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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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51-0483352
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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777 Long Ridge Road
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Stamford, Connecticut
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06902
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common stock, par value $0.001 per share
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New York Stock Exchange
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Title of class
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None
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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“we,” “us,” “our” and the “Company” are to SYNCHRONY FINANCIAL and its subsidiaries, which together represent the businesses that historically have conducted GE’s North American retail finance business;
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“Synchrony” are to SYNCHRONY FINANCIAL only;
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“GE” are to General Electric Company and its subsidiaries;
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“GECC” are to General Electric Capital Corporation (a subsidiary of GE) and its subsidiaries;
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“GECFI” are to GE Consumer Finance, Inc. (a subsidiary of GECC that owns 84.6% of the common stock of Synchrony) and its subsidiaries;
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the “Bank” are to Synchrony Bank (a subsidiary of Synchrony), previously known as GE Capital Retail Bank;
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the “Bank Term Loan” are to the term loan agreement, dated as of July 30, 2014, among Synchrony, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto, as amended;
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the “GECC Term Loan” are to the term loan agreement, dated as of July 30, 2014, among Synchrony, as borrower, GECC, as administrative agent, and the other Lenders party thereto, as amended; and
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“FICO” score are to a credit score developed by Fair Isaac & Co., which is widely used as a means of evaluating the likelihood that credit users will pay their obligations.
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Increased sales.
Our programs drive increased sales for our partners by providing instant credit with an attractive value proposition (which may include discounts, promotional financing and customized loyalty rewards). Based on our research and experience in our Retail Card and Payment Solutions platforms, we believe average sales per customer in these platforms are generally higher for customers who use our cards compared to consumers who do not. In Payment Solutions, the availability of promotional financing is important to the consumer’s decision to make purchases of “big-ticket” items and a driver of retailer selection. In CareCredit, the availability of credit can also have a substantial influence over consumer spending with a significant number of consumers indicating in our research that they would postpone or forego all or a portion of their desired healthcare procedures or services if credit was not available through their healthcare providers.
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Strengthened customer loyalty.
Our programs benefit our partners through strengthened customer loyalty. Our Retail Card customers have had their cards an average of
7
years at December 31, 2014. We believe customer loyalty drives repeat business and additional sales. Our active Retail Card accounts at December 31, 2014 made an average of more than
12
purchases per account during the year ended December 31, 2014. In our Payment Solutions platform, 26% of purchase volume in 2014 was from existing customers through repeat purchases at our individual Payment Solution partners, as well as from the use of certain cards within industry-specific networks comprised of multiple Payment Solutions partners. Our CareCredit customers can use their card at any provider within our provider network, which we believe is an important source of new business to our providers, and 47% of CareCredit purchase volume in 2014 was from existing customers reusing their card at one or more providers.
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Enhanced marketing.
We have developed significant marketing expertise that we share with our partners, including through dedicated on-site teams, a national field sales force and experts who reside in our marketing centers of excellence. We believe this expertise is of substantial value to our partners in increasing sales and profitability. Our omni-channel capabilities allow us to market our credit products wherever our partners offer their products. Our customer relationship management (“CRM”) and data analytics capabilities allow us to track customer responsiveness to different marketing strategies, which helps us target marketing messages and promotional offers to our partners’ customers. In Payment Solutions, our dedicated industry-focused sales and marketing teams bring substantial retailer marketing expertise to our smaller retailer and merchant partners. These partners benefit from our research on how to increase store traffic with various promotional offerings. We also provide them with website and e-commerce capabilities that many could not afford to develop on their own.
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Additional economic benefits.
Our programs provide economic benefits to our partners in addition to increasing sales. Our Retail Card partners typically benefit from retailer share arrangements that provide for payments to them once the economic performance of the program exceeds a contractually-defined threshold. These shared economics enhance our partners’ engagement with us and provide an incentive for partners to support our programs. In addition, for most of our partners, our credit programs reduce costs by eliminating the interchange fees for in-store purchases that would otherwise be paid when general purpose credit cards or debit cards are used. Our programs also allow our partners to avoid the risks and administrative costs associated with carrying an accounts receivable balance for their customers, and this is particularly attractive to many of our CareCredit partners.
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Instant access to credit.
We offer qualified customers instant access to credit at the point of sale and across multiple channels. Our Retail Card programs provide financing for frequent purchases with attractive program benefits, including, in the case of our Dual Card, the convenience of a general purpose credit card. Payment Solutions and CareCredit offer promotional financing that enables qualified customers to make major purchases, including, in the case of CareCredit, elective healthcare procedures or services that typically are not covered by insurance.
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Attractive discounts, promotional terms and loyalty rewards.
We believe our programs provide substantial value to our customers through attractive discounts, promotional terms and loyalty rewards. Retail Card customers typically benefit from first purchase discounts (e.g., 10% or more off the purchase price when a new account is opened) and discounts or loyalty rewards when their card is used to make subsequent purchases from our partners. Our Retail Card customers typically earn rewards based on the amount of their purchases from our partners at a rate which is generally higher than the reward rate on general purpose cash back credit cards. Our Payment Solutions and CareCredit customers typically benefit from promotional financing such as interest-free periods on purchases. These types of promotions typically are not available to consumers when they use a general purpose credit card outside of introductory offer periods.
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Ability to obtain separate financing for major purchases.
We believe many consumers prefer to obtain separate financing for major purchases or category expenditures rather than accessing available borrowing capacity under their general purpose credit cards or using cash. We believe our customers also value the ability to compartmentalize, budget and track their spending and borrowing through separate financing for a major purchase.
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Improvements in consumer spending and credit utilization.
Consumer spending has increased as U.S. economic conditions and consumer confidence continue to recover from the recent financial crisis. The U.S. consumer payments industry, which consists of credit, debit, cash, check and electronic payments, is projected to grow by 27% from 2013 to 2018 (from $8.9 trillion in 2013 to $11.4 trillion in 2018) according to The Nilson Report (December 2014). According to that report, credit card payments are expected to account for the majority of the growth of the U.S. consumer payments industry. Credit card payments accounted for $2.5 trillion or 27.8% of U.S. consumer payments volume in 2013 and are expected to grow to $4.1 trillion or 36.0% of U.S. consumer payments volume in 2018. Credit card spending is growing as a percentage of total consumer spending, driven in part by the growth of online and mobile purchases.
