series A dividends declared
$
42.18
$
32
31
Series B Preferred Stock Cash Dividends Declared
Month of Payment
Amount per Preferred Share
Amount
($ in millions, except per share data)
Three months ended June 30, 2024
May 2024
$
18.79
$
9
Three months ended September 30, 2024
August 2024
20.63
10
Total Series B dividends declared
$
39.42
$
19
In February 2024, we issued depositary shares representing $500 million of Series B 8.250% fixed rate reset non-cumulative perpetual preferred stock, with dividends payable quarterly beginning in May 2024. The declaration and payment of future dividends to holders of our common and preferred stock will be at the discretion of the Board and will depend on many factors. For a discussion of regulatory and other restrictions on our ability to pay dividends and repurchase stock, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” in our 2023 Form 10-K.
Common Shares Repurchased Under Publicly Announced Programs
Total Number of Shares Purchased
Dollar Value of Shares Purchased
($ and shares in millions)
Three months ended March 31, 2024
7.5
$
300
Three months ended June 30, 2024
6.9
300
Three months ended September 30, 2024
6.6
300
Total
21.0
$
900
During the nine months ended September 30, 2024, we repurchased $900 million of common stock as part of our 2023 share repurchase program. In April 2024, the Board of Directors approved an incremental share repurchase program of up to $1.0 billion through June 30, 2025 (the "2024 plan"). At September 30, 2024, $700 million of the authorization capacity under the 2024 plan remained outstanding. Repurchases under this program are subject to market conditions and other factors, including legal and regulatory restrictions and required approvals, if any.
Regulatory Capital Requirements - Synchrony Financial
As a savings and loan holding company, we are required to maintain minimum capital ratios, under the applicable U.S. Basel III capital rules. For more information, see “Regulation—Savings and Loan Holding Company Regulation” in our 2023 Form 10-K.
For Synchrony Financial to be a well-capitalized savings and loan holding company, Synchrony Bank must be well-capitalized and Synchrony Financial must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve Board to meet and maintain a specific capital level for any capital measure. At September 30, 2024, Synchrony Financial met all the requirements to be deemed well-capitalized.
32
The following table sets forth the composition of our capital ratios for the Company calculated under the Basel III Standardized Approach rules at September 30, 2024 and December 31, 2023, respectively.
Basel III
At September 30, 2024
At December 31, 2023
($ in millions)
Amount
Ratio(1)
Amount
Ratio(1)
Total risk-based capital
$
16,864
16.4
%
$
15,464
14.9
%
Tier 1 risk-based capital
$
14,723
14.3
%
$
13,334
12.9
%
Tier 1 leverage
$
14,723
12.5
%
$
13,334
11.7
%
Common equity Tier 1 capital
$
13,501
13.1
%
$
12,600
12.2
%
Risk-weighted assets
$
103,103
$
103,460
______________________
(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 2023 Form 10-K.
Capital amounts and ratios in the above table all reflect the applicable CECL regulatory capital transition adjustment for each period. The increase in our common equity Tier 1 capital ratio compared to December 31, 2023 was primarily due to the retention of net earnings during the nine months ended September 30, 2024 and the net impact of the Pets Best disposition and Ally Lending acquisition, partially offset by the third year phase-in of the impact of CECL on our regulatory capital.
Regulatory Capital Requirements - Synchrony Bank
At September 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, and also reflects the applicable CECL regulatory capital transition adjustment for each period.
At September 30, 2024
At December 31, 2023
Minimum to be Well-Capitalized under Prompt Corrective Action Provisions
($ in millions)
Amount
Ratio
Amount
Ratio
Ratio
Total risk-based capital
$
15,583
15.9
%
$
14,943
15.3
%
10.0%
Tier 1 risk-based capital
$
13,499
13.8
%
$
12,880
13.2
%
8.0%
Tier 1 leverage
$
13,499
12.1
%
$
12,880
12.0
%
5.0%
Common equity Tier 1 capital
$
13,499
13.8
%
$
12,880
13.2
%
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 2023 Form 10-K.
33
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, 2024, we had not recorded any contingent liabilities in our Condensed Consolidated Statement of Financial Position related to any guarantees. See Note 6 - 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 5 - Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for more information on our unfunded lending commitments.
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 2023 Form 10-K, for a detailed discussion of these critical accounting estimates.
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.
On March 5, 2024, the CFPB released a final rule amending its regulations that implement the Truth in Lending Act to, among other things, lower the safe harbor dollar amount for credit card late fees from the prior $30 (adjusted to $41 for each subsequent late payment within the next six billing cycles) to $8 and to eliminate the automatic annual inflation adjustment to such safe harbor dollar amount. The final rule had an original effective date of May 14, 2024. Industry organizations have challenged the final rule in court, and on May 10, 2024, the United States District Court for the Northern District of Texas granted an injunction and stay of the final rule, and the injunction granted remains in effect. The final outcome of such challenge, including the impact on the final rule, is uncertain. See "Business Trends and Conditions" above for the anticipated financial impacts related to the final rule.
34
On June 20, 2024, the FDIC released a final rule imposing additional requirements for the content of resolution plans submitted by insured depository institutions with $100 billion or more in total assets, including the Bank, following the rule’s effective date of October 1, 2024.Under the final rule, if the FDIC deems a resolution plan filing not credible and the insured depository institution fails to resubmit a credible plan, the institution could become subject to an enforcement action. Our first resolution plan under the final rule is due on July 1, 2025 and we will be required to file a resolution plan once every three years thereafter. Additionally, we will be required to submit interim supplements annually. We are evaluating the impact of the final rule.
On July 30, 2024, the FDIC issued a proposed rule that would revise the FDIC’s regulations governing the classification and treatment of brokered deposits. The proposal would, among other changes, broaden the definition of deposit broker to include agents that place or facilitate the placement of third-party deposits at only one insured depository institution and agents that receive a fee or other remuneration in exchange for the placement of deposits. In addition, the proposal would narrow the exception to the definition of deposit broker for agents whose primary purpose is not the placement of funds with depository institutions. While we are evaluating the potential impact of the proposed rule, if the rule is finalized as proposed, the Bank may be required to classify a greater amount of its deposits obtained with the involvement of third parties as brokered deposits. An increase in the amount of brokered deposits on the Bank’s balance sheet could, among other consequences, increase the Bank’s deposit insurance assessment costs.
On September 10, 2024, the Vice Chair for Supervision at the Federal Reserve Board (the "Vice Chair"), gave a speech outlining a set of potential revisions to the July 2023 interagency proposed rule to revise the U.S. regulatory capital framework (known as the “Basel Endgame” proposal). In the speech, the Vice Chair indicated that he will recommend that the Federal Reserve Board issue a re-proposal of the rule in which banking organizations with total assets between $100 billion and $250 billion, such as Synchrony, would not be subject to the changes to their capital requirements that were included in the July 2023 Basel Endgame proposal, other than the proposed requirement to recognize unrealized gains and losses of their securities in regulatory capital. It remains uncertain whether the federal banking agencies will re-propose the Basel Endgame rule, and if so, whether the agencies will adopt the Vice Chair’s recommendations.
On September 17, 2024, the OCC finalized a new Policy Statement Regarding Statutory Factors Under the Bank Merger Act (the “Policy Statement”), which outlines factors that the OCC will consider when evaluating a proposed bank merger transaction. Also on September 17, 2024, the United States Department of Justice (the “DOJ”) withdrew its 1995 Bank Merger Guidelines and announced that it will instead evaluate the competitive impact of bank mergers using its 2023 Merger Guidelines that the DOJ applies to mergers in all industries. Compared to the 1995 Bank Merger Guidelines, the 2023 Merger Guidelines set forth more stringent concentration limits and add several largely qualitative bases on which the DOJ may challenge a merger. While the effect of these changes for particular transactions remains unclear, both the Policy Statement and the change in the DOJ’s bank merger antitrust policy may make it more difficult and/or costly for us to obtain regulatory approval for an acquisition or may otherwise result in more onerous conditions to obtain approval for an acquisition.
See “Regulation—Regulation Relating to Our Business” in our 2023 Form 10-K for additional information on regulations that apply to us, and “—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.
