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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report and in our 2021 Form 10-K. The discussion below contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. See “Cautionary Note Regarding Forward-Looking Statements.”

Introduction and Business Overview

____________________________________________________________________________________________

We are a premier consumer financial services company delivering one of the industry's most complete, digitally-enabled product suites. Our experience, expertise and scale encompass a broad spectrum of industries including digital, health and wellness, retail, telecommunications, home, auto, outdoor, pet and more. We have an established and diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers, which we refer to as our “partners.” For the three and nine months ended September 30, 2022, we financed $44.6 billion and $132.3 billion of purchase volume, respectively, and had 66.3 million and 68.5 million average active accounts, respectively, and at September 30, 2022, we had $86.0 billion of loan receivables.

We offer our credit products primarily through our wholly-owned subsidiary, the Bank. In addition, through the Bank, we offer, directly to retail, affinity relationships and commercial customers, a range of deposit products insured by the Federal Deposit Insurance Corporation (“FDIC”), including certificates of deposit, individual retirement accounts (“IRAs”), money market accounts, savings accounts and sweep and affinity deposits. We also take deposits at the Bank through third-party securities brokerage firms that offer our FDIC-insured deposit products to their customers. We have significantly expanded our online direct banking operations in recent years and our deposit base serves as a source of stable and diversified low cost funding for our credit activities. At September 30, 2022, we had $68.4 billion in deposits, which represented 82% of our total funding sources.

Our Sales Platforms

_________________________________________________________________

We conduct our operations through a single business segment. Profitability and expenses, including funding costs, credit losses and operating expenses, are managed for the business as a whole. Substantially all of our revenue activities are within the United States. We primarily manage our credit products through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle). Those platforms are organized by the types of partners we work with, and are measured on interest and fees on loans, loan receivables, active accounts and other sales metrics.

Home & Auto

Our Home & Auto sales platform provides comprehensive payments and financing solutions with integrated in-store and digital experiences through a broad network of partners and merchants providing home and automotive merchandise and services, as well as our Synchrony Car Care network and Synchrony HOME credit card offering. Our Home & Auto sales platform partners include a wide range of key retailers in the home improvement, furniture, bedding, appliance and electronics industry, such as Ashley HomeStores LTD, Lowe's, and Mattress Firm, as well as automotive merchandise and services, such as Chevron and Discount Tire. In addition, we also have program agreements with buying groups, manufacturers and industry associations, such as Nationwide Marketing Group and the Home Furnishings Association.

Digital

Our Digital sales platform provides comprehensive payments and financing solutions with integrated digital experiences through partners and merchants who primarily engage with their consumers through digital channels. Our Digital sales platform includes key partners delivering digital payment solutions, such as PayPal, including our Venmo program, online marketplaces, such as Amazon and eBay, and digital-first brands and merchants, such as Verizon, the Qurate brands, and Fanatics.

Diversified & Value

Our Diversified & Value sales platform provides comprehensive payments and financing solutions with integrated in-store and digital experiences through large retail partners who deliver everyday value to consumers shopping for daily needs or important life moments. Our Diversified & Value sales platform is comprised of five large retail partners: Belk, Fleet Farm, JCPenney, Sam's Club and TJX Companies, Inc.

Health & Wellness

Our Health & Wellness sales platform provides comprehensive healthcare payments and financing solutions, through a network of providers and health systems, for those seeking health and wellness care for themselves, their families and their pets, and includes key brands such as CareCredit and Pets Best, as well as partners such as Walgreens.

Lifestyle

Lifestyle provides comprehensive payments and financing solutions with integrated in-store and digital experiences through partners and merchants who offer merchandise in power sports, outdoor power equipment, and other industries such as sporting goods, apparel, jewelry and music. Our Lifestyle sales platform partners include a wide range of key retailers in the apparel, specialty retail, outdoor, music and luxury industry, such as

American Eagle, Dick's Sporting Goods, Guitar Center, Polaris and Pandora.

Corp, Other

Corp, Other includes activity and balances related to certain program agreements with retail partners and merchants that will not be renewed beyond their current expiry date and certain programs that were previously terminated, which are not managed within the five sales platforms discussed above, and for the nine months ended September 30, 2022 primarily includes activity associated with the Gap Inc. and BP portfolios, which were both sold in the second quarter of 2022. Corp, Other also includes amounts related to changes in the fair value of equity investments and realized gains or losses associated with the sale of investments.

Our Credit Products

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

The following table sets forth each credit product by type and indicates the percentage of our total loan receivables that are under standard terms only or pursuant to a promotional financing offer at September 30, 2022.

									Promotional Offer
Credit Product			Standard Terms Only						Deferred Interest						Other Promotional						Total
Credit cards			57.7		%				20.6		%				16.2		%				94.5		%
Commercial credit products			2.0						—						—						2.0
Consumer installment loans			—						0.1						3.3						3.4
Other			0.1						—						—						0.1
Total			59.8		%				20.7		%				19.5		%				100.0		%

Credit Cards

We offer the following principal types of credit cards:

• Private Label Credit Cards.** Private label credit cards are partner-branded credit cards (e.g., Lowe’s or Amazon) or program-branded credit cards (e.g., Synchrony Car Care or CareCredit) that are used primarily for the purchase of goods and services from the partner or within the program network. In addition, in some cases, cardholders may be permitted to access their credit card accounts for cash advances. Credit under our private label credit cards typically is extended either on standard terms only or pursuant to a promotional financing offer.

• Dual Cards and General Purpose Co-Branded Cards.** Our patented Dual Cards are credit cards that function as private label credit cards when used to purchase goods and services from our partners, and as general purpose credit cards when used to make purchases from other retailers wherever cards from those card networks are accepted or for cash advance transactions. We also offer general purpose co-branded credit cards that do not function as private label credit cards, as well as a Synchrony-branded general purpose credit card. Dual Cards and general purpose co-branded credit cards are offered across all of our sales platforms and credit is typically extended on standard terms only. We offer either Dual Cards or general purpose co-branded credit cards through approximately 20 of our large retail partners, of which the majority are Dual Cards, as well as our CareCredit Dual Card. Consumer Dual Cards and Co-Branded cards totaled 23% of our total loan receivables portfolio at September 30, 2022.

Commercial Credit Products

We offer private label cards and Dual Cards for commercial customers that are similar to our consumer offerings. We also offer a commercial pay-in-full accounts receivable product to a wide range of business customers.

Installment Loans

We originate installment loans to consumers (and a limited number of commercial customers) in the United States, primarily in the power products market (motorcycles, ATVs and lawn and garden), as well as through our various SetPay installment products (such as our SetPay Pay in 4 product for short-term loans). Installment loans are closed-end credit accounts where the customer pays down the outstanding balance in installments. Installment loans are generally assessed periodic finance charges using fixed interest rates.