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Improvements in U.S. household finances.
U.S. household finances have recovered substantially since the financial crisis. According to the Federal Reserve Board, the average U.S. household’s debt service ratio is better than pre-crisis levels, having improved to
9.9
% for the three months ended September 30, 2014 from 13.1% for the three months ended September 30, 2007. According to the Federal Reserve Board, aggregate U.S. household net worth also has increased, from $66.8 trillion at December 31, 2007 to $81.3 trillion at September 30, 2014.
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Growth of direct banking and deposit balances.
According to 2012 and 2014 American Bankers Association surveys, the percentage of customers who prefer to do their banking via direct channels (internet, mail, phone and mobile) increased from 53% to 54% between 2010 and 2014, while those who prefer branch banking declined from 25% to 21% over the same period. This preference for direct banking has been evidenced by robust growth in direct deposits. U.S. direct deposits increased by 48%, from $359 billion at December 31, 2010 to $532 billion at September 30, 2014, according to data for 17 surveyed banks from SNL Financial, a financial institutions data and analysis provider.
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Large, diversified and well established consumer finance franchise.
Our business is large and diversified with
64.3 million
active accounts at December 31, 2014 and a partner network with approximately
338,000
locations across the United States and in Canada as of December 31, 2014. At December 31, 2014, we had
$61.3 billion
in total loan receivables, and we are the largest provider of private label credit cards in the United States based on purchase volume and receivables according to The Nilson Report (April 2014). We have built large scale operations that support each of our sales platforms, and we believe our extensive partner network, with its broad geographic reach and diversity by industry, provides us with a distribution capability that is difficult to replicate. We believe the scale of our business and resulting operating efficiencies also contribute significantly to our success and profitability. In addition, we believe our partner-centric model, including our distribution capability, could lend itself to geographic expansion.
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Partner-centric model with long-standing and stable relationships.
Our business is based on a partner-centric, business-to-business model. Our ability to establish and maintain deep, collaborative relationships with our partners is a core skill that we have developed through decades of experience, and we have more than 1,000 dedicated employees, most of whom are co-located with our partners, to help drive the growth of our partners’ sales and our share of their sales. At December 31, 2014, the average length of our relationship for our 40 largest programs across all platforms, which accounted in aggregate for
73.9
% of our platform revenue for the year ended December 31, 2014, is
15
years. From these same 40 programs,
67.2
% of our platform revenue for the year ended December 31, 2014 was generated under programs with current contractual terms that continue through at least January 1, 2017. A diverse and growing group of more than
200,000
partners accounted for the remaining
26.1
% of our platform revenue for the year ended December 31, 2014.
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Deeply integrated technology across multiple channels.
Our proprietary technology is deeply integrated with our partners’ systems and processes, which enables us to provide customized credit products to their customers at the point of sale across multiple channels. Our technologies enable customers to apply for credit at the point of sale in store, online or on a mobile device and, if approved, purchase instantly. Our online and mobile technologies are capable of being seamlessly integrated into our partners’ systems to enable our customers to check their available credit line, manage their account, access our eChat online customer service and participate in the relevant partners’ loyalty rewards programs online and using mobile devices. In addition, in CareCredit, we have developed an extensive provider locator that helps to connect customers to our approximately
186,000
healthcare provider locations. This online locator received an average of over 600,000 hits per month in 2014, helping to drive incremental business for our provider partners. We believe that our continued investment in technology and mobile offerings will help us deepen our relationships with our existing partners, as well as provide a competitive advantage when seeking to win new business.
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Strong operating performance.
For the year ended December 31, 2014, we have grown our purchase volume and loan receivables at
9.9%
and
7.0%
, respectively. For the years ended December 31, 2014 and 2013, our net earnings were
$2.1 billion
and $2.0 billion, respectively, and our return on assets was
3.2
% and 3.5%, respectively. We were profitable throughout the recent U.S. financial crisis. We believe our ability to maintain profitability through various economic cycles is attributable to our rigorous underwriting process, strong pricing discipline, low cost to acquire new accounts, operational expertise and retailer share arrangements with our largest partners.
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Strong balance sheet and capital base.
We have a strong capital base and a diversified and stable funding profile with access to multiple sources of funding, including a growing deposit platform at the Bank, securitized financings under well-established programs, bank facilities and the public unsecured debt markets. At December 31, 2014, we had an estimated fully phased-in Basel III Tier 1 common ratio of
14.5%
, and our business was funded with
$35.0 billion
of deposits at the Bank,
$15.0 billion
of securitized financings,
$0.7 billion
of transitional funding from the GECC Term Loan,
$8.2 billion
from the Bank Term Loan, and
$3.6 billion
of senior unsecured notes. At December 31, 2014, we had
$12.9 billion
of cash and short-term liquid investments (or
17.1
% of total assets), and an aggregate of
$6.1 billion
of undrawn committed capacity under our securitization programs. At December 31, 2014, the combined total of our liquid assets and undrawn capacity equated to 25.2% of total assets. We also had, at the same date more than
$25.0 billion
of unencumbered assets in the Bank available to be used to generate additional liquidity through secured borrowings or asset sales.
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Experienced and effective risk management.
We have an experienced risk management team and an enterprise risk management infrastructure that we believe enable us to effectively manage our risk. Our enterprise risk management function is designed to identify, measure, monitor and control risk, including credit, market, liquidity, strategic and operational risks. Our focus on the credit process is evidenced by the success of our business through multiple economic cycles. We control the credit criteria for all of our programs and issue credit only to consumers who qualify under those credit criteria. Our systems are integrated with our partners’ systems, and therefore we can use our proprietary credit approval processes to make credit decisions instantly at the point of sale and across all application channels in accordance with our underwriting guidelines and risk appetite. Our risk management strategies are customized by industry and partner, and we believe our proprietary decisioning systems and customized credit scores provide significant incremental predictive capabilities over standard credit bureau-based scores alone. In addition, we have an extensive compliance program, and we have invested, and will continue to invest, in enhancing our regulatory compliance capabilities.
