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OFFON

SYNCHRONY FINANCIAL

(SYF)
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SYNCHRONY FINANCIAL : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/21/2021 | 04:16pm EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this quarterly
report and in our 2020 Form 10-K. The discussion below contains forward-looking
statements that are based upon current expectations and are subject to
uncertainty and changes in circumstances. Actual results may differ materially
from these expectations. See "Cautionary Note Regarding Forward-Looking
Statements."
Introduction and Business Overview
____________________________________________________________________________________________
We are a premier consumer financial services company delivering 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. We provide a range of credit products through our financing programs which
we have established with a diverse group of national and regional retailers,
local merchants, manufacturers, buying groups, industry associations and
healthcare service providers, which we refer to as our "partners." For the three
and nine months ended September 30, 2021, we financed $41.9 billion and $118.8
billion of purchase volume, respectively, and had 67.2 million and 66.5 million
average active accounts, respectively, and at September 30, 2021, we had $76.4
billion of loan receivables.
We offer our credit products primarily through our wholly-owned subsidiary, the
Bank. In addition, through the Bank, we offer, directly to retail and commercial
customers, a range of deposit products insured by the Federal Deposit Insurance
Corporation ("FDIC"), including certificates of deposit, individual retirement
accounts ("IRAs"), money market accounts and savings accounts. We also take
deposits at the Bank through third-party securities brokerage firms that offer
our FDIC-insured deposit products to their customers. We have significantly
expanded our online direct banking operations in recent years and our deposit
base serves as a source of stable and diversified low cost funding for our
credit activities. At September 30, 2021, we had $60.3 billion in deposits,
which represented 82% of our total funding sources.
Our Sales Platforms
_________________________________________________________________
We conduct our operations through a single business segment. Profitability and
expenses, including funding costs, credit losses and operating expenses, are
managed for the business as a whole. Substantially all of our operations are
within the United States. In June 2021, we announced organizational changes
aimed to further align the company's activities with its partners and evolving
consumer expectations, while leveraging our innovation, data, expertise and
scale to deliver products and capabilities to market faster. As part of these
changes, we established a Growth Organization that includes our marketing, data,
analytics, customer experience and product development teams in one cohesive
group and we also combined our Technology and Operations teams. For our sales
activities, we now primarily manage our credit products through five sales
platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and
Lifestyle). Those platforms are organized by the types of partners we work with,
and are measured on interest and fees on loans, loan receivables, active
accounts and other sales metrics.
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[[Image Removed: syf-20210930_g2.jpg]]
Home & Auto
Our Home & Auto sales platform provides comprehensive payments and financing
solutions with integrated in-store and digital experiences through a broad
network of partners and merchants providing home and automotive merchandise and
services, and includes partners such as Ashley Homestores LTD and Lowe's, as
well as our Synchrony Car Care network and Synchrony HOME credit card offering.
Digital
Our Digital sales platform provides comprehensive payments and financing
solutions with integrated digital experiences through partners and merchants who
primarily engage with their consumers through digital channels, including
partners such as Amazon and PayPal.
Diversified & Value
Our Diversified & Value sales platform provides comprehensive payments and
financing solutions with integrated in-store and digital experiences through
partners and merchants who offer a wide assortment of merchandise, including
partners such as JCPenney and Sam's Club.
Health & Wellness
Our Health & Wellness sales platform provides comprehensive healthcare payments
and financing solutions, through a network of providers and health systems, for
those seeking health and wellness care for themselves, their families and their
pets, and includes key brands such as CareCredit and Pets Best, as well as the
recently launched MyWalgreens co-branded program.
Lifestyle
Lifestyle provides comprehensive payments and financing solutions with
integrated in-store and digital experiences through partners and merchants who
offer merchandise in power sports, outdoor power equipment, and other industries
such as sporting goods, apparel, jewelry and music.
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Corp, Other
Corp, Other includes activity and balances related to certain program agreements
with retail partners and merchants that will not be renewed beyond their current
expiry date and certain programs that were previously terminated, which are not
managed within the five sales platforms discussed above, and includes amounts
associated with our program agreement with Gap Inc. which is scheduled to expire
in the second quarter of 2022. Corp, Other also includes amounts related to
changes in the fair value of equity investments and realized gains or losses
associated with the sale of investments.
Our Credit Products
____________________________________________________________________________________________
Through our sales platforms, we offer three principal types of credit products:
credit cards, commercial credit products and consumer installment loans. We also
offer a debt cancellation product.
The following table sets forth each credit product by type and indicates the
percentage of our total loan receivables that are under standard terms only or
pursuant to a promotional financing offer at September 30, 2021.
                                                                                     Promotional Offer
Credit Product                             Standard Terms Only         Deferred Interest           Other Promotional                Total
Credit cards                                           57.7  %                     20.4  %                      16.5  %                  94.6  %
Commercial credit products                              1.8                           -                            -                      1.8
Consumer installment loans                              0.1                         0.1                          3.3                      3.5
Other                                                   0.1                           -                            -                      0.1
Total                                                  59.7  %                     20.5  %                      19.8  %                 100.0  %


