Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
FORM 8-K
 
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
October 20, 2020
Date of Report
(Date of earliest event reported) 
 
 
SYNCHRONY FINANCIAL
(Exact name of registrant as specified in its charter) 
 
 
Delaware
 
001-36560
 
51-0483352
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)

777 Long Ridge Road
 
 
Stamford,
Connecticut
 
06902
(Address of principal executive offices)
 
(Zip Code)
(203) 585-2400
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.001 per share
SYF
New York Stock Exchange
Depositary Shares Each Representing a 1/40th Interest in a Share of 5.625% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A
SYFPrA
New York Stock Exchange




Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨




Item 2.02    Results of Operations and Financial Condition.
On October 20, 2020, Synchrony Financial (the “Company”) issued a press release setting forth the Company’s third quarter 2020 earnings. A copy of the Company’s press release is being furnished as Exhibit 99.1 and hereby incorporated by reference. The information furnished pursuant to this Item 2.02, including Exhibits, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
 
Item 9.01    Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being furnished as part of this report:

 
 
 
Number
  
Description
 
 
99.1
  
Press release, dated October 20, 2020, issued by Synchrony Financial
99.2
 
Financial Data Supplement of the Company for the quarter ended September 30, 2020
99.3
 
Financial Results Presentation of the Company for the quarter ended September 30, 2020
99.4
 
Explanation of Non-GAAP Measures
104
 
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
 
 
 
 
 
 
SYNCHRONY FINANCIAL
 
 
 
 
Date: October 20, 2020
 
 
 
By:
 
/s/ Jonathan Mothner
 
 
 
 
Name:
 
Jonathan Mothner
 
 
 
 
Title:
 
Executive Vice President, General Counsel and Secretary






EXHIBIT INDEX
 
 
 
 
Number
  
Description
 
 
  
 
 
 
104
 
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL




Exhibit 99.1

syf1q16eprimage17.jpg
Investor Relations    Media Relations
Greg Ketron    Sue Bishop
(203) 585-6291    (203) 585-2802
For Immediate Release: October 20, 2020
Synchrony Reports Third Quarter Net Earnings of $313 Million or $0.52 Per Diluted Share
Included Restructuring Charge of $89 million, or $0.11 Per Diluted Share, and Provision for Credit Losses Included CECL Impact of $66 Million, or $0.09 Per Diluted Share

STAMFORD, Conn. – Synchrony Financial (NYSE: SYF) today announced third quarter 2020 earnings results amid the continuing Coronavirus (COVID-19) pandemic. Synchrony reported third quarter 2020 net earnings of $313 million, or $0.52 per diluted share; this included a restructuring charge of $89 million, or $67 million after tax, which equates to an EPS reduction of $0.11, and an increase in the provision for credit losses as a result of CECL implementation earlier this year of $66 million, or $50 million after tax, which equates to an EPS reduction of $0.09.
Results included*:
•
Loan receivables decreased 6% to $78.5 billion, or 5% on a Core** basis
•
Interest and fees on loans decreased 22% to $3.8 billion, or 12% on a Core basis
•
Purchase volume decreased 6% to $36.0 billion, or flat on a Core basis
•
Average active accounts decreased 16% to 64.3 million, or 8% on a Core basis
•
Deposits decreased $2.5 billion, or 4%, to $63.5 billion
•
Renewed and extended a key relationship with Sam's Club
•
Successfully launched the new Venmo program
•
Added and extended Payment Solutions relationships with 4 Wheel Parts, Kane’s Furniture, Levin Furniture and Mattress, SVP Sewing Brands LLC, and System Pavers
•
CareCredit successfully launched healthcare system partnerships with Lehigh Valley Health Network, St. Luke's University Health Network, and Cox Health and added and extended relationships with Blue River Pet Care and NVA
•
Returned $129 million in capital through common stock dividends

“During times of crisis and uncertainty, it is imperative to lead with the fundamental values and principles upon which an organization is built. At Synchrony, we continue to put our employees, partners, customers, shareholders and communities at the forefront of our decision making. Moving in an agile fashion, we quickly reallocated our resources to focus on the most critical priorities to sustain and drive business growth,” said Margaret Keane, Chief Executive Officer, Synchrony Financial.

“In the third quarter, we successfully launched an innovative, digital-first program with Venmo, renewed and extended our relationship with Sam's Club, while also extending several programs and adding new partnerships. We've also deployed an array of enhanced digital solutions for our partners and cardholders, further strengthening our market position and meeting the evolving demands of the new environment,” she added.


1

Business and Financial Results for the Third Quarter of 2020*
Earnings
•
Net interest income decreased $932 million, or 21%, to $3.5 billion, mainly due to the impact of COVID-19 and the Walmart consumer portfolio sale.
•
Retailer share arrangements decreased $117 million, or 12%, to $899 million, reflecting the impact of COVID-19 on program performance.
•
Provision for credit losses increased $191 million, or 19%, to $1.2 billion, mainly driven by the reserve increase for the projected impact of COVID-19 related losses and the prior year reserve reduction related to Walmart, partially offset by lower net charge-offs.
•
Other income increased $46 million, or 54%, to $131 million, largely driven by lower loyalty program costs which included the effects of the sale of the Walmart consumer portfolio.
•
Other expense was flat; the restructuring charge and expenses related to the COVID-19 response were offset by cost reductions from Walmart, lower purchase volume and accounts, and reductions in certain discretionary spend.
•
Net earnings totaled $313 million compared to $1.1 billion last year.
Balance Sheet
•
Period-end loan receivables decreased 6%, or 5% on a Core basis; purchase volume decreased 6%, or flat on a Core basis; and average active accounts decreased 16%, or 8% on a Core basis.
•
Deposits decreased $2.5 billion, or 4%, to $63.5 billion and comprised 80% of funding.
•
The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn credit facilities) of $26.8 billion, or 28.0% of total assets.
•
The Company has elected to defer the regulatory capital effects of CECL for two years; the estimated Common Equity Tier 1 ratio was 15.8% compared to 14.5%, and the estimated Tier 1 Capital ratio was 16.7% compared to 14.5%, reflecting the Company’s strong capital generation capabilities. The estimated Tier 1 Capital ratio also reflects the $750 million preferred stock issuance in November 2019.
Key Financial Metrics
•
Return on assets was 1.3% and return on equity was 10.3%.
•
Net interest margin was 13.80%.
•
Efficiency ratio was 39.7%.
Credit Quality
•
Loans 30+ days past due as a percentage of total period-end loan receivables were 2.67% compared to 4.47% last year; excluding the Walmart consumer portfolio, the rate was down approximately 175 basis points compared to last year.
•
Through September 30th, we had granted minimum payment forbearance to a cumulative total of approximately 2 million accounts, or $3.8 billion in account balances at the time of forbearance. As of September 30th, only 119,000 accounts or $227 million in account balances remained in forbearance.
•
Net charge-offs as a percentage of total average loan receivables were 4.42% compared to 5.35% last year; excluding the Walmart consumer portfolio, the rate decreased approximately 45 basis points compared to last year.
•
The allowance for credit losses as a percentage of total period-end loan receivables was 12.92%.

2

Sales Platforms
•
Retail Card period-end loan receivables decreased 6%, driven primarily by the impact from COVID-19, partially offset by growth in digital partners. Interest and fees on loans decreased 27%, purchase volume decreased 7%, and average active accounts decreased 19%, driven primarily by the sale of the Walmart consumer portfolio and the decline in loan receivables.
•
Payment Solutions period-end loan receivables decreased 5%; period-end loan receivables decreased 1% on a Core basis primarily due to the impact from COVID-19, partially offset by growth in Power. Interest and fees on loans decreased 10%, driven primarily by lower late fees. Purchase volume decreased 6% and average active accounts decreased 7%.
•
CareCredit period-end loan receivables decreased 7%, driven primarily by the impact from COVID-19. Interest and fees on loans decreased 8%, driven primarily by lower merchant discount as a result of the decline in purchase volume, which decreased 3%. Average active accounts decreased 8%.
* All comparisons are for the third quarter of 2020 compared to the third quarter of 2019, unless otherwise noted.
** Financial measures shown above on a Core basis are non-GAAP measures and exclude from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the financial tables.
Corresponding Financial Tables and Information
No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed February 13, 2020, and the Company’s forthcoming Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.
Conference Call and Webcast Information
On Tuesday, October 20, 2020, at 8:30 a.m. Eastern Time, Margaret Keane, Chief Executive Officer, Brian Doubles, President, and Brian Wenzel Sr., Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on the Synchrony Financial corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will also be available on the website.
About Synchrony Financial
Synchrony (NYSE: SYF) is a premier consumer financial services company. We deliver a wide range of specialized financing programs, as well as innovative consumer banking products, across key industries including digital, retail, home, auto, travel, health and pet. Synchrony enables our partners to grow sales and loyalty with consumers. We are one of the largest issuers of private label credit cards in the United States; we also offer co-branded products, installment loans and consumer financing products for small- and medium-sized businesses, as well as healthcare providers.
Synchrony is changing what’s possible through our digital capabilities, deep industry expertise, actionable data insights, frictionless customer experience and customized financing solutions.

3

For more information, visit www.synchrony.com and Twitter: @Synchrony.

Cautionary Statement Regarding Forward-Looking Statements
This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "estimates," "will," "should," "may" or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated, including the future impacts of the novel coronavirus disease (“COVID-19”) outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; a material indemnification obligation to GE under the Tax Sharing and Separation Agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau’s regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit the Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.

4

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed on February 13, 2020, and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as filed on July 23, 2020. You should not consider any list of such factors to be an exhaustive statement of all the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
Non-GAAP Measures
The information provided herein includes measures we refer to as "tangible common equity" and certain “Core” financial measures that have been adjusted to exclude amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively, which are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company's Current Report on Form 8-K filed with the SEC today.