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High quality and diverse asset base.
Our consumer active accounts had an average FICO score of
715
, and our total loan receivables (including loan receivables held for sale) had a weighted average consumer FICO score of
698
, in each case at December 31, 2014. In addition,
72.2
% of our portfolio’s loan receivables (including loan receivables held for sale) are from consumers with a FICO score of greater than 660 at December 31, 2014. Our over-30 day delinquency rate at December 31, 2014 is below 2007 pre-financial crisis levels. We have a seasoned customer base with
35.0
% of our loan receivables (including loan receivables held for sale) at December 31, 2014 associated with accounts that have been open for more than five years. Our portfolio is also diversified by geography, with receivables balances broadly reflecting the U.S. population distribution.
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Experienced management team and business built on GE culture.
Our senior management team, including key members who helped us successfully navigate the financial crisis, is continuing to lead our Company following the initial public offering of our common stock (the “IPO”). We have operated as a largely standalone business within GECC, with our own sales, marketing, risk management, operations, collections, customer service and compliance functions. Our business has been built on GE’s culture and heritage, with a strong emphasis on our partners and customers, a rigorous use of metrics and analytics, a disciplined approach to risk management and compliance and a focus on continuous improvement and strong execution.
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Increase customer penetration at our existing partners.
We believe there is a significant opportunity to grow our business by increasing the usage of our cards in each of our sales platforms. In Retail Card, based on sales data provided by our partners, we have increased penetration of our partners’ aggregate sales in each of the last three years. For the year ended December 31, 2013, penetration of our Retail Card partners’ sales ranged from
1
% to over 45%, and the aggregate sales of all Retail Card partners were over $550 billion, which we believe represents a significant opportunity for potential growth. We believe there is also a significant market opportunity for us to increase our penetration in Payment Solutions and CareCredit.
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Attract new partners.
We seek to attract new partners by both launching new programs and acquiring existing programs from our competitors. In Retail Card, which is typically characterized by longer-term, exclusive relationships, we added three new Retail Card partners from January 1, 2012 through December 31, 2014. We also entered into an agreement with an additional Retail Card partner, BP, for which we expect the associated program to begin in mid-2015. In Payment Solutions, where a significant number of our partners include independent dealers and merchants that enter into separate arrangements with us, we increased our total partners from approximately
59,000
at December 31, 2011 to approximately
63,000
at December 31, 2014. In CareCredit, where we attract new healthcare provider partners largely by leveraging our endorsements from professional associations and healthcare consultants, we increased the number of partner locations from approximately
154,000
at December 31, 2011 to approximately
186,000
at December 31, 2014. We believe there is a significant opportunity to attract new partners in each of our platforms, including by adding additional merchants, dealers and healthcare providers under existing programs.
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Leverage technology to support our partners.
Our business model is focused on supporting our partners by offering credit wherever they offer their products and services (i.e., in-store, online and on mobile devices). We intend to continue to make significant investments in online and mobile technologies, which we believe will lead to new accounts, increased sales and deeper relationships with our existing partners and will give us an advantage when competing for new partners. We intend to continue to roll out the capability for consumers to apply for our products via their mobile devices, receive an instant credit decision and obtain immediate access to credit, and to deliver targeted rewards and promotions to our customers via their mobile devices for immediate use. We also expect to leverage emerging mobile payment system technologies. For example, through our participation in the Apple Pay program, we can place Dual Cards in Apple Pay for our participating partners who desire to have their cards in this wallet program, and we have invested in mobile platforms LoopPay and GPShopper.
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Capitalize on our advanced data, analytics and customer relationship management capabilities.
We believe that our ongoing efforts to expand our data and analytics capabilities help differentiate us from our competitors. We have access to a vast amount of data (such as our customers’ purchase patterns and payment histories) from our over
115 million
open accounts at December 31, 2014 and the hundreds of millions of transactions our customers make each year. Consistent with applicable privacy rules and regulations, we are developing new tools to assess this data to develop and deliver valuable insights and actionable analysis that can be used to improve the effectiveness of marketing strategies leading to incremental growth for both our partners and our business. Our recently enhanced CRM platform will utilize these insights and analysis to drive more relevant and timely offers to our customers via their preferred channels of communication. We believe the combination of our analytics expertise and extensive data access will drive greater partner engagement and increased sales, strengthen customer loyalty, and provide us a competitive advantage.
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Expand our integrated multi-tender loyalty programs.
We are leveraging our extensive data analytics, loyalty experience and broad retail presence to launch multi-tender loyalty programs that enable customers to earn rewards from a partner, regardless of how they pay for their purchases (e.g., cash, private label or general purpose credit cards). By expanding our loyalty program capabilities beyond private label credit cards we can provide deeper insights to our partners about their customers, including spending patterns and shopping behaviors. Multi-tender loyalty programs will also provide us with access to non-cardholders, giving us the opportunity to grow our customer base by marketing our credit products to them and delivering a more compelling value proposition.
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Increase focus on small and mid-sized businesses.
We currently offer private label credit cards and Dual Cards for small to mid-sized commercial customers that are similar to our consumer offerings. We are increasing our focus on marketing our commercial pay-in-full accounts receivable product to a wide range of business customers and are rolling out an improved customer experience for this product with enhanced functionality. Our loan receivables from business customers were
$1.3 billion
at December 31, 2014, and we believe our strategic focus on business customers will enable us to continue to attract new business customers and increase the diversity of our loan receivables.
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Expand our direct banking activities.
