Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

Synchrony Financial and subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

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

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

Provision for credit losses (Note 4)	1,488		929		4,161		2,174
Net interest income, after retailer share arrangements and provision for credit losses	1,895		1,942		5,589		6,057
Other income:
Interchange revenue	267		238		761		731
Debt cancellation fees	131		103		371		285
Loyalty programs	(358)		(326)		(1,001)		(906)
Other	52		29		87		240
Total other income	92		44		218		350
Other expense:
Employee costs	444		416		1,346		1,222
Professional fees	219		204		614		599
Marketing and business development	125		115		389		366
Information processing	177		150		522		458
Other	189		179		571		541
Total other expense	1,154		1,064		3,442		3,186
Earnings before provision for income taxes	833		922		2,365		3,221
Provision for income taxes (Note 12)	205		219		567		782
Net earnings	$	628	$	703	$	1,798	$	2,439
Net earnings available to common stockholders	$	618	$	692	$	1,767	$	2,407

Earnings per share
Basic	$	1.49	$	1.48	$	4.16	$	4.89
Diluted	$	1.48	$	1.47	$	4.14	$	4.86

See accompanying notes to condensed consolidated financial statements.

Synchrony Financial and subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

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	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022

Net earnings	$	628	$	703	$	1,798	$	2,439

Other comprehensive income (loss)
Debt securities	3		(33)		31		(110)
Currency translation adjustments	(2)		(5)		(1)		(9)
Employee benefit plans	(1)		—		(1)		1
Other comprehensive income (loss)	—		(38)		29		(118)

Comprehensive income	$	628	$	665	$	1,827	$	2,321

Amounts presented net of taxes.

See accompanying notes to condensed consolidated financial statements.

Synchrony Financial and subsidiaries

Condensed Consolidated Statements of Financial Position (Unaudited)

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($ in millions)	At September 30, 2023		At December 31, 2022
Assets
Cash and equivalents	$	15,643	$	10,294
Debt securities (Note 3)	2,882		4,879
Loan receivables: (Notes 4 and 5)
Unsecuritized loans held for investment	78,470		72,638
Restricted loans of consolidated securitization entities	19,403		19,832
Total loan receivables	97,873		92,470
Less: Allowance for credit losses	(10,176)		(9,527)
Loan receivables, net	87,697		82,943

Goodwill	1,105		1,105
Intangible assets, net (Note 6)	1,169		1,287
Other assets	4,443		4,056
Total assets	$	112,939	$	104,564

Liabilities and Equity
Deposits: (Note 7)
Interest-bearing deposit accounts	$	77,669	$	71,336
Non-interest-bearing deposit accounts	397		399
Total deposits	78,066		71,735
Borrowings: (Notes 5 and 8)
Borrowings of consolidated securitization entities	6,519		6,227

Senior and subordinated unsecured notes	8,712		7,964
Total borrowings	15,231		14,191
Accrued expenses and other liabilities	5,875		5,765
Total liabilities	$	99,172	$	91,691

Equity:
Preferred stock, par share value $0.001 per share; 750,000 shares authorized; 750,000 shares issued and outstanding at both September 30, 2023 and December 31, 2022 and aggregate liquidation preference of $750 at both September 30, 2023 and December 31, 2022	$	734	$	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, 2023 and December 31, 2022; 413,785,325 and 438,216,755 shares outstanding at September 30, 2023 and December 31, 2022, respectively	1		1
Additional paid-in capital	9,750		9,718
Retained earnings	18,338		16,716
Accumulated other comprehensive income (loss):
Debt securities	(62)		(93)
Currency translation adjustments	(39)		(38)
Employee benefit plans	5		6
Treasury stock, at cost; 420,199,359 and 395,767,929 shares at September 30, 2023 and December 31, 2022, respectively	(14,960)		(14,171)

Total equity	13,767		12,873
Total liabilities and equity	$	112,939	$	104,564

See accompanying notes to condensed consolidated financial statements.

Synchrony Financial and subsidiaries

Condensed Consolidated Statements of Changes in Equity (Unaudited)

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	Preferred Stock			Common Stock
($ in millions, shares in thousands)	Shares Issued	Amount		Shares Issued	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity

Balance at January 1, 2022	750	$	734	833,985	$	1	$	9,669	$	14,245	$	(69)	$	(10,925)	$	13,655



Net earnings	—	—		—	—		—		932		—		—		932
Other comprehensive income	—	—		—	—		—		—		(52)		—		(52)

Purchases of treasury stock	—	—		—	—		—		—		—		(968)		(968)
Stock-based compensation	—	—		—	—		(26)		(50)		—		51		(25)
Dividends - preferred stock ($14.06 per share)	—	—		—	—		—		(10)		—		—		(10)
Dividends - common stock ($0.22 per share)	—	—		—	—		—		(114)		—		—		(114)

Balance at March 31, 2022	750	$	734	833,985	$	1	$	9,643	$	15,003	$	(121)	$	(11,842)	$	13,418
Net earnings	—	—		—	—		—		804		—		—		804
Other comprehensive income	—	—		—	—		—		—		(28)		—		(28)
Purchases of treasury stock	—	—		—	—		—		—		—		(701)		(701)
Stock-based compensation	—	—		—	—		20		(9)		—		8		19
Dividends - preferred stock ($14.06 per share)	—	—		—	—		—		(11)		—		—		(11)
Dividends - common stock ($0.22 per share)	—	—		—	—		—		(108)		—		—		(108)
Balance at June 30, 2022	750	$	734	833,985	$	1	$	9,663	$	15,679	$	(149)	$	(12,535)	$	13,393
Net earnings	—	—		—	—		—		703		—		—		703
Other comprehensive income	—	—		—	—		—		—		(38)		—		(38)
Purchases of treasury stock	—	—		—	—		—		—		—		(951)		(951)
Stock-based compensation	—	—		—	—		22		(10)		—		13		25
Dividends - preferred stock ($14.06 per share)	—	—		—	—		—		(11)		—		—		(11)
Dividends - common stock ($0.23 per share)	—	—		—	—		—		(109)		—		—		(109)