Credit Cards
We typically offer the following principal types of credit cards:
•Private Label Credit Cards. Private label credit cards are partner-branded
credit cards (e.g., Lowe's or Amazon) or program-branded credit cards (e.g.,
Synchrony Car Care or CareCredit) that are used primarily for the purchase of
goods and services from the partner or within the program network. In addition,
in some cases, cardholders may be permitted to access their credit card accounts
for cash advances. Credit under our private label credit cards is extended
either on standard terms or pursuant to a promotional financing offer.
•Dual Cards and General Purpose Co-Branded Cards. Our patented Dual Cards are
credit cards that function as private label credit cards when used to purchase
goods and services from our partners, and as general purpose credit cards when
used to make purchases from other retailers wherever cards from those card
networks are accepted or for cash advance transactions. We also offer general
purpose co-branded credit cards that do not function as private label credit
cards, as well as, in limited circumstances, a Synchrony-branded general purpose
credit card. Credit extended under our Dual Cards and general purpose co-branded
credit cards typically is extended on standard terms only. We offer either Dual
Cards or general purpose co-branded credit cards across all of our sales
platforms, spanning 21 partners and our CareCredit Dual Card, of which the
majority are Dual Cards. Consumer Dual Cards and Co-Branded cards totaled 24% of
our total loan receivables portfolio, including held for sale, at September 30,
2021.
Commercial Credit Products
We offer private label cards and Dual Cards for commercial customers that are
similar to our consumer offerings. We also offer a commercial pay-in-full
accounts receivable product to a wide range of business customers.
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Installment Loans
We originate installment loans to consumers (and a limited number of commercial
customers) in the United States, primarily in the power products market
(motorcycles, ATVs and lawn and garden), as well as through our various SetPay
installment products. Installment loans are closed-end credit accounts where the
customer pays down the outstanding balance in installments. Installment loans
are generally assessed periodic finance charges using fixed interest rates.
Business Trends and Conditions
____________________________________________________________________________________________
We believe our business and results of operations will be impacted in the future
by various trends and conditions. For a discussion of certain trends and
conditions, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Business Trends and Conditions" in our 2020 Form 10-K. For
a discussion of how certain trends and conditions impacted the three and nine
months ended September 30, 2021, see "-Results of Operations."
Seasonality
____________________________________________________________________________________________
We experience fluctuations in transaction volumes and the level of loan
receivables as a result of higher seasonal consumer spending and payment
patterns that typically result in an increase of loan receivables from August
through a peak in late December, with reductions in loan receivables occurring
over the first and second quarters of the following year as customers pay their
balances down.
The seasonal impact to transaction volumes and the loan receivables balance
typically results in fluctuations in our results of operations, delinquency
metrics and the allowance for credit losses as a percentage of total loan
receivables between quarterly periods.
In addition to the seasonal variance in loan receivables discussed above, we
also typically experience a seasonal increase in delinquency rates and
delinquent loan receivables balances during the third and fourth quarters of
each year due to lower customer payment rates resulting in higher net charge-off
rates in the first and second quarters. Our delinquency rates and delinquent
loan receivables balances typically decrease during the subsequent first and
second quarters as customers begin to pay down their loan balances and return to
current status resulting in lower net charge-off rates in the third and fourth
quarters. Because customers who were delinquent during the fourth quarter of a
calendar year have a higher probability of returning to current status when
compared to customers who are delinquent at the end of each of our interim
reporting periods, we expect that a higher proportion of delinquent accounts
outstanding at an interim period end will result in charge-offs, as compared to
delinquent accounts outstanding at a year end. Consistent with this historical
experience, we generally experience a higher allowance for credit losses as a
percentage of total loan receivables at the end of an interim period, as
compared to the end of a calendar year. In addition, despite improving credit
metrics such as declining past due amounts, we may experience an increase in our
allowance for credit losses at an interim period end compared to the prior year
end, reflecting these same seasonal trends.
While the effects of the seasonal trends discussed above remain evident, we also
continue to experience improvements in customer payment behavior, which include
the effects of governmental stimulus actions and industry-wide forbearance
measures. Customer payments as a percentage of beginning-of-period loan
receivables for the three months ended September 30, 2021 were approximately 260
basis points higher than our prior five-year historical average for the third
quarter. These higher payment rates have resulted in reductions in loan
receivables and delinquency rates beyond our seasonal expectations.
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Results of Operations
____________________________________________________________________________________________
Highlights for the Three and Nine Months Ended September 30, 2021
Below are highlights of our performance for the three and nine months ended
September 30, 2021 compared to the three and nine months ended September 30,
2020, as applicable, except as otherwise noted.
•Net earnings increased to $1.1 billion from $313 million and to $3.4 billion
from $647 million for the three and nine months ended September 30, 2021,
respectively, which included the impact of a reserve release related to the