35
ITEM 1. FINANCIAL STATEMENTS
Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
Restricted loans of consolidated securitization entities
21,188
21,434
Total loan receivables
102,193
102,988
Less: Allowance for credit losses
(11,029)
(10,571)
Loan receivables, net
91,164
92,417
Goodwill (Note 7)
1,274
1,018
Intangible assets, net (Note 7)
765
815
Other assets
5,747
4,915
Assets held for sale (Note 3)
—
256
Total assets
$
119,229
$
117,479
Liabilities and Equity
Deposits: (Note 8)
Interest-bearing deposit accounts
$
81,901
$
80,789
Non-interest-bearing deposit accounts
383
364
Total deposits
82,284
81,153
Borrowings: (Notes 6 and 9)
Borrowings of consolidated securitization entities
8,015
7,267
Senior and subordinated unsecured notes
7,617
8,715
Total borrowings
15,632
15,982
Accrued expenses and other liabilities
5,333
6,334
Liabilities held for sale (Note 3)
—
107
Total liabilities
$
103,249
$
103,576
Equity:
Preferred stock, par share value $0.001 per share; 1,250,000 and 750,000 shares authorized at September 30, 2024 and December 31, 2023, respectively; 1,250,000 and 750,000 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively, and aggregate liquidation preference of $1,250 at September 30, 2024 and $750 at December 31, 2023
$
1,222
$
734
Common Stock, par share value $0.001 per share; 4,000,000,000 shares authorized; 833,984,684 shares issued at both September 30, 2024 and December 31, 2023; 389,224,881 and 406,875,775 shares outstanding at September 30, 2024 and December 31, 2023, respectively
1
1
Additional paid-in capital
9,822
9,775
Retained earnings
20,975
18,662
Accumulated other comprehensive income (loss):
Debt securities
(13)
(33)
Currency translation adjustments
(39)
(38)
Employee benefit plans
2
3
Treasury stock, at cost; 444,759,803 and 427,108,909 shares at September 30, 2024 and December 31, 2023, respectively
(15,990)
(15,201)
Total equity
15,980
13,903
Total liabilities and equity
$
119,229
$
117,479
See accompanying notes to condensed consolidated financial statements.
38
Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Changes in Equity (Unaudited)
Synchrony Financial (the “Company”) provides a range of credit products through financing programs it has established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. We primarily offer private label, Dual Card, co-brand and general purpose credit cards, as well as short- and long-term installment loans, and savings products insured by the Federal Deposit Insurance Corporation (“FDIC”) through Synchrony Bank (the “Bank”).
References to the “Company”, “we”, “us” and “our” are to Synchrony Financial and its consolidated subsidiaries unless the context otherwise requires.
NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Preparing financial statements in conformity with U.S. GAAP requires us to make estimates based on assumptions about current, and for some estimates, future, economic and market conditions (for example, unemployment, housing, interest rates and market liquidity) which affect reported amounts and related disclosures in our condensed consolidated financial statements. Although our current estimates contemplate current conditions and how we expect them to change in the future, as appropriate, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect our results of operations and financial position. Among other effects, such changes could result in incremental losses on loan receivables, future impairments of debt securities, goodwill and intangible assets, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increases in our tax liabilities.
We primarily conduct our business within the United States and substantially all of our revenues are from U.S. customers. The operating activities conducted by our non-U.S. affiliates use the local currency as their functional currency. The effects of translating the financial statements of these non-U.S. affiliates to U.S. dollars are included in equity. Asset and liability accounts are translated at period-end exchange rates, while revenues and expenses are translated at average rates for the respective periods.
Consolidated Basis of Presentation
The Company’s financial statements have been prepared on a consolidated basis. Under this basis of presentation, our financial statements consolidate all of our subsidiaries – i.e., entities in which we have a controlling financial interest, most often because we hold a majority voting interest. To determine if we hold a controlling financial interest in an entity, we first evaluate if we are required to apply the variable interest entity (“VIE”) model to the entity, otherwise the entity is evaluated under the voting interest model. We consolidate certain securitization entities under the VIE model. See Note 6. Variable Interest Entities.
Interim Period Presentation
The condensed consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed consolidated financial statements should not be considered as necessarily indicative of results that may be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with our 2023 annual consolidated financial statements and the related notes in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "2023 Form 10-K").
42
New Accounting Standards
Recently Issued But Not Yet Adopted Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU improves reportable segment disclosure requirements and requires enhanced disclosures about significant segment expenses. The Company will adopt this guidance on a retrospective basis on its effective date, which for us is beginning within our December 31, 2024 Form 10-K.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the rate reconciliation, as well as additional qualitative information about the reconciliation, and additional disaggregated information about income taxes paid. The Company will adopt this guidance on a retrospective basis on its effective date, which for us is beginning within our December 31, 2025 Form 10-K.
Equity Method Investments
We use the equity method of accounting for investments where we have significant influence, but not control, over the operating and financial policies of the investee. Our assessment of significant influence includes factors such as our ownership interest, legal form, and representation on the board of directors. The Company generally records the initial investment at cost or fair value, as appropriate. Subsequently, we adjust each investment for our proportionate share of net income or loss in the investee. We amortize, where appropriate, differences between the Company’s cost basis and underlying equity in net assets, which are reported in Other Income. The Company evaluates equity method investments for other-than-temporary impairment when events or changes in circumstance indicate that the carrying amount of the investment might not be recoverable.
See Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our 2023 annual consolidated financial statements in our 2023 Form 10-K, for additional information on our other significant accounting policies.
43
NOTE 3. ACQUISITIONS AND DISPOSITIONS
Ally Lending
On March 1, 2024, we acquired Ally Financial Inc.'s point of sale financing business, ("Ally Lending") for cash consideration of $2.0 billion. This acquisition deepens our presence and reach in the home improvement and health and wellness sectors, including high-growth specialty areas such as roofing, HVAC, and windows, as well as in cosmetic, audiology, and dentistry.
The Ally Lending acquisition has been accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their estimated fair value as of the acquisition date.
There were no adjustments to the fair value of assets acquired and liabilities assumed (measurement period adjustments) related to the acquisition during the three months ended September 30, 2024. During the nine months ended September 30, 2024, measurement period adjustments were recognized related to the acquisition as detailed in the table below.
($ in millions)
Amounts Recognized as of Acquisition Date (as previously reported as of March 31, 2024)
Measurement Period Adjustments
Amounts Recognized as of Acquisition Date (as adjusted)
Assets acquired
Cash
$
34
$
—
$
34
Loan receivables(a)
1,875
(198)
1,677
Intangible assets, net
23
(5)
18
Other assets
2
—
2
Total
$
1,934
$
(203)
$
1,731
Liabilities assumed
Other liabilities
(16)
2
(14)
Total net identifiable assets acquired
$
1,918
$
(201)
$
1,717
Less: Total cash consideration paid
$
1,969
$
—
$
1,969
Goodwill
$
51
$
201
$
252
_______________________
(a)Loan discounts are recognized into interest income over the estimated remaining life of the acquired loans. The were no changes to the provisional amount of loan discount recorded in the three months ended September 30, 2024.
The amounts above represent the estimated fair values of the respective assets acquired and liabilities assumed as of the date of acquisition. The estimated fair values reflect market participant assumptions about facts and circumstances existing at the acquisition date. The measurement period adjustments reflected above did not result from events occurring subsequent to the acquisition date.
The valuation of the assets acquired and liabilities assumed is substantially complete and will be finalized no later than one year after the acquisition date. The goodwill recognized related to the acquisition is tax-deductible and reflects the expected synergies and operational efficiencies arising from the transaction.
44
The acquisition primarily included loan receivables with an unpaid principal balance of $2.2 billion. These loan receivables are reported within Consumer installment loans in Note 5. Loan Receivables and Allowance for Credit Losses. To determine the provisional fair value of loans at acquisition, we estimate expected cash flows and discount those cash flows using an observable market rate of interest, when available, adjusted for factors that a market participant would consider in determining fair value. In determining fair value, expected cash flows are adjusted to include prepayment, default rate, and loss severity estimates. The difference between the fair value and the amount contractually due is recorded as a loan discount or premium at acquisition. Including the impact of measurement period adjustments, the provisional loan discount at the acquisition date was $469 million, which is to be amortized into interest income over the estimated remaining life of the loans, as described within Note 2. Basis of Presentation and Summary of Significant Accounting Policies within our 2023 Form 10-K. The interest and fees related to the acquired business are included in our Condensed Consolidated Statements of Earnings subsequent to the acquisition date and totaled $91 million and $232 million for the three and nine months ended September 30, 2024, respectively. These amounts include amortization of the loan discount recognized at acquisition of $42 million and $122 million, respectively. Expense activities, including those associated with the acquired business, are managed for the Company as a whole.
Loans acquired without a more-than-insignificant credit deterioration since origination are measured under the Allowance for Credit Losses model, as described within Note 2. Basis of Presentation and Summary of Significant Accounting Policies within our 2023 Form 10-K. The Company’s best estimate of contractual cash flows not expected to be collected at the date of acquisition was $180 million, which is included within our allowance for credit losses, and recognized through provision for credit losses in our Condensed Consolidated Statements of Earnings for the nine months ended September 30, 2024.
Included in the acquisition was $64 million of loans that have experienced more-than-insignificant deterioration in credit quality since origination (referred to as “purchased credit deteriorated” or “PCD” assets) that were not immediately written off at the acquisition date and are subject to specific guidance upon acquisition. An allowance for PCD assets of $39 million was recorded at the date of acquisition. Subsequent to initial recognition, the accounting for the PCD assets will generally follow the Allowance for Credit Losses model described within Note 2. Basis of Presentation and Summary of Significant Accounting Policies of our 2023 Form 10-K.