Balance at September 30, 2022	750	$	734	833,985	$	1	$	9,685	$	16,252	$	(187)	$	(13,473)	$	13,012


	Preferred Stock			Common Stock
($ in millions, shares in thousands)	Shares Issued	Amount		Shares Issued	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
Balance at January 1, 2023	750	$	734	833,985	$	1	$	9,718	$	16,716	$	(125)	$	(14,171)	$	12,873
Cumulative effect of change in accounting principle									222						222
Adjusted balance, beginning of period	750	734		833,985	1		9,718		16,938		(125)		(14,171)		13,095
Net earnings				—	—		—		601		—		—		601
Other comprehensive income	—	—		—	—		—		—		23				23

Purchases of treasury stock	—	—		—	—		—		—				(404)		(404)
Stock-based compensation	—	—		—	—		(13)		(59)				61		(11)
Dividends - preferred stock ($14.06 per share)									(11)						(11)
Dividends - common stock ($0.23 per share)	—	—		—	—		—		(100)		—		—		(100)

Balance at March 31, 2023	750	$	734	833,985	$	1	$	9,705	$	17,369	$	(102)	$	(14,514)	$	13,193
Net earnings	—	—		—	—		—		569		—		—		569
Other comprehensive income	—	—		—	—		—		—		6		—		6
Purchases of treasury stock	—	—		—	—		—		—		—		(303)		(303)
Stock-based compensation	—	—		—	—		22		(1)		—		3		24
Dividends - preferred stock ($14.06 per share)	—	—		—	—		—		(10)		—		—		(10)
Dividends - common stock ($0.23 per share)	—	—		—	—		—		(99)		—		—		(99)

Balance at June 30, 2023	750	$	734	833,985	$	1	$	9,727	$	17,828	$	(96)	$	(14,814)	$	13,380
Net earnings	—	—		—	—		—		628		—		—		628
Other comprehensive income	—	—		—	—		—		—		—		—		—
Purchases of treasury stock	—	—		—	—		—		—		—		(152)		(152)
Stock-based compensation	—	—		—	—		23		(4)		—		6		25
Dividends - preferred stock ($14.06 per share)	—	—		—	—		—		(10)		—		—		(10)
Dividends - common stock ($0.25 per share)	—	—		—	—		—		(104)		—		—		(104)

Balance at September 30, 2023	750	$	734	833,985	$	1	$	9,750	$	18,338	$	(96)	$	(14,960)	$	13,767

See accompanying notes to condensed consolidated financial statements.

Synchrony Financial and subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

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	Nine months ended September 30,
($ in millions)	2023		2022
Cash flows - operating activities
Net earnings	$	1,798	$	2,439
Adjustments to reconcile net earnings to cash provided from operating activities
Provision for credit losses	4,161		2,174
Deferred income taxes	(271)		(185)
Depreciation and amortization	340		318
(Increase) decrease in interest and fees receivable	(323)		74
(Increase) decrease in other assets	37		(26)
Increase (decrease) in accrued expenses and other liabilities	(7)		(322)
All other operating activities	541		375
Cash provided from (used for) operating activities	6,276		4,847

Cash flows - investing activities
Maturity and sales of debt securities	3,882		3,659
Purchases of debt securities	(1,642)		(3,624)


Proceeds from sale of loan receivables	—		3,930
Net (increase) decrease in loan receivables, including held for sale	(8,797)		(6,999)
All other investing activities	(508)		(342)
Cash provided from (used for) investing activities	(7,065)		(3,376)

Cash flows - financing activities
Borrowings of consolidated securitization entities
Proceeds from issuance of securitized debt	1,547		1,670
Maturities and repayment of securitized debt	(1,257)		(2,600)
Senior and subordinated unsecured notes
Proceeds from issuance of senior and subordinated unsecured notes	740		2,235
Maturities and repayment of senior and subordinated unsecured notes	—		(1,500)




Dividends paid on preferred stock	(31)		(32)
Net increase (decrease) in deposits	6,354		6,125
Purchases of treasury stock	(859)		(2,619)
Dividends paid on common stock	(303)		(331)
All other financing activities	(32)		(44)
Cash provided from (used for) financing activities	6,159		2,904

Increase (decrease) in cash and equivalents, including restricted amounts	5,370		4,375
Cash and equivalents, including restricted amounts, at beginning of period	10,430		8,686
Cash and equivalents at end of period:
Cash and equivalents	15,643		11,962
Restricted cash and equivalents included in other assets	157		1,099
Total cash and equivalents, including restricted amounts, at end of period	$	15,800	$	13,061

See accompanying notes to condensed consolidated financial statements.

Synchrony Financial and subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

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NOTE 1. BUSINESS DESCRIPTION

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 Canada 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 5. 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 2022 annual consolidated financial statements and the related notes in our Annual Report on Form 10-K for the year ended December 31, 2022 (our "2022 Form 10-K").

New Accounting Standards

Newly Adopted Accounting Standards

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("TDRs") by creditors. The elimination of the TDR guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses.