Business Trends and Conditions

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We believe our business and results of operations will be impacted in the future by various trends and conditions. For a discussion of certain trends and conditions, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Trends and Conditions” in our 2021 Form 10-K. For a discussion of how certain trends and conditions impacted the three and nine months ended September 30, 2022, see “—Results of Operations.”

Seasonality

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We experience fluctuations in transaction volumes and the level of loan receivables as a result of higher seasonal consumer spending and payment patterns that typically result in an increase of loan receivables from August through a peak in late December, with reductions in loan receivables typically occurring over the first and second quarters of the following year as customers pay their balances down.

The seasonal impact to transaction volumes and the loan receivables balance typically results in fluctuations in our results of operations, delinquency metrics and the allowance for credit losses as a percentage of total loan receivables between quarterly periods.

In addition to the seasonal variance in loan receivables discussed above, we also typically experience a seasonal increase in delinquency rates and delinquent loan receivables balances during the third and fourth quarters of each year due to lower customer payment rates, resulting in higher net charge-off rates in the first and second quarters. Our delinquency rates and delinquent loan receivables balances typically decrease during the subsequent first and second quarters as customers begin to pay down their loan balances and return to current status, resulting in lower net charge-off rates in the third and fourth quarters. Because customers who were delinquent during the fourth quarter of a calendar year have a higher probability of returning to current status when compared to customers who are delinquent at the end of each of our interim reporting periods, we expect that a higher proportion of delinquent accounts outstanding at an interim period end will result in charge-offs, as compared to delinquent accounts outstanding at a year end. Consistent with this historical experience, we generally experience a higher allowance for credit losses as a percentage of total loan receivables at the end of an interim period, as compared to the end of a calendar year. In addition, despite improving credit metrics such as declining past due amounts, we may experience an increase in our allowance for credit losses at an interim period end compared to the prior year end, reflecting these same seasonal trends.

While the effects of the seasonal trends discussed above have remained evident during the nine months ended September 30, 2022, we also continue to experience elevated customer payment behavior, which include the effects of governmental stimulus actions, industry-wide forbearance measures and elevated consumer savings. While we have experienced some moderation in the three months ended September 30, 2022, customer payments as a percentage of beginning-of-period loan receivables remain significantly elevated compared to historical averages, and corresponding delinquency rates and net charge-off rates are below our historical average. During the three months ended September 30, 2022, we have experienced an increase in our delinquency rates that reflects both the seasonal trends discussed above and some moderation of customer payment rates.

Results of Operations

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Highlights for the Three and Nine Months Ended September 30, 2022

Below are highlights of our performance for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021, as applicable, except as otherwise noted.

• Net earnings decreased to $703 million from $1.1 billion and to $2.4 billion from $3.4 billion. The decreases in the three and nine months ended September 30, 2022 were primarily driven by increases in provision for credit losses due to reserve reductions in the prior year, partially offset by higher net interest income.

• Loan receivables increased 12.6% to $86.0 billion at September 30, 2022 compared to $76.4 billion at September 30, 2021, driven by strong purchase volume growth and some moderation of customer payment rates.

• Net interest income increased 7.4% to $3.9 billion and 10.7% to $11.5 billion for the three and nine months ended September 30, 2022, respectively. Interest and fees on loans increased 9.5% and 10.0% for the three and nine months ended September 30, 2022, respectively, primarily driven by growth in average loan receivables, partially offset by the impacts of portfolios sold in the second quarter of 2022. For the three and nine months ended September 30, 2022, interest expense increased due to higher benchmark rates and higher funding liabilities.

• Retailer share arrangements decreased 16.5% to $1.1 billion the three months ended September 30, 2022, primarily due to the impact of portfolios sold in the second quarter of 2022 and program performance. Retailer share arrangements remained relatively flat for the nine months ended September 30, 2022.

• Over-30 day loan delinquencies as a percentage of period-end loan receivables increased 86 basis points to 3.28% at September 30, 2022. The net charge-off rate increased 82 basis points to 3.00% and decreased 29 basis points to 2.82% for the three and nine months ended September 30, 2022, respectively.

• Provision for credit losses increased to $929 million from $25 million, and to $2.2 billion from $165 million for the three and nine months ended September 30, 2022, respectively. The increases for the three and nine months ended September 30, 2022, were primarily driven by reserve increases in the current year versus reserve reductions in the prior year periods. The increases in reserves for credit losses were $294 million and $414 million for the three and nine months ended September 30, 2022, respectively, and the reserve reductions for the corresponding prior year periods were $407 million and $1.6 billion, respectively. Our allowance coverage ratio (allowance for credit losses as a percent of period-end loan receivables) decreased to 10.58% at September 30, 2022, as compared to 11.28% at September 30, 2021.

• Other expense increased by $103 million, or 10.7%, and $345 million, or 12.1%, for the three and nine months ended September 30, 2022, respectively. The increase for the three months ended September 30, 2022 was primarily driven by increases in employee costs and other expense. The increase in the nine months ended September 30, 2022 was primarily driven by higher employee costs, other expense, information processing and marketing and business development.

• At September 30, 2022, deposits represented 82% of our total funding sources. Total deposits increased by 9.9% to $68.4 billion at September 30, 2022, compared to December 31, 2021.

• During the nine months ended September 30, 2022, we declared and paid cash dividends on our Series A 5.625% non-cumulative preferred stock of $42.18 per share, or $32 million.

• In April 2022, we announced that our Board approved an incremental share repurchase authorization of $2.8 billion through June 2023 and plans to increase our quarterly dividend by 5% to $0.23 per common share commencing in the third quarter of 2022. During the nine months ended September 30, 2022, we repurchased $2.6 billion of our outstanding common stock, and declared and paid cash dividends of $0.67 per share, or $331 million. At September 30, 2022 we have a total share repurchase authorization of $1.4 billion remaining. For more information, see “Capital—Dividend and Share Repurchases.”

2022 Partner Agreements

During the nine months ended September 30, 2022, we continued to expand and diversify our portfolio with the addition or renewal of more than 55 partners, which included the following:

• In our Home & Auto sales platform, we announced our new partnerships with Bassett, Floor & Decor and Furnitureland South and extended our agreements with Cardi's, Generac Power Systems, Home Zone, Ivan Smith Furniture, Mathis Brothers, Mattress Warehouse, Metro Mattress, Mitsubishi Electric Trane HVAC, NAPA AutoCare, New South Window Solutions, Regency Furniture Showrooms, Sleep Number and Sit 'N Sleep.