Pets Best
In March 2024, we sold our wholly-owned subsidiary, Pets Best Insurance Services, LLC (“Pets Best”) to Poodle Holdings, Inc. (“Buyer”) for consideration comprising a combination of cash and an equity interest of less than 10% in Independence Pet Holdings, Inc., ("IPH") an affiliate of Buyer. In connection with the sale, IPH also appointed two Synchrony executives to its board of directors. The sale of Pets Best resulted in the recognition of a gain on sale of $1.1 billion or $802 million, net of tax in the three months ended March 31, 2024. The pre-tax gain amount has been recognized within the Other component of Other Income in our Condensed Consolidated Statements of Earnings.
The Company’s initial equity investment in IPH was recorded in Other Assets on our Condensed Consolidated Statements of Financial Position and is accounted for under the equity method of accounting. The investment was recorded at its estimated fair value at the date acquired of $605 million. The estimated fair value at acquisition date was determined using a weighted average methodology of three approaches: a market approach which includes using a multiple of projected revenues, precedent transactions and an intrinsic value analysis. The market-multiple approach was established based on a selected group of publicly traded companies. The use of selected precedent transaction multiples was calibrated to the valuation outcome using the market approach. Intrinsic value analysis determines implied multiples primarily based upon recent market studies and forecasted performance. The change in the carrying value of our equity investment in IPH subsequent to the date acquired was not material.
45
NOTE 4. DEBT SECURITIES
All of our debt securities are classified as available-for-sale and are held to meet our liquidity objectives or to comply with the Community Reinvestment Act (“CRA”). Our debt securities consist of the following:
September 30, 2024
December 31, 2023
Gross
Gross
Gross
Gross
Amortized
unrealized
unrealized
Estimated
Amortized
unrealized
unrealized
Estimated
($ in millions)
cost
gains
losses
fair value
cost
gains
losses
fair value
U.S. government and federal agency
$
814
$
5
$
—
$
819
$
2,264
$
1
$
(1)
$
2,264
State and municipal
17
—
—
17
10
—
—
10
Residential mortgage-backed(a)
345
—
(29)
316
392
—
(38)
354
Asset-backed(b)
1,178
8
(1)
1,185
1,167
4
(8)
1,163
Other
8
—
—
8
8
—
—
8
Total(c)
$
2,362
$
13
$
(30)
$
2,345
$
3,841
$
5
$
(47)
$
3,799
_______________________
(a)All of our residential mortgage-backed securities have been issued by government-sponsored entities and are collateralized by U.S. mortgages.
(b)Our asset-backed securities are collateralized by credit card and auto loans.
(c) At September 30, 2024 and December 31, 2023, the estimated fair value of debt securities pledged by the Bank as collateral to the Federal Reserve to secure Federal Reserve discount window advances was $701 million and $360 million, respectively.
The following table presents the estimated fair values and gross unrealized losses of our available-for-sale debt securities:
In loss position for
Less than 12 months
12 months or more
Gross
Gross
Estimated
unrealized
Estimated
unrealized
($ in millions)
fair value
losses
fair value
losses
At September 30, 2024
U.S. government and federal agency
$
—
$
—
$
—
$
—
State and municipal
5
—
4
—
Residential mortgage-backed
—
—
305
(29)
Asset-backed
43
—
136
(1)
Other
—
—
—
—
Total
$
48
$
—
$
445
$
(30)
At December 31, 2023
U.S. government and federal agency
$
495
$
—
$
399
$
(1)
State and municipal
—
—
9
—
Residential mortgage-backed
1
—
346
(38)
Asset-backed
171
—
244
(8)
Other
—
—
8
—
Total
$
667
$
—
$
1,006
$
(47)
We regularly review debt securities for impairment resulting from credit loss using both qualitative and quantitative criteria, as necessary based on the composition of the portfolio at period end. Based on our assessment, no material impairments for credit losses were recognized during the period.
46
We presently do not intend to sell our debt securities that are in an unrealized loss position and believe that it is not more likely than not that we will be required to sell these securities before recovery of our amortized cost.
Contractual Maturities of Investments in Available-for-Sale Debt Securities
Amortized
Estimated
Weighted
At September 30, 2024 ($ in millions)
cost
fair value
average yield (a)
Due
Within one year
$
1,272
$
1,275
4.8
%
After one year through five years
$
747
$
755
5.0
%
After five years through ten years
$
149
$
141
1.8
%
After ten years
$
194
$
174
2.2
%
_____________________
(a)Weighted average yield is calculated based on the amortized cost of each security. In calculating yield, no adjustment has been made with respect to any tax-exempt obligations.
All securities are presented above based upon contractual maturity date, except our asset-backed securities which are allocated based upon expected final payment date. We expect actual maturities to differ from contractual maturities because borrowers have the right to prepay certain obligations.
There were no material realized gains or losses recognized for the nine months ended September 30, 2024 and 2023.
Although we generally do not have the intent to sell any specific securities held at September 30, 2024, in the ordinary course of managing our debt securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield, liquidity requirements and funding obligations.
NOTE 5. LOAN RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES
($ in millions)
September 30, 2024
December 31, 2023
Credit cards
$
94,008
$
97,043
Consumer installment loans
6,125
3,977
Commercial credit products
1,936
1,839
Other
124
129
Total loan receivables, before allowance for credit losses(a)(b)(c)
$
102,193
$
102,988
_______________________
(a)Total loan receivables include $21.2 billion and $21.4 billion of restricted loans of consolidated securitization entities at September 30, 2024 and December 31, 2023, respectively. See Note 6. Variable Interest Entities for further information on these restricted loans.
(b)At September 30, 2024 and December 31, 2023, loan receivables included deferred costs, net of purchase discounts and deferred income, of $(251) million and $213 million, respectively.
(c)At September 30, 2024 and December 31, 2023, $21.2 billion and $22.4 billion, respectively, of loan receivables were pledged by the Bank as collateral to the Federal Reserve to secure Federal Reserve discount window advances.
47
Allowance for Credit Losses(a)(b)
($ in millions)
Balance at July 1, 2024
Provision charged to operations(c)
Gross charge-offs
Recoveries
Other
Balance at September 30, 2024
Credit cards
$
10,255
$
1,460
$
(1,720)
$
291
$
—
$
10,286
Consumer installment loans
602
99
(100)
11
—
612
Commercial credit products
123
41
(37)
2
—
129
Other
2
—
—
—
—
2
Total
$
10,982
$
1,600
$
(1,857)
$
304
$
—
$
11,029
($ in millions)
Balance at July 1, 2023
Provision charged to operations
Gross charge-offs
Recoveries
Balance at September 30, 2023
Credit cards
$
9,464
$
1,357
$
(1,265)
$
225
$
9,781
Consumer installment loans
221
92
(59)
10
264
Commercial credit products
112
38
(28)
2
124
Other
7
1
(1)
—
7
Total
$
9,804
$
1,488
$
(1,353)
$
237
$
10,176
($ in millions)
Balance at January 1, 2024
Provision charged to operations(c)
Gross charge-offs
Recoveries
Other(d)
Balance at September 30, 2024
Credit cards
$
10,156
$
4,515
$
(5,313)
$
921
$
7
$
10,286
Consumer installment loans
279
557
(297)
34
39
612
Commercial credit products
131
101
(109)
6
—
129
Other
5
(2)
(1)
—
—
2
Total
$
10,571
$
5,171
$
(5,720)
$
961
$
46
$
11,029
($ in millions)
Balance at January 1, 2023
Impact of ASU 2022-02 Adoption
Post-Adoption Balance at January 1, 2023
Provision charged to operations
Gross charge-offs
Recoveries
Balance at September 30, 2023
Credit cards
$
9,225
$
(294)
$
8,931
$
3,853
$
(3,697)
$
694
$
9,781
Consumer installment loans
208
1
209
182
(148)
21
264
Commercial credit products
87
(1)
85
126
(93)
6
124
Other
7
—
8
—
(1)
—
7
Total
$
9,527
$
(294)
$
9,233
$
4,161
$
(3,939)
$
721
$
10,176
_______________________
(a)The allowance for credit losses at September 30, 2024 and 2023 reflects our estimate of expected credit losses for the life of the loan receivables on our Condensed Consolidated Statements of Financial Position at September 30, 2024 and 2023 which includes the consideration of current and expected macroeconomic conditions that existed at those dates.
(b)Excluded from the table above are allowance for credit losses for loan receivables acquired and immediately written off within the period presented.
(c)Provision for credit losses in the Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2024 also includes amounts associated with off-balance sheet credit exposures recorded in Accrued expenses and other liabilities in the Condensed Consolidated Statements of Financial Position.
(d)Primarily represents allowance for credit losses for PCD assets.