The Company adopted this guidance as of January 1, 2023, on a modified retrospective basis, which resulted in the recognition of the effects of adoption through a cumulative-effect adjustment to retained earnings. As a result of adoption, we incurred a reduction of $294 million to the Company's allowance for credit losses, and a corresponding increase, net of tax effect, to retained earnings of $222 million. Subsequent updates to our estimate of expected credit losses have been recorded through the provision for credit losses in our Condensed Consolidated Statement of Earnings.

Allowance for Credit Losses

Following the adoption of ASU 2022-02 on January 1, 2023 discussed above, we have made the following changes prospectively to our significant accounting policies.

We no longer separately measure our allowance for credit losses on TDRs, and we incorporate the impact of loan modifications made to borrowers experiencing financial difficulties into our overall assessment of portfolio loss content and estimate of expected credit losses. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our 2022 annual consolidated financial statements in our 2022 Form 10-K, for additional information on the methodology used to estimate expected credit losses.

Loan Modifications and Restructurings

Our loss mitigation strategy is intended to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions or other actions, for borrowers experiencing financial difficulty. We primarily use long-term modification programs for borrowers experiencing financial difficulty as a loss mitigation strategy to improve long-term collectability of the loans. The long-term modification programs include changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months, reducing the interest rate on the loan, and stopping the assessment of penalty fees. We also make long-term loan modifications for customers who request financial assistance through external sources, such as through consumer credit counseling service agencies. Long-term loan modification programs do not normally include the forgiveness of unpaid principal, interest or fees. We may also provide certain borrowers with a short-term loan modification program (generally up to 3 months) that can include the forgiveness of unpaid principal balance, interest and/or fees. The evaluation of whether a borrower is experiencing financial difficulty includes our consideration of all relevant facts and circumstances. See Note 4. Loan Receivables and Allowance for Credit Losses for additional information on our loan modifications and restructurings.

Once the loan has been modified, it only returns to current status (re-aged) after three consecutive monthly program payments are received post the modification date, subject to re-aging limitations in the Federal Financial Institutions Examination Council guidelines on Uniform Retail Credit Classification and Account Management policy issued in June 2000.

See Note 2. Basis of Presentation and Summary of Significant Accounting Policies to our 2022 annual consolidated financial statements in our 2022 Form 10-K, for additional information on our applicable significant accounting policies in effect prior to the adoption of ASU 2022-02.

NOTE 3. 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, 2023								December 31, 2022
			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	$	1,445	$	—	$	(9)	$	1,436	$	3,917	$	—	$	(53)	$	3,864
State and municipal	10		—		(1)		9		10		—		—		10
Residential mortgage-backed(a)	411		—		(57)		354		467		—		(49)		418
Asset-backed(b)	1,090		—		(15)		1,075		599		—		(19)		580
Other	8				—		8		8		—		(1)		7

Total	$	2,964	$	—	$	(82)	$	2,882	$	5,001	$	—	$	(122)	$	4,879

(a) All of our residential mortgage-backed securities have been issued by government-sponsored entities and are collateralized by U.S. mortgages. At September 30, 2023 and December 31, 2022, $86 million and $100 million of residential mortgage-backed securities, respectively, were pledged by the Bank as collateral to the Federal Reserve to secure Federal Reserve Discount Window advances.

(b) Our asset-backed securities are collateralized by credit card and auto loans.

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, 2023
U.S. government and federal agency	$	544	$	—	$	892	$	(9)
State and municipal	—		—		9		(1)
Residential mortgage-backed	8		—		347		(57)
Asset-backed	783		(3)		245		(12)
Other	—		—		8		—
Total	$	1,335	$	(3)	$	1,501	$	(79)

At December 31, 2022
U.S. government and federal agency	$	3,032	$	(30)	$	638	$	(23)
State and municipal	5		—		5		—
Residential mortgage-backed	316		(31)		101		(18)
Asset-backed	230		—		348		(19)
Other	7		(1)		—		—
Total	$	3,590	$	(62)	$	1,092	$	(60)

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.

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, 2023 ($ in millions)	cost		fair value		Average yield (a)
Due
Within one year	$	1,736	$	1,721	2.7	%
After one year through five years	$	835	$	824	4.7	%
After five years through ten years	$	190	$	170	1.8	%
After ten years	$	203	$	167	2.0	%

(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, 2023 and 2022.

Although we generally do not have the intent to sell any specific securities held at September 30, 2023, 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 4. LOAN RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES


($ in millions)	September 30, 2023		December 31, 2022
Credit cards	$	92,078	$	87,630
Consumer installment loans	3,784		3,056
Commercial credit products	1,879		1,682
Other	132		102
Total loan receivables, before allowance for credit losses(a)(b)	$	97,873	$	92,470

(a)Total loan receivables include $19.4 billion and $19.8 billion of restricted loans of consolidated securitization entities at September 30, 2023 and December 31, 2022, respectively. See Note 5. Variable Interest Entities for further information on these restricted loans.

(b)At September 30, 2023 and December 31, 2022, loan receivables included deferred costs, net of deferred income, of $201 million and $237 million, respectively.

Allowance for Credit Losses**(a)(b)**


($ 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 July 1, 2022		Provision charged to operations		Gross charge-offs		Recoveries		Balance at September 30, 2022
Credit cards	$	8,605	$	864	$	(785)	$	189	$	8,873
Consumer installment loans	129		38		(25)		4		146
Commercial credit products	71		26		(19)		2		80
Other	3		1		(1)		—		3
Total	$	8,808	$	929	$	(830)	$	195	$	9,102



($ 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



($ in millions)	Balance at January 1, 2022		Provision charged to operations		Gross charge-offs		Recoveries		Balance at September 30, 2022
Credit cards	$	8,512	$	2,028	$	(2,273)	$	606	$	8,873
Consumer installment loans	115		80		(63)		14		146
Commercial credit products	59		64		(48)		5		80
Other	2		2		(1)		—		3
Total	$	8,688	$	2,174	$	(2,385)	$	625	$	9,102

(a)The allowance for credit losses at September 30, 2023 and 2022 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, 2023 and 2022 which include the consideration of current and expected macroeconomic conditions that existed at those dates.