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

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

• In our Health & Wellness sales platform, we expanded our network through our new partnerships with Buffalo Veterinary Group, Mission Veterinary Partners, Rarebreed Veterinary Partners, Service Corporation International, Smile Design Dentistry and Suveto and extended our agreements with Encore Vet Group, Interdent, Lucid and Sono Bello.

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

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

• In our Lifestyle sales platform, we announced our new partnership with American Trailer World and extended our program agreements with Guitar Center, Janome, Kevin Jewelers, Kymco, Reeds, Sweetwater, Suzuki and Suzuki Marine.

• We launched our SetPay Pay in 4 buy now, pay later solution on the Clover point-of-sale and business management platform from Fiserv.

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

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)			2022						2021						2022						2021
Interest income			$	4,342					$	3,898					$	12,438					$	11,218
Interest expense			414						240						919						809
Net interest income			3,928						3,658						11,519						10,409
Retailer share arrangements			(1,057)						(1,266)						(3,288)						(3,261)
Provision for credit losses			929						25						2,174						165
Net interest income, after retailer share arrangements and provision for credit losses			1,942						2,367						6,057						6,983
Other income			44						94						350						314
Other expense			1,064						961						3,186						2,841
Earnings before provision for income taxes			922						1,500						3,221						4,456
Provision for income taxes			219						359						782						1,048
Net earnings			$	703					$	1,141					$	2,439					$	3,408
Net earnings available to common stockholders			$	692					$	1,130					$	2,407					$	3,376

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)			2022						2021						2022						2021
Financial Position Data (Average):
Loan receivables, including held for sale			$	84,038					$	78,714					$	83,404					$	77,965
Total assets			$	98,694					$	91,948					$	96,786					$	93,915
Deposits			$	67,158					$	59,633					$	64,751					$	61,258
Borrowings			$	13,360					$	13,522					$	13,645					$	14,528
Total equity			$	13,238					$	14,117					$	13,475					$	13,619
Selected Performance Metrics:
Purchase volume(1)(2)			$	44,557					$	41,912					$	132,264					$	118,782
Home & Auto			$	12,273					$	11,069					$	35,428					$	31,929
Digital			$	12,941					$	10,980					$	36,600					$	31,250
Diversified & Value			$	14,454					$	12,006					$	40,400					$	32,844
Health & Wellness			$	3,514					$	3,024					$	10,064					$	8,660
Lifestyle			$	1,374					$	1,298					$	4,000					$	3,857
Corp, Other			$	1					$	3,535					$	5,772					$	10,242
Average active accounts (in thousands)(2)(3)			66,266						67,189						68,517						66,500
Net interest margin(4)			15.52		%				15.45		%				15.64		%				14.40		%
Net charge-offs			$	635					$	432					$	1,760					$	1,815
Net charge-offs as a % of average loan receivables, including held for sale			3.00		%				2.18		%				2.82		%				3.11		%
Allowance coverage ratio(5)			10.58		%				11.28		%				10.58		%				11.28		%
Return on assets(6)			2.8		%				4.9		%				3.4		%				4.9		%
Return on equity(7)			21.1		%				32.1		%				24.2		%				33.5		%
Equity to assets(8)			13.41		%				15.35		%				13.92		%				14.50		%
Other expense as a % of average loan receivables, including held for sale			5.02		%				4.84		%				5.11		%				4.87		%
Efficiency ratio(9)			36.5		%				38.7		%				37.1		%				38.1		%
Effective income tax rate			23.8		%				23.9		%				24.3		%				23.5		%
Selected Period-End Data:
Loan receivables			$	86,012					$	76,388					$	86,012					$	76,388
Allowance for credit losses			$	9,102					$	8,616					$	9,102					$	8,616
30+ days past due as a % of period-end loan receivables(10)			3.28		%				2.42		%				3.28		%				2.42		%
90+ days past due as a % of period-end loan receivables(10)			1.43		%				1.05		%				1.43		%				1.05		%
Total active accounts (in thousands)(2)(3)			66,503						67,245						66,503						67,245

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

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

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

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

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

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

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

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

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

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

Average Balance Sheet

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

			2022																		2021
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)			$	11,506					$	65					2.24		%				$	9,559					$	3					0.12		%
Securities available for sale			4,861						19						1.55		%				5,638						8						0.56		%
Loan receivables, including held for sale(3):
Credit cards			79,354						4,153						20.76		%				74,686						3,793						20.15		%
Consumer installment loans			2,884						74						10.18		%				2,555						64						9.94		%
Commercial credit products			1,720						30						6.92		%				1,407						29						8.18		%
Other			80						1						4.96		%				66						1						NM
Total loan receivables, including held for sale			84,038						4,258						20.10		%				78,714						3,887						19.59		%
Total interest-earning assets			100,405						4,342						17.16		%				93,911						3,898						16.47		%
Non-interest-earning assets:
Cash and due from banks			1,580																		1,588
Allowance for credit losses			(8,878)																		(8,956)
Other assets			5,587																		5,405
Total non-interest-earning assets			(1,711)																		(1,963)
Total assets			$	98,694																	$	91,948
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts			$	66,787					$	280					1.66		%				$	59,275					$	131					0.88		%
Borrowings of consolidated securitization entities			6,258						54						3.42		%				7,051						41						2.31		%
Senior unsecured notes			7,102						80						4.47		%				6,471						68						4.17		%
Total interest-bearing liabilities			80,147						414						2.05		%				72,797						240						1.31		%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts			371																		358
Other liabilities			4,938																		4,676
Total non-interest-bearing liabilities			5,309																		5,034
Total liabilities			85,456																		77,831
Equity
Total equity			13,238																		14,117
Total liabilities and equity			$	98,694																	$	91,948
Interest rate spread**(4)**															15.11		%																15.16		%
Net interest income									$	3,928																	$	3,658
Net interest margin**(5)**															15.52		%																15.45		%