The reasonable and supportable forecast period used in our estimate of credit losses at September 30, 2024 was 12 months, consistent with the forecast period utilized since the adoption of CECL. Beyond the reasonable and supportable forecast period, we revert to historical loss information at the loan receivables segment level over a 6-month period, gradually increasing the weight of historical losses by an equal amount each month during the reversion period, and utilize historical loss information thereafter for the remaining life of the portfolio. The reversion period and methodology remain unchanged since the adoption of CECL.
48
Losses on loan receivables, including those which are modified for borrowers experiencing financial difficulty, are estimated and recognized upon origination of the loan, based on expected credit losses for the life of the loan balance at September 30, 2024. Expected credit loss estimates are developed using both quantitative models and qualitative adjustments, and incorporates a macroeconomic forecast, as described within Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our 2023 annual consolidated financial statements within our 2023 Form 10-K. The current and forecasted economic conditions at the balance sheet date influenced our current estimate of expected credit losses, which reflects our expectations of the macroeconomic environment. There have been no significant changes in our overall expectation of credit losses during the current quarterly period. We continued to experience a decrease in payment rates from the second quarter and have also experienced an increase in net charge-offs during the nine months ended September 30, 2024 as compared to the prior year period. These conditions are reflected in our current estimate of expected credit losses. Our allowance for credit losses increased to $11.0 billion during the nine months ended September 30, 2024, primarily reflecting these conditions and the impact of the Ally Lending acquisition. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our 2023 annual consolidated financial statements within our 2023 Form 10-K for additional information on our significant accounting policies related to our allowance for credit losses.
Delinquent and Non-accrual Loans
The following table provides information on our delinquent and non-accrual loans:
At September 30, 2024 ($ in millions)
30-89 days delinquent
90 or more days delinquent
Total past due
90 or more days delinquent and accruing
Total non-accruing
Credit cards
$
2,318
$
2,298
$
4,616
$
2,298
$
—
Consumer installment loans
134
40
174
—
40
Commercial credit products
49
44
93
44
—
Total delinquent loans
$
2,501
$
2,382
$
4,883
$
2,342
$
40
Percentage of total loan receivables
2.4
%
2.3
%
4.8
%
2.3
%
—
%
At December 31, 2023 ($ in millions)
30-89 days delinquent
90 or more days delinquent
Total past due
90 or more days delinquent and accruing
Total non-accruing
Credit cards
$
2,375
$
2,290
$
4,665
$
2,290
$
—
Consumer installment loans
96
23
119
—
23
Commercial credit products
61
40
101
40
—
Total delinquent loans
$
2,532
$
2,353
$
4,885
$
2,330
$
23
Percentage of total loan receivables
2.5
%
2.3
%
4.7
%
2.3
%
—
%
49
Credit Quality Indicators
Our loan receivables portfolio includes both secured and unsecured loans. Secured loan receivables are largely comprised of consumer installment loans secured by equipment. Unsecured loan receivables are largely comprised of our open-ended consumer and commercial revolving credit card loans. As part of our credit risk management activities, on an ongoing basis, we assess overall credit quality by reviewing information related to the performance of a customer’s account with us, including delinquency information, as well as information from credit bureaus relating to the customer’s broader credit performance. We utilize VantageScore credit scores to assist in our assessment of credit quality. VantageScore credit scores are obtained at origination of the account and are refreshed, at a minimum quarterly, but could be as often as weekly, to assist in predicting customer behavior. We categorize these credit scores into the following three credit score categories: (i) 651 or higher, which are considered the strongest credits; (ii) 591 to 650, considered moderate credit risk; and (iii) 590 or less, which are considered weaker credits. There are certain customer accounts, including for our commercial credit products, for which a VantageScore credit score may not be available where we use alternative sources to assess their credit quality and predict behavior. The following table provides the most recent VantageScore credit scores, or equivalent, available for our revolving credit card and commercial credit product customers at September 30, 2024, December 31, 2023 and September 30, 2023, respectively, as a percentage of each class of loan receivable. The table below excludes 0.3% of our total loan receivables balance for our credit cards and commercial credit products at each of September 30, 2024, December 31, 2023 and September 30, 2023, which represents those customer accounts for which a VantageScore credit score, or equivalent, is not available.
September 30, 2024
December 31, 2023
September 30, 2023
651 or
591 to
590 or
651 or
591 to
590 or
651 or
591 to
590 or
higher
650
less
higher
650
less
higher
650
less
Credit cards
72
%
19
%
9
%
72
%
19
%
9
%
73
%
19
%
8
%
Commercial credit products
83
%
7
%
10
%
83
%
10
%
7
%
86
%
7
%
7
%
Consumer Installment Loans
Delinquency trends are the primary credit quality indicator for our consumer installment loans, which we use to monitor credit quality and risk within the portfolio. The tables below include information on our consumer installment loans by origination year. The amounts for the current year period include information related to loan receivables associated with the Ally Lending acquisition. See Note 3. Acquisitions and Dispositions for additional information.
Consumer Installment Loans by Origination Year
By origination year
At September 30, 2024 ($ in millions)
2024
2023
2022
2021
2020
Prior
Total
Amortized cost basis
$
2,269
$
1,997
$
1,129
$
484
$
201
$
45
$
6,125
30-89 days delinquent
$
34
$
47
$
32
$
14
$
6
$
1
$
134
90 or more days delinquent
$
10
$
14
$
11
$
4
$
1
$
—
$
40
By origination year
At December 31, 2023 ($ in millions)
2023
2022
2021
2020
2019
Prior
Total
Amortized cost basis
$
2,097
$
931
$
541
$
312
$
69
$
27
$
3,977
30-89 days delinquent
$
44
$
25
$
15
$
9
$
2
$
1
$
96
90 or more days delinquent
$
11
$
6
$
4
$
2
$
—
$
—
$
23
Gross Charge-offs for Consumer Installment Loans by Origination Year
By origination year
For the nine months ended ($ in millions)
2024
2023
2022
2021
2020
Prior
Total
September 30, 2024
$
23
$
135
$
87
$
35
$
13
$
4
$
297
September 30, 2023
$
—
$
29
$
66
$
32
$
15
$
6
$
148
50
Loan Modifications to Borrowers Experiencing Financial Difficulty
The Company adopted ASU 2022-02 at January 1, 2023 on a modified retrospective basis through a cumulative adjustment to retained earnings. The new guidance is applicable for all loans modified to borrowers experiencing financial difficulties since January 1, 2023. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies - Allowance for Credit Losses - Loan Modifications to Borrowers Experiencing Financial Difficulty within our 2023 Form 10-K for additional information on our significant accounting policies related to loan modifications to borrowers experiencing financial difficulty.
The following table provides information on our loan modifications made to borrowers experiencing financial difficulty during the periods presented, which do not include loans that are classified as loan receivables held for sale:
Three months ended September 30
2024
2023
($ in millions)
Amount(a)
% of Total Class of Loan Receivables
Amount
% of Total Class of Loan Receivables
Long-term modifications
Credit cards
$
442
0.5
%
$
412
0.4
%
Consumer installment loans
—
—
%
—
—
%
Commercial credit products
3
0.2
%
1
0.1
%
Short-term modifications
Credit cards
231
0.2
%
163
0.2
%
Consumer installment loans
—
—
%
—
—
%
Commercial credit products
—
—
%
—
—
%
Total
$
676
0.7
%
$
576
0.6
%
Nine months ended September 30
2024
2023
($ in millions)
Amount(a)
% of Total Class of Loan Receivables
Amount
% of Total Class of Loan Receivables
Long-term modifications
Credit cards
$
1,322
1.4
%
$
1,134
1.2
%
Consumer installment loans
—
—
%
—
—
%
Commercial credit products
7
0.4
%
4
0.2
%
Short-term modifications
Credit cards
704
0.7
%
440
0.5
%
Consumer installment loans
—
—
%
—
—
%
Commercial credit products
1
—
%
—
—
%
Total
$
2,034
2.0
%
$
1,578
1.6
%
_______________________
(a)Represents balance at enrollment date. Long-term and short-term loan modifications made to borrowers for the nine months ended September 30, 2024 had amortized cost balances at September 30, 2024 of $1.1 billion and $149 million, respectively.
Financial Effects of Loan Modifications to Borrowers Experiencing Financial Difficulty
As part of our loan modifications to borrowers experiencing financial difficulty, we may provide multiple concessions to minimize our economic loss and improve long-term loan performance and collectability.
51
For long-term modifications made in the three and nine months ended September 30, 2024 and September 30, 2023, the financial effect of these modifications reduced the weighted-average interest rates by 97% for all periods presented. For short-term modifications made in the three months ended September 30 2024 and 2023, unpaid balances of $15 million and $10 million, respectively, were forgiven. For short-term modifications made in the nine months ended September 30, 2024 and 2023, unpaid balances of $216 million and $123 million, respectively, were forgiven. Additionally, beginning in the three months ended September 30, 2024, for borrowers that enroll in our short-term loan modification programs, we no longer charge interest and penalty fees during the term of the program.