(b)Comparative information is presented in accordance with the applicable accounting standards in effect prior to the adoption of ASU 2022-02.

The reasonable and supportable forecast period used in our estimate of credit losses at September 30, 2023 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.

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, 2023. Expected credit loss estimates are developed using both quantitative models and qualitative adjustments, and incorporates a macroeconomic forecast, as described within the 2022 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. We continue to experience a decrease in payment rates and an increase in delinquencies and net charge-offs during the nine months ended September 30, 2023. We expect net charge-offs to continue to increase. These conditions are reflected in our current estimate of expected credit losses, which remain generally consistent with the prior quarter. Our allowance for credit losses increased to $10.2 billion during the nine months ended September 30, 2023, primarily due to growth in loan receivables, partially offset by the reserve reduction associated with the adoption of ASU 2022-02. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies 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, 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	$	2,159		$	1,957		$	4,116		$	1,957		$	—
Consumer installment loans	80			21			101			—			21
Commercial credit products	45			42			87			42			—

Total delinquent loans	$	2,284		$	2,020		$	4,304		$	1,999		$	21
Percentage of total loan receivables	2.3		%	2.1		%	4.4		%	2.0		%	—		%


At December 31, 2022 ($ 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	$	1,710		$	1,516		$	3,226		$	1,516		$	—
Consumer installment loans	61			14			75			—			14
Commercial credit products	44			32			76			32			—

Total delinquent loans	$	1,815		$	1,562		$	3,377		$	1,548		$	14
Percentage of total loan receivables	2.0		%	1.7		%	3.7		%	1.7		%	—		%

Consumer Installment Loans by Origination Year


	By origination year
At or for the nine months ended September 30, 2023 ($ in millions)	2023		2022		2021		2020		2019		Prior		Total
Amortized cost basis	$	1,664	$	1,034	$	611	$	357	$	82	$	36	$	3,784
30-89 days delinquent	33		22		14		8		2		1		80
90 or more days delinquent	10		6		3		2		—		—		21
Current period gross charge-offs	29		66		32		15		4		2		148


	By origination year
At December 31, 2022 ($ in millions)	2022		2021		2020		2019		2018		Prior		Total
Amortized cost basis	$	1,441	$	868	$	535	$	135	$	58	$	19	$	3,056
30-89 days delinquent	26		18		12		3		1		1		61
90 or more days delinquent	6		5		2		1		—		—		14

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.

Loan Modifications to Borrowers Experiencing Financial Difficulty

We use certain loan modification programs for borrowers experiencing financial difficulties. We primarily use long-term modification programs for borrowers experiencing financial difficulty as a loss mitigation strategy to improve long-term collectability of the loans. The long-term programs involve changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months, reducing the interest rate on the loan, and stopping the assessment of penalty fees. We also make long-term loan modifications for customers who request financial assistance through external sources, such as through consumer credit counseling service agencies. Long-term loan modification programs do not normally include the forgiveness of unpaid principal, interest or fees. We may also provide certain borrowers with a short-term loan modification program (generally up to 3 months) that can include the forgiveness of unpaid principal balance, interest and/or fees. We generally do not convert revolving loans to term loans, outside of loan modification programs for borrowers experiencing financial difficulties.

Three and nine months ended September 30, 2023

The Company adopted ASU 2022-02 as of 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 as of the beginning of 2023. The following table provides information on our loan modifications to borrowers experiencing financial difficulty during the period presented, which do not include loans that are classified as loan receivables held for sale:


	Three months ended September 30, 2023				Nine months ended September 30, 2023
($ in millions)	Amount		% of Loan Receivables		Amount		% of Loan Receivables
Long-term modifications
Credit cards	$	412	0.4	%	$	1,134	1.2	%
Consumer installment loans	—		—	%	—		—	%
Commercial credit products	1		0.1	%	4		0.2	%
Short-term modifications
Credit cards	163		0.2	%	440		0.5	%
Consumer installment loans	—		—	%	—		—	%
Commercial credit products	—		—	%	—		—	%
Total	$	576	0.6	%	$	1,578	1.6	%

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. For long-term modifications made in the three and nine months ended September 30, 2023, the financial effect of these modifications reduced the weighted-average interest rates by 97% for both periods, respectively. For short-term modifications made in the three and nine months ended September 30, 2023, unpaid balances of $10 million and $123 million, respectively, were forgiven.

Performance of Loans Modified to Borrowers Experiencing Financial Difficulty

The following table provides information on the performance of loans modified to borrowers experiencing financial difficulty which have been modified subsequent to January 1, 2023 and remain in a modification program at September 30, 2023:


	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.

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 between January 1, 2023 and September 30, 2023 and experienced a payment default and charged-off during the period presented:


	Three months ended September 30, 2023			Nine months ended September 30, 2023
($ in millions, accounts in thousands)	Accounts defaulted	Loans defaulted		Accounts defaulted	Loans defaulted
Credit cards	31	$	77	51	$	122
Consumer installment loans	—	—		—	—
Commercial credit products	—	1		—	1

Total	31	$	78	51	$	123

Of the loans modified to borrowers experiencing financial difficulty that enrolled in a short-term modification program between January 1, 2023 and September 30, 2023, 50% have fully completed all required payments and successfully exited the program during the nine months ended September 30, 2023.