			2022																		2021
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)			$	9,920					$	90					1.21		%				$	12,567					$	11					0.12		%
Securities available for sale			5,143						43						1.12		%				6,128						21						0.46		%
Loan receivables, including held for sale(3):
Credit cards			78,946						12,009						20.34		%				74,179						10,934						19.71		%
Consumer installment loans			2,781						209						10.05		%				2,398						176						9.81		%
Commercial credit products			1,604						83						6.92		%				1,334						73						7.32		%
Other			73						4						7.33		%				54						3						7.43		%
Total loan receivables, including held for sale			83,404						12,305						19.73		%				77,965						11,186						19.18		%
Total interest-earning assets			98,467						12,438						16.89		%				96,660						11,218						15.52		%
Non-interest-earning assets:
Cash and due from banks			1,607																		1,594
Allowance for credit losses			(8,735)																		(9,656)
Other assets			5,447																		5,317
Total non-interest-earning assets			(1,681)																		(2,745)
Total assets			$	96,786																	$	93,915
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts			$	64,371					$	567					1.18		%				$	60,907					$	447					0.98		%
Borrowings of consolidated securitization entities			6,547						127						2.59		%				7,296						136						2.49		%
Senior unsecured notes			7,098						225						4.24		%				7,232						226						4.18		%
Total interest-bearing liabilities			78,016						919						1.57		%				75,435						809						1.43		%
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts			380																		351
Other liabilities			4,915																		4,510
Total non-interest-bearing liabilities			5,295																		4,861
Total liabilities			83,311																		80,296
Equity
Total equity			13,475																		13,619
Total liabilities and equity			$	96,786																	$	93,915
Interest rate spread**(4)**															15.32		%																14.09		%
Net interest income									$	11,519																	$	10,409
Net interest margin**(5)**															15.64		%																14.40		%

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

(2)Includes average restricted cash balances of $688 million and $745 million for the three months ended September 30, 2022 and 2021, respectively, and $647 million and $570 million for the nine months ended September 30, 2022 and 2021, respectively.

(3)Interest income on loan receivables includes fees on loans of $676 million and $610 million for the three months ended September 30, 2022 and 2021, respectively, and $2.0 billion and $1.6 billion for the nine months ended September 30, 2022 and 2021, respectively.

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

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

For a summary description of the composition of our key line items included in our Statements of Earnings, see Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K.

Interest Income

Interest income increased by $444 million, or 11.4%, and $1.2 billion, or 10.9%, for the three and nine months ended September 30, 2022, respectively, primarily driven by increases in interest and fees on loans of 9.5% and 10.0%, respectively. The increases in interest and fees on loans were primarily driven by growth in average loan receivables, partially offset by the impacts of portfolios sold in the second quarter of 2022. Excluding the impact of the portfolio sales, interest and fees on loans increased 17.5% and 13.6% for the three and nine months ended September 30, 2022, respectively.

Average interest-earning assets

Three months ended September 30 ($ in millions)			2022						%						2021						%
Loan receivables, including held for sale			$	84,038					83.7		%				$	78,714					83.8		%
Liquidity portfolio and other			16,367						16.3		%				15,197						16.2		%
Total average interest-earning assets			$	100,405					100.0		%				$	93,911					100.0		%

Nine months ended September 30 ($ in millions)			2022						%						2021						%
Loan receivables, including held for sale			$	83,404					84.7		%				$	77,965					80.7		%
Liquidity portfolio and other			15,063						15.3		%				18,695						19.3		%
Total average interest-earning assets			$	98,467					100.0		%				$	96,660					100.0		%

Average loan receivables, including held for sale, increased 6.8% and 7.0% for the three and nine months ended September 30, 2022, respectively, primarily driven by growth in purchase volume, partially offset by the impacts from portfolios sold in the second quarter of 2022. Purchase volume increased 6.3% and 11.4% for the three and nine months ended September 30, 2022, respectively, and excluding the impact of portfolios sold during the second quarter, purchase volume increased by 16.1% and 16.4%, respectively.

Yield on average interest-earning assets

The yield on average interest-earning assets increased for the three and nine months ended September 30, 2022. The increase in the three months ended September 30, 2022 was primarily due to an increase in the yield on average loan receivables. The increase for the nine months ended September 30, 2022 was primarily due to an increase in the percentage of interest-earning assets attributable to loan receivables as well as an increase in the yield on average loan receivables. The increase in loan receivable yield was 51 basis points to 20.10% and 55 basis points to 19.73% for the three and nine months ended September 30, 2022, respectively.

Interest Expense

Interest expense increased by $174 million, or 72.5%, and $110 million, or 13.6%, for the three and nine months ended September 30, 2022, respectively, primarily attributed to benchmark interest rates and higher funding liabilities. Our cost of funds increased to 2.05% and 1.57% for the three and nine months ended September 30, 2022, respectively, compared to 1.31% and 1.43% for the three and nine months ended September 30, 2021, respectively.

Average interest-bearing liabilities

Three months ended September 30 ($ in millions)			2022						%						2021						%
Interest-bearing deposit accounts			$	66,787					83.3		%				$	59,275					81.4		%
Borrowings of consolidated securitization entities			6,258						7.8		%				7,051						9.7		%
Senior unsecured notes			7,102						8.9		%				6,471						8.9		%
Total average interest-bearing liabilities			$	80,147					100.0		%				$	72,797					100.0		%

Nine months ended September 30 ($ in millions)			2022						%						2021						%
Interest-bearing deposit accounts			$	64,371					82.5		%				$	60,907					80.7		%
Borrowings of consolidated securitization entities			6,547						8.4		%				7,296						9.7		%
Senior unsecured notes			7,098						9.1		%				7,232						9.6		%
Total average interest-bearing liabilities			$	78,016					100.0		%				$	75,435					100.0		%

Net Interest Income

Net interest income increased by $270 million, or 7.4%, and $1.1 billion, or 10.7%, for the three and nine months ended September 30, 2022, respectively, resulting from the changes in interest income and interest expense discussed above.

Retailer Share Arrangements

Retailer share arrangements decreased by $209 million, or 16.5%, for the three months ended September 30, 2022, primarily due to the impact of portfolios sold in the second quarter of 2022 and program performance. Retailer share arrangements remained relatively flat for the nine months ended September 30, 2022.

Provision for Credit Losses

Provision for credit losses increased to $929 million from $25 million, and to $2.2 billion from $165 million, for the three and nine months ended September 30, 2022, respectively. The increases for the three and nine months ended September 30, 2022 were primarily driven by reserve increases in the current year versus reserve reductions in the prior year periods. The increases in reserves for credit losses were $294 million and $414 million for the three and nine months ended September 30, 2022, respectively, and the reserve reductions for the corresponding prior year periods were $407 million and $1.6 billion, respectively.

Other Income

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Interchange revenue			$	238					$	232					$	731					$	626
Debt cancellation fees			103						70						285						205
Loyalty programs			(326)						(256)						(906)						(682)
Other			29						48						240						165
Total other income			$	44					$	94					$	350					$	314

Other income decreased by $50 million, or 53.2%, and increased $36 million, or 11.5%, for the three and nine months ended September 30, 2022, respectively. The decrease for the three months ended September 30, 2022 was primarily driven by higher loyalty program costs associated with purchase volume growth. The increase for the nine months ended September 30, 2022 was primarily driven by the recognition of the gain on sale of $120 million from the portfolio sales in the second quarter of 2022, as well as higher interchange revenue and debt cancellation fees, partially offset by higher loyalty program costs associated with purchase volume growth.