Performance of Loans Modified to Borrowers Experiencing Financial Difficulty
The following tables provide information on the performance of loans modified to borrowers experiencing financial difficulty which have been modified within the previous 12 months and remain in a modification program at September 30, 2024. For the comparative period, amounts represent loans that were modified subsequent to January 1, 2023 and remained in a modification program at September 30, 2023:
Amortized cost basis
At September 30, 2024 ($ in millions)
Current
30-89 days delinquent
90 or more days delinquent
Total past due(a)
Long-term modifications
Credit cards
$
1,002
$
178
$
132
$
310
Consumer installment loans
—
—
—
—
Commercial credit products
3
1
1
2
Short-term modifications
Credit cards
72
38
39
77
Consumer installment loans
—
—
—
—
Commercial credit products
—
—
—
—
Total delinquent modified loans
$
1,077
$
217
$
172
$
389
Percentage of total loan receivables
1.1
%
0.2
%
0.2
%
0.4
%
Amortized cost basis
At September 30, 2023 ($ in millions)
Current
30-89 days delinquent
90 or more days delinquent
Total past due(a)
Long-term modifications
Credit cards
$
655
$
150
$
118
$
268
Consumer installment loans
—
—
—
—
Commercial credit products
2
1
1
2
Short-term modifications
Credit cards
40
28
39
67
Consumer installment loans
—
—
—
—
Commercial credit products
—
—
—
—
Total delinquent modified loans
$
697
$
179
$
158
$
337
Percentage of total loan receivables
0.7
%
0.2
%
0.1
%
0.3
%
___________________
(a)Once a loan has been modified, it only returns to current status (re-aged) after three consecutive monthly program payments are received post the modification date.
52
Payment Defaults
The following table presents the type, number and amount of loans to borrowers experiencing financial difficulty that enrolled in a long-term modification program within the previous 12 months from September 30, 2024, or between January 1, 2023 and September 30, 2023 for the comparative period, and experienced a payment default and charged-off during the period presented:
Three months ended September 30
2024
2023
($ in millions, accounts in thousands)
Accounts defaulted
Loans defaulted
Accounts defaulted
Loans defaulted
Credit cards
43
$
116
31
$
77
Consumer installment loans
—
—
—
—
Commercial credit products
—
1
—
1
Total
43
$
117
31
$
78
Nine months ended September 30
2024
2023
($ in millions, accounts in thousands)
Accounts defaulted
Loans defaulted
Accounts defaulted
Loans defaulted
Credit cards
96
$
259
51
$
122
Consumer installment loans
—
—
—
—
Commercial credit products
1
2
—
1
Total
97
$
261
51
$
123
Of the loans modified to borrowers experiencing financial difficulty that enrolled in a short-term modification program within the previous 12 months from September 30, 2024, or between January 1, 2023 and September 30, 2023 for the comparative period, 60% and 50% had fully completed all required payments and successfully exited the program during the nine months ended September 30, 2024 and 2023, respectively.
Unfunded Lending Commitments
We manage the potential risk in credit commitments by limiting the total amount of credit, both by individual customer and in total, by monitoring the size and maturity of our portfolios and by applying the same credit standards for all of our credit products. Unused credit card lines available to our customers totaled approximately $432 billion and $427 billion at September 30, 2024 and December 31, 2023, respectively. While these amounts represented the total available unused credit card lines, we have not experienced and do not anticipate that all of our customers will access their entire available line at any given point in time.
53
Interest Income by Product
The following table provides additional information about our interest and fees on loans, including merchant discounts, from our loan receivables, including held for sale:
Three months ended September 30,
Nine months ended September 30,
($ in millions)
2024
2023
2024
2023
Credit cards(a)
$
5,236
$
5,003
$
15,345
$
14,179
Consumer installment loans
238
108
630
285
Commercial credit products
46
38
134
108
Other
2
2
7
7
Total(b)
$
5,522
$
5,151
$
16,116
$
14,579
_______________________
(a)Interest income on credit cards that was reversed related to accrued interest receivables written off was $551 million and $422 million for the three months ended September 30, 2024 and 2023, respectively, and $1.7 billion and $1.3 billion for the nine months ended September 30, 2024 and 2023, respectively.
(b)Deferred merchant discounts to be recognized in interest income at both September 30, 2024 and December 31, 2023, was $1.9 billion, respectively, which are included in Accrued expenses and other liabilities in our Condensed Consolidated Statement of Financial Position.
54
NOTE 6. VARIABLE INTEREST ENTITIES
We use VIEs to securitize loan receivables and arrange asset-backed financing in the ordinary course of business. Investors in these entities only have recourse to the assets owned by the entity and not to our general credit. We do not have implicit support arrangements with any VIE and we did not provide non-contractual support for previously transferred loan receivables to any of these VIEs in the three and nine months ended September 30, 2024 and 2023. Our VIEs are able to accept new loan receivables and arrange new asset-backed financings, consistent with the requirements and limitations on such activities placed on the VIE by existing investors. Once an account has been designated to a VIE, the contractual arrangements we have require all existing and future loan receivables originated under such account to be transferred to the VIE. The amount of loan receivables held by our VIEs in excess of the minimum amount required under the asset-backed financing arrangements with investors may be removed by us under removal of accounts provisions. All loan receivables held by a VIE are subject to claims of third-party investors.
In evaluating whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity’s economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity’s future performance and the exercise of professional judgment in deciding which decision-making rights are most important.
In determining whether we have the right to receive benefits or the obligation to absorb losses that could potentially be significant to a VIE, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity’s design, including: the entity’s capital structure, contractual rights to earnings or losses, subordination of our interests relative to those of other investors, as well as any other contractual arrangements that might exist that could have the potential to be economically significant. The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic interests is a matter that requires the exercise of professional judgment.
We consolidate VIEs where we have the power to direct the activities that significantly affect the VIEs' economic performance, typically because of our role as either servicer or administrator for the VIEs. The power to direct exists because of our role in the design and conduct of the servicing of the VIEs’ assets as well as directing certain affairs of the VIEs, including determining whether and on what terms debt of the VIEs will be issued.
The loan receivables in these entities have risks and characteristics similar to our other loan receivables and were underwritten to the same standard. Accordingly, the performance of these assets has been similar to our other comparable loan receivables, and the blended performance of the pools of receivables in these entities reflects the eligibility criteria that we apply to determine which receivables are selected for transfer. Contractually, the cash flows from these loan receivables must first be used to pay third-party debt holders, as well as other expenses of the entity. Excess cash flows, if any, are available to us. The creditors of these entities have no claim on our other assets.
55
The table below summarizes the assets and liabilities of our consolidated securitization VIEs described above:
($ in millions)
September 30, 2024
December 31, 2023
Assets
Loan receivables, net(a)
$
19,246
$
19,537
Other assets(b)
47
47
Total
$
19,293
$
19,584
Liabilities
Borrowings
$
8,015
$
7,267
Other liabilities
29
31
Total
$
8,044
$
7,298
_______________________
(a)Includes $1.9 billion and $1.9 billion of related allowance for credit losses resulting in gross restricted loan receivables of $21.2 billion and $21.4 billion at September 30, 2024 and December 31, 2023, respectively.
(b) Includes $42 million and $45 million of segregated funds held by the VIEs at September 30, 2024 and December 31, 2023, respectively, which are classified as restricted cash and equivalents and included as a component of Other assets in our Condensed Consolidated Statements of Financial Position.
The balances presented above are net of intercompany balances and transactions that are eliminated in our condensed consolidated financial statements.
We provide servicing for all of our consolidated VIEs. Collections are required to be placed into segregated accounts owned by each VIE in amounts that meet contractually specified minimum levels. These segregated funds are invested in cash and cash equivalents and are restricted as to their use, principally to pay maturing principal and interest on debt and the related servicing fees. Collections above these minimum levels are remitted to us on a daily basis.
Income (principally, interest and fees on loans) earned by our consolidated VIEs was $1.2 billion and $1.0 billion, for the three months ended September 30, 2024 and 2023, respectively. Related expenses consisted primarily of provision for credit losses of $331 million and $189 million, for the three months ended September 30, 2024 and 2023, respectively, and interest expense of $108 million and $86 million, for the three months ended September 30, 2024 and 2023, respectively.
Income (principally, interest and fees on loans) earned by our consolidated VIEs was $3.2 billion and $2.9 billion, for the nine months ended September 30, 2024 and 2023, respectively. Related expenses consisted primarily of provision for credit losses of $753 million and $553 million, for the nine months ended September 30, 2024 and 2023, respectively, and interest expense of $323 million and $241 million, for the nine months ended September 30, 2024 and 2023, respectively. These amounts do not include intercompany transactions, principally fees and interest, which are eliminated in our condensed consolidated financial statements.