5
Exhibit 99.2


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL SUMMARY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Nine Months Ended
 
 
 
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
3Q'20 vs. 3Q'19
 
Sep 30,
2020
 
Sep 30,
2019
 
YTD'20 vs. YTD'19
EARNINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
$
3,457

 
$
3,396

 
$
3,890

 
$
4,029

 
$
4,389

 
$
(932
)
(21.2
)%
 
$
10,743

 
$
12,770

 
$
(2,027
)
(15.9
)%
Retailer share arrangements
(899
)
 
(773
)
 
(926
)
 
(1,029
)
 
(1,016
)
 
117

(11.5
)%
 
(2,598
)
 
(2,829
)
 
231

(8.2
)%
Provision for credit losses
1,210

 
1,673

 
1,677

 
1,104

 
1,019

 
191

18.7
 %
 
4,560

 
3,076

 
1,484

48.2
 %
Net interest income, after retailer share arrangements and provision for credit losses
1,348

 
950

 
1,287

 
1,896

 
2,354

 
(1,006
)
(42.7
)%
 
3,585

 
6,865

 
(3,280
)
(47.8
)%
Other income
131

 
95

 
97

 
104

 
85

 
46

54.1
 %
 
323

 
267

 
56

21.0
 %
Other expense
1,067

 
986

 
1,002

 
1,079

 
1,064

 
3

0.3
 %
 
3,055

 
3,166

 
(111
)
(3.5
)%
Earnings before provision for income taxes
412

 
59

 
382

 
921

 
1,375

 
(963
)
(70.0
)%
 
853

 
3,966

 
(3,113
)
(78.5
)%
Provision for income taxes
99

 
11

 
96

 
190

 
319

 
(220
)
(69.0
)%
 
206

 
950

 
(744
)
(78.3
)%
Net earnings
$
313

 
$
48

 
$
286

 
$
731

 
$
1,056

 
$
(743
)
(70.4
)%
 
$
647

 
$
3,016

 
$
(2,369
)
(78.5
)%
Net earnings available to common stockholders
$
303

 
$
37

 
$
275

 
$
731

 
$
1,056

 
$
(753
)
(71.3
)%
 
$
615

 
$
3,016


$
(2,401
)
(79.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 


 


 
 
 
 
 
 
 
 


 


 


 
COMMON SHARE STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
$
0.52

 
$
0.06

 
$
0.45

 
$
1.15

 
$
1.60

 
$
(1.08
)
(67.5
)%
 
$
1.04

 
$
4.42

 
$
(3.38
)
(76.5
)%
Diluted EPS
$
0.52

 
$
0.06

 
$
0.45

 
$
1.15

 
$
1.60

 
$
(1.08
)
(67.5
)%
 
$
1.04

 
$
4.40

 
$
(3.36
)
(76.4
)%
Dividend declared per share
$
0.22

 
$
0.22

 
$
0.22

 
$
0.22

 
$
0.22

 
$
—

—
 %
 
$
0.66

 
$
0.64

 
$
0.02

3.1
 %
Common stock price
$
26.17

 
$
22.16

 
$
16.09

 
$
36.01

 
$
34.09

 
$
(7.92
)
(23.2
)%
 
$
26.17

 
$
34.09

 
$
(7.92
)
(23.2
)%
Book value per share
$
19.47

 
$
19.13

 
$
19.27

 
$
23.31

 
$
23.13

 
$
(3.66
)
(15.8
)%
 
$
19.47

 
$
23.13

 
$
(3.66
)
(15.8
)%
Tangible common equity per share(1)
$
15.75

 
$
15.28

 
$
15.35

 
$
19.50

 
$
19.68

 
$
(3.93
)
(20.0
)%
 
$
15.75

 
$
19.68

 
$
(3.93
)
(20.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning common shares outstanding
583.7

 
583.2

 
615.9

 
653.7

 
668.9

 
(85.2
)
(12.7
)%
 
615.9

 
718.8

 
(102.9
)
(14.3
)%
Issuance of common shares
—

 
—

 
—

 
—

 
—

 
—

—
 %
 
—

 
—

 
—

—
 %
Stock-based compensation
0.1

 
0.5

 
0.9

 
0.6

 
0.4

 
(0.3
)
(75.0
)%
 
1.5

 
2.5

 
(1.0
)
(40.0
)%
Shares repurchased
—

 
—

 
(33.6
)
 
(38.4
)
 
(15.6
)
 
15.6

(100.0
)%
 
(33.6
)
 
(67.6
)
 
34.0

(50.3
)%
Ending common shares outstanding
583.8

 
583.7

 
583.2

 
615.9

 
653.7

 
(69.9
)
(10.7
)%
 
583.8

 
653.7

 
(69.9
)
(10.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
583.8

 
583.7

 
604.9

 
633.7

 
658.3

 
(74.5
)
(11.3
)%
 
590.8

 
682.5

 
(91.7
)
(13.4
)%
Weighted average common shares outstanding (fully diluted)
584.8

 
584.4

 
607.4

 
637.7

 
661.7

 
(76.9
)
(11.6
)%
 
592.2

 
685.6

 
(93.4
)
(13.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SELECTED METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Nine Months Ended
 
 
 
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
3Q'20 vs. 3Q'19
 
Sep 30,
2020
 
Sep 30,
2019
 
YTD'20 vs. YTD'19
PERFORMANCE METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on assets(1)
1.3
%
 
0.2
%
 
1.1
%
 
2.7
%
 
3.9
%
 


(2.6
)%
 
0.9
%
 
3.8
%
 


(2.9
)%
Return on equity(2)
10.3
%
 
1.6
%
 
9.1
%
 
19.0
%
 
28.3
%
 


(18.0
)%
 
7.0
%
 
27.2
%
 


(20.2
)%
Return on tangible common equity(3)
13.1
%
 
1.6
%
 
11.6
%
 
23.0
%
 
33.4
%
 


(20.3
)%
 
8.8
%
 
32.2
%
 


(23.4
)%
Net interest margin(4)
13.80
%
 
13.53
%
 
15.15
%
 
15.01
%
 
16.29
%
 


(2.49
)%
 
14.17
%
 
16.04
%
 


(1.87
)%
Efficiency ratio(5)
39.7
%
 
36.3
%
 
32.7
%
 
34.8
%
 
30.8
%
 


8.9
 %
 
36.1
%
 
31.0
%
 


5.1
 %
Other expense as a % of average loan receivables, including held for sale
5.44
%
 
5.04
%
 
4.77
%
 
5.01
%
 
4.66
%
 


0.78
 %
 
5.08
%
 
4.72
%
 


0.36
 %
Effective income tax rate
24.0
%
 
18.6
%
 
25.1
%
 
20.6
%
 
23.2
%
 


0.8
 %
 
24.2
%
 
24.0
%
 


0.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net charge-offs as a % of average loan receivables, including held for sale
4.42
%
 
5.35
%
 
5.36
%
 
5.15
%
 
5.35
%
 


(0.93
)%
 
5.05
%
 
5.80
%
 


(0.75
)%
30+ days past due as a % of period-end loan receivables(6)
2.67
%
 
3.13
%
 
4.24
%
 
4.44
%
 
4.47
%
 


(1.80
)%
 
2.67
%
 
4.47
%
 


(1.80
)%
90+ days past due as a % of period-end loan receivables(6)
1.24
%
 
1.77
%
 
2.10
%
 
2.15
%
 
2.07
%
 


(0.83
)%
 
1.24
%
 
2.07
%
 


(0.83
)%
Net charge-offs
$
866

 
$
1,046

 
$
1,125

 
$
1,109

 
$
1,221

 
$
(355
)
(29.1
)%
 
$
3,037

 
$
3,896

 
$
(859
)
(22.0
)%
Loan receivables delinquent over 30 days(6)
$
2,100

 
$
2,453

 
$
3,500

 
$
3,874

 
$
3,723

 
$
(1,623
)
(43.6
)%
 
$
2,100

 
$
3,723

 
$
(1,623
)
(43.6
)%
Loan receivables delinquent over 90 days(6)
$
973

 
$
1,384

 
$
1,735

 
$
1,877

 
$
1,723

 
$
(750
)
(43.5
)%
 
$
973

 
$
1,723

 
$
(750
)
(43.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for credit losses (period-end)
$
10,146

 
$
9,802

 
$
9,175

 
$
5,602

 
$
5,607

 
$
4,539

81.0
 %
 
$
10,146

 
$
5,607

 
$
4,539

81.0
 %
Allowance coverage ratio(7)
12.92
%
 
12.52
%
 
11.13
%
 
6.42
%
 
6.74
%
 


6.18
 %
 
12.92
%
 
6.74
%
 


6.18
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BUSINESS METRICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(8)(9)
$
36,013

 
$
31,155

 
$
32,042

 
$
40,212

 
$
38,395

 
$
(2,382
)
(6.2
)%
 
$
99,210

 
$
109,199

 
$
(9,989
)
(9.1
)%
Period-end loan receivables
$
78,521

 
$
78,313

 
$
82,469

 
$
87,215

 
$
83,207

 
$
(4,686
)
(5.6
)%
 
$
78,521

 
$
83,207

 
$
(4,686
)
(5.6
)%
Credit cards
$
75,204

 
$
75,353

 
$
79,832

 
$
84,606

 
$
79,788

 
$
(4,584
)
(5.7
)%
 
$
75,204

 
$
79,788

 
$
(4,584
)
(5.7
)%
Consumer installment loans
$
1,987

 
$
1,779

 
$
1,390

 
$
1,347

 
$
2,050

 
$
(63
)
(3.1
)%
 
$
1,987

 
$
2,050

 
$
(63
)
(3.1
)%
Commercial credit products
$
1,270

 
$
1,140

 
$
1,203

 
$
1,223

 
$
1,317

 
$
(47
)
(3.6
)%
 
$
1,270

 
$
1,317

 
$
(47
)
(3.6
)%
Other
$
60

 
$
41

 
$
44

 
$
39

 
$
52

 
$
8

15.4
 %
 
$
60

 
$
52

 
$
8

15.4
 %
Average loan receivables, including held for sale
$
78,005

 
$
78,697

 
$
84,428

 
$
85,376

 
$
90,556

 
$
(12,551
)
(13.9
)%
 
$
80,368

 
$
89,752

 
$
(9,384
)
(10.5
)%
Period-end active accounts (in thousands)(9)(10)
64,800

 
63,430

 
68,849

 
75,471

 
77,094

 
(12,294
)
(15.9
)%
 
64,800

 
77,094

 
(12,294
)
(15.9
)%
Average active accounts (in thousands)(9)(10)
64,270

 
64,836

 
72,078

 
73,734

 
76,695

 
(12,425
)
(16.2
)%
 
67,246

 
76,653

 
(9,407
)
(12.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIQUIDITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liquid assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
$
13,552