Other Expense

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Employee costs			$	416					$	369					$	1,222					$	1,092
Professional fees			204						196						599						575
Marketing and business development			115						110						366						319
Information processing			150						139						458						407
Other			179						147						541						448
Total other expense			$	1,064					$	961					$	3,186					$	2,841

Other expense increased by $103 million, or 10.7%, for the three months ended September 30, 2022 primarily driven by increases in employee costs and other expense. The increase in employee costs was primarily attributable to an increase in headcount driven by growth and insourcing, higher hourly wages and other compensation adjustments. The increase in other expense was primarily due to higher operational losses and higher charitable contributions.

Other expense increased by $345 million, or 12.1% for the nine months ended September 30, 2022, primarily driven by increases in employee costs, other expense, information processing and marketing and business development. The increases in employee costs and other expense were primarily due to the factors discussed above for the current quarter, as well as site strategy actions taken in the second quarter. The increase in information processing was driven by the growth in purchase volume and technology investments. The increase in marketing and business development was driven by the additional marketing and growth investments resulting from the reinvestment of the proceeds from the gain on sale of loan receivables.

Other expense for the three and nine months ended September 30, 2022, included a total of $27 million and $89 million, respectively, related to additional marketing, growth and site strategy actions taken to reinvest the proceeds from the gain on sale received in the second quarter.

Provision for Income Taxes

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Effective tax rate			23.8		%				23.9		%				24.3		%				23.5		%
Provision for income taxes			$	219					$	359					$	782					$	1,048

The effective tax rate for the three months ended September 30, 2022 decreased slightly compared to the same period in the prior year. The effective tax rate for the nine months ended September 30, 2022 increased compared to the same period in the prior year primarily due to the resolution of certain tax matters in the prior period. For both periods presented, the effective tax rate differs from the applicable U.S. federal statutory tax rate primarily due to state income taxes.

Platform Analysis

As discussed above under “—Our Sales Platforms,” we offer our credit products primarily through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle), which management measures based on their revenue-generating activities. The following is a discussion of certain supplemental information for the three and nine months ended September 30, 2022, for each of our five sales platforms and Corp, Other.

Home & Auto

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Purchase volume			$	12,273					$	11,069					$	35,428					$	31,929
Period-end loan receivables			$	29,017					$	26,210					$	29,017					$	26,210
Average loan receivables, including held for sale			$	28,387					$	25,800					$	27,307					$	25,396
Average active accounts (in thousands)			18,350						17,516						17,923						17,326
Interest and fees on loans			$	1,210					$	1,092					$	3,406					$	3,121
Other income			$	20					$	18					$	64					$	51

Home & Auto interest and fees on loans increased by $118 million, or 10.8%, and increased by $285 million, or 9.1%, for the three and nine months ended September 30, 2022, respectively, primarily driven by growth in average loan receivables. The growth in average loan receivables for both periods reflected purchase volume growth of 10.9% and 11.0%, respectively, reflecting the continued strength in Home and higher Auto-related spend.

Digital

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Purchase volume			$	12,941					$	10,980					$	36,600					$	31,250
Period-end loan receivables			$	22,925					$	19,636					$	22,925					$	19,636
Average loan receivables, including held for sale			$	22,361					$	19,286					$	21,596					$	19,168
Average active accounts (in thousands)			19,418						17,655						19,176						17,426
Interest and fees on loans			$	1,197					$	973					$	3,277					$	2,767
Other income			$	(22)					$	(19)					$	(47)					$	(59)

Digital interest and fees on loans increased by $224 million, or 23.0%, and increased $510 million, or 18.4%, for the three and nine months ended September 30, 2022, respectively, primarily driven by growth in average loan receivables. The growth in average loan receivables for both periods reflected purchase volume growth of 17.9% and 17.1%, respectively, and average active account growth of 10.0% for both periods, respectively, with strong engagement across both new and established programs.

Other income decreased by $3 million, or 15.8%, and increased $12 million, or 20.3%, for the three and nine months ended September 30, 2022, respectively. The decrease for the three months ended September 30, 2022 was primarily driven by higher program loyalty costs associated with the increase in purchase volume, partially offset by increases in interchange revenue. The increase for the nine months ended September 30, 2022 was primarily driven by increases in interchange revenue and debt cancellation fees, partially offset by higher program loyalty costs associated with the increase in purchase volume.

Diversified & Value

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Purchase volume			$	14,454					$	12,006					$	40,400					$	32,844
Period-end loan receivables			$	16,566					$	14,415					$	16,566					$	14,415
Average loan receivables, including held for sale			$	16,243					$	14,328					$	15,627					$	14,333
Average active accounts (in thousands)			19,411						17,903						19,258						17,591
Interest and fees on loans			$	935					$	780					$	2,587					$	2,298
Other income			$	(19)					$	(8)					$	(63)					$	(5)

Diversified & Value interest and fees on loans increased by $155 million, or 19.9%, and $289 million, or 12.6%, for the three and nine months ended September 30, 2022, primarily driven by growth in average loan receivables. The growth in average loan receivables for both periods reflected purchase volume growth of 20.4% and 23.0%, respectively, reflecting strong retailer performance and customer engagement and average active account growth of 8.4% and 9.5%, respectively.

Other income decreased by $11 million and $58 million for the three and nine months ended September 30, 2022, respectively, primarily driven by higher program loyalty costs, partially offset by higher interchange revenue.

Health & Wellness

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Purchase volume			$	3,514					$	3,024					$	10,064					$	8,660
Period-end loan receivables			$	11,590					$	9,879					$	11,590					$	9,879
Average loan receivables, including held for sale			$	11,187					$	9,654					$	10,681					$	9,477
Average active accounts (in thousands)			6,411						5,707						6,207						5,673
Interest and fees on loans			$	706					$	587					$	1,966					$	1,668
Other income			$	55					$	41					$	157					$	117

Health & Wellness interest and fees on loans increased by $119 million, or 20.3%, and $298 million, or 17.9% for the three and nine months ended September 30, 2022, respectively, primarily driven by growth in average loan receivables. The growth in average loan receivables for both periods reflected strength across the network, particularly in Dental and Pet categories. Purchase volume increased 16.2% for both periods, respectively, and average active accounts increased 12.3% and 9.4%, respectively.