reclassification of the Gap portfolio to loan receivables held for sale of $187
million after-tax. The increases in the three and nine months ended
September 30, 2021 were primarily driven by lower provision for credit losses.
•Loan receivables decreased to $76.4 billion at September 30, 2021 compared to
$78.5 billion at September 30, 2020, driven by the reclassification of $3.5
billion of loan receivables associated with the Gap portfolio to loan
receivables held for sale. Excluding the impact of the reclassification, loan
receivables increased 2% reflecting strong purchase volume growth, partially
offset by higher payment rates.
•Net interest income increased 5.8% to $3.7 billion and decreased 3.1% to $10.4
billion for the three and nine months ended September 30, 2021, respectively.
Interest and fees on loans increased 1.7% for the three months ended
September 30, 2021, driven by an increase in average loan receivables, and
decreased 6.5% for the nine months ended September 30, 2021 reflecting the
impact of elevated payment rates and lower delinquencies during the period. For
both current year periods, interest expense decreased primarily due to lower
benchmark interest rates.
•Retailer share arrangements increased 40.8% to $1.3 billion and 25.5% to $3.3
billion for the three and nine months ended September 30, 2021, respectively,
primarily due to the decreases in provision for credit losses, as well as
program performance.
•Over-30 day loan delinquencies as a percentage of period-end loan receivables
decreased 25 basis points to 2.42% at September 30, 2021. Excluding amounts
related to the Gap Inc. portfolio from both periods, the decrease compared to
the prior year was approximately 40 basis points. The net charge-off rate
decreased 224 basis points to 2.18% and 194 basis points to 3.11% for the three
and nine months ended September 30, 2021, respectively.
•Provision for credit losses decreased by $1.2 billion, or 97.9%, and $4.4
billion, or 96.4% for the three and nine months ended September 30, 2021,
respectively, primarily driven by lower reserves, including a $247 million
reserve release following the reclassification of the Gap portfolio to loan
receivables held for sale, and lower net charge-offs. Our allowance coverage
ratio (allowance for credit losses as a percent of period-end loan receivables)
decreased to 11.28% at September 30, 2021, as compared to 12.92% at
September 30, 2020.
•Other expense decreased by $106 million, or 9.9%, and $214 million, or 7.0%,
for the three and nine months ended September 30, 2021, respectively, primarily
driven by a prior year restructuring charge of $89 million and lower operational
losses.
•At September 30, 2021, deposits represented 82% of our total funding sources.
Total deposits decreased by 3.9% to $60.3 billion at September 30, 2021,
compared to December 31, 2020.
•During the nine months ended September 30, 2021, we declared and paid cash
dividends on our Series A 5.625% non-cumulative preferred stock of $42.18 per
share, or $32 million.
•During the nine months ended September 30, 2021, we repurchased $1.9 billion of
our outstanding common stock, and declared and paid cash dividends of $0.66 per
share, or $380 million. In May 2021 we announced that the Board of Directors
approved a new share repurchase program of up to $2.9 billion for the period
which commenced April 1, 2021 through June 30, 2022, subject to market
conditions and other factors, including legal and regulatory restrictions and
required approvals, if any.
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•In February 2021 in our Health & Wellness sales platform, we completed our
acquisition of Allegro Credit, a leading provider of point-of-sale consumer
financing for audiology products and dental services.
2021 Partner Agreements
•In our Home & Auto sales platform, we announced our new partnership with
Alarm.com, BoxDrop and Gardner White and extended our program agreements with
Abt Electronics, Ashley HomeStores LTD, CITGO, Mitchell Gold Co., Phillips 66
and WG&R Furniture.
•In our Digital sales platform, we announced PayPal Savings, a new
PayPal-branded savings account and extended our program agreement with Shop HQ.
•In our Diversified & Value sales platform, we extended our program agreement
with TJX Companies, Inc.
•In our Health & Wellness sales platform, we launched our Walgreens credit card,
expanded our network through our new partnerships with Emory Healthcare, Mercy
Health, Ochsner Health, Prime Health, Southern Veterinary Partners and Sycle and
extended our agreements with Heartland Dental, LCA Vision and Rite Aid. In
addition, we also made our CareCredit patient financing app available in the
Epic App Orchard, further expanding the availability of CareCredit to healthcare
organizations using Epic.
•In our Lifestyle sales platform, we announced our new partnerships with Family
Farm & Home, and JCB and extended our program agreements with American Eagle,
Daniels, Ricoma, Sutherlands, Tacony Corporation and The Container Store.
•We announced our expanded strategic partnership with Fiserv to broaden our
distribution network for Synchrony products and services via the Clover
point-of-sale and business management platform.
•During the third quarter of 2021, we entered into an agreement to sell loan
receivables associated with our program agreement with Gap Inc. We expect to
recognize a gain on sale of the portfolio, which, subject to customary closing
conditions, is expected to be completed in the second quarter of 2022.
•Excluding our program agreement with Gap Inc., our five largest programs based
upon interest and fees on loans for the year ended December 31, 2020 were
Amazon, JCPenney, Lowe's, PayPal and Sam's Club.
Summary Earnings
The following table sets forth our results of operations for the periods
indicated.
                                          Three months ended September 30,        Nine months ended September 30,
($ in millions)                                2021                2020               2021                2020
Interest income                           $     3,898          $   3,837          $   11,218          $  12,074
Interest expense                                  240                380                 809              1,331
Net interest income                             3,658              3,457              10,409             10,743
Retailer share arrangements                    (1,266)              (899)             (3,261)            (2,598)