 
$
16,344

 
$
13,704

 
$
12,147

 
$
11,461

 
$
2,091

18.2
 %
 
$
13,552

 
$
11,461

 
$
2,091

18.2
 %
Total liquid assets
$
21,402

 
$
22,352

 
$
19,225

 
$
17,322

 
$
15,201

 
$
6,201

40.8
 %
 
$
21,402

 
$
15,201

 
$
6,201

40.8
 %
Undrawn credit facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Undrawn credit facilities
$
5,400

 
$
5,650

 
$
5,600

 
$
6,050

 
$
6,500

 
$
(1,100
)
(16.9
)%
 
$
5,400

 
$
6,500

 
$
(1,100
)
(16.9
)%
Total liquid assets and undrawn credit facilities
$
26,802

 
$
28,002

 
$
24,825

 
$
23,372

 
$
21,701

 
$
5,101

23.5
 %
 
$
26,802

 
$
21,701

 
$
5,101

23.5
 %
Liquid assets % of total assets
22.37
%
 
23.15
%
 
19.61
%
 
16.52
%
 
14.35
%
 


8.02
 %
 
22.37
%
 
14.35
%
 


8.02
 %
Liquid assets including undrawn credit facilities % of total assets
28.02
%
 
29.00
%
 
25.32
%
 
22.30
%
 
20.48
%
 


7.54
 %
 
28.02
%
 
20.48
%
 


7.54
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Return on assets represents net earnings as a percentage of average total assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Return on equity represents net earnings as a percentage of average total equity.
 
 
 
 
 
 
 
(3) Return on tangible common equity represents net earnings available to common stockholders as a percentage of average tangible common equity. Tangible common equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
 
 
 
 
 
 
 
(4) Net interest margin represents net interest income divided by average interest-earning assets.
 
 
 
 
 
 
 
(5) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, plus other income, less retailer share arrangements.
 
 
 
 
 
 
 
(6) Based on customer statement-end balances extrapolated to the respective period-end date.
 
 
 
 
 
 
 
(7) Allowance coverage ratio represents allowance for credit losses divided by total period-end loan receivables.
 
 
 
 
 
 
 
(8) 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.
 
 
 
 
 
 
 
(9) Includes activity and accounts associated with loan receivables held for sale.
 
 
 
 
 
 
 
(10) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
 
 
 
 
 
 
 

2


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STATEMENTS OF EARNINGS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Nine Months Ended
 
 
 
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
3Q'20 vs. 3Q'19
 
Sep 30,
2020
 
Sep 30,
2019
 
YTD'20 vs. YTD'19
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
3,821

 
$
3,808

 
$
4,340

 
$
4,492

 
$
4,890

 
$
(1,069
)
(21.9
)%
 
$
11,969

 
$
14,213

 
$
(2,244
)
(15.8
)%
Interest on cash and debt securities
16

 
22

 
67

 
93

 
91

 
(75
)
(82.4
)%
 
105

 
292

 
(187
)
(64.0
)%
Total interest income
3,837

 
3,830

 
4,407

 
4,585

 
4,981

 
(1,144
)
(23.0
)%
 
12,074

 
14,505

 
(2,431
)
(16.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on deposits
245

 
293

 
356

 
383

 
411

 
(166
)
(40.4
)%
 
894

 
1,183

 
(289
)
(24.4
)%
Interest on borrowings of consolidated securitization entities
53

 
59

 
73

 
80

 
88

 
(35
)
(39.8
)%
 
185

 
278

 
(93
)
(33.5
)%
Interest on senior unsecured notes
82

 
82

 
88

 
93

 
93

 
(11
)
(11.8
)%
 
252

 
274

 
(22
)
(8.0
)%
Total interest expense
380

 
434

 
517

 
556

 
592

 
(212
)
(35.8
)%
 
1,331

 
1,735

 
(404
)
(23.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
3,457

 
3,396

 
3,890

 
4,029

 
4,389

 
(932
)
(21.2
)%
 
10,743

 
12,770

 
(2,027
)
(15.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retailer share arrangements
(899
)
 
(773
)
 
(926
)
 
(1,029
)
 
(1,016
)
 
117

(11.5
)%
 
(2,598
)
 
(2,829
)
 
231

(8.2
)%
Provision for credit losses
1,210

 
1,673

 
1,677

 
1,104

 
1,019

 
191

18.7
 %
 
4,560

 
3,076

 
1,484

48.2
 %
Net interest income, after retailer share arrangements and provision for credit losses
1,348

 
950

 
1,287

 
1,896

 
2,354

 
(1,006
)
(42.7
)%
 
3,585

 
6,865

 
(3,280
)
(47.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interchange revenue
172

 
134

 
161

 
192

 
197

 
(25
)
(12.7
)%
 
467

 
556

 
(89
)
(16.0
)%
Debt cancellation fees
68

 
69

 
69

 
64

 
64

 
4

6.3
 %
 
206

 
201

 
5

2.5
 %
Loyalty programs
(155
)
 
(134
)
 
(158
)
 
(181
)
 
(203
)
 
48

(23.6
)%
 
(447
)
 
(562
)
 
115

(20.5
)%
Other
46

 
26

 
25

 
29

 
27

 
19

70.4
 %
 
97

 
72

 
25

34.7
 %
Total other income
131

 
95

 
97

 
104

 
85

 
46

54.1
 %
 
323

 
267

 
56

21.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee costs
382

 
327

 
324

 
385

 
359

 
23

6.4
 %
 
1,033

 
1,070

 
(37
)
(3.5
)%
Professional fees
187

 
189

 
197

 
199

 
205

 
(18
)
(8.8
)%
 
573

 
668

 
(95
)
(14.2
)%
Marketing and business development
107

 
91

 
111

 
152

 
139

 
(32
)
(23.0
)%
 
309

 
397

 
(88
)
(22.2
)%
Information processing
125

 
116

 
123

 
122

 
127

 
(2
)
(1.6
)%
 
364

 
363

 
1

0.3
 %
Other
266

 
263

 
247

 
221

 
234

 
32

13.7
 %
 
776

 
668

 
108

16.2
 %
Total other expense
1,067

 
986

 
1,002

 
1,079

 
1,064

 
3

0.3
 %
 
3,055

 
3,166

 
(111
)
(3.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before provision for income taxes
412

 
59

 
382

 
921

 
1,375

 
(963
)
(70.0
)%
 
853

 
3,966

 
(3,113
)
(78.5
)%
Provision for income taxes
99

 
11

 
96

 
190

 
319

 
(220
)
(69.0
)%
 
206

 
950

 
(744
)
(78.3
)%
Net earnings
$
313

 
$
48

 
$
286

 
$
731

 
$
1,056

 
$
(743
)
(70.4
)%
 
$
647

 
$
3,016

 
$
(2,369
)
(78.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings available to common stockholders
$
303

 
$
37

 
$
275

 
$
731

 
$
1,056

 
$
(753
)
(71.3
)%
 
$
615

 
$
3,016

 
$
(2,401
)
(79.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 


3


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
STATEMENTS OF FINANCIAL POSITION
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Sep 30, 2020 vs. Sep 30, 2019
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and equivalents
$
13,552

 
$
16,344

 
$
13,704

 
$
12,147

 
$
11,461

 
$
2,091

18.2
 %
Debt securities
8,432

 
6,623

 
6,146

 
5,911

 
4,584

 
3,848

83.9
 %
Loan receivables:
 
 
 
 
 
 
 
 
 
 
 
 
Unsecuritized loans held for investment
52,613

 
52,629

 
54,765

 
58,398

 
56,220

 
(3,607
)
(6.4
)%
Restricted loans of consolidated securitization entities
25,908

 
25,684

 
27,704

 
28,817

 
26,987

 
(1,079
)
(4.0
)%
Total loan receivables
78,521

 
78,313

 
82,469

 
87,215

 
83,207

 
(4,686
)
(5.6
)%
Less: Allowance for credit losses(1)
(10,146
)
 
(9,802
)
 
(9,175
)
 
(5,602
)
 
(5,607
)
 
(4,539
)
81.0
 %
Loan receivables, net
68,375

 
68,511

 
73,294

 
81,613

 
77,600

 
(9,225
)
(11.9
)%
Loan receivables held for sale
4

 
4

 
5

 
725

 
8,182

 
(8,178
)
(100.0
)%
Goodwill
1,078

 
1,078

 
1,078

 
1,078

 
1,078

 
—

—
 %
Intangible assets, net
1,091

 
1,166

 
1,208

 
1,265

 
1,177

 
(86
)
(7.3
)%
Other assets
3,126

 
2,818

 
2,603

 
2,087

 
1,861

 
1,265

68.0
 %
Total assets
$
95,658

 
$
96,544

 
$
98,038

 
$
104,826

 
$
105,943

 
$
(10,285
)
(9.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
63,195

 
$
63,857

 
$
64,302

 
$
64,877

 
$
65,677

 
$
(2,482
)
(3.8
)%
Non-interest-bearing deposit accounts
298

 
291

 
313

 
277

 
295

 
3

1.0
 %
Total deposits
63,493

 
64,148

 
64,615

 
65,154

 
65,972

 
(2,479
)
(3.8
)%
Borrowings:
 
 
 
 
 
 
 
 
 
 
 
 
Borrowings of consolidated securitization entities
7,809

 
8,109

 
9,291

 
10,412

 
10,912

 
(3,103
)
(28.4
)%
Senior unsecured notes
7,962

 
7,960

 
7,957

 
9,454

 
9,451

 
(1,489
)
(15.8
)%
Total borrowings
15,771

 
16,069

 
17,248

 
19,866

 
20,363

 
(4,592
)
(22.6
)%
Accrued expenses and other liabilities
4,295

 
4,428

 
4,205

 
4,718

 
4,488

 
(193
)
(4.3
)%
Total liabilities
83,559

 
84,645

 
86,068

 
89,738

 
90,823

 
(7,264
)
(8.0
)%
Equity:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
734

 
734

 
734

 
734

 
—

 
734

NM

Common stock
1

 
1

 
1

 
1

 
1

 
—

—
 %
Additional paid-in capital
9,552

 
9,532

 
9,523

 
9,537

 
9,520

 
32

0.3
 %
Retained earnings
10,024

 
9,852

 
9,960

 
12,117

 
11,533

 
(1,509
)
(13.1
)%
Accumulated other comprehensive income (loss)
(31
)
 
(37
)
 
(49
)
 
(58
)
 
(44
)
 
13

(29.5
)%
Treasury stock
(8,181
)
 
(8,183
)
 
(8,199
)
 
(7,243
)
 
(5,890
)
 
(2,291
)
38.9
 %
Total equity
12,099

 
11,899

 
11,970

 
15,088

 
15,120

 
(3,021
)
(20.0
)%
Total liabilities and equity
$
95,658

 
$
96,544

 
$
98,038

 
$
104,826

 
$
105,943

 
$
(10,285
)
(9.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses ("CECL") that measures the allowance for credit losses based on management’s best estimate of expected credit losses for the life of our loan receivables. Prior periods presented reflect measurement of the allowance based on management’s estimate of probable incurred credit losses in accordance with the previous accounting guidance effective for those periods.