Non-consolidated VIEs
As part of our community reinvestment initiatives, we invest in funds that invest in affordable housing properties and receive affordable housing tax credits for these investments. These investments included in our Condensed Consolidated Statement of Financial Position totaled $755 million and $736 million at September 30, 2024 and December 31, 2023, respectively, and represents our total exposure for these entities.
For the three months ended September 30, 2024 and 2023, provision for income taxes included amortization expense of $24 million and $21 million, respectively, and tax credits and other tax benefits of $30 million and $25 million, respectively, associated with investments in affordable housing properties. For the nine months ended September 30, 2024 and 2023, provision for income taxes included amortization expense of $71 million and $56 million, respectively, and tax credits and other tax benefits of $86 million and $72 million, respectively, associated with investments in affordable housing properties.
56
Our other investments in non-consolidated VIEs, totaled $282 million and $252 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, the Company also had investment commitments of $197 million related to these investments.
NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
($ in millions)
2024
Balance at January 1
$
1,018
Change in amounts allocated to disposition of business(a)
4
Goodwill recognized upon acquisition
252
Balance at September 30
$
1,274
_____________
(a)The change in the nine months ended September 30, 2024 was based upon the carrying amount of net assets of Pets Best and the final valuation of consideration received at closing.
Intangible Assets
September 30, 2024
December 31, 2023
($ in millions)
Gross carrying amount
Accumulated amortization
Net
Gross carrying amount
Accumulated amortization
Net
Capitalized software
$
2,191
$
(1,490)
$
701
$
2,065
$
(1,302)
$
763
Other
194
(130)
64
204
(152)
52
Total
$
2,385
$
(1,620)
$
765
$
2,269
$
(1,454)
$
815
During the nine months ended September 30, 2024, we recorded additions to intangible assets subject to amortization of $193 million, primarily related to capitalized software expenditures, as well as intangible assets of $18 million related to the Ally Lending acquisition. See Note 3. Acquisitions and Dispositions for additional information.
Amortization expense was $83 million and $74 million for the three months ended September 30, 2024 and 2023, respectively, and $243 million and $216 million for the nine months ended September 30, 2024 and 2023, respectively, and is included as a component of Other expense in our Condensed Consolidated Statements of Earnings.
57
NOTE 8. DEPOSITS
September 30, 2024
December 31, 2023
($ in millions)
Amount
Average rate(a)
Amount
Average rate(a)
Interest-bearing deposits
$
81,901
4.7
%
$
80,789
3.9
%
Non-interest-bearing deposits
383
—
364
—
Total deposits
$
82,284
$
81,153
____________________
(a)Based on interest expense for the nine months ended September 30, 2024 and the year ended December 31, 2023 and average deposits balances.
At September 30, 2024 and December 31, 2023, interest-bearing deposits included $11.0 billion and $10.0 billion, respectively, of certificates of deposit that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor for each account ownership category. These amounts include partially insured certificates of deposit.
At September 30, 2024, our interest-bearing time deposits maturing for the remainder of 2024 and over the next four years and thereafter were as follows:
($ in millions)
2024
2025
2026
2027
2028
Thereafter
Deposits
$
6,429
$
32,886
$
3,032
$
2,969
$
1,526
$
916
The above maturity table excludes $30.0 billion of demand deposits with no defined maturity, of which $27.9 billion are savings accounts. In addition, at September 30, 2024, we had $4.1 billion of broker network deposit sweeps procured through a program arranger who channels brokerage account deposits to us that are also excluded from the above maturity table. Unless extended, the contracts associated with these broker network deposit sweeps will terminate between 2025 and 2026.
58
NOTE 9. BORROWINGS
September 30, 2024
December 31, 2023
($ in millions)
Maturity date
Interest Rate
Weighted average interest rate
Outstanding Amount(a)(b)
Outstanding Amount(a)(b)
Borrowings of consolidated securitization entities:
Fixed securitized borrowings
2025 - 2027
3.37% - 5.74%
4.73
%
$
4,915
$
3,417
Floating securitized borrowings
2024 - 2027
5.81% - 6.07%
5.90
%
3,100
3,850
Total borrowings of consolidated securitization entities
5.18
%
8,015
7,267
Senior unsecured notes:
Synchrony Financial senior unsecured notes:
Fixed senior unsecured notes
2025 - 2031
2.87% - 5.15%
4.19
%
4,635
6,480
Fixed to floating senior unsecured notes(c)
2030
5.94%
5.94
%
745
—
Synchrony Bank senior unsecured notes:
Fixed senior unsecured notes
2025 - 2027
5.40% - 5.63%
5.49
%
1,496
1,494
Total senior unsecured notes
4.66
%
6,876
7,974
Subordinated unsecured notes:
Synchrony Financial subordinated unsecured notes:
Fixed subordinated unsecured notes
2033
7.25%
7.25
%
741
741
Total senior and subordinated unsecured notes
4.91
%
7,617
8,715
Total borrowings
$
15,632
$
15,982
___________________
(a)Includes unamortized debt premiums, discounts and issuance costs.
(b)The Company may redeem certain borrowings prior to their original contractual maturity dates in accordance with the optional redemption provision specified in the respective instruments
(c)Interest rate fixed through August 1, 2029; resets August 2, 2029 to floating rate based on compounded Secured Overnight Financing Rate ("SOFR") plus 213 basis points.
Debt Maturities
The following table summarizes the maturities of the principal amount of our borrowings of consolidated securitization entities and senior and subordinated unsecured notes for the remainder of 2024 and over the next four years and thereafter:
($ in millions)
2024
2025
2026
2027
2028
Thereafter
Borrowings
$
175
$
5,650
$
3,250
$
3,700
$
—
$
2,900
Senior Unsecured Notes
2024 Issuance($ in millions):
Issuance Date
Principal Amount
Maturity
Interest Rate
Fixed to floating rate subordinated unsecured notes:
Synchrony Financial
August 2024
$
750
August 2030
5.935%
59
Additional Sources of Liquidity
We have undrawn committed and uncommitted capacity under certain credit facilities, primarily from private lenders under our securitization programs, subject to customary borrowing conditions, and also have access to the Federal Reserve discount window.
At September 30, 2024, we had an aggregate of $2.7 billion of undrawn capacity under our securitization financings, of which $2.2 billion was committed and $450 million was uncommitted. At December 31, 2023, we had an aggregate of $2.5 billion of undrawn capacity under our securitization financings, of which all was committed.
At September 30, 2024 and December 31, 2023, we had an aggregate of $500 million of undrawn committed capacity under our unsecured revolving credit facility with private lenders.
At September 30, 2024 and December 31, 2023, we had an aggregate of $11.4 billion and $10.4 billion, respectively, of available borrowing capacity through the Federal Reserve discount window based on the amount and type of assets pledged.
60
NOTE 10. FAIR VALUE MEASUREMENTS
For a description of how we estimate fair value, see Note 2. Basis of Presentation and Summary of Significant Accounting Policies in our 2023 annual consolidated financial statements within our 2023 Form 10-K. The following tables present our assets and liabilities measured at fair value on a recurring basis.
Recurring Fair Value Measurements
At September 30, 2024 ($ in millions)
Level 1
Level 2
Level 3
Total(a)
Assets
Debt securities
U.S. government and federal agency
$
—
$
819
$
—
$
819
State and municipal
—
—
17
17
Residential mortgage-backed
—
316
—
316
Asset-backed
—
1,185
—
1,185
Other
—
—
8
8
Other(b)
15
—
8
23
Total
$
15
$
2,320
$
33
$
2,368
Liabilities
Other(c)
—
—
10
10
Total
$
—
$
—
$
10
$
10
At December 31, 2023 ($ in millions)
Assets
Debt securities
U.S. government and federal agency
$
—
$
2,264
$
—
$
2,264
State and municipal
—
—
10
10
Residential mortgage-backed
—
354
—
354
Asset-backed
—
1,162
—
1,162
Other
—
—
8
8
Other(b)
14
—
10
24
Total
$
14
$
3,780
$
28
$
3,822
Liabilities
Other(c)
—
—
$
4
$
4
Total
$
—
$
—
$
4
$
4
_______________________
(a) For the nine months ended September 30, 2024 and 2023, there were no fair value measurements transferred between levels.
(b) Other is primarily comprised of equity investments measured at fair value, which are included in Other assets in our Condensed Consolidated Statement of Financial Position, as well as certain financial assets for which we have elected the fair value option which are included in Loan receivables in our Condensed Consolidated Statement of Financial Position.
(c) Other includes certain financial liabilities for which we have elected the fair value option. These liabilities are included in Accrued expenses and other liabilities in our Condensed Consolidated Statement of Financial Position.