In January 2013, we acquired the deposit business of MetLife, which is a direct banking platform that at the time of the acquisition had $6.0 billion in U.S. direct deposits and $0.4 billion in brokered deposits. Our U.S. direct deposits have grown significantly since the MetLife acquisition to
$19.7 billion
at December 31, 2014. A key part of our strategy is to continue to increase our deposit base as a source of stable and diversified low cost funding. The platform is highly scalable, allowing us to expand without the overhead expenses of a traditional “brick and mortar” branch network. We believe we are well-positioned to benefit from the consumer-driven shift from branch banking to direct banking. According to 2012 and 2014 American Bankers Association surveys, the percentage of customers who prefer to do their banking via direct channels (i.e., internet, mail, phone and mobile) increased from 53% to 54% between 2010 and 2014, while those who prefer branch banking declined from 25% to 21% over the same period. To attract new deposits and retain existing ones, we have increased and continue to increase our advertising and marketing, are enhancing our loyalty program and are expanding mobile banking offerings. We also intend to introduce new deposit and credit products and enhancements to our existing products. These new and enhanced products may include the introduction of checking accounts, overdraft protection lines of credit, a bill payment account feature and Synchrony-branded debit and general purpose credit cards, as well as enhanced small business deposit accounts and expanded affinity offers.
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The IPO.
The IPO was the first step in GE’s exit from our business. As a result of the IPO, GE reduced its beneficial ownership in us from 100% to 84.6%, and our total equity increased through receipt of the IPO net proceeds.
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Separation.
The second step of GE’s exit from our business will involve GE’s disposition of all of its remaining shares of our stock through a Split-off (defined below) or one or more other transactions following the IPO, which disposition is referred to as the “Separation.”
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Form of Separation Transaction
. GE has indicated that it expects to effect a split-off transaction by making a tax-free distribution of all of its remaining shares of our stock to electing GE stockholders in exchange for shares of GE’s common stock (the “Split-off”). GE may also decide to exit our business by selling or otherwise distributing or disposing of all or a portion of its shares of our stock in a different type of transaction. We do not expect that the form in which the Separation occurs (a Split-off or some other form of distribution or disposition) will have materially different implications for our profitability.
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Conditions to Separation
. The Separation would be subject to various conditions, including receipt of any necessary bank regulatory and other approvals (as discussed below), the existence of satisfactory market conditions, and, in the case of the Split-off, a private letter ruling from the Internal Revenue Service (“IRS”) as to certain issues relating to, and an opinion from tax counsel confirming, the tax-free treatment of the transaction to GE and its stockholders.
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GE SLHC Deregistration.
The final step in GE’s exit from our business will be complete when the Federal Reserve Board determines that GE no longer controls us for regulatory purposes and releases GE from savings and loan holding company registration (the “GE SLHC Deregistration”).
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Increase capital and liquidity levels.
All of the net proceeds from the IPO were used to significantly increase our capital levels and, together with the net proceeds from the 2014 issuance of senior unsecured notes, the GECC Term Loan and the Bank Term Loan and after repayment of GECC related party debt (as described below), our liquidity levels. In connection with our application to the Federal Reserve Board and the Separation, we expect to continue to increase our capital and liquidity levels by, among other things, retaining net earnings and by not paying a dividend or returning capital through stock repurchases until our application to the Federal Reserve Board is approved. We will also seek to continue to increase our liquidity through growth of our direct deposits and other funding sources, including unsecured debt. At December 31, 2014, we had an estimated fully phased-in Basel III Tier 1 common ratio of
14.5%
, and we had liquidity consisting of
$12.9 billion
of cash and short-term liquid investments (or
17.1
% of total assets) and an aggregate of
$6.1 billion
of undrawn committed capacity under our securitization programs. At December 31, 2014, the combined total of our liquid assets and undrawn capacity equated to 25.2% of total assets.
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Establish and expand standalone operations and infrastructure.
We are currently establishing or significantly expanding, and expect to continue to establish or expand, our standalone corporate governance, risk management, capital planning, treasury, information technology, compliance, regulatory, internal audit and other control operations and infrastructure. Although we will continue to receive certain services from GE on a transitional basis, we expect to reduce our reliance on these services in connection with our application to the Federal Reserve Board and the Separation, replacing such services with those provided by unaffiliated third parties or with our own capabilities. We may be required to operate without receiving any of these services from GE prior to the Separation.
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Reduce or eliminate funding provided by GECC.
In connection with the IPO, we repaid all then-outstanding related party debt owed to GECC and its affiliates (approximately $8.0 billion), while entering into a GECC Term Loan of $1.5 billion. During 2014, we prepaid an aggregate of $845 million of the GECC Term Loan, and subsequent to December 31, 2014, made additional prepayments in the aggregate of $206 million, including through the use of proceeds from additional third-party borrowings. Following these prepayments, the indebtedness outstanding under the GECC Term Loan was $449 million. We expect that, in connection with our application to the Federal Reserve Board and the Separation, we will continue to prepay part or substantially all of the remaining outstanding related party debt owed to GECC under the GECC Term Loan.
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Diversify funding sources.
In addition to reducing the amount of outstanding related party debt owed to GECC, we intend to further diversify our funding sources by growing the amount of our direct deposits, by reducing the proportion of funding provided by brokered deposits, and by continuing to access the unsecured debt markets. The Federal Reserve Board may require us to take additional actions beyond the significant infrastructure expansion and other steps we are already planning and implementing and beyond what we are now anticipating.
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(in millions, except partner locations)
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Retail Card
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Payment Solutions
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CareCredit
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Approximate partner locations (at December 31, 2014)
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33,000
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119,000
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186,000
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Average active accounts for the year ended December 31, 2014
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48.6
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6.9
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4.5
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Loan receivables (at December 31, 2014)
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$
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42,308
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$
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12,095
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$
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6,883
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Category
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Length of Relationship
(1)
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Amazon
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Online retailer
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7
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American Eagle
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Specialty retailer-apparel
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18
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Belk
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Department store
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9
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Chevron (Chevron USA and Chevron Canada)
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Oil and gas retailer
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7
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Dick’s Sporting Goods
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Specialty retailer-sporting goods
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11
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Ebates
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Online retailer
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1
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Gap (including Old Navy and Banana Republic)
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Specialty retailer-apparel
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16
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JCPenney
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Department store
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15
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Lowe’s
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Mass merchandiser-home improvement
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36
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Men’s Wearhouse
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Specialty retailer-apparel
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17
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PayPal (including eBay)
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Online retailer
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10
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Phillips 66
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Oil and gas retailer
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1
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QVC
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Multi-channel electronic retailer
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9
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Sam’s Club
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Mass merchandiser
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21
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ShopHQ
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Multi-channel electronic retailer
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8
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Stein Mart
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Department store
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8
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TJX (including T.J.Maxx, Marshalls and HomeGoods)
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Specialty retailer-apparel and home goods
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3
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Toys “R” Us (including Babies “R” Us)
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Specialty retailer-toys
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2
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Walmart
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Mass merchandiser
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15
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(1)
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In years, at December 31, 2014.