Provision for credit losses                        25              1,210                 165              4,560
Net interest income, after retailer share
arrangements and provision for credit
losses                                          2,367              1,348               6,983              3,585
Other income                                       94                131                 314                323
Other expense                                     961              1,067               2,841              3,055
Earnings before provision for income
taxes                                           1,500                412               4,456                853
Provision for income taxes                        359                 99               1,048                206
Net earnings                              $     1,141          $     313          $    3,408          $     647
Net earnings available to common
stockholders                              $     1,130          $     303          $    3,376          $     615


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Other Financial and Statistical Data
The following table sets forth certain other financial and statistical data for
the periods indicated.
                                                    At and for the                                 At and for the
                                           Three months ended September 30,               Nine months ended September 30,
($ in millions)                               2021                    2020                    2021                   2020
Financial Position Data (Average):
Loan receivables, including held for
sale                                   $        78,714           $    78,005          $         77,965           $   80,368
Total assets                           $        91,948           $    96,340          $         93,915           $   98,333
Deposits                               $        59,633           $    63,876          $         61,258           $   64,380
Borrowings                             $        13,522           $    16,017          $         14,528           $   17,207
Total equity                           $        14,117           $    12,139          $         13,619           $   12,303
Selected Performance Metrics:
Purchase volume(1)(2)                  $        41,912           $    36,013          $        118,782           $   99,210
Home & Auto                            $        11,765           $    10,653          $         33,889           $   29,486
Digital                                $        10,980           $     9,038          $         31,250           $   24,871
Diversified & Value                    $        12,006           $     9,634          $         32,844           $   26,718
Health & Wellness                      $         3,024           $     2,738          $          8,660           $    7,349
Lifestyle                              $         1,298           $     1,267          $          3,857           $    3,550
Corp, Other                            $         2,839           $     2,683          $          8,282           $    7,236
Average active accounts (in
thousands)(2)(3)                                67,189                64,270                    66,500               67,246
Net interest margin(4)                           15.45   %             13.80  %                  14.40   %            14.17  %
Net charge-offs                        $           432           $       866          $          1,815           $    3,037
Net charge-offs as a % of average loan
receivables, including held for sale              2.18   %              4.42  %                   3.11   %             5.05  %
Allowance coverage ratio(5)                      11.28   %             12.92  %                  11.28   %            12.92  %
Return on assets(6)                                4.9   %               1.3  %                    4.9   %              0.9  %
Return on equity(7)                               32.1   %              10.3  %                   33.5   %              7.0  %
Equity to assets(8)                              15.35   %             12.60  %                  14.50   %            12.51  %
Other expense as a % of average loan
receivables, including held for sale              4.84   %              5.44  %                   4.87   %             5.08  %
Efficiency ratio(9)                               38.7   %              39.7  %                   38.1   %             36.1  %
Effective income tax rate                         23.9   %              24.0  %                   23.5   %             24.2  %
Selected Period-End Data:
Loan receivables                       $        76,388           $    78,521          $         76,388           $   78,521
Allowance for credit losses            $         8,616           $    10,146          $          8,616           $   10,146
30+ days past due as a % of period-end
loan receivables(10)                              2.42   %              2.67  %                   2.42   %             2.67  %
90+ days past due as a % of period-end
loan receivables(10)                              1.05   %              1.24  %                   1.05   %             1.24  %
Total active accounts (in
thousands)(2)(3)                                67,245                64,800                    67,245               64,800