61
Level 3 Fair Value Measurements
Our Level 3 recurring fair value measurements primarily relate to state and municipal and corporate debt instruments, which are valued using non-binding broker quotes or other third-party sources, and financial assets and liabilities for which we have elected the fair value option. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 10. Fair Value Measurements in our 2023 annual consolidated financial statements within our 2023 Form 10-K for a description of our process to evaluate third-party pricing servicers. Our state and municipal debt securities are classified as available-for-sale with changes in fair value included in Accumulated other comprehensive income.
The changes in our Level 3 assets and liabilities that are measured on a recurring basis for the three and nine months ended September 30, 2024 and 2023, respectively, were not material.
62
Financial Assets and Financial Liabilities Carried at Other Than Fair Value
Carrying
Corresponding fair value amount
At September 30, 2024 ($ in millions)
value
Total
Level 1
Level 2
Level 3
Financial Assets
Financial assets for which carrying values equal or approximate fair value:
Cash and equivalents(a)
$
17,934
$
17,934
$
17,934
$
—
$
—
Other assets(a)(b)
$
47
$
47
$
47
$
—
$
—
Financial assets carried at other than fair value:
Loan receivables, net(c)
$
91,156
$
104,113
$
—
$
—
$
104,113
Financial Liabilities
Financial liabilities carried at other than fair value:
Deposits
$
82,284
$
82,493
$
—
$
82,493
$
—
Borrowings of consolidated securitization entities
$
8,015
$
8,065
$
—
$
4,968
$
3,097
Senior and subordinated unsecured notes
$
7,617
$
7,558
$
—
$
7,558
$
—
Carrying
Corresponding fair value amount
At December 31, 2023 ($ in millions)
value
Total
Level 1
Level 2
Level 3
Financial Assets
Financial assets for which carrying values equal or approximate fair value:
Cash and equivalents(a)
$
14,259
$
14,259
$
14,259
$
—
$
—
Other assets(a)(b)
$
50
$
50
$
50
$
—
$
—
Assets held for sale(d)
$
112
$
112
$
112
$
—
$
—
Financial assets carried at other than fair value:
Loan receivables, net(c)
$
92,407
$
104,761
$
—
$
—
$
104,761
Financial Liabilities
Financial liabilities carried at other than fair value:
Deposits
$
81,153
$
80,935
$
—
$
80,935
$
—
Borrowings of consolidated securitization entities
$
7,267
$
7,250
$
—
$
3,411
$
3,839
Senior and subordinated unsecured notes
$
8,715
$
8,423
$
—
$
8,423
$
—
_______________________
(a)For cash and equivalents and restricted cash and equivalents, carrying value approximates fair value due to the liquid nature and short maturity of these instruments.
(b)This balance relates to restricted cash and equivalents, which is included in Other assets.
(c) Excludes financial assets for which we have elected the fair value option. Under certain retail partner program agreements, the expected sales proceeds in the event of a sale of their credit card portfolio may be limited to the amounts owed by our customers, which may be less than the fair value indicated above.
(d) Includes $19 million of cash and equivalents and $93 million of restricted cash and equivalents.
63
Equity Securities Without Readily Determinable Fair Values
Three months ended
Nine months ended
At or for the periods ended September 30
($ in millions)
2024
2023
2024
2023
Carrying value(a)
$
270
$
268
$
270
$
268
Upward adjustments(b)
—
17
—
17
Downward adjustments(b)
(5)
(5)
(7)
(6)
_______________________
(a)Carrying value reflects cumulative purchases and sales in addition to upward and downward carrying value changes, and at December 31, 2023 was $270 million.
(b) Between January 1, 2018 and September 30, 2024, cumulative upward and downward carrying value adjustments were $205 million and $(21) million, respectively.
NOTE 11. REGULATORY AND CAPITAL ADEQUACY
As a savings and loan holding company and a financial holding company, we are subject to regulation, supervision and examination by the Federal Reserve Board and subject to the capital requirements as prescribed by Basel III capital rules and the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Bank is a federally chartered savings association. As such, the Bank is subject to regulation, supervision and examination by the Office of the Comptroller of the Currency of the U.S. Treasury (the “OCC”), which is its primary regulator, and by the Consumer Financial Protection Bureau (“CFPB”). In addition, the Bank, as an insured depository institution, is supervised by the FDIC.
Failure to meet minimum capital requirements can initiate 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 consolidated financial statements. Under capital adequacy guidelines, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require us and the Bank to maintain minimum amounts and ratios (set forth in the tables below) of Total, Tier 1 and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined).
For Synchrony Financial to be a well-capitalized savings and loan holding company, the 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.
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 its regulatory capital. Beginning in the first quarter of 2022, the effects are being phased-in over a three-year period through 2024 and will be fully phased-in beginning in the first quarter of 2025. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period included both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during the two-year period ended December 31, 2021, collectively the “CECL regulatory capital transition adjustment”. Beginning in the first quarter of 2024 only 25% of the CECL regulatory capital transition adjustment is deferred in our regulatory capital amounts and ratios, as compared to 50% at December 31, 2023.
At September 30, 2024 and December 31, 2023, Synchrony Financial met all applicable requirements to be deemed well-capitalized pursuant to Federal Reserve Board regulations. At September 30, 2024 and December 31, 2023, the Bank also met all applicable requirements to be deemed well-capitalized pursuant to OCC regulations and for purposes of the Federal Deposit Insurance Act. There are no conditions or events subsequent to September 30, 2024 that management believes have changed the Company's or the Bank’s capital category.
64
The actual capital amounts, ratios and the applicable required minimums of the Company and the Bank are as follows:
Synchrony Financial
At September 30, 2024 ($ in millions)
Actual
Minimum for capital adequacy purposes
Amount
Ratio(a)
Amount
Ratio(b)
Total risk-based capital
$
16,864
16.4
%
$
8,248
8.0
%
Tier 1 risk-based capital
$
14,723
14.3
%
$
6,186
6.0
%
Tier 1 leverage
$
14,723
12.5
%
$
4,726
4.0
%
Common equity Tier 1 Capital
$
13,501
13.1
%
$
4,640
4.5
%
At December 31, 2023 ($ in millions)
Actual
Minimum for capital adequacy purposes
Amount
Ratio(a)
Amount
Ratio(b)
Total risk-based capital
$
15,464
14.9
%
$
8,277
8.0
%
Tier 1 risk-based capital
$
13,334
12.9
%
$
6,208
6.0
%
Tier 1 leverage
$
13,334
11.7
%
$
4,563
4.0
%
Common equity Tier 1 Capital
$
12,600
12.2
%
$
4,656
4.5
%
Synchrony Bank
At September 30, 2024 ($ in millions)
Actual
Minimum for capital adequacy purposes
Minimum to be well-capitalized under prompt corrective action provisions
Amount
Ratio(a)
Amount
Ratio(b)
Amount
Ratio
Total risk-based capital
$
15,583
15.9
%
$
7,852
8.0
%
$
9,815
10.0
%
Tier 1 risk-based capital
$
13,499
13.8
%
$
5,889
6.0
%
$
7,852
8.0
%
Tier 1 leverage
$
13,499
12.1
%
$
4,469
4.0
%
$
5,586
5.0
%
Common equity Tier I capital
$
13,499
13.8
%
$
4,417
4.5
%
$
6,380
6.5
%
At December 31, 2023 ($ in millions)
Actual
Minimum for capital adequacy purposes
Minimum to be well-capitalized under prompt corrective action provisions
Amount
Ratio(a)
Amount
Ratio(b)
Amount
Ratio
Total risk-based capital
$
14,943
15.3
%
$
7,822
8.0
%
$
9,778
10.0
%
Tier 1 risk-based capital
$
12,880
13.2
%
$
5,867
6.0
%
$
7,822
8.0
%
Tier 1 leverage
$
12,880
12.0
%
$
4,302
4.0
%
$
5,377
5.0
%
Common equity Tier I capital
$
12,880
13.2
%
$
4,400
4.5
%
$
6,356
6.5
%
_______________________
(a)Capital ratios are calculated based on the Basel III Standardized Approach rules. Capital amounts and ratios at September 30, 2024 and at December 31, 2023 in the above tables reflect the applicable CECL regulatory capital transition adjustment.
(b)At September 30, 2024 and at December 31, 2023, Synchrony Financial and the Bank also must maintain a capital conservation buffer of common equity Tier 1 capital in excess of minimum risk-based capital ratios by at least 2.5 percentage points to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees.
The Bank may pay dividends on its stock, with consent or non-objection from the OCC and the Federal Reserve Board, among other things, if its regulatory capital would not thereby be reduced below the applicable regulatory capital requirements.
65
NOTE 12. EARNINGS PER SHARE
Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the assumed conversion of all dilutive securities, which are calculated using the treasury stock method.