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(1)
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Percentages stated as a proportion of total Retail Card loan receivables (including loan receivables held for sale) at December 31, 2014.
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(2)
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Excludes three program agreements that have expired or otherwise will not be extended beyond their contractual expiration dates in 2015, which represented 1.3% of our total Retail Card loan receivables (including loan receivables held for sale) at December 31, 2014.
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(3)
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Program agreements with one of our partners, covering most of the financing we provide to that partner’s customers, were extended from 2016 to beyond 2021. Program agreements covering the remaining financing provided to the partner’s customers (most of which we believe will be extended) represent
$331 million
of loan receivables at December 31, 2014 and are included as part of the 2016 information.
|
(4)
|
Includes one program agreement that we do not expect to extend beyond its contractual expiration date in 2016, which represented 2.5% of our total loan receivables (including loan receivables held for sale) at December 31, 2014.
|
(5)
|
In February 2015
,
we extended our program agreement with Amazon. The contractual expiration date following the extension of this program agreement is reflected in the above chart.
|
•
|
programs with national and regional retailers and their related retail outlets;
|
•
|
programs with manufacturers and the merchants and dealers (including franchisees) that sell the manufacturers’ products;
|
•
|
programs with buying groups or industry associations and their participating member merchants and dealers; and
|
•
|
individually-branded industry programs that we create and the networks of individual, unrelated merchants and dealers who participate in these programs.
|
|
Category
|
|
Length of
Relationship
(1)
|
|
American Signature Furniture
|
Furniture retailer
|
|
2
|
|
Ashley Furniture HomeStores
|
Furniture retailer and manufacturer
|
|
3
|
|
Discount Tire
|
Tire retailer
|
|
16
|
|
h.h.gregg
|
Electronics and appliances retailer
|
|
16
|
|
North American Home Furnishings Association
|
Furniture industry association
|
|
5
|
|
P.C. Richard & Son
|
Electronics and appliances retailer
|
|
16
|
|
Rooms To Go
|
Furniture retailer
|
|
12
|
|
Select Comfort
|
Bedding retailer
|
|
11
|
|
Sleepy’s
|
Bedding retailer
|
|
14
|
|
Yamaha Motor Corp. USA
|
Powersports manufacturer
|
|
10
|
|
(1)
|
In years, at December 31, 2014.
|
Credit Product
|
Standard Terms Only
|
|
Promotional Offer
|
|
Total
|
|||
Credit cards
|
67.7
|
%
|
|
28.4
|
%
|
|
96.1
|
%
|
Commercial credit products
|
2.2
|
|
|
—
|
|
|
2.2
|
|
Consumer installment loans
|
—
|
|
|
1.7
|
|
|
1.7
|
|
Total
|
69.9
|
%
|
|
30.1
|
%
|
|
100.0
|
%
|
•
|
payment processing (more than
440 million
paper and electronic payments in 2014);
|
•
|
embossing and mailing credit cards (approximately
54 million
cards in 2014);
|
•
|
printing and mailing and eService delivery of credit card statements (more than
640 million
paper and electronic statements in 2014); and
|
•
|
other letters mailed or sent electronically (approximately
88 million
in 2014).
|
•
|
under the Basel III standardized approach, a Tier 1 common equity to risk-weighted assets ratio of 7% (the minimum of 4.5% plus a fully phased-in mandatory conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of 8.5% (the minimum of 6% plus a fully phased-in mandatory conservation buffer of 2.5%), and a total capital to risk-weighted assets ratio of 10.5% (a minimum of 8% plus a fully phased-in mandatory conservation buffer of 2.5%);
|
•
|
stress-tested minimum capital ratios described above of 5% Tier 1 common capital to risk-weighted assets, 6% Tier 1 capital to risk-weighted assets and 8% total capital to risk-weighted assets;
|
•
|
a leverage ratio of Tier 1 capital to total exposures of 4%; and
|
•
|
in the case of GECC, a stress-tested minimum supplemental leverage ratio of 3%.
|
•
|
under the Basel III standardized approach, a Tier 1 common equity to risk-weighted assets ratio of 7% (the minimum of 4.5% plus a fully phased-in mandatory conservation buffer of 2.5%), a Tier 1 capital to risk-weighted assets ratio of 8.5% (the minimum of 6% plus a fully phased-in mandatory conservation buffer of 2.5%), and a total capital to risk-weighted assets ratio of 10.5% (a minimum of 8% plus a fully phased-in mandatory conservation buffer of 2.5%); and
|
•
|
a leverage ratio of Tier 1 capital to total exposures of 5%.
|
•
|
a world-class brand associated with trust, integrity and longevity;
|
•
|
perception of high-quality products and services;
|
•
|
strong capital base and financial strength;
|
•
|
preferred status among our partners, customers and employees; and
|
•
|
established relationships with bank and other regulators.
|
•
|
now that GE’s beneficial ownership in our common stock has decreased to 84.6%;
|
•
|
when GE reduces its ownership in our common stock to a level below 50%; and
|
•
|
when we cease using the GE name and logo in our sales and marketing materials, particularly when we deliver notices to partners, customers and depositors that our name and the name of the Bank and some of our other subsidiaries will change.