4


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Sep 30, 2020
 
Jun 30, 2020
 
Mar 31, 2020
 
Dec 31, 2019
 
Sep 30, 2019
 
 
 
Interest
 
Average
 
 
 
Interest
 
Average
 
 
 
Interest
 
Average
 
 
 
Interest
 
Average
 
 
 
Interest
 
Average
 
Average
 
Income/
 
Yield/
 
Average
 
Income/
 
Yield/
 
Average
 
Income/
 
Yield/
 
Average
 
Income/
 
Yield/
 
Average
 
Income/
 
Yield/
 
Balance
 
Expense
 
Rate
 
Balance
 
Expense
 
Rate
 
Balance
 
Expense
 
Rate
 
Balance
 
Expense
 
Rate
 
Balance
 
Expense
 
Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning cash and equivalents
$
13,664

 
$
4

 
0.12
%
 
$
15,413

 
$
3

 
0.08
%
 
$
12,902

 
$
42

 
1.31
%
 
$
16,269

 
$
68

 
1.66
%
 
$
10,947

 
$
59

 
2.14
%
Securities available for sale
7,984

 
12

 
0.60
%
 
6,804

 
19

 
1.12
%
 
5,954

 
25

 
1.69
%
 
4,828

 
25

 
2.05
%
 
5,389

 
32

 
2.36
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan receivables, including held for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit cards
74,798

 
3,752

 
19.96
%
 
75,942

 
3,740

 
19.81
%
 
81,716

 
4,272

 
21.03
%
 
81,960

 
4,409

 
21.34
%
 
87,156

 
4,807

 
21.88
%
Consumer installment loans
1,892

 
46

 
9.67
%
 
1,546

 
37

 
9.63
%
 
1,432

 
35

 
9.83
%
 
2,058

 
48

 
9.25
%
 
2,022

 
48

 
9.42
%
Commercial credit products
1,238

 
22

 
7.07
%
 
1,150

 
30

 
10.49
%
 
1,243

 
33

 
10.68
%
 
1,311

 
34

 
10.29
%
 
1,329

 
35

 
10.45
%
Other
77

 
1

 
NM

 
59

 
1

 
NM

 
37

 
—

 
—
%
 
47

 
1

 
NM

 
49

 
—

 
—
%
Total loan receivables, including held for sale
78,005

 
3,821

 
19.49
%
 
78,697

 
3,808

 
19.46
%
 
84,428

 
4,340

 
20.67
%
 
85,376

 
4,492

 
20.87
%
 
90,556

 
4,890

 
21.42
%
Total interest-earning assets
99,653

 
3,837

 
15.32
%
 
100,914

 
3,830

 
15.26
%
 
103,284

 
4,407

 
17.16
%
 
106,473

 
4,585

 
17.08
%
 
106,892

 
4,981

 
18.49
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
1,489

 
 
 
 
 
1,486

 
 
 
 
 
1,450

 
 
 
 
 
1,326

 
 
 
 
 
1,374

 
 
 
 
Allowance for credit losses
(9,823
)
 
 
 
 
 
(9,221
)
 
 
 
 
 
(8,708
)
 
 
 
 
 
(5,593
)
 
 
 
 
 
(5,773
)
 
 
 
 
Other assets
5,021

 
 
 
 
 
4,779

 
 
 
 
 
4,696

 
 
 
 
 
3,872

 
 
 
 
 
3,920

 
 
 
 
Total non-interest-earning assets
(3,313
)
 
 
 
 
 
(2,956
)
 
 
 
 
 
(2,562
)
 
 
 
 
 
(395
)
 
 
 
 
 
(479
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
96,340

 
 
 
 
 
$
97,958

 
 
 
 
 
$
100,722

 
 
 
 
 
$
106,078

 
 
 
 
 
$
106,413

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
63,569

 
$
245

 
1.53
%
 
$
64,298

 
$
293

 
1.83
%
 
$
64,366

 
$
356

 
2.22
%
 
$
65,380

 
$
383

 
2.32
%
 
$
65,615

 
$
411

 
2.49
%
Borrowings of consolidated securitization entities
8,057

 
53

 
2.62
%
 
8,863

 
59

 
2.68
%
 
9,986

 
73

 
2.94
%
 
10,831

 
80

 
2.93
%
 
11,770

 
88

 
2.97
%
Senior unsecured notes
7,960

 
82

 
4.10
%
 
7,958

 
82

 
4.14
%
 
8,807

 
88

 
4.02
%
 
9,452

 
93

 
3.90
%
 
9,347

 
93

 
3.95
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest-bearing liabilities
79,586

 
380

 
1.90
%
 
81,119

 
434

 
2.15
%
 
83,159

 
517

 
2.50
%
 
85,663

 
556

 
2.58
%
 
86,732

 
592

 
2.71
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposit accounts
307

 
 
 
 
 
309

 
 
 
 
 
299

 
 
 
 
 
281

 
 
 
 
 
283

 
 
 
 
Other liabilities
4,308

 
 
 
 
 
4,349

 
 
 
 
 
4,672

 
 
 
 
 
4,906

 
 
 
 
 
4,570

 
 
 
 
Total non-interest-bearing liabilities
4,615

 
 
 
 
 
4,658

 
 
 
 
 
4,971

 
 
 
 
 
5,187

 
 
 
 
 
4,853

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
84,201

 
 
 
 
 
85,777

 
 
 
 
 
88,130

 
 
 
 
 
90,850

 
 
 
 
 
91,585

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity
12,139

 
 
 
 
 
12,181

 
 
 
 
 
12,592

 
 
 
 
 
15,228

 
 
 
 
 
14,828

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity
$
96,340

 
 
 
 
 
$
97,958

 
 
 
 
 
$
100,722

 
 
 
 
 
$
106,078

 
 
 
 
 
$
106,413

 
 
 
 
Net interest income
 
 
$
3,457

 
 
 
 
 
$
3,396

 
 
 
 
 
$
3,890

 
 
 
 
 
$
4,029

 
 
 
 
 
$
4,389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread(1)
 
 
 
 
13.42
%
 
 
 
 
 
13.11
%
 
 
 
 
 
14.66
%
 
 
 
 
 
14.50
%
 
 
 
 
 
15.78
%
Net interest margin(2)
 
 
 
 
13.80
%
 
 
 
 
 
13.53
%
 
 
 
 
 
15.15
%
 
 
 
 
 
15.01
%
 
 
 
 
 
16.29
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average interest-earning assets.

5


 
 
 
 
 
 
 
 
 
 
 
 
SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
Sep 30, 2020
 
Nine Months Ended
Sep 30, 2019
 
 
 
Interest
 
Average
 
 
 
Interest
 
Average
 
Average
 
Income/
 
Yield/
 
Average
 
Income/
 
Yield/
 
Balance
 
Expense
 
Rate
 
Balance
 
Expense
 
Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Interest-earning cash and equivalents
$
13,992

 
$
49

 
0.47
%
 
$
10,989

 
$
190

 
2.31
%
Securities available for sale
6,918

 
56

 
1.08
%
 
5,679

 
102

 
2.40
%
 
 
 
 
 
 
 
 
 
 
 
 
Loan receivables, including held for sale:
 
 
 
 
 
 
 
 
 
 
 
Credit cards, including held for sale
77,476

 
11,764

 
20.28
%
 
86,471

 
13,975

 
21.61
%
Consumer installment loans
1,624

 
118

 
9.71
%
 
1,931

 
134

 
9.28
%
Commercial credit products
1,210

 
85

 
9.38
%
 
1,304

 
103

 
10.56
%
Other
58

 
2

 
4.61
%
 
46

 
1

 
2.91
%
Total loan receivables, including held for sale
80,368

 
11,969

 
19.89
%
 
89,752

 
14,213

 
21.17
%
Total interest-earning assets
101,278

 
12,074

 
15.92
%
 
106,420

 
14,505

 
18.22
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
1,475

 
 
 
 
 
1,327

 
 
 
 
Allowance for loan losses
(9,253
)
 
 
 
 
 
(6,006
)
 
 
 
 
Other assets
4,833

 
 
 
 
 
3,801

 
 
 
 
Total non-interest-earning assets
(2,945
)
 
 
 
 
 
(878
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
98,333

 
 
 
 
 
$
105,542

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
64,075

 
$
894

 
1.86
%
 
$
64,546

 
$
1,183

 
2.45
%
Borrowings of consolidated securitization entities
8,966

 
185

 
2.76
%
 
12,315

 
278

 
3.02
%
Senior unsecured notes
8,241

 
252

 
4.08
%
 
9,262

 
274

 
3.96
%
Total interest-bearing liabilities
81,282

 
1,331

 
2.19
%
 
86,123

 
1,735

 
2.69
%
 
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposit accounts
305

 
 
 
 
 
280

 
 
 
 
Other liabilities
4,443

 
 
 
 
 
4,327

 
 
 
 
Total non-interest-bearing liabilities
4,748

 
 
 
 
 
4,607

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
86,030

 
 
 
 
 
90,730

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
Total equity
12,303

 
 
 
 
 
14,812

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity
$
98,333

 
 
 
 
 
$
105,542

 
 
 
 
Net interest income
 
 
$
10,743

 
 
 
 
 
$
12,770

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread(1)
 
 
 
 
13.73
%
 
 
 
 
 
15.53
%
Net interest margin(2)
 
 
 
 
14.17
%
 
 
 
 
 
16.04
%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(2) Net interest margin represents net interest income divided by average interest-earning assets.