The following table presents the calculation of basic and diluted earnings per common share:
Three months ended September 30,
Nine months ended September 30,
(in millions, except per share data)
2024
2023
2024
2023
Net earnings
$
789
$
628
$
2,725
$
1,798
Preferred stock dividends
(21)
(10)
$
(51)
$
(31)
Net earnings available to common stockholders
$
768
$
618
$
2,674
$
1,767
Weighted average common shares outstanding, basic
392.3
416.0
398.7
$
424.3
Effect of dilutive securities
4.2
2.4
3.7
$
2.2
Weighted average common shares outstanding, dilutive
396.5
418.4
$
402.4
$
426.5
Earnings per basic common share
$
1.96
$
1.49
$
6.71
$
4.16
Earnings per diluted common share
$
1.94
$
1.48
$
6.65
$
4.14
We have issued certain stock-based awards under both the Synchrony Financial 2014 and 2024 Long-Term Incentive Plans. A total of zero shares and 3 million shares for the three months ended September 30, 2024 and 2023, respectively, and 1 million and 5 million shares for the nine months ended September 30, 2024 and 2023, respectively, related to these awards, were considered anti-dilutive and therefore were excluded from the computation of diluted earnings per common share.
NOTE 13. EQUITY AND OTHER STOCK RELATED INFORMATION
Preferred Stock
The following table summarizes the Company's preferred stock issued and outstanding at September 30, 2024 and December 31, 2023.
Series
Issuance Date
Redeemable by Issuer Beginning
Per Annum Dividend Rate
Liquidation Preference per Share
Total Shares Outstanding
September 30, 2024
December 31, 2023
($ in millions, except per share data)
Series A(a)
November 14, 2019
November 15, 2024
5.625%
$1,000
750,000
$
734
$
734
Series B(a)
February 23, 2024
May 15, 2029
8.25%(b)
$1,000
500,000
$
488
$
—
$
1,222
$
734
_______________________
(a)Issued as depositary shares, each representing a 1/40th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 of each calendar year at a fixed rate, in each case when, as and if declared by the Board of Directors.
(b)Through May 14, 2029; resets May 15, 2029 and each date falling on the fifth anniversary at 5-Year Treasury Rate plus 4.044%.
66
NOTE 14. INCOME TAXES
Unrecognized Tax Benefits
($ in millions)
September 30, 2024
December 31, 2023
Unrecognized tax benefits, excluding related interest expense and penalties(a)
$
232
$
230
Portion that, if recognized, would reduce tax expense and effective tax rate(b)
$
183
$
182
____________________
(a)Interest and penalties related to unrecognized tax benefits were not material for all periods presented.
(b)Comprised of federal unrecognized tax benefits and state and local unrecognized tax benefits net of the effects of associated U.S. federal income taxes. Excludes amounts attributable to any related valuation allowances resulting from associated increases in deferred tax assets.
We establish a liability that represents the difference between a tax position taken (or expected to be taken) on an income tax return and the amount of taxes recognized in our financial statements. The liability associated with the unrecognized tax benefits is adjusted periodically when new information becomes available. The amount of unrecognized tax benefits that is reasonably possible to be resolved in the next twelve months is expected to be $35 million, of which $28 million, if recognized, would reduce the Company's tax expense and effective tax rate.
In the current year, the Company executed a Memorandum of Understanding with the IRS to participate voluntarily in the IRS Compliance Assurance Process (“CAP”) program for the 2024 tax year, and thus the tax year is under IRS review. The IRS is also examining our 2023 tax year, and we expect the review will be completed in the current year. Additionally, we are under examination in various states going back to 2014.
We believe that there are no issues or claims that are likely to significantly impact our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties that could result from such examinations.
NOTE 15. LEGAL PROCEEDINGS AND REGULATORY MATTERS
In the normal course of business, from time to time, we have been named as a defendant in various legal proceedings, including arbitrations, class actions and other litigation, arising in connection with our business activities. Certain of the legal actions include claims for substantial compensatory and/or punitive damages, or claims for indeterminate amounts of damages. We are also involved, from time to time, in reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our business (collectively, “regulatory matters”), which could subject us to significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, diminished income and damage to our reputation. We contest liability and/or the amount of damages as appropriate in each pending matter. In accordance with applicable accounting guidance, we establish an accrued liability for legal and regulatory matters when those matters present loss contingencies which are both probable and reasonably estimable.
Legal proceedings and regulatory matters are subject to many uncertain factors that generally cannot be predicted with assurance, and we may be exposed to losses in excess of any amounts accrued.
For some matters, we are able to determine that an estimated loss, while not probable, is reasonably possible. For other matters, including those that have not yet progressed through discovery and/or where important factual information and legal issues are unresolved, we are unable to make such an estimate. We currently estimate that the reasonably possible losses for legal proceedings and regulatory matters, whether in excess of a related accrued liability or where there is no accrued liability, and for which we are able to estimate a possible loss, are immaterial. This represents management’s estimate of possible loss with respect to these matters and is based on currently available information. This estimate of possible loss does not represent our potential maximum loss exposure. The legal proceedings and regulatory matters underlying the estimate will change from time to time and actual results may vary significantly from current estimates.
67
Our estimate of reasonably possible losses involves significant judgment, given the varying stages of the proceedings, the existence of numerous yet to be resolved issues, the breadth of the claims (often spanning multiple years), unspecified damages and/or the novelty of the legal issues presented. Based on our current knowledge, we do not believe that we are a party to any pending legal proceeding or regulatory matters that would have a material adverse effect on our condensed consolidated financial condition or liquidity. However, in light of the uncertainties involved in such matters, the ultimate outcome of a particular matter could be material to our operating results for a particular period depending on, among other factors, the size of the loss or liability imposed and the level of our earnings for that period, and could adversely affect our business and reputation.
68
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk refers to the risk that a change in the level of one or more market prices, rates, indices, correlations or other market factors will result in losses for a position or portfolio. We are exposed to market risk primarily from changes in interest rates.
We borrow money from a variety of depositors and institutions in order to provide loans to our customers. Changes in market interest rates cause our net interest income to increase or decrease, as some of our assets and liabilities carry interest rates that fluctuate with market benchmarks. The interest rate benchmark for our floating rate assets is generally the prime rate, and the interest rate benchmark for our floating rate liabilities is generally either the Secured Overnight Financing Rate ("SOFR"), U.S. Treasury bills, or the federal funds rate. The prime rate and the SOFR, U.S. Treasury bills or federal funds rate could reset at different times or could diverge, leading to mismatches in the interest rates on our floating rate assets and floating rate liabilities.
The following table presents the approximate net interest income impacts forecasted over the next twelve months from an immediate and parallel change in interest rates affecting all interest rate sensitive assets and liabilities at September 30, 2024.
Basis Point Change
At September 30, 2024
($ in millions)
-100 basis points
$
(223)
+100 basis points
$
72
For a more detailed discussion of our exposure to market risk, refer to “Management's Discussion and Analysis—Quantitative and Qualitative Disclosures about Market Risk” in our 2023 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), and based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024.
No change in internal control over financial reporting occurred during the fiscal quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
69
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of legal proceedings, see Note 15. Legal Proceedings and Regulatory Matters to our condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors included in our 2023 Form 10-K under the heading “Risk Factors Relating to Our Business” and “Risk Factors Relating to Regulation”.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The table below sets forth information regarding purchases of our common stock primarily related to our share repurchase program that were made by us or on our behalf during the three months ended September 30, 2024.
($ in millions, except per share data)
Total Number of Shares Purchased(a)
Average Price Paid Per Share(b)
Total Number of Shares
Purchased as
Part of Publicly Announced Programs
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Programs(b)(c)
July 1 - 31, 2024
35,424
$
48.74
—
$
1,000.0
August 1 - 31, 2024
5,001,194
45.41
5,000,000
773.0
September 1 - 30, 2024
1,607,751
45.41
1,606,512
700.0
Total
6,644,369
$
45.43
6,606,512
$
700.0
_______________________
(a)Includes 35,424 shares, 1,194 shares and 1,239 shares withheld in July, August and September, respectively, to offset tax withholding obligations that occur upon the delivery of outstanding shares underlying performance stock awards, restricted stock awards or upon the exercise of stock options.
(b)Amounts exclude commission costs.
(c)In April 2024 the Board of Directors approved an incremental share repurchase program of up to $1.0 billion through June 30, 2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
70
ITEM 5. OTHER INFORMATION
Trading Plans
On July 19, 2024, Jonathan S. Mothner, Executive Vice President, Chief Risk and Legal Officer, entered into a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).Mr. Mothner’s plan covers the sale of an aggregate amount of 34,163 of the Company’s securities, and will terminate on July 21, 2025, or an earlier date under certain circumstances specified under the terms of the plan, including if all trades are executed or all orders related to the trades under the plan expire. During the three months ended September 30, 2024, no other director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408(a) of Regulation S-K.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (included as Exhibit 101)
______________________
*Filed electronically herewith.
72
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Synchrony Financial
(Registrant)
October 23, 2024
/s/ Brian J. Wenzel Sr.
Date
Brian J. Wenzel Sr. Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)