______________________
(1)Purchase volume, or net credit sales, represents the aggregate amount of
charges incurred on credit cards or other credit product accounts less returns
during the period.
(2)Includes activity and accounts associated with loan receivables held for
sale.
(3)Active accounts represent credit card or installment loan accounts on which
there has been a purchase, payment or outstanding balance in the current month.
(4)Net interest margin represents net interest income divided by average
interest-earning assets.
(5)Allowance coverage ratio represents allowance for credit losses divided by
total period-end loan receivables.
(6)Return on assets represents net earnings as a percentage of average total
assets.
(7)Return on equity represents net earnings as a percentage of average total
equity.
(8)Equity to assets represents average total equity as a percentage of average
total assets.
(9)Efficiency ratio represents (i) other expense, divided by (ii) sum of net
interest income, plus other income, less retailer share arrangements.
(10)Based on customer statement-end balances extrapolated to the respective
period-end date.
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Average Balance Sheet
The following tables set forth information for the periods indicated regarding
average balance sheet data, which are used in the discussion of interest income,
interest expense and net interest income that follows.
                                                                         2021                                                     2020
                                                                     Interest            Average                              Interest            Average
                                                    Average          Income /            Yield /             Average           Income/            Yield /

Three months ended September 30 ($ in millions) Balance Expense

            Rate(1)             Balance           Expense            

Rate(1)

Assets

Interest-earning assets:
Interest-earning cash and equivalents(2)          $  9,559          $      3                 0.12  %       $ 13,664          $      4                 0.12  %
Securities available for sale                        5,638                 8                 0.56  %          7,984                12                 0.60  %
Loan receivables, including held for sale(3):
Credit cards                                        74,686             3,793                20.15  %         74,798             3,752                19.96  %
Consumer installment loans                           2,555                64                 9.94  %          1,892                46                 9.67  %
Commercial credit products                           1,407                29                 8.18  %          1,238                22                 7.07  %
Other                                                   66                 1                      NM             77                 1                      NM
Total loan receivables, including held for sale     78,714             3,887                19.59  %         78,005             3,821                19.49  %
Total interest-earning assets                       93,911             3,898                16.47  %         99,653             3,837                15.32  %
Non-interest-earning assets:
Cash and due from banks                              1,588                                                    1,489
Allowance for credit losses                         (8,956)                                                  (9,823)
Other assets                                         5,405                                                    5,021
Total non-interest-earning assets                   (1,963)                                                  (3,313)
Total assets                                      $ 91,948                                                 $ 96,340
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts                 $ 59,275          $    131                 0.88  %       $ 63,569          $    245                 1.53  %
Borrowings of consolidated securitization
entities                                             7,051                41                 2.31  %          8,057                53                 2.62  %

Senior unsecured notes                               6,471                68                 4.17  %          7,960                82                 4.10  %