6


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
BALANCE SHEET STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
Sep 30, 2020 vs.
Sep 30, 2019
BALANCE SHEET STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
Total common equity
$
11,365

 
$
11,165

 
$
11,236

 
$
14,354

 
$
15,120

 
$
(3,755
)
(24.8
)%
Total common equity as a % of total assets
11.88
%
 
11.56
%
 
11.46
%
 
13.69
%
 
14.27
%
 

(2.39
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Tangible assets
$
93,489

 
$
94,300

 
$
95,752

 
$
102,483

 
$
103,688

 
$
(10,199
)
(9.8
)%
Tangible common equity(1)
$
9,196

 
$
8,921

 
$
8,950

 
$
12,011

 
$
12,865

 
$
(3,669
)
(28.5
)%
Tangible common equity as a % of tangible assets(1)
9.84
%
 
9.46
%
 
9.35
%
 
11.72
%
 
12.41
%
 

(2.57
)%
Tangible common equity per share(1)
$
15.75

 
$
15.28

 
$
15.35

 
$
19.50

 
$
19.68

 
$
(3.93
)
(20.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL RATIOS(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 

Basel III - CECL Transition
 
Basel III
 
 
 
Total risk-based capital ratio(4)
18.1
%
 
17.6
%
 
16.5
%
 
16.3
%
 
15.8
%
 
 
 
Tier 1 risk-based capital ratio(5)
16.7
%
 
16.3
%
 
15.2
%
 
15.0
%
 
14.5
%
 
 
 
Tier 1 leverage ratio(6)
13.3
%
 
12.7
%
 
12.3
%
 
12.6
%
 
12.6
%
 
 
 
Common equity Tier 1 capital ratio
15.8
%
 
15.3
%
 
14.3
%
 
14.1
%
 
14.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures.
(2) Regulatory capital ratios at September 30, 2020 are preliminary and therefore subject to change.
(3) Capital ratios starting March 31, 2020 reflect election to delay for two years an estimate of CECL’s effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020.
(4) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets.
(5) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets.
(6) Tier 1 leverage ratio is the ratio of Tier 1 capital divided by total average assets, after certain adjustments. Tier 1 leverage ratios are based upon the use of daily averages for all periods presented.


 
 
 
 
 
 
 
 
 
 
 
 
 

7


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PLATFORM RESULTS
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited, $ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
 
Nine Months Ended
 
 
 
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
 
3Q'20 vs. 3Q'19
 
Sep 30,
2020
 
Sep 30,
2019
 
YTD'20 vs. YTD'19
RETAIL CARD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)(2)
$
27,374

 
$
24,380

 
$
24,008

 
$
30,968

 
$
29,282

 
$
(1,908
)
(6.5
)%
 
$
75,762

 
$
83,472

 
$
(7,710
)
(9.2
)%
Period-end loan receivables
$
49,595

 
$
49,967

 
$
52,390

 
$
56,387

 
$
52,697

 
$
(3,102
)
(5.9
)%
 
$
49,595

 
$
52,697

 
$
(3,102
)
(5.9
)%
Average loan receivables, including held for sale
$
49,503

 
$
50,238

 
$
53,820

 
$
54,505

 
$
60,660

 
$
(11,157
)
(18.4
)%
 
$
51,181

 
$
60,494

 
$
(9,313
)
(15.4
)%
Average active accounts (in thousands)(2)(3)
47,065

 
46,970

 
53,018

 
54,662

 
58,082

 
(11,017
)
(19.0
)%
 
49,197

 
58,156

 
(8,959
)
(15.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
2,619

 
$
2,640

 
$
3,037

 
$
3,143

 
$
3,570

 
$
(951
)
(26.6
)%
 
$
8,296

 
$
10,414

 
$
(2,118
)
(20.3
)%
Other income
$
84

 
$
56

 
$
59

 
$
77

 
$
65

 
$
19

29.2
 %
 
$
199

 
$
200

 
$
(1
)
(0.5
)%
Retailer share arrangements
$
(877
)
 
$
(752
)
 
$
(904
)
 
$
(988
)
 
$
(998
)
 
$
121

(12.1
)%
 
$
(2,533
)
 
$
(2,774
)
 
$
241

(8.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PAYMENT SOLUTIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)(2)
$
5,901

 
$
4,823

 
$
5,375

 
$
6,402

 
$
6,281

 
$
(380
)
(6.0
)%
 
$
16,099

 
$
17,478

 
$
(1,379
)
(7.9
)%
Period-end loan receivables
$
19,550

 
$
19,119

 
$
19,973

 
$
20,528

 
$
20,478

 
$
(928
)
(4.5
)%
 
$
19,550

 
$
20,478

 
$
(928
)
(4.5
)%
Average loan receivables, including held for sale
$
19,247

 
$
19,065

 
$
20,344

 
$
20,701

 
$
20,051

 
$
(804
)
(4.0
)%
 
$
19,551

 
$
19,654

 
$
(103
)
(0.5
)%
Average active accounts (in thousands)(2)(3)
11,497

 
11,900

 
12,681

 
12,713

 
12,384

 
(887
)
(7.2
)%
 
12,031

 
12,354

 
(323
)
(2.6
)%
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
650

 
$
632

 
$
706

 
$
737

 
$
721

 
$
(71
)
(9.8
)%
 
$
1,988

 
$
2,092

 
$
(104
)
(5.0
)%
Other income
$
13

 
$
14

 
$
13

 
$
4

 
$
(1
)
 
$
14

NM

 
$
40

 
$
11

 
$
29

NM

Retailer share arrangements
$
(20
)
 
$
(18
)
 
$
(18
)
 
$
(37
)
 
$
(15
)
 
$
(5
)
33.3
 %
 
$
(56
)
 
$
(48
)
 
$
(8
)
16.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CARECREDIT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)
$
2,738

 
$
1,952

 
$
2,659

 
$
2,842

 
$
2,832

 
$
(94
)
(3.3
)%
 
$
7,349

 
$
8,249

 
$
(900
)
(10.9
)%
Period-end loan receivables
$
9,376

 
$
9,227

 
$
10,106

 
$
10,300

 
$
10,032

 
$
(656
)
(6.5
)%
 
$
9,376

 
$
10,032

 
$
(656
)
(6.5
)%
Average loan receivables, including held for sale
$
9,255

 
$
9,394

 
$
10,264

 
$
10,170

 
$
9,845

 
$
(590
)
(6.0
)%
 
$
9,636

 
$
9,604

 
$
32

0.3
 %
Average active accounts (in thousands)(3)
5,708

 
5,966

 
6,379

 
6,359

 
6,229

 
(521
)
(8.4
)%
 
6,018

 
6,143

 
(125
)
(2.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
552

 
$
536

 
$
597

 
$
612

 
$
599

 
$
(47
)
(7.8
)%
 
$
1,685

 
$
1,707

 
$
(22
)
(1.3
)%
Other income
$
34

 
$
25

 
$
25

 
$
23

 
$
21

 
$
13

61.9
 %
 
$
84

 
$
56

 
$
28

50.0
 %
Retailer share arrangements
$
(2
)
 
$
(3
)
 
$
(4
)
 
$
(4
)
 
$
(3
)
 
$
1

(33.3
)%
 
$
(9
)
 
$
(7
)
 
$
(2
)
28.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL SYF
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase volume(1)(2)
$
36,013

 
$
31,155

 
$
32,042

 
$
40,212

 
$
38,395

 
$
(2,382
)
(6.2
)%
 
$
99,210

 
$
109,199

 
$
(9,989
)
(9.1
)%
Period-end loan receivables
$
78,521

 
$
78,313

 
$
82,469

 
$
87,215

 
$
83,207

 
$
(4,686
)
(5.6
)%
 
$
78,521

 
$
83,207

 
$
(4,686
)
(5.6
)%
Average loan receivables, including held for sale
$
78,005

 
$
78,697

 
$
84,428

 
$
85,376

 
$
90,556

 
$
(12,551
)
(13.9
)%
 
$
80,368

 
$
89,752

 
$
(9,384
)
(10.5
)%
Average active accounts (in thousands)(2)(3)
64,270

 
64,836

 
72,078

 
73,734

 
76,695

 
(12,425
)
(16.2
)%
 
67,246

 
76,653

 
(9,407
)
(12.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
3,821

 
$
3,808

 
$
4,340

 
$
4,492

 
$
4,890

 
$
(1,069
)
(21.9
)%
 
$
11,969

 
$
14,213

 
$
(2,244
)
(15.8
)%
Other income
$
131

 
$
95

 
$
97

 
$
104

 
$
85

 
$
46

54.1
 %
 
$
323

 
$
267

 
$
56

21.0
 %
Retailer share arrangements
$
(899
)
 
$
(773
)
 
$
(926
)
 
$
(1,029
)
 
$
(1,016
)
 
$
117

(11.5
)%
 
$
(2,598
)
 
$
(2,829
)
 
$
231

(8.2
)%
(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 balances 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.
 