Other income increased by $14 million, or 34.1%, and $40 million, or 34.2%, for the three and nine months ended September 30, 2022, respectively, primarily due to higher debt cancellation fees. The increase for the nine months ended September 30, 2022 was also driven by higher commission fees earned by Pets Best.

Lifestyle

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Purchase volume			$	1,374					$	1,298					$	4,000					$	3,857
Period-end loan receivables			$	5,686					$	5,234					$	5,686					$	5,234
Average loan receivables, including held for sale			$	5,610					$	5,185					$	5,478					$	5,080
Average active accounts (in thousands)			2,524						2,465						2,546						2,500
Interest and fees on loans			$	208					$	187					$	593					$	550
Other income			$	8					$	6					$	21					$	17

Lifestyle interest and fees on loans increased by $21 million, or 11.2%, and $43 million, or 7.8%, for the three and nine months ended September 30, 2022, respectively, primarily driven by growth in average loan receivables. The growth in average loan receivables for both periods reflected purchase volume growth of 5.9% and 3.7% for the three and nine months ended September 30, 2022, respectively, which was driven by an industry-specific rebound within our Luxury retail partners and higher out-of-partner spend more broadly. The increase in the nine months ended September 30, 2022 was partially offset by the ongoing impact of inventory constraints in Outdoor by comparison to strong growth in the prior year.

Corp, Other

			Three months ended September 30,												Nine months ended September 30,
($ in millions)			2022						2021						2022						2021
Purchase volume			$	1					$	3,535					$	5,772					$	10,242
Period-end loan receivables			$	228					$	1,014					$	228					$	1,014
Average loan receivables, including held for sale			$	250					$	4,461					$	2,715					$	4,511
Average active accounts (in thousands)			152						5,943						3,407						5,984
Interest and fees on loans			$	2					$	268					$	476					$	782
Other income			$	2					$	56					$	218					$	193

Corp, Other interest and fees on loans decreased by $266 million, or 99.3%, and $306 million, or 39.1%, for the three and nine months ended September 30, 2022, respectively, primarily driven by the effects of the sale of the BP and Gap Inc. portfolios in May 2022 and June 2022, respectively.

Other income decreased by $54 million, or 96.4%, and increased by $25 million, or 13.0%, respectively, for the three and nine months ended September 30, 2022, respectively. The decrease for the three months ended September 30, 2022 was primarily driven by lower interchange revenue and lower investment gains, partially offset by lower loyalty costs. The lower interchange revenue and loyalty costs were due to the portfolio sales in the second quarter of 2022. The increase for the nine months ended September 30, 2022 was primarily due to the gain on sale of $120 million recognized related to the portfolio sales in the second quarter of 2022, partially offset by lower investment gains and lower interchange revenue.

Loan Receivables

____________________________________________________________________________________________

Loan receivables are our largest category of assets and represent our primary source of revenue. The following discussion provides supplemental information regarding our loan receivables portfolio. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies and Note 4. Loan Receivables and Allowance for Credit Losses to our condensed consolidated financial statements for additional information related to our loan receivables, including troubled debt restructurings (“TDRs”).

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

($ in millions)			At September 30, 2022						(%)						At December 31, 2021						(%)
Loans
Credit cards			$	81,254					94.5		%				$	76,628					94.9		%
Consumer installment loans			2,945						3.4		%				2,675						3.4
Commercial credit products			1,723						2.0		%				1,372						1.7
Other			90						0.1		%				65						—
Total loans			$	86,012					100.0		%				$	80,740					100.0		%

Loan receivables increased 6.5% to $86.0 billion at September 30, 2022 compared to December 31, 2021, primarily driven by strong purchase volume growth, partially offset by the seasonality of our business.

Loan receivables increased 12.6% to $86.0 billion at September 30, 2022 compared to $76.4 billion at September 30, 2021, driven by strong purchase volume growth and some moderation of customer payment rates.

Our loan receivables portfolio had the following geographic concentration at September 30, 2022.

($ in millions)			Loan Receivables Outstanding						% of Total Loan Receivables Outstanding
State
Texas			$	9,294					10.8		%
California			$	8,909					10.4		%
Florida			$	7,862					9.1		%
New York			$	4,339					5.0		%
North Carolina			$	3,530					4.1		%

Delinquencies

Over-30 day loan delinquencies as a percentage of period-end loan receivables increased to 3.28% at September 30, 2022 from 2.42% at September 30, 2021, and increased from 2.62% at December 31, 2021. The increases were primarily driven by the moderation of customer payment rates. The increase as compared to December 31, 2021 also reflects the impacts of the seasonality of our business.

Net Charge-Offs

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

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

															Three months ended September 30,
															2022												2021
($ in millions)															Amount						Rate						Amount						Rate
Credit cards															$	596					2.98		%				$	417					2.22		%
Consumer installment loans															21						2.89		%				7						1.09		%
Commercial credit products															17						3.92		%				7						1.97		%
Other															1						4.96		%				1						6.01		%
Total net charge-offs															$	635					3.00		%				$	432					2.18		%

															Nine months ended September 30,
															2022												2021
($ in millions)															Amount						Rate						Amount						Rate
Credit cards															$	1,667					2.82		%				$	1,767					3.18		%
Consumer installment loans															49						2.36		%				24						1.34		%
Commercial credit products															43						3.58		%				23						2.31		%
Other															1						1.83		%				1						2.48		%
Total net charge-offs															$	1,760					2.82		%				$	1,815					3.11		%

Allowance for Credit Losses

The allowance for credit losses totaled $9.1 billion at September 30, 2022, compared to $8.7 billion at December 31, 2021 and $8.6 billion at September 30, 2021, and reflects our estimate of expected credit losses for the life of the loan receivables on our consolidated statement of financial position. Our allowance for credit losses as a percentage of total loan receivables decreased to 10.58% at September 30, 2022, from 10.76% at December 31, 2021 and decreased from 11.28% at September 30, 2021.

The increases in allowance for credit losses compared to September 30, 2021 and December 31, 2021 were primarily driven by growth in loan receivables.

Funding, Liquidity and Capital Resources

____________________________________________________________________________________________

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

Funding Sources

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

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

			2022																		2021
Three months ended September 30 ($ in millions)			Average Balance						%						Average Rate						Average Balance						%						Average Rate
Deposits(1)			$	66,787					83.3		%				1.7		%				$	59,275					81.4		%				0.9		%
Securitized financings			6,258						7.8						3.4						7,051						9.7						2.3
Senior unsecured notes			7,102						8.9						4.5						6,471						8.9						4.2
Total			$	80,147					100.0		%				2.1		%				$	72,797					100.0		%				1.3		%

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(1)Excludes $371 million and $358 million average balance of non-interest-bearing deposits for the three months ended September 30, 2022 and 2021, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the three months ended September 30, 2022 and 2021.