|
•
|
consolidating or merging with or into any person or, subject to certain exceptions, permitting any subsidiary to merge with or into any person;
|
•
|
acquiring control of a bank or savings association or making any other acquisition of assets or equity for a price (including assumed debt) in excess of $500 million (other than acquisitions of receivables portfolios in the ordinary course of business that do not exceed $1 billion); provided, that once GE’s beneficial ownership of our common stock decreases below 20%, the general threshold will be increased to $1 billion and the threshold for acquisitions of receivables portfolios in the ordinary course of business will be increased to $2 billion;
|
•
|
disposing of assets or securities in a single transaction or a series of related transactions for a price (including assumed debt) in excess of $500 million (other than dispositions among us and our affiliates, issuances of asset-backed securitization debt to maintain the aggregate level of borrowing capacity we had at the time of the IPO and dispositions of receivables in the ordinary course of business that do not exceed $1 billion); provided, that once GE’s beneficial ownership of our common stock decreases below 20%, the general threshold will be increased to $1 billion and the threshold for disposition of receivables portfolios in the ordinary course of business will be increased to $2 billion;
|
•
|
incurring or guaranteeing debt that would reasonably be expected to result in a downgrade of our publicly issued debt below specified ratings at the time of the IPO;
|
•
|
dissolving. liquidating or winding up our Company;
|
•
|
altering, amending, terminating or repealing, or adopting any provision inconsistent with, the provisions of our certificate of incorporation or our bylaws;
|
•
|
adopting or implementing any stockholder rights plan or similar takeover defense measure;
|
•
|
declaring or paying any dividend or other distribution in respect of our common stock;
|
•
|
repurchasing our common stock, subject to certain exceptions;
|
•
|
entering into a new principal line of business or entering into business outside of the United States and Canada; or
|
•
|
establishing an executive committee of our board of directors.
|
•
|
engaging in the same or similar business activities or lines of business as us; or
|
•
|
doing business with any of our partners, customers or vendors.
|
Location
|
|
Owned/Leased
(1)
|
Corporate Headquarters:
|
|
|
Stamford, CT
|
|
Leased
|
|
|
|
Bank Headquarters:
|
|
|
Draper, UT
|
|
Leased
|
|
|
|
Payment Processing Centers:
|
|
|
Atlanta, GA
|
|
Leased
|
Longwood, FL
|
|
Leased
|
|
|
|
Customer Service Centers:
|
|
|
Canton, OH
|
|
Leased
|
Charlotte, NC
|
|
Leased
|
Frisco, TX
|
|
Leased
|
Hyderabad, India
|
|
Leased
|
Kettering, OH
|
|
Leased
|
Manila, Philippines
|
|
Leased
|
Manila, Philippines (Alabang)
|
|
Leased
|
Merriam, KS
|
|
Owned
|
Phoenix, AZ
|
|
Leased
|
Rapid City, SD
|
|
Leased
|
San Juan, PR
|
|
Leased
|
|
|
|
Other Support Centers:
|
|
|
Alpharetta, GA
|
|
Leased
|
Bellevue, WA
|
|
Leased
|
Bentonville, AR
|
|
Leased
|
Chicago, IL
|
|
Leased
|
Costa Mesa, CA
|
|
Leased
|
San Francisco, CA
|
|
Leased
|
San Jose, CA
|
|
Leased
|
St. Paul, MN
|
|
Leased
|
Van Buren, MI
|
|
Leased
|
Walnut Creek, CA
|
|
Leased
|
|
|
|
Bank Retail Branch Location:
|
|
|
Bridgewater, NJ
|
|
Leased
|
(1)
|
In connection with the IPO, certain of these leased properties were assigned to us by GECC. In some cases, GECC continues to have liability for obligations under the leases, and we have agreed to indemnify GECC for any costs or expenses related to those obligations.
|
|
Common stock market price
|
||||||
($ in dollars)
|
High
|
|
Low
|
||||
2014
|
|
|
|
||||
Fourth quarter
|
$
|
30.50
|
|
|
$
|
24.20
|
|
Third quarter
(1)
|
25.79
|
|
|
22.93
|
|
(1)
|
Trading commenced July 31, 2014. Prior to that date, there was no public trading market for our common stock.
|
|
July 31, 2014
|
|
December 31, 2014
|
||||
Synchrony Financial
|
$
|
100.00
|
|
|
$
|
129.35
|
|
S&P 500
|
100.00
|
|
|
106.64
|
|
||
S&P 500 Financials
|
100.00
|
|
|
110.42
|
|
|
Years Ended December 31,
|
||||||||||||||||||
($ in millions, except per share data)
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
Interest income
|
$
|
12,242
|
|
|
$
|
11,313
|
|
|
$
|
10,309
|
|
|
$
|
9,141
|
|
|
$
|
8,760
|
|
Interest expense
|
922
|
|
|
742
|
|
|
745
|
|
|
932
|
|
|
1,094
|
|
|||||
Net interest income
|
11,320
|
|
|
10,571
|
|
|
9,564
|
|
|
8,209
|
|
|
7,666
|
|
|||||
Retailer share arrangements
|
(2,575
|
)
|
|
(2,373
|
)
|
|
(1,984
|
)
|
|
(1,428
|
)
|
|
(989
|
)
|
|||||
Net interest income, after retailer share arrangements
|
8,745
|
|
|
8,198
|
|
|
7,580
|
|
|
6,781
|
|
|
6,677
|
|
|||||
Provision for loan losses
|
2,917
|
|
|
3,072
|
|
|
2,565
|
|
|
2,258
|
|
|
3,151
|
|
|||||
Net interest income, after retailer share arrangements and provision for loan losses
|
5,828
|
|
|
5,126
|
|
|
5,015
|
|
|
4,523
|
|
|
3,526
|
|
|||||
Other income
|
485
|
|
|
500
|
|
|
484
|
|
|
497
|
|
|
481
|
|
|||||
Other expense
|
2,927
|
|
|
2,484
|
|
|
2,123
|
|
|
2,010
|
|
|
1,978
|
|
|||||
Earnings before provision for income taxes
|
3,386
|
|
|
3,142
|
|
|
3,376
|
|
|
3,010
|
|
|
2,029
|
|
|||||
Provision for income taxes
|
1,277
|
|
|
1,163
|
|
|
1,257
|
|
|
1,120
|
|
|
760
|
|
|||||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
|
$
|
1,890
|
|
|
$
|
1,269
|
|
Weighted average shares outstanding (in millions)
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
757.4
|
|
|
705.3
|
|
|
705.3
|
|
|
705.3
|
|
|
705.3
|
|
|||||
Diluted
|
757.6
|
|
|
705.3
|
|
|
705.3
|
|
|
705.3
|
|
|
705.3
|
|
|||||
Earnings per share
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
2.78
|
|
|
$
|
2.81
|
|
|
$
|
3.00
|
|
|
$
|
2.68
|
|
|
$
|
1.80
|
|
Diluted
|
$
|
2.78
|
|
|
$
|
2.81
|
|
|
$
|
3.00
|
|
|
$
|
2.68
|
|
|
$
|
1.80
|
|
($ in millions)
|
At December 31,
|
||||||||||||||||||
2014
|
|
2013
|
|
2012
|
|
2011
(1)
|
|
2010
|
|||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and equivalents
|
$
|
11,828
|
|
|
$
|
2,319
|
|
|
$
|
1,334
|
|
|
$
|
1,187
|
|
|
$
|
219
|
|
Investment securities
|
1,598
|
|
|
236
|
|
|
193
|
|
|
198
|
|
|
116
|
|
|||||
Loan receivables
|
61,286
|
|
|
57,254