Three and nine months ended September 30, 2022

Troubled Debt Restructurings

Under our modified retrospective adoption of ASU 2022-02, the following information on loan modifications for periods prior to January 1, 2023 are presented in accordance with the applicable accounting standards in effect at that time. The following table provides information on our TDR loan modifications during the prior year period presented:


	Three months ended September 30,		Nine months ended September 30,
($ in millions)	2022		2022
Credit cards	$	265	$	681
Consumer installment loans	—		—
Commercial credit products	1		2

Total	$	266	$	683

Prior to January 1, 2023, our allowance for credit losses on TDRs was generally measured based on the difference between the recorded loan receivable and the present value of the expected future cash flows, discounted at the original effective interest rate of the loan. Interest income from loans accounted for as TDRs was accounted for in the same manner as other accruing loans.

The following table provides information about loans classified as TDRs and specific reserves at December 31, 2022. We do not evaluate credit card loans on an individual basis but instead estimate an allowance for credit losses on a collective basis.


At December 31, 2022 ($ in millions)	Total recorded investment		Related allowance		Net recorded investment		Unpaid principal balance
Credit cards	$	1,355	$	(600)	$	755	$	1,206
Consumer installment loans	—		—		—		—
Commercial credit products	4		(2)		2		4
Total	$	1,359	$	(602)	$	757	$	1,210

Financial Effects of TDRs

The following table presents the types and financial effects of loans modified and accounted for as TDRs during the prior year period presented:


	Three months ended September 30,						Nine months ended September 30,
	2022						2022
($ in millions)	Interest income recognized during period when loans were modified		Interest income that would have been recorded with original terms		Average recorded investment		Interest income recognized during period when loans were modified		Interest income that would have been recorded with original terms		Average recorded investment
Credit cards	$	9	$	80	$	1,218	$	26	$	234	$	1,201
Consumer installment loans	—		—		—		—		—		—
Commercial credit products	—		1		4		—		1		3
Total	$	9	$	81	$	1,222	$	26	$	235	$	1,204

Payment Defaults

The following table presents the type, number and amount of loans accounted for as TDRs that enrolled in a modification program within the previous 12 months from September 30, 2022 and experienced a payment default and charged-off during the prior year period presented:


	Three months ended September 30,			Nine months ended September 30,
	2022			2022
($ in millions, accounts in thousands)	Accounts defaulted	Loans defaulted		Accounts defaulted	Loans defaulted
Credit cards	25	$	56	52	$	116
Consumer installment loans	—	—		—	—
Commercial credit products	—	—		—	1

Total	25	$	56	52	$	117

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 for which a VantageScore score is not available where we use alternative sources to assess their credit and predict behavior. The following table provides the most recent VantageScore scores available for our customers at September 30, 2023, December 31, 2022 and September 30, 2022, respectively, as a percentage of each class of loan receivable. The table below excludes 0.3%, 0.4% and 0.4% of our total loan receivables balance at each of September 30, 2023, December 31, 2022 and September 30, 2022, respectively, which represents those customer accounts for which a VantageScore score is not available.


	September 30, 2023						December 31, 2022						September 30, 2022
	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	73	%	19	%	8	%	74	%	19	%	7	%	75	%	18	%	7	%
Consumer installment loans	76	%	17	%	7	%	77	%	17	%	6	%	77	%	17	%	6	%
Commercial credit products	86	%	7	%	7	%	88	%	6	%	6	%	90	%	6	%	4	%

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 $426 billion and $417 billion at September 30, 2023 and December 31, 2022, 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.

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)	2023		2022		2023		2022
Credit cards(a)	$	5,003	$	4,153	$	14,179	$	12,009
Consumer installment loans	108		74		285		209
Commercial credit products	38		30		108		83
Other	2		1		7		4
Total(b)	$	5,151	$	4,258	$	14,579	$	12,305

(a)Interest income on credit cards that was reversed related to accrued interest receivables written off was $422 million and $265 million for the three months ended September 30, 2023 and 2022, respectively, and $1.3 billion and $770 million for the nine months ended September 30, 2023 and 2022, respectively.

(b)Deferred merchant discounts to be recognized in interest income at September 30, 2023 and December 31, 2022, were $1.9 billion and $1.7 billion, respectively, which are included in Accrued expenses and other liabilities in our Condensed Consolidated Statement of Financial Position.

NOTE 5. 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, 2023 and 2022. 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 financing 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 financing 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.

The table below summarizes the assets and liabilities of our consolidated securitization VIEs described above:


($ in millions)	September 30, 2023		December 31, 2022
Assets
Loan receivables, net(a)	$	17,610	$	18,015

Other assets(b)	63		61
Total	$	17,673	$	18,076

Liabilities
Borrowings	$	6,519	$	6,227
Other liabilities	26		23
Total	$	6,545	$	6,250

(a) Includes $1.8 billion and $1.8 billion of related allowance for credit losses resulting in gross restricted loans of $19.4 billion and $19.8 billion at September 30, 2023 and December 31, 2022, respectively.

(b) Includes $60 million and $56 million of segregated funds held by the VIEs at September 30, 2023 and December 31, 2022, 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 $1.0 billion and $896 million for the three months ended September 30, 2023 and 2022, respectively. Related expenses consisted primarily of provision for credit losses of $189 million and $23 million for the three months ended September 30, 2023 and 2022, respectively, and interest expense of $86 million and $54 million for the three months ended September 30, 2023 and 2022, respectively.