			2022																		2021
Nine months ended September 30 ($ in millions)			Average Balance						%						Average Rate						Average Balance						%						Average Rate
Deposits(1)			$	64,371					82.5		%				1.2		%				$	60,907					80.7		%				1.0		%
Securitized financings			6,547						8.4						2.6						7,296						9.7						2.5
Senior unsecured notes			7,098						9.1						4.2						7,232						9.6						4.2
Total			$	78,016					100.0		%				1.6		%				$	75,435					100.0		%				1.4		%

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(1)Excludes $380 million and $351 million average balance of non-interest-bearing deposits for the nine months ended September 30, 2022 and 2021, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the nine months ended September 30, 2022 and 2021.

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, 2022, we had $54.8 billion in direct deposits and $13.6 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to utilize our direct deposits base as a source of stable and diversified low-cost funding.

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

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

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

In December 2020, the FDIC issued a final rule to revise and clarify its framework for classifying deposits as brokered deposits, with full compliance with this rule required by January 1, 2022. In accordance with this final rule, deposits generated through certain sweep deposit relationships were reclassified from brokered to direct deposits in the first quarter of 2022.

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)			2022																		2021
Average Balance						%						Average Rate						Average Balance						%						Average Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)			$	22,789					34.1		%				1.3		%				$	20,795					35.1		%				1.1		%
Savings, money market, and demand accounts			31,005						46.4						1.7						28,929						48.8						0.5
Brokered deposits			12,993						19.5						2.2						9,551						16.1						1.5
Total interest-bearing deposits			$	66,787					100.0		%				1.7		%				$	59,275					100.0		%				0.9		%

Nine months ended September 30 ($ in millions)			2022																		2021
Average Balance						%						Average Rate						Average Balance						%						Average Rate
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)			$	21,552					33.5		%				1.1		%				$	22,796					37.4		%				1.3		%
Savings, money market, and demand accounts			30,990						48.1						1.0						28,050						46.1						0.5
Brokered deposits			11,829						18.4						1.7						10,061						16.5						1.5
Total interest-bearing deposits			$	64,371					100.0		%				1.2		%				$	60,907					100.0		%				1.0		%

Our deposit liabilities provide funding with maturities ranging from one day to ten years. At September 30, 2022, the weighted average maturity of our interest-bearing time deposits was 1.2 years. See Note 7. Deposits to our condensed consolidated financial statements for more information on the maturities of our time deposits.

The following table summarizes deposits by contractual maturity at September 30, 2022:

($ in millions)			3 Months or Less						Over 3 Months but within 6 Months						Over 6 Months but within 12 Months						Over 12 Months						Total
U.S. deposits (less than FDIC insurance limit)****(1)(2)			$	31,069					$	2,844					$	8,799					$	10,865					$	53,577
U.S. deposits (in excess of FDIC insurance limit)****(2)
Direct deposits:
Certificates of deposit (including IRA certificates of deposit)			623						913						2,884						1,716						6,136
Savings, money market, and demand accounts			8,691						—						—						—						8,691
Total			$	40,383					$	3,757					$	11,683					$	12,581					$	68,404

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

(2)The standard deposit insurance amount is $250,000 per depositor, for each account ownership category. Deposits in excess of FDIC insurance limit presented above include partially uninsured accounts.

Securitized Financings

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

The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at September 30, 2022.

($ in millions)			Less Than One Year						One Year Through Three Years						Four Years Through Five Years						After Five Years						Total
Scheduled maturities of long-term borrowings—owed to securitization investors:
SYNCT(1)			$	2,890					$	500					$	—					$	—					$	3,390
SFT			—						1,300						—						—						1,300
SYNIT(1)			—						1,675						—						—						1,675
Total long-term borrowings—owed to securitization investors			$	2,890					$	3,475					$	—					$	—					$	6,365

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(1)Excludes any subordinated classes of SYNCT notes and SYNIT notes that we owned at September 30, 2022.

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

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

The following table summarizes for each of our trusts the three-month rolling average excess spread at September 30, 2022.

			Note Principal Balance ($ in millions)						# of Series Outstanding						Three-Month Rolling Average Excess Spread**(1)**
SYNCT			$	3,534					7						~ 11.9% to 17.2%
SFT			$	1,300					5						17.4		%
SYNIT			$	1,675					1						17.7		%

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(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, 2022.

Senior Unsecured Notes

During the nine months ended September 30, 2022, we made repayments of senior unsecured notes totaling $1.5 billion, comprising of $750 million of notes issued by Synchrony Financial and $750 million of notes issued by Synchrony Bank.

The following table provides a summary of our outstanding fixed rate senior unsecured notes at September 30, 2022, which includes $750 million of senior unsecured notes issued by Synchrony Financial in June 2022, and $900 million and $600 million of senior unsecured notes issued by Synchrony Bank in August 2022.

Issuance Date						Interest Rate**(1)**						Maturity						Principal Amount Outstanding**(2)**
($ in millions)
Fixed rate senior unsecured notes:
Synchrony Financial
August 2014						4.250%						August 2024						1,250
July 2015						4.500%						July 2025						1,000
August 2016						3.700%						August 2026						500
December 2017						3.950%						December 2027						1,000
March 2019						4.375%						March 2024						600
March 2019						5.150%						March 2029						650
October 2021						2.875%						October 2031						750
June 2022						4.875%						June 2025						750
Synchrony Bank
August 2022						5.400%						August 2025						900
August 2022						5.625%						August 2027						600
Total fixed rate senior unsecured notes																		$	8,000

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(1)Weighted average interest rate of all senior unsecured notes at September 30, 2022 was 4.45%.

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

Short-Term Borrowings

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

Other

At September 30, 2022, we had more than $25.0 billion of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window.

Covenants

The indenture pursuant to which our senior unsecured notes have been issued includes various covenants. If we do not satisfy any of these covenants, the maturity of amounts outstanding thereunder may be accelerated and become payable. We were in compliance with all of these covenants at September 30, 2022.

At September 30, 2022, 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-
Preferred stock			BB-						B+
Outlook for Synchrony Financial senior unsecured debt			Stable						Stable
Synchrony Bank
Senior unsecured debt			BBB						BBB-
Outlook for Synchrony Bank senior unsecured debt			Stable						Stable

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

Liquidity

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

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

We maintain a liquidity portfolio, which at September 30, 2022 had $16.6 billion of liquid assets, primarily consisting of cash and equivalents and short-term obligations of the U.S. Treasury, less cash in transit which is not considered to be liquid, compared to $13.0 billion of liquid assets at December 31, 2021. The increase in liquid assets was primarily due to deposit growth to accommodate the seasonality of our business and $3.9 billion of proceeds from portfolios sold during the second quarter of 2022, partially offset by loan receivables growth in the nine months ended September 30, 2022. We believe our liquidity position at September 30, 2022 remains strong as we continue to operate in a period of uncertain economic conditions and we will continue to closely monitor our liquidity as economic conditions change.