|
|
|
52,313
|
|
|
47,741
|
|
|
45,230
|
|
|||||
Allowance for loan losses
|
(3,236
|
)
|
|
(2,892
|
)
|
|
(2,274
|
)
|
|
(2,052
|
)
|
|
(2,362
|
)
|
|||||
Loan receivables held for sale
|
332
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Goodwill
|
949
|
|
|
949
|
|
|
936
|
|
|
936
|
|
|
938
|
|
|||||
Intangible assets, net
|
519
|
|
|
300
|
|
|
255
|
|
|
252
|
|
|
227
|
|
|||||
Other assets
|
2,431
|
|
|
919
|
|
|
705
|
|
|
1,853
|
|
|
4,438
|
|
|||||
Assets of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,847
|
|
|||||
Total assets
|
$
|
75,707
|
|
|
$
|
59,085
|
|
|
$
|
53,462
|
|
|
$
|
50,115
|
|
|
$
|
50,653
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total deposits
|
$
|
34,955
|
|
|
$
|
25,719
|
|
|
$
|
18,804
|
|
|
$
|
17,832
|
|
|
$
|
13,798
|
|
Total borrowings
|
27,460
|
|
|
24,321
|
|
|
27,815
|
|
|
25,890
|
|
|
30,936
|
|
|||||
Accrued expenses and other liabilities
|
2,814
|
|
|
3,085
|
|
|
2,261
|
|
|
2,065
|
|
|
1,600
|
|
|||||
Liabilities of discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Total liabilities
|
65,229
|
|
|
53,125
|
|
|
48,880
|
|
|
45,787
|
|
|
46,347
|
|
|||||
Total equity
|
10,478
|
|
|
5,960
|
|
|
4,582
|
|
|
4,328
|
|
|
4,306
|
|
|||||
Total liabilities and equity
|
$
|
75,707
|
|
|
$
|
59,085
|
|
|
$
|
53,462
|
|
|
$
|
50,115
|
|
|
$
|
50,653
|
|
(1)
|
In 2011, we completed the sale of a discontinued business operation. The selected earnings information presented above is of continuing operations.
|
(1)
|
For a definition of platform revenue, which is a non-GAAP measure, and its reconciliation to interest and fees on loans, see “
Results of Operations - Platform Analysis - Non-GAAP Measure
” below.
|
Credit Product
|
Standard Terms
|
|
Promotional Offer
|
|
Total
|
|||
Credit cards
|
67.7
|
%
|
|
28.4
|
%
|
|
96.1
|
%
|
Commercial credit products
|
2.2
|
|
|
—
|
|
|
2.2
|
|
Consumer installment loans
|
—
|
|
|
1.7
|
|
|
1.7
|
|
Total
|
69.9
|
%
|
|
30.1
|
%
|
|
100.0
|
%
|
•
|
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., CarCareONE or CareCredit) that are used primarily for the purchase of goods and services from the partner or within the program network. In Retail Card, credit under our private label credit cards typically is extended on standard terms only, and in Payment Solutions and CareCredit, credit under our private label credit cards typically is extended pursuant to a promotional financing offer.
|
•
|
Dual 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 elsewhere. Credit extended under our Dual Cards typically is extended under standard terms only. Currently, only Retail Card offers Dual Cards. At
December 31, 2014
, we offered Dual Cards through 14 of our 19 active Retail Card programs.
|
•
|
Growth in loan receivables and interest income
. We believe continuing improvement in the U.S. economy and employment rates will contribute to an increase in consumer credit spending. In addition, we expect the use of credit cards to continue to increase versus other forms of payment such as cash and checks. We anticipate that these trends, combined with our marketing and partner engagement strategies, will contribute to growth in our loan receivables. In the near-to medium term, we expect our total interest income to continue to grow, driven by the expected growth in average loan receivables. Our historical growth rates in loan receivables and interest income have benefited from new partner acquisitions, and therefore, if we do not continue to acquire new partners, replace the Retail Card programs that are not being extended or otherwise grow our business, our growth rates in loan receivables and interest income in the future will be lower than in recent periods. In addition, we do not expect to make any significant changes to customer pricing or merchant discount pricing in the near term, and therefore we expect yields generated from interest and fees on interest-earning assets will remain relatively stable
|
•
|
Changing funding mix and increased funding costs
. Prior to the IPO, the related party debt provided by GECC and its affiliates was one of our key funding sources. Following the IPO, and repayment of all then-outstanding related party debt, our primary funding sources are now comprised of cash from operations, deposits (direct and brokered deposits), securitized financings and third-party debt. Over time, we expect to raise additional unsecured debt financing and continue to increase our level of direct deposits, while using a portion of this funding to repay, in advance of the Separation, all or a substantial portion of the remaining transitional funding from the GECC Term Loan, increase liquidity levels and support growth in our business. As a result of the growth in our third-party borrowings, our funding costs in the aggregate have increased following the IPO. At December 31, 2014, our third-party borrowings increased by approximately $11.8 billion compared to December 31, 2013. We expect the following factors to continue to impact our funding costs:
|
•
|
continued growth in our direct deposits as a source of stable and low cost funding;
|
•
|
the changing mix in our funding sources, as our historical related party debt was replaced during 2014 by higher cost funding provided by third-party credit facilities, unsecured debt financing and transitional funding from the GECC Term Loan; and
|
•
|
a rising interest rate environment
|
•
|
Extended duration of program agreements
. We have extended many of our 40 largest program agreements, and as a result, we expect to continue to benefit from these programs on a long-term basis as indicated by the following expiration schedule, which indicates for each period the number of programs scheduled to expire and the proportion of platform revenue that these programs comprised for the year ended December 31, 2014.
|
(1)
|
Percentages stated as a proportion of total platform revenue for the year ended December 31, 2014.
|
(2)
|
In February 2015
,
we extended our program agreement with Amazon, a Retail Card partner. The contractual expiration date following the extension of this program agreement is reflected in the above chart.
|
•
|
Increases in retailer share arrangement payments and other expense under extended program agreements.