Income (principally, interest and fees on loans) earned by our consolidated VIEs was $2.9 billion and $2.7 billion for the nine months ended September 30, 2023 and 2022, respectively. Related expenses consisted primarily of provision for credit losses of $553 million and $151 million for the nine months ended September 30, 2023 and 2022, respectively, and interest expense of $241 million and $127 million for the nine months ended September 30, 2023 and 2022, 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 affordable housing properties and receive affordable housing tax credits for these investments. These investments included in our Condensed Consolidated Statement of Financial Position totaled $721 million and $557 million at September 30, 2023 and December 31, 2022, respectively, and represents our total exposure for these entities. Additionally, we have other investments in non-consolidated VIEs which totaled $252 million and $230 million at September 30, 2023 and December 31, 2022, respectively. At September 30, 2023, the Company also had investment commitments of $186 million related to these investments.

NOTE 6. INTANGIBLE ASSETS


	September 30, 2023						December 31, 2022
($ in millions)	Gross carrying amount		Accumulated amortization		Net		Gross carrying amount		Accumulated amortization		Net
Customer-related	$	1,751	$	(1,204)	$	547	$	1,725	$	(1,113)	$	612
Capitalized software and other	1,876		(1,254)		622		1,721		(1,046)		675
Total	$	3,627	$	(2,458)	$	1,169	$	3,446	$	(2,159)	$	1,287

During the nine months ended September 30, 2023, we recorded additions to intangible assets subject to amortization of $182 million, primarily related to capitalized software expenditures, as well as customer-related intangible assets.

Customer-related intangible assets primarily relate to retail partner contract acquisitions and extensions, as well as purchased credit card relationships. During the nine months ended September 30, 2023 and 2022, we recorded additions to customer-related intangible assets subject to amortization of $26 million and $55 million, respectively, primarily related to payments made to acquire and extend certain retail partner relationships. These additions had a weighted average amortizable life of 7 years and 6 years for the nine months ended September 30, 2023 and 2022, respectively.

Amortization expense related to retail partner contracts was $28 million and $26 million for the three months ended September 30, 2023 and 2022, respectively, and $82 million and $86 million for the nine months ended September 30, 2023 and 2022, respectively, and is included as a component of marketing and business development expense in our Condensed Consolidated Statements of Earnings. All other amortization expense was $74 million and $64 million for the three months ended September 30, 2023 and 2022, respectively, and $217 million and $189 million for the nine months ended September 30, 2023 and 2022, respectively, and is included as a component of other expense in our Condensed Consolidated Statements of Earnings.

NOTE 7. DEPOSITS


	September 30, 2023				December 31, 2022
($ in millions)	Amount		Average rate(a)		Amount		Average rate(a)
Interest-bearing deposits	$	77,669	3.7	%	$	71,336	1.5	%
Non-interest-bearing deposits	397		—		399		—
Total deposits	$	78,066			$	71,735

(a)Based on interest expense for the nine months ended September 30, 2023 and the year ended December 31, 2022 and average deposits balances.

At September 30, 2023 and December 31, 2022, interest-bearing deposits included $8.9 billion and $7.2 billion, respectively, of certificates of deposit that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor for each account ownership category.

At September 30, 2023, our interest-bearing time deposits maturing for the remainder of 2023 and over the next four years and thereafter were as follows:


($ in millions)			2023						2024						2025						2026						2027						Thereafter
Deposits			$	6,087					$	28,709					$	4,683					$	1,475					$	2,546					$	1,261

The above maturity table excludes $29.0 billion of demand deposits with no defined maturity, of which $27.2 billion are savings accounts. In addition, at September 30, 2023, we had $3.9 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.

NOTE 8. BORROWINGS


	September 30, 2023						December 31, 2022
($ 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 - 2026	3.37% - 5.54%	4.30	%	$	2,669	$	2,377
Floating securitized borrowings	2024 - 2026	6.07% - 6.45%	6.20	%	3,850		3,850
Total borrowings of consolidated securitization entities			5.42	%	6,519		6,227

Senior unsecured notes:
Synchrony Financial senior unsecured notes:
Fixed senior unsecured notes	2024 - 2031	2.87% - 5.15%	4.22	%	6,478		6,473


Synchrony Bank senior unsecured notes:
Fixed senior unsecured notes	2025 - 2027	5.40% - 5.63%	5.49	%	1,493		1,491

Total senior unsecured notes			4.45	%	7,971		7,964

Subordinated unsecured notes:
Synchrony Financial subordinated unsecured notes:
Fixed subordinated unsecured notes	2033	7.25%	7.25	%	741		—
Total senior and subordinated unsecured notes			4.69	%	8,712		7,964

Total borrowings					$	15,231	$	14,191

(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.

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 2023 and over the next four years and thereafter:


($ in millions)			2023						2024						2025						2026						2027						Thereafter
Borrowings			$	—					$	4,225					$	5,300					$	2,000					$	1,600					$	2,150

Third-Party Debt

2023 Issuance ($ in millions):


Issuance Date	Principal Amount		Maturity	Interest Rate
Fixed rate subordinated unsecured notes:
Synchrony Financial
February 2023	$	750	February 2033	7.250%

Credit Facilities

As additional sources of liquidity, we have undrawn committed capacity under certain credit facilities, primarily related to our securitization programs.

At September 30, 2023, we had an aggregate of $2.5 billion of undrawn committed capacity under our securitization financings, subject to customary borrowing conditions, from private lenders under our securitization programs, and an aggregate of $0.5 billion of undrawn committed capacity under our unsecured revolving credit facility with private lenders.