 
 
 
 
 
 

 
 
 
 
 
 
 

 
 
 
 
 
 
 

8


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES(1)
 
 
(unaudited, $ in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
COMMON EQUITY AND REGULATORY CAPITAL MEASURES(2)
 
 
 
 
 
 
 
 
 
GAAP Total equity
$
12,099

 
$
11,899

 
$
11,970

 
$
15,088

 
$
15,120

Less: Preferred stock
(734
)
 
(734
)
 
(734
)
 
(734
)
 
—

Less: Goodwill
(1,078
)
 
(1,078
)
 
(1,078
)
 
(1,078
)
 
(1,078
)
Less: Intangible assets, net
(1,091
)
 
(1,166
)
 
(1,208
)
 
(1,265
)
 
(1,177
)
Tangible common equity
$
9,196

 
$
8,921

 
$
8,950

 
$
12,011

 
$
12,865

Add: CECL transition amount
2,656

 
2,570

 
2,417

 
—

 
—

 
 
 
 
 
 
 
 
 
 
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss)
305

 
302

 
304

 
319

 
290

Common equity Tier 1
$
12,157

 
$
11,793

 
$
11,671

 
$
12,330

 
$
13,155

Preferred stock
734

 
734

 
734

 
734

 
—

Tier 1 capital
$
12,891

 
$
12,527

 
$
12,405

 
$
13,064

 
$
13,155

 
 
 
 
 
 
 
 
 
 
Add: Allowance for credit losses includible in risk-based capital
1,034

 
1,031

 
1,082

 
1,147

 
1,190

Total Risk-based capital
$
13,925

 
$
13,558

 
$
13,487

 
$
14,211

 
$
14,345

 
 
 
 
 
 
 
 
 
 
ASSET MEASURES(2)
 
 
 
 
 
 
 
 
 
Total average assets
$
96,340

 
$
97,958

 
$
100,722

 
$
106,078

 
$
106,413

Adjustments for:
 
 
 
 
 
 
 
 
 
Add: CECL transition amount
2,656

 
2,570

 
2,417

 
—

 
—

Disallowed goodwill and other disallowed intangible assets
(net of related deferred tax liabilities) and other
(1,906
)
 
(1,980
)
 
(2,010
)
 
(2,059
)
 
(1,975
)
Total assets for leverage purposes
$
97,090

 
$
98,548

 
$
101,129

 
$
104,019

 
$
104,438

 
 
 
 
 
 
 
 
 
 
Risk-weighted assets
$
76,990

 
$
77,048

 
$
81,639

 
$
87,302

 
$
90,772

 
 
 
 
 
 
 
 
 
 
CECL FULLY PHASED-IN CAPITAL MEASURES
 
 
 
 
 
 
 
 
 
Tier 1 capital
$
12,891

 
$
12,527

 
$
12,405

 
$
13,064

 
$
13,155

Less: CECL transition adjustment
(2,656
)
 
(2,570
)
 
(2,417
)
 
—

 
—

Tier 1 capital (CECL fully phased-in)
$
10,235

 
$
9,957

 
$
9,988

 
$
13,064

 
$
13,155

Add: Allowance for credit losses
10,146

 
9,802

 
9,175

 
5,602

 
5,607

Tier 1 capital (CECL fully phased-in) + Reserves for credit losses
$
20,381

 
$
19,759

 
$
19,163

 
$
18,666

 
$
18,762

 
 
 
 
 
 
 
 
 
 
Risk-weighted assets
$
76,990

 
$
77,048

 
$
81,639

 
$
87,302

 
$
90,772

Less: CECL transition adjustment
(2,447
)
 
(2,361
)
 
(2,204
)
 
—

 
—

Risk-weighted assets (CECL fully phased-in)
$
74,543

 
$
74,687

 
$
79,435

 
$
87,302

 
$
90,772

 
 
 
 
 
 
 
 
 
 
TANGIBLE COMMON EQUITY PER SHARE
 
 
 
 
 
 
 
 
 
GAAP book value per share
$
19.47

 
$
19.13

 
$
19.27

 
$
23.31

 
$
23.13

Less: Goodwill
(1.85
)
 
(1.85
)
 
(1.85
)
 
(1.75
)
 
(1.65
)
Less: Intangible assets, net
(1.87
)
 
(2.00
)
 
(2.07
)
 
(2.06
)
 
(1.80
)
Tangible common equity per share
$
15.75

 
$
15.28

 
$
15.35

 
$
19.50

 
$
19.68

 
 
 
 
 
 
 
 
 
 
(1) Regulatory measures at September 30, 2020 are presented on an estimated basis.
(2) Capital ratios starting March 31, 2020 reflect election to delay for two years an estimate of CECL’s effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in March 2020


9


SYNCHRONY FINANCIAL
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NON-GAAP MEASURES (Continued)
 
 
(unaudited, $ in millions, except per share statistics)
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Sep 30,
2020
 
Jun 30,
2020
 
Mar 31,
2020
 
Dec 31,
2019
 
Sep 30,
2019
ALLOWANCE FOR LOAN LOSSES (1)
 
 
 
 
 
 
 
 
 
Allowance for credit losses
$
10,146

 
$
9,802

 
$
9,175

 
N/A

 
N/A

Less: Impact from CECL(2)
(3,671
)
 
(3,605
)
 
(3,122
)
 
—

 
—

Allowance for loan losses(1)
$
6,475

 
$
6,197

 
$
6,053

 
$
5,602

 
$
5,607

 
 
 
 
 
 
 
 
 
 
ALLOWANCE FOR LOAN LOSSES AS A % OF PERIOD-END LOAN RECEIVABLES
 
 
 
 
 
 
 
 
 
Allowance for credit losses as a % of period-end loan receivables
12.92
 %
 
12.52
 %
 
11.13
 %
 
N/A

 
N/A

Less: Impact from CECL(2)
(4.67
)%
 
(4.61
)%
 
(3.79
)%
 
—
%
 
—
%
Allowance for loan losses as a % of period-end loan receivables
8.25
 %
 
7.91
 %
 
7.34
 %
 
6.42
%
 
6.74
%
 
 
 
 
 
 
 
 
 
 
CORE PURCHASE VOLUME
 
 
 
 
 
 
 
 
 
Purchase Volume
$
36,013

 
$
31,155

 
$
32,042

 
$
40,212

 
$
38,395

Less: Walmart and Yamaha Purchase volume
—

 
—

 
—

 
(267
)
 
(2,381
)
Core Purchase volume
$
36,013

 
$
31,155

 
$
32,042

 
$
39,945

 
$
36,014

 
 
 
 
 
 
 
 
 
 
CORE LOAN RECEIVABLES
 
 
 
 
 
 
 
 
 
Loan receivables
$
78,521

 
$
78,313

 
$
82,469

 
$
87,215

 
$
83,207

Less: Walmart and Yamaha Loan receivables
—

 
—

 
—

 
(3
)
 
(872
)
Core Loan receivables
$
78,521

 
$
78,313

 
$
82,469

 
$
87,212

 
$
82,335

 
 
 
 
 
 
 
 
 
 
Retail Card Loan receivables
$
49,595

 
$
49,967

 
$
52,390

 
$
56,387

 
$
52,697

Less: Walmart Loan receivables
—

 
—

 
—

 
—

 
(112
)
Core Loan receivables
$
49,595

 
$
49,967

 
$
52,390

 
$
56,387

 
$
52,585

 
 
 
 
 
 
 
 
 
 
Payment Solutions Loan receivables
$
19,550

 
$
19,119

 
$
19,973

 
$
20,528

 
$
20,478

Less: Yamaha Loan receivables
—

 
—

 
—

 
(3
)
 
(760
)
Core Loan receivables
$
19,550

 
$
19,119

 
$
19,973

 
$
20,525

 
$
19,718

 
 
 
 
 
 
 
 
 
 
CORE AVERAGE ACTIVE ACCOUNTS (in thousands)
 
 
 
 
 
 
 
 
 
Average active accounts (in thousands)
64,270

 
64,836

 
72,078

 
73,734

 
76,695

Less: Walmart and Yamaha average Active accounts (in thousands)
—

 
—

 
—

 
(1,777
)
 
(7,001
)
Core Average active accounts (in thousands)
64,270

 
64,836

 
72,078

 
71,957

 
69,694

 
 
 
 
 
 
 
 
 
 
CORE INTEREST AND FEES ON LOANS
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
3,821

 
$
3,808

 
$
4,340

 
$
4,492

 
$
4,890

Less: Walmart and Yamaha Interest and fees on loans
—

 
—

 
—

 
(69
)
 
(531
)
Core Interest and fees on loans
$
3,821

 
$
3,808

 
$
4,340

 
$
4,423

 
$
4,359

 
 
 
 
 
 
 
 
 
 
(1) Beginning in 1Q'20, allowance for loan losses is calculated based upon accounting standards no longer effective, and as such is a Non-GAAP measure.
(2) Impact from CECL reflects the additional allowance for credit losses recorded in accordance with ASC 2016-13, as compared to the allowance for credit losses required had the prior accounting guidance been applied.


10

Exhibit 99.3 3Q’20 Financial Results October 20, 2020

 
Disclaimers Cautionary Statement Regarding Forward-Looking Statements The following slides are part of a presentation by Synchrony Financial in connection with reporting quarterly financial results. No representation is made that the information in these slides is complete. For additional information, see the earnings release and financial supplement included as exhibits to our Current Report on Form 8-K filed today and available on our website (www.synchronyfinancial.com) and the SEC's website (www.sec.gov). All references to net earnings and net income are intended to have the same meaning. This presentation contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "targets," "outlook," "estimates," "will," "should," "may" or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated, including the future impacts of the novel coronavirus disease (“COVID-19”) outbreak and measures taken in response thereto for which future developments are highly uncertain and difficult to predict; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, and promotion and support of our products by our partners; cyber-attacks or other security breaches; disruptions in the operations of our computer systems and data centers; the financial performance of our partners; the sufficiency of our allowance for credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; damage to our reputation; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; failure of third parties to provide various services that are important to our operations; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and/or interpretations, and state sales tax rules and regulations; a material indemnification obligation to GE under the Tax Sharing and Separation Agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislative and regulatory developments and the impact of the Consumer Financial Protection Bureau’s regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock, and restrictions that limit the Synchrony Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this presentation and in our public filings, including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed on February 13, 2020, and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, as filed on July 23, 2020. You should not consider any list of such factors to be an exhaustive statement of all the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. 2

 
3Q’20 Highlights Financial Highlights Business Highlights • $313 million Net earnings, $0.52 diluted EPS • Renewed and extended a key relationship ‒ Other expense for the quarter included the impact from a restructuring charge of $89 million, or $67 million after-tax, which equates to an EPS reduction of $0.11 ‒ Increase in provision for credit losses for the quarter included • Launched a new program impact from CECL implementation of $66 million, or $50 million after-tax, which equates to an EPS reduction of $0.09 • Core Growth metrics(a) down in 3Q’20 primarily due to COVID-19: ‒ Loan receivables down 6%; down 5% on a Core basis ‒ Interest and fees on loans down 22%; down 12% on a Core basis • Added and extended partnerships ‒ Purchase volume down 6%; flat on a Core basis ‒ Average active accounts down 16%; down 8% on a Core basis • Net charge-offs 4.42% compared to 5.35% in the prior year • Provision for credit losses up 19% primarily driven by reserve increase • Launched new partnerships with health systems for projected impact of COVID-19 related losses and prior year reserve reduction related to Walmart, partially offset by lower net charge offs • Efficiency ratio 39.7% compared to 30.8% in the prior year • Deposits down $2.5 billion compared to prior year • Strong capital and liquidity • Renewed and extended CareCredit relationships ‒ 15.8% CET1 & $21.4 billion liquid assets ‒ Maintained $0.22 dividend, which equates to $129 million of capital returned to shareholders (a) Growth Metrics shown above on a Core basis are non-GAAP measures and excludes from both the prior year and the current year amounts related to the Walmart and Yamaha 3 portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the appendix.