As additional sources of liquidity, at September 30, 2022, we had an aggregate of $3.2 billion of undrawn committed capacity on our securitized financings, subject to customary borrowing conditions, from private lenders under our securitization programs and $0.5 billion of undrawn committed capacity under our unsecured revolving credit facility with private lenders, and we had more than $25.0 billion of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales or to be pledged to the Federal Reserve Board for credit at the discount window.

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

We rely significantly on dividends and other distributions and payments from the Bank for liquidity; however, bank regulations, contractual restrictions and other factors limit the amount of dividends and other distributions and payments that the Bank may pay to us. For a discussion of regulatory restrictions on the Bank’s ability to pay dividends, see “Regulation—Risk Factors Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” and “Regulation—Regulation Relating to Our Business—Savings Association Regulation—Dividends and Stock Repurchases” in our 2021 Form 10-K.

Capital

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

Synchrony is not currently required to conduct stress tests. See “Regulation—Regulation Relating to Our Business—Recent Legislative and Regulatory Developments” in our 2021 Form 10-K. In addition, while we have not been subject to the Federal Reserve Board's formal capital plan submission requirements to-date, we submitted a capital plan to the Federal Reserve Board in 2022. While not required, our capital plan process does include certain internal stress testing.

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, 2022						February 2022						$	0.22					$	114
Three months ended June 30, 2022						May 2022						0.22						108
Three months ended September 30, 2022						August 2022						0.23						109
Total dividends declared												$	0.67					$	331

Preferred Stock Cash Dividends Declared						Month of Payment						Amount per Preferred Share						Amount
($ in millions, except per share data)
Three months ended March 31, 2022						February 2022						$	14.06					$	10
Three months ended June 30, 2022						May 2022						14.06						11
Three months ended September 30, 2022						August 2022						14.06						11
Total dividends declared												$	42.18					$	32

In April 2022, we announced that our Board approved plans to increase our quarterly common stock dividend by 5% to $0.23 per common share which commenced in the third quarter of 2022. 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 2021 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, 2022						22.0						$	967
Three months ended June 30, 2022						18.7						701
Three months ended September 30, 2022						29.2						950
Total						69.9						$	2,618

In April 2022, we announced that our Board approved an incremental share repurchase authorization of $2.8 billion through June 2023, resulting in total share repurchase authorization of $3.1 billion. In all instances, the share repurchase programs are subject to market conditions and other factors, including legal and regulatory restrictions and required approvals.

During the nine months ended September 30, 2022, we repurchased $2.6 billion of common stock as part of the share repurchase programs announced in 2021 and 2022, with remaining authorized share repurchase capacity of $1.4 billion under the 2022 program.

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 2021 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, 2022, Synchrony Financial met all the requirements to be deemed well-capitalized.

The following table sets forth the composition of our capital ratios for the Company calculated under the Basel III Standardized Approach rules at September 30, 2022 and December 31, 2021, respectively.

			Basel III
			At September 30, 2022												At December 31, 2021
($ in millions)			Amount						Ratio**(1)**						Amount						Ratio**(1)**
Total risk-based capital			$	14,154					16.5		%				$	15,122					17.8		%
Tier 1 risk-based capital			$	13,012					15.2		%				$	14,003					16.5		%
Tier 1 leverage			$	13,012					13.2		%				$	14,003					14.7		%
Common equity Tier 1 capital			$	12,278					14.3		%				$	13,269					15.6		%
Risk-weighted assets			$	85,664											$	84,950

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

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 through December 31, 2021. Beginning in the first quarter of 2022, the effects are now 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 2021 Form 10-K.

Capital amounts and ratios in the above table all reflect the applicable CECL regulatory capital transition adjustment for each period. The decrease in our common equity Tier 1 capital ratio compared to December 31, 2021 was primarily due to the first year phase-in of the impact of CECL on our regulatory capital and our share repurchases and dividends for the nine months ended September 30, 2022, partially offset by net earnings for the same period.

Regulatory Capital Requirements - Synchrony Bank

At September 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, and also reflects the applicable CECL regulatory capital transition adjustment for each period.

			At September 30, 2022												At December 31, 2021												Minimum to be Well-Capitalized under Prompt Corrective Action Provisions
($ in millions)			Amount						Ratio						Amount						Ratio						Ratio
Total risk-based capital			$	13,414					16.9		%				$	14,091					18.3		%				10.0%
Tier 1 risk-based capital			$	12,356					15.6		%				$	13,075					16.9		%				8.0%
Tier 1 leverage			$	12,356					13.6		%				$	13,075					15.1		%				5.0%
Common equity Tier 1 capital			$	12,356					15.6		%				$	13,075					16.9		%				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 2021 Form 10-K.

Off-Balance Sheet Arrangements and Unfunded Lending Commitments

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We do not have any material off-balance sheet arrangements, including guarantees of third-party obligations. Guarantees are contracts or indemnification agreements that contingently require us to make a guaranteed payment or perform an obligation to a third-party based on certain trigger events. At September 30, 2022, we had not recorded any contingent liabilities in our Condensed Consolidated Statement of Financial Position related to any guarantees. See Note 5 - Variable Interest Entities to our condensed consolidated financial statements for more information on our investment commitments for unconsolidated variable interest entities (“VIE's”).

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

Critical Accounting Estimates

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In preparing our condensed consolidated financial statements, we have identified certain accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. The critical accounting estimates we have identified relate to allowance for credit losses and fair value measurements. These estimates reflect our best judgment about current, and for some estimates future, economic and market conditions and their effects based on information available as of the date of these financial statements. If these conditions change from those expected, it is reasonably possible that these judgments and estimates could change, which may result in incremental losses on loan receivables, or material changes to our Condensed Consolidated Statement of Financial Position, among other effects. See “Management's Discussion and Analysis—Critical Accounting Estimates” in our 2021 Form 10-K, for a detailed discussion of these critical accounting estimates.

Regulation and Supervision

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

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

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

See “Regulation” in our 2021 Form 10-K for additional information on regulations that are currently applicable to us. See also “—Capital” above, for discussion of the impact of regulations and supervision on our capital and liquidity, including our ability to pay dividends and repurchase stock.