Total interest-bearing liabilities                  72,797               240                 1.31  %         79,586               380                 1.90  %
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts                  358                                                      307
Other liabilities                                    4,676                                                    4,308
Total non-interest-bearing liabilities               5,034                                                    4,615
Total liabilities                                   77,831                                                   84,201
Equity
Total equity                                        14,117                                                   12,139
Total liabilities and equity                      $ 91,948                                                 $ 96,340
Interest rate spread(4)                                                                     15.16  %                                                 13.42  %
Net interest income                                                 $  3,658                                                 $  3,457
Net interest margin(5)                                                                      15.45  %                                                 13.80  %


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                                                                         2021                                                     2020
                                                                     Interest            Average                              Interest            Average
                                                    Average          Income /            Yield /             Average           Income/            Yield /

Nine months ended September 30 ($ in millions) Balance Expense

            Rate(1)             Balance           Expense            

Rate(1)

Assets

Interest-earning assets:
Interest-earning cash and equivalents(2)          $ 12,567          $     11                 0.12  %       $ 13,992          $     49                 0.47  %
Securities available for sale                        6,128                21                 0.46  %          6,918                56                 1.08  %
Loan receivables, including held for sale(3):
Credit cards                                        74,179            10,934                19.71  %         77,476            11,764                20.28  %
Consumer installment loans                           2,398               176                 9.81  %          1,624               118                 9.71  %
Commercial credit products                           1,334                73                 7.32  %          1,210                85                 9.38  %
Other                                                   54                 3                 7.43  %             58                 2                 4.61  %
Total loan receivables, including held for sale     77,965            11,186                19.18  %         80,368            11,969                19.89  %
Total interest-earning assets                       96,660            11,218                15.52  %        101,278            12,074                15.92  %
Non-interest-earning assets:
Cash and due from banks                              1,594                                                    1,475
Allowance for credit losses                         (9,656)                                                  (9,253)
Other assets                                         5,317                                                    4,833
Total non-interest-earning assets                   (2,745)                                                  (2,945)
Total assets                                      $ 93,915                                                 $ 98,333
Liabilities
Interest-bearing liabilities:
Interest-bearing deposit accounts                 $ 60,907          $    447                 0.98  %       $ 64,075          $    894                 1.86  %
Borrowings of consolidated securitization
entities                                             7,296               136                 2.49  %          8,966               185                 2.76  %
Senior unsecured notes                               7,232               226                 4.18  %          8,241               252                 4.08  %

Total interest-bearing liabilities                  75,435               809                 1.43  %         81,282             1,331                 2.19  %
Non-interest-bearing liabilities:
Non-interest-bearing deposit accounts                  351                                                      305
Other liabilities                                    4,510                                                    4,443
Total non-interest-bearing liabilities               4,861                                                    4,748
Total liabilities                                   80,296                                                   86,030
Equity
Total equity                                        13,619                                                   12,303
Total liabilities and equity                      $ 93,915                                                 $ 98,333
Interest rate spread(4)                                                                     14.09  %                                                 13.73  %
Net interest income                                                 $ 10,409                                                 $ 10,743
Net interest margin(5)                                                                      14.40  %                                                 14.17  %


_______________________
(1)Average yields/rates are based on total interest income/expense over average
balances.
(2)Includes average restricted cash balances of $745 million and $214 million
for the three months ended September 30, 2021 and 2020, respectively, and $570
million and $612 million for the nine months ended September 30, 2021 and 2020,
respectively.
(3)Interest income on loan receivables includes fees on loans of $610 million
and $487 million for the three months ended September 30, 2021 and 2020,
respectively, and $1.6 billion for both the nine months ended September 30, 2021
and 2020, respectively.
(4)Interest rate spread represents the difference between the yield on total
interest-earning assets and the rate on total interest-bearing liabilities.
(5)Net interest margin represents net interest income divided by average total
interest-earning assets.
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For a summary description of the composition of our key line items included in
our Statements of Earnings, see Management's Discussion and Analysis of
Financial Condition and Results of Operations in our 2020 Form 10-K.
Interest Income
Interest income increased by $61 million, or 1.6%, and decreased by $856
million, or 7.1%, for the three and nine months ended September 30, 2021,
respectively. The increase in the three months ended September 30, 2021 was
primarily driven by increases in interest and fees on loans attributed to an
increase in average loan receivables, including held for sale. The decrease in
the nine months ended September 30, 2021 reflected the impact of improvements in
customer payment behavior and lower delinquencies during the period, which
resulted in lower average loan receivables.

© Edgar Online, source Glimpses

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