NOTE 9. 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 2022 annual consolidated financial statements in our 2022 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, 2023 ($ in millions)	Level 1		Level 2		Level 3		Total(a)
Assets
Debt securities
U.S. government and federal agency	$	—	$	1,436	$	—	$	1,436
State and municipal	—		—		9		9
Residential mortgage-backed	—		354		—		354
Asset-backed	—		1,075		—		1,075
Other	—		—		8		8
Other(b)	13		—		9		22
Total	$	13	$	2,865	$	26	$	2,904

Liabilities
Other(c)	—		—		6		6
Total	$	—	$	—	$	6	$	6

At December 31, 2022 ($ in millions)
Assets
Debt securities
U.S. government and federal agency	$	—	$	3,864	$	—	$	3,864
State and municipal	—		—		10		10
Residential mortgage-backed	—		418		—		418
Asset-backed	—		580		—		580
Other	—		—		7		7
Other(b)	14		—		13		27
Total	$	14	$	4,862	$	30	$	4,906

Liabilities
Other(c)	—		—		$	7	$	7

Total	$	—	$	—	$	7	$	7

(a) For the nine months ended September 30, 2023 and 2022, 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 is primarily comprised of certain financial liabilities for which we have elected the fair value option, which are included in Accrued expenses and other liabilities in our Condensed Consolidated Statement of Financial Position.

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 9. Fair Value Measurements in our 2022 annual consolidated financial statements in our 2022 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, 2023 and 2022, respectively, were not material.

Financial Assets and Financial Liabilities Carried at Other Than Fair Value


	Carrying		Corresponding fair value amount
At September 30, 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)	$	15,643	$	15,643	$	15,643	$	—	$	—
Other assets(a)(b)	$	157	$	157	$	157	$	—	$	—
Financial assets carried at other than fair value:
Loan receivables, net(c)	$	87,688	$	99,153	$	—	$	—	$	99,153


Financial Liabilities
Financial liabilities carried at other than fair value:
Deposits	$	78,066	$	77,710	$	—	$	77,710	$	—
Borrowings of consolidated securitization entities	$	6,519	$	6,454	$	—	$	2,605	$	3,849

Senior and subordinated unsecured notes	$	8,712	$	8,014	$	—	$	8,014	$	—

	Carrying		Corresponding fair value amount
At December 31, 2022 ($ 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)	$	10,294	$	10,294	$	10,294	$	—	$	—
Other assets(a)(b)	$	136	$	136	$	136	$	—	$	—
Financial assets carried at other than fair value:
Loan receivables, net(c)	$	82,930	$	94,339	$	—	$	—	$	94,339


Financial Liabilities
Financial liabilities carried at other than fair value:
Deposits	$	71,735	$	70,685	$	—	$	70,685	$	—
Borrowings of consolidated securitization entities	$	6,227	$	6,127	$	—	$	2,327	$	3,800

Senior and subordinated unsecured notes	$	7,964	$	7,530	$	—	$	7,530	$	—

(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.

Equity Securities Without Readily Determinable Fair Values


	Three months ended September 30,				Nine months ended September 30,
At or for the periods ended September 30 ($ in millions)	2023		2022		2023		2022
Carrying value(a)	$	268	$	246	$	268	$	246
Upward adjustments(b)	17		—		17		7
Downward adjustments(b)	(5)		(1)		(6)		(3)

(a) Carrying value reflects cumulative purchases and sales in addition to upward and downward carrying value changes, and at December 31, 2022 was $245 million.

(b) Between January 1, 2018 and September 30, 2023, cumulative upward and downward carrying value adjustments were $205 million and $(14) million, respectively.

NOTE 10. 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 2023 only 50% of the CECL regulatory capital transition adjustment is now deferred in our regulatory capital amounts and ratios, as compared to 75% at December 31, 2022.

At September 30, 2023 and December 31, 2022, Synchrony Financial met all applicable requirements to be deemed well-capitalized pursuant to Federal Reserve Board regulations. At September 30, 2023 and December 31, 2022, 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, 2023 that management believes have changed the Company's or the Bank’s capital category.

The actual capital amounts, ratios and the applicable required minimums of the Company and the Bank are as follows:

Synchrony Financial


At September 30, 2023 ($ in millions)	Actual				Minimum for capital adequacy purposes
	Amount		Ratio(a)		Amount		Ratio(b)
Total risk-based capital	$	14,964	15.3	%	$	7,839	8.0	%
Tier 1 risk-based capital	$	12,906	13.2	%	$	5,879	6.0	%
Tier 1 leverage	$	12,906	11.8	%	$	4,380	4.0	%
Common equity Tier 1 Capital	$	12,172	12.4	%	$	4,409	4.5	%


At December 31, 2022 ($ in millions)	Actual				Minimum for capital adequacy purposes
	Amount		Ratio(a)		Amount		Ratio(b)
Total risk-based capital	$	13,713	15.0	%	$	7,328	8.0	%
Tier 1 risk-based capital	$	12,493	13.6	%	$	5,496	6.0	%
Tier 1 leverage	$	12,493	12.3	%	$	4,075	4.0	%
Common equity Tier 1 Capital	$	11,759	12.8	%	$	4,122	4.5	%

Synchrony Bank


At September 30, 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	$	14,401	15.6	%	$	7,396	8.0	%	$	9,244	10.0	%
Tier 1 risk-based capital	$	12,408	13.4	%	$	5,547	6.0	%	$	7,396	8.0	%
Tier 1 leverage	$	12,408	12.1	%	$	4,108	4.0	%	$	5,136	5.0	%
Common equity Tier I capital	$	12,408	13.4	%	$	4,160	4.5	%	$	6,009	6.5	%


At December 31, 2022 ($ 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	$	13,313	15.6	%	$	6,838	8.0	%	$	8,547	10.0	%
Tier 1 risk-based capital	$	12,174	14.2	%	$	5,128	6.0	%	$	6,838	8.0	%
Tier 1 leverage	$	12,174	12.8	%	$	3,790	4.0	%	$	4,738	5.0	%
Common equity Tier I capital	$	12,174	14.2	%	$	3,846	4.5	%	$	5,556	6.5	%

(a)Capital ratios are calculated based on the Basel III Standardized Approach rules. Capital amounts and ratios at September 30, 2023 and at December 31, 2022 in the above tables reflect the applicable CECL regulatory capital transition adjustment.

(b)At September 30, 2023 and at December 31, 2022, 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.

NOTE 11. 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.

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)	2023		2022		2023		2022
Net earnings	$	628	$	703	$	1,798	$	2,439
Preferred stock dividends	(10)		(11)		$	(31)	$	(32)
Net earnings available to common stockholders	$	618	$	692	$	1,767	$	2,407

Weighted average common shares outstanding, basic	416.0		468.5		424.3		$	492.1
Effect of dilutive securities	2.4		2.2		2.2		$	2.9
Weighted average common shares outstanding, dilutive	418.4		470.7		$	426.5	$	495.0

Earnings per basic common share	$	1.49	$	1.48	$	4.16	$	4.89
Earnings per diluted common share	$	1.48	$	1.47	$	4.14	$	4.86

We have issued certain stock-based awards under the Synchrony Financial 2014 Long-Term Incentive Plan. A total of 3 million shares and 5 million shares for the three months ended September 30, 2023 and 2022, respectively, and 5 million and 3 million shares for the nine months ended September 30, 2023 and 2022, respectively, related to these awards, were considered anti-dilutive and therefore were excluded from the computation of diluted earnings per common share.

NOTE 12. INCOME TAXES

Unrecognized Tax Benefits


($ in millions)	September 30, 2023		December 31, 2022
Unrecognized tax benefits, excluding related interest expense and penalties(a)	$	252	$	267
Portion that, if recognized, would reduce tax expense and effective tax rate(b)	$	199	$	177

(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 $31 million, of which $24 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 2023 tax year, and thus the tax year is under IRS review. The IRS is also examining our 2022 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 13. 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 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.

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.

Below is a description of certain of our regulatory matters and legal proceedings.

On November 2, 2018, a putative class action lawsuit, Retail Wholesale Department Store Union Local 338 Retirement Fund v. Synchrony Financial, et al., was filed in the U.S. District Court for the District of Connecticut, naming as defendants the Company and two of its officers. The lawsuit asserts violations of the Exchange Act for allegedly making materially misleading statements and/or omitting material information concerning the Company’s underwriting practices and private-label card business, and was filed on behalf of a putative class of persons who purchased or otherwise acquired the Company’s common stock between October 21, 2016 and November 1, 2018. The complaint seeks an award of unspecified compensatory damages, costs and expenses. On February 5, 2019, the court appointed Stichting Depositary APG Developed Markets Equity Pool as lead plaintiff for the putative class. On April 5, 2019, an amended complaint was filed, asserting a new claim for violations of the Securities Act in connection with statements in the offering materials for the Company’s December 1, 2017 note offering. The Securities Act claims are filed on behalf of persons who purchased or otherwise acquired Company bonds in or traceable to the December 1, 2017 note offering between December 1, 2017 and November 1, 2018. The amended complaint names as additional defendants two additional Company officers, the Company’s board of directors, and the underwriters of the December 1, 2017 note offering. The amended complaint is captioned Stichting Depositary APG Developed Markets Equity Pool and Stichting Depositary APG Fixed Income Credit Pool v. Synchrony Financial et al. On March 26, 2020, the District Court recaptioned the case In re Synchrony Financial Securities Litigation and on March 31, 2020, the District Court granted the defendants’ motion to dismiss the complaint with prejudice. On April 20, 2020, plaintiffs filed a notice to appeal the decision to the United States Court of Appeals for the Second Circuit. On February 16, 2021, the Court of Appeals affirmed the District Court’s dismissal of the Securities Act claims and all of the claims under the Exchange Act with the exception of a claim relating to a single statement on January 19, 2018 regarding whether Synchrony was receiving pushback on credit from its retail partners. On April 3, 2023, the parties executed a Stipulation and Agreement of Settlement, in which plaintiffs agreed to settle all remaining claims in the action in exchange for a payment of $34 million. The District Court preliminarily approved the settlement on April 12, 2023. On August 3, 2023, the District Court entered an order granting final approval to the settlement.

On January 28, 2019, a purported shareholder derivative action, Gilbert v. Keane, et al., was filed in the U.S. District Court for the District of Connecticut against the Company as a nominal defendant, and certain of the Company’s officers and directors. The lawsuit alleges breach of fiduciary duty claims based on the allegations raised by the plaintiff in the Stichting Depositary APG class action, unjust enrichment, waste of corporate assets, and that the defendants made materially misleading statements and/or omitted material information in violation of the Exchange Act. The complaint seeks a declaration that the defendants breached and/or aided and abetted the breach of their fiduciary duties to the Company, unspecified monetary damages with interest, restitution, a direction that the defendants take all necessary actions to reform and improve corporate governance and internal procedures, and attorneys’ and experts’ fees. On March 11, 2019, a second purported shareholder derivative action, Aldridge v. Keane, et al., was filed in the U.S. District Court for the District of Connecticut. The allegations in the Aldridge complaint are substantially similar to those in the Gilbert complaint. On March 26, 2020, the District Court recaptioned the Gilbert and Aldridge cases as In re Synchrony Financial Derivative Litigation. On August 11, 2023, the parties submitted a joint status report to the District Court indicating that the parties had reached a memorandum of understanding to settle the litigation, which is not expected to have a material financial impact on the Company.

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