We believe that as a result of both the overall growth of our programs generally as well as amendments we have made to the terms of certain program agreements that we extended during 2014, the payments we make to our partners under these extended retailer share arrangements, in the aggregate, are likely to increase both in absolute terms and as a percentage of our net earnings. These increases will be offset in part by decreases in retailer share arrangement payments made to those partners whose programs are not being extended. Overall, we expect our payments to our partners under our retailer share arrangements to grow generally in line with the growth of our Retail Card loan receivables.
|
•
|
Stable asset quality and enhancements to allowance for loan loss methodology.
Our credit performance continued to improve through 2014. Our net charge-off rates decreased to
4.51%
for the year ended December 31, 2014 from
4.68%
for the year ended December 31, 2013, and our over-30 day delinquency rate decreased to
4.14%
at December 31, 2014 from
4.35%
at December 31, 2013, which are lower year-end levels than we experienced immediately prior to the financial crisis in 2007. In the near term, we expect the U.S. employment rate to continue to stabilize, and we do not anticipate making significant changes to our underwriting standards. Accordingly, we expect our charge-off rates to remain relatively stable in the near term.
|
•
|
Increases in other expense to operate as a fully independent company.
We have experienced and expect to continue to experience increases in other expense in order to operate as a fully independent public company. The components include increases in our advertising and marketing expense, corporate governance, risk management, capital planning, treasury, information technology, compliance, regulatory, internal audit and other control operations and infrastructure that is necessary to enable us to operate as a fully standalone company. We expect this incremental increase in our annual run rate of other expense to be fully incurred in 2015 after giving effect to anticipated savings from the reductions in corporate allocations by GE and transitional service payments to GE following the Separation.
|
•
|
Impact of regulatory developments.
For the years ended December 31, 2014 and 2013, we incurred $26 million and $133 million, respectively, in expenses related to litigation and regulatory matters. The expenses incurred in 2013, primarily related to an increase to our reserve for the matters settled with the CFPB and the DOJ in late 2013 and 2014. See “
Item 1. Business—Regulation—Consumer Financial Services Regulation
.”
|
•
|
Increased capital and liquidity levels.
We expect to maintain sufficient capital and liquidity resources to support our daily operations, our business growth, our credit ratings as well as regulatory and compliance requirements in a cost effective and prudent manner through expected and unexpected market environments. In connection with our application to the Federal Reserve Board described above and the Separation, we expect to continue to increase our capital and liquidity levels by, among other things, retaining net earnings and not paying a dividend or returning capital through stock repurchases until our application to the Federal Reserve Board is approved. Thereafter, our board of directors intends to consider a policy for paying dividends and may consider stock repurchases, in each case consistent with maintaining capital ratios well in excess of minimum regulatory requirements. At December 31, 2014, the Company had an estimated fully phased-in Basel III Tier 1 common ratio of
14.5%
. We also expect that our liquidity portfolio will continue to grow in line with growth in our assets.
|
•
|
Net earnings increased
6.6%
to
$2,109 million
for the
year ended
December 31, 2014
, driven by higher net interest income and a reduction in our provision for loan losses, partially offset by increases in retailer share arrangements and other expenses.
|
•
|
Loan receivables increased
7.0%
to
$61,286 million
at
December 31, 2014
compared to
December 31, 2013
, primarily driven by higher purchase volume and average active account growth.
|
•
|
Net interest income increased
7.1%
to
$11,320 million
for the
year ended
December 31, 2014
, primarily due to higher average loan receivables.
|
•
|
Retailer share arrangements increased
8.5%
to
$2,575 million
for the
year ended
December 31, 2014
, primarily as a result of improved performance, and the growth of the programs in which we have retailer share arrangements, as well as from changes to the terms of the retailer share arrangements for those partners with whom we extended program agreements in late 2013 and in 2014.
|
•
|
Loan delinquencies as a percentage of period-end loan receivables decreased with the over-30 day delinquency rate decreasing to
4.14%
at
December 31, 2014
from
4.35%
at December 31, 2013, driven by continued improvement in the U.S. economy and employment rates. Net charge-off rates decreased to
4.51%
for the
year ended
December 31, 2014
, from
4.68%
for the
year ended
December 31, 2013
.
|
•
|
Provision for loan losses decreased by
$155 million
, or
5.0%
, to
$2,917 million
for the
year ended
December 31, 2014
. This decrease was driven primarily as a result of an incremental provision of $642 million recorded during 2013 relating to the enhancements to our allowance for loan loss methodology, which was not repeated in 2014. This decrease was partially offset by increased provisions in 2014 primarily driven by portfolio growth. Our allowance coverage ratio (allowance for loan losses as a percent of end of period loan receivables) increased to
5.28%
at December 31, 2014, as compared to
5.05%
at
December 31, 2013
,
reflecting a transition to a stable credit outlook at
December 31, 2014
from an improving outlook at
December 31, 2013
.
|
•
|
Other expense increased to
$2,927 million
from
$2,484 million
for the years ended
December 31, 2014
and 2013, respectively, driven by business growth, increased marketing investments and incremental costs associated with building our standalone infrastructure.
|
•
|
We completed the initial public offering of a total of
128.5 million
shares of our common stock and our new debt financings which increased our indebtedness with third parties and reduced our funding from GECC. The net proceeds from these transactions increased our liquidity portfolio by
$7.3 billion
. Our liquidity portfolio, including undrawn credit facilities, was
$19