 
Venmo Credit Card Apply in the Unique Plastic Use Mobile Phone to Venmo App Design Scan Plastic Native, easy experience Five designs, personalized Activate card Send payments or with customer’s QR code split purchases Smart, Dynamic Easy Spend Real-time Rewards Tracking Alerts Automatically added to + Virtual card for online Notification channel/ type Venmo account transactions controlled by cardholder 4

 
Accelerating Digital and Product Innovation Expanded Digital Products & Path To Purchase Credit Integration Capabilities 29% Mobile Channel Application Growth* * 3Q20 vs 3Q19 excluding Walmart ▪ Next Gen Native SDK for Partner Integration Financing offer Home Page integrated throughout ~60% ▪ Customer Alerting & customer experience Digital Controls Platform Applications* * Percentage of Total Applications ▪ Expansive API Platform ▪ SetPay Installment Product 47% Product Page Online ▪ Adaptive Digital Rewards Sales* * Percentage of Retail Card total Contactless Digital >65% Technology Shopping Cart Digital Payments* ▪ QR & Barcodes * 3Q20 % of Total Payments ▪ Digital Cards ~$8B ▪ Direct To Device Payments Made Check Out Through SyPI®* Check Out * Through 3Q20 5

 
COVID-19 Impact on Core Metrics(a) Purchase Volume Growth New Accounts (b) % in YoY Growth Rates 6.3 (17)% Jan Feb Mar Apr May Jun Jul Aug Sep 5.3 13% 10% 5% (0)% (3)% (2)% 3Q'19 3Q'20 (6)% (12)% YTD 17.7 14.1 (20)% (c) (27)% Purchase Volume per Account $517 $560 8% Platform Purchase Volume Growth % in YoY Growth Rates Jan Feb Mar Apr May Jun Jul Aug Sep 10% 13% 7% 0% 1% Retail Card 3Q'19 3Q'20 (2)% (3)% (9)% (d) (21)% Average Balance per Account 13% 10% 1% Payment $1,168 $1,214 4% (4)% (4)% Solutions (11)% (15)% (7)% (41)% 14% 18% 0% 5% CareCredit (4)% (14)% (22)% (29)% (60)% 3Q'19 3Q'20 (a) All metrics exclude from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. (b) New Accounts represent accounts that were approved in the respective period, in millions. 6 (c) Purchase Volume per Account is calculated as the Purchase volume divided by Average active accounts, in $. (d) Average Balance per Account is calculated as the Average loan receivables divided by Average active accounts, in $.

 
COVID Forbearance Impact – Program-to-Date through Sept 30th Min Pay Due (MPD) Performance Statistics Credit Score (a) Enrollments 57% $ in millions, accounts in thousands 11% Program-to-Date Enrolled 41% 30% $3,813 At Sept 30, 2020 Never Enrolled 27% 35% 36% 2,023 16% 7% 17% $227 119 24% 6% Balance Accounts Credit Line Utilization Payment Rate Currently Enrolled Not Enrolled < 600 601-660 661-720 721+ MPD Enrollment by Payment Behavior of Post-Program Date and Delinquency Enrolled Accounts (b) Delinquency (c) Current at Enrollment 40 6.5X 35 DQ at Enrollment 30 8% 25 34% Thousands 20 15 3.3X 10 58% 5 Q3’20: $15 0 No Pay Q3’20: $1 Current & < 30 days past due Pay Less than Full Balance 30 + days past due Pay Balance in Full Entry Rate (a) Based on most recent FICO scores available for our customers in each period, weighted by balance, as a % of period-end receivables. If FICO score was not available, credit bureau-based scores were mapped to a FICO equivalent. If neither score was available, the account was excluded. 7 (b) Reflects September performance for percent of accounts by payment status ever enrolled in the program. (c) Entry rate performance based on August delinquency for accounts graduating from forbearance program in July 2020 as compared to accounts never enrolled.

 
Financial Results Summary earnings statement 3Q’20 Highlights B/(W) $ in millions, except per share statistics 3Q’20 3Q’19 $ % • $313 million Net earnings, $0.52 diluted EPS Total interest income $3,837 $4,981 $(1,144) (23)% • Net interest income down 21% driven by the impact of COVID-19 and the Walmart sale Total interest expense 380 592 212 36% − Interest and fees on loans down 22% driven by Net interest income (NII) 3,457 4,389 (932) (21)% the impact of COVID-19 and the Walmart sale Retailer share arrangements (RSA) (899) (1,016) 117 12% − Interest expense decrease driven primarily by lower benchmark rates Provision for credit losses 1,210 1,019 (191) (19)% • Retailer share arrangements down 12% Other income 131 85 46 54% • Provision for credit losses up 19% Other expense 1,067 1,064 (3) (0)% − Increase is primarily driven by reserve increase for Pre-Tax earnings 412 1,375 (963) (70)% projected impact of COVID-19 related losses and prior year reserve reduction related to Walmart Provision for income taxes 99 319 220 69% − Net charge-offs of 4.42% compared to 5.35% in Net earnings 313 1,056 (743) (70)% the prior year primarily driven by the Walmart sale Preferred dividends 10 0 (10) NM • Other expense flat Net earnings available to common $303 $1,056 $(753) (71)% stockholders Diluted earnings per share $0.52 $1.60 $(1.08) 8

 
Growth Metrics Purchase volume (6)% Loan receivables (6)% $ in billions $ in billions $83.2 $38.4 $36.0 $78.5 Core (a) $36.0 $36.0 0% Core (a) $82.3 $78.5 (5)% 3Q'19 3Q'20 3Q'19 3Q'20 Dual Card / Dual Card / (b) $13.7 $13.1 (5)% (b) $19.7 $18.3 (7)% Co-Brand Co-Brand Average active accounts (16)% Interest and fees on loans (22)% in millions $ in millions 76.7 $4,890 64.3 $3,821 Core (a) 69.7 64.3 (8)% Core (a) $4,359 $3,821 (12)% 3Q'19 3Q'20 3Q'19 3Q'20 a) Financial measures shown above on a Core basis are non-GAAP measures. See non-GAAP reconciliation in the appendix. 9 b) Dual Card / Co-Brand Purchase volume and Loan receivables shown above are consumer only and excludes from the prior year amounts related to the Walmart portfolio.

 
Platform Results(a) Retail Card Payment Solutions CareCredit Loan receivables, $ in billions Loan receivables, $ in billions Loan receivables, $ in billions (6)% (5)% (7)% $52.7 $20.5 $19.6 $10.0 $49.5 $9.4 Core(b) $52.6 $49.5 (6)% $19.7 $19.6 (1)% 3Q'19 3Q'20 V% 3Q'19 3Q'20 V% 3Q'19 3Q'20 V% Purchase volume $29.3 $27.4 (7)% $6.3 $5.9 (6)% $2.8 $2.7 (3)% Accounts 58.1 47.1 (19)% 12.4 11.5 (7)% 6.2 5.7 (8)% Interest and $3,570 $2,619 (27)% $721 $650 (10)% $599 $552 (8)% fees on loans • Receivable reduction primarily due • Core receivable reduction primarily • Receivable reduction primarily to COVID-19 partially offset by due to COVID-19 partially offset by due to COVID-19 growth in digital partners growth in Power • Interest and fees on loans down • Interest and fees on loans down • Interest and fees on loans down 10% 8% driven primarily by lower 27% driven primarily by the Walmart driven primarily by lower late fees merchant discount as a result of sale and the decline in loan the decline in purchase volume receivables (a) Accounts represent average active accounts in millions, which are credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in 10 the current month. Purchase volume $ in billions and Interest and fees on loans $ in millions. (b) Loan receivables shown above on a Core basis is a non-GAAP measure. See non-GAAP reconciliation in the appendix.

 
Net Interest Income 3Q’20 Highlights Net interest income • Net interest income decreased 21% compared to prior year $ in millions, % of average interest-earning assets driven by the impact of COVID-19 and the Walmart sale (21)% − Interest and fees on loans decreased 22% compared to prior year primarily driven by the impact of COVID-19 and the Walmart sale $4,389 • Net interest margin (NIM) down 249bps. − Mix of Interest-earnings assets: (1.24)% − Loan receivables mix as a percent of total Earning $3,457 Assets decreased from 84.7% to 78.3% − Loan receivables yield: (1.64)% − Loan receivables yield of 19.49%, down 193bps. versus prior year including approximately 75bps. of 16.29% impact from Prime rate movement 13.80% − Liquidity portfolio yield: (0.29)% − Interest-bearing liabilities cost: 0.68% − Total cost decreased 81bps. to 1.90% due primarily to lower benchmark rates and lower deposit pricing NIM Walk 3Q’19 NIM 16.29% 3Q'19 3Q'20 Mix of Interest-earning assets (1.24)% Loan receivables yield (1.64)% Liquidity portfolio yield (0.29)% Interest-bearing liabilities cost 0.68% 3Q’20 NIM 13.80% 11

 
Asset Quality Metrics 30+ days past due Net charge-offs $ in millions, % of period-end loan receivables $ in millions, % of average loan receivables including held for sale $4,430 $1,344 $1,331 $4,021 $3,957 $1,248 $1,221 $3,723 $3,874 $3,625 $1,109 $1,125 $3,500 $1,087 $1,046 $866 4.92% $2,453 4.59% 4.76% 4.43% 4.47% 4.44% 4.24% $2,100 5.54% 6.06% 6.01% 3.13% (a) 4.97% 5.35% 5.15% 5.36% 5.35% (a) 2.67% 4.42% 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 3Q'20 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 3Q'20 90+ days past due Allowance for credit losses(b) $ in millions, % of period-end loan receivables $ in millions, % of period-end loan receivables $9,802 $10,146 $2,135 $2,019 $9,175 $1,833 $1,877 $1,768 $1,723 $1,735 12.52% 12.92% $6,427 $1,384 $6,223 11.13% $5,942 $5,809 $5,607 $5,602 2.51% $6,197 $6,475 2.29% $973 $6,053 2.09% 2.16% 2.07% 2.15% 2.10% 7.39% 7.11% 6.90% 7.10% 1.77% 6.74% 6.42% (a) 1.24% 7.91% 8.25% 7.34% 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 3Q'20 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19 1Q'20 2Q'20 3Q'20 (a) Excluding the Walmart Portfolio, 3Q’20 30+ rate was down ~175bps versus 3Q’19; 3Q’20 net charge-off rate was down ~45bps versus 3Q’19; 3Q’20 90+ rate was down ~80bps versus 3Q’19. (b) Allowance for credit losses reflects adoption of CECL on January 1, 2020, which included a $3.0 billion increase in reserves upon adoption. For comparability purposes, allowance 12 for loan losses in FY20 is also presented. This measure reflects the prior accounting guidance and is a non-GAAP measure for FY20. See non-GAAP reconciliation in appendix.

 
Other Expense Other expense 0% $ in millions 3Q’20 Highlights $1,064 $1,067 • Other expense flat – The restructuring charge and expenses related to the COVID-19 response were offset by cost reductions from Walmart, lower purchase volume and accounts, and reductions in certain discretionary spend • Efficiency ratio 39.7% vs. 30.8% prior year – Other expense was negatively impacted by the restructuring charge and expenditures related to our response to COVID-19 3Q'19 3Q'20 V$ V% – Excluding these impacts, efficiency ratio would Employee costs $359 $382 $23 6% have been 3.7pts lower in 3Q’20, or 36.0% for the quarter Professional fees 205 187 (18) (9)% – Increase in ratio driven by decrease in Marketing/BD 139 107 (32) (23)% revenue, which is a result of both lower Information processing 127 125 (2) (2)% receivables and lower interest and fee yield Other 234 266 32 14% Other expense $1,064 $1,067 $3 0% (a) Efficiency 30.8% 39.7% 8.9 pts. 13 (a) “Other expense” divided by sum of “NII” plus “Other income” less “Retailer share arrangements (RSA)”.

 
Funding, Capital and Liquidity Funding sources Capital ratios (b) $ in billions CET1 Capital Ratio $86.3 $79.3 V$ 14.5% 15.8% Unsecured $9.4 $8.0 $(1.4) $10.9 Securitization $7.8 $(3.1) 3Q'19 3Q'20 Transition Deposits $66.0 $63.5 $(2.5) Tier 1 Capital Ratio 14.5% 16.7% 3Q'19 3Q'20 Variance 3Q'19 3Q'20 Deposits 76% 80% +4 pts. Transition Total Capital Ratio Securitization 13% 10% (3) pts. 15.8% 18.1% Unsecured 11% 10% (1) pt. (a) Liquidity $26.8 $ in billions $21.7 3Q'19 3Q'20 Transition Tier 1 Capital + Credit Loss Reserve Ratio(c) 27.3% 3Q'19 3Q'20 20.7% Liquid assets $15.2 $21.4 Undrawn credit facilities 6.5 5.4 Total liquidity $21.7 $26.8 3Q'19 3Q'20 % of Total assets 20.5% 28.0% Fully Phased-in (a) Does not include unencumbered assets in the Bank that could be pledged. (b) Capital ratios reflect election to delay for two years an estimate of CECL’s effect on regulatory capital in accordance with the interim final rule issued by U.S. banking agencies in 1Q’20. (c) The “Tier 1 Capital + Reserves Ratio” is the sum of our “Tier 1 Capital” and “Allowance for Credit Losses,” divided by our “Total Risk-Weighted Assets”. For 3Q’20, both Tier 1 Capital and 14 Risk-Weighted Assets are adjusted to reflect the fully phased-in impact of CECL. These adjusted metrics are non-GAAP measures, see non-GAAP reconciliation in appendix.

 
3Q’20 Wrap Up • Net earnings of $313 million … $0.52 diluted earnings per share • Other expense for the quarter included the impact from a restructuring charge of $89 million, or $67 million after-tax, which equates to an EPS reduction of $0.11 • Increase in provision for credit losses for the quarter included impact from CECL implementation of $66 million, or $50 million after-tax, which equates to an EPS reduction of $0.09 • Core Growth metrics(a) down due to impact of COVID-19 … Purchase volume flat, Loan receivables (5)%, Average Active Accounts (8)%, Interest and fees on loans (12)% • Renewed and extended a key relationship with Sam’s Club • Launched a new program with Venmo • Added and extended partnerships with Four Wheel Parts, Kane’s Furniture, Levin Furniture, SVP Sewing Brands and System Pavers • Launched new partnerships with health systems: Lehigh, St Luke’s and Cox Health • Renewed and extended CareCredit relationships with Blue River Petcare and NVA • Strong deposit platform … deposits at $63.5 billion now contributing 80% of funding • Maintained $0.22 dividend, which equates to $129 million of capital returned to shareholders • Strong balance sheet, 15.8% CET1 and $21.4 billion of liquid assets (a) Growth Metrics shown above on a Core basis are non-GAAP measures and excludes from both the prior year and the current year amounts related to the Walmart and Yamaha portfolios, sold in October 2019 and January 2020, respectively. See non-GAAP reconciliation in the appendix. 15

 
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Appendix 17

 
Non-GAAP Reconciliation(a) The following table sets forth the components of our Growth Metrics and impact from CECL for the periods indicated below. At Sept 30, Total Retail Card Payment Solutions 2019 2020 2019 2020 2019 2020 Loan receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $83.2 $78.5 $52.7 $49.6 $20.5 $19.6 Less: Walmart and Yamaha Loan receivables . . . . . . . . . . . . . . . . . . . . . . . . . (0.9) - (0.1) - (0.8) - Core Loan receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $82.3 $78.5 $52.6 $49.6 $19.7 $19.6 Allowance for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A $10,146 Less: 3Q’20 impact from CECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (3,671) Allowance for loan losses . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,607 $6,475 Allowance for credit losses as a % of period-end loan receivables . . . . . . . . N/A 12.92% Less: 3Q’20 impact from CECL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (4.67)% Allowance for loan losses as a % of period-end loan receivables . . . . 6.74% 8.25% For the quarter ended Sept 30, Total 2019 2020 Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38.4 $36.0 Less: Walmart and Yamaha Purchase volume . . . . . . . . . . . . . . . . . . . . (2.4) - Core Purchase volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36.0 $36.0 Average active accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.7 64.3 Less: Walmart and Yamaha Average active accounts . . . . . . . . . . . . . . (7.0) - Core Average active accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.7 64.3 Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,890 $3,821 Less: Walmart and Yamaha Interest and fees on loans . . . . . . . . . . . . . (531) - Core Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,359 $3,821 (a) Accounts represent average active accounts in millions, which are credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in 18 the current month. Loan receivables and Purchase volume $ in billions. Interest and fees on loans, Allowance for credit losses, and Allowance for loan losses $ in millions.

 
Non-GAAP Reconciliation (continued)(a) The following table sets forth the components of our Tier 1 Capital + Reserves ratio for the periods indicated below. At Sept 30, Total 2019 2020 Tier 1 capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,155 $12,891 Less: CECL transition adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (2,656) Tier 1 capital (CECL fully phased-in) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,155 $10,235 Add: Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,607 10,146 Tier 1 capital (CECL fully phased-in) plus Reserves for credit losses. $18,762 $20,381 Risk-weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,772 $76,990 Less: CECL transition adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (2,447) Risk-weighted assets (CECL fully phased-in) . . . . . . . . . . . . . . . . . . . . . . $90,772 $74,543 19 (a) Estimated at September 30, 2020, $ in millions.

 
Exhibit 99.4

Explanation of Non-GAAP Measures
The information provided in this Form 8-K and exhibits includes measures which are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
We present certain financial measures that have been adjusted to exclude amounts related to the Walmart and Yamaha portfolios from the prior year periods presented, which we refer to as "Core" financial measures, in this Form 8-K and exhibits. These Core financial measures are not measures presented in accordance with GAAP. Given the sale of the Walmart and Yamaha portfolios which were completed in October 2019 and January 2020, respectively, we believe the presentation of certain Core financial measures is a more meaningful measure to investors of the Company's ongoing credit programs.
On January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“CECL”). For the initial year of adoption of the new accounting standard, we present what both our allowance for credit losses and allowance for credit losses as a percentage of our period-end loan receivables (“allowance coverage ratio”) would have been if the prior accounting guidance was still in effect. These measures are non-GAAP measures. We believe the presentation of these measures is meaningful to investors in providing comparability with the corresponding GAAP measures we report in prior year periods when the prior accounting guidance was effective.
In addition, we also present certain capital measures in this Form 8-K and exhibits. Our “fully-phased Tier 1 Capital and Credit Loss Reserve Ratio” is not required by regulators to be disclosed, and therefore is considered a non-GAAP measure. We believe this ratio is a useful measure to investors as it provides a meaningful measure of what the Company’s total loss absorption capacity would be if the transitional rules currently in effect, which permit the temporary deferral of the regulatory capital effects of CECL, were no longer available for us to apply.
We also present a measure we refer to as “tangible common equity” in this Form 8-K and exhibits. Tangible common equity itself is not a measure presented in accordance with GAAP. We believe tangible common equity is a more meaningful measure to investors of the net asset value of the Company.
The reconciliations of the above non-GAAP measures to the applicable comparable GAAP financial measure are included in the detailed financial tables included in Exhibit 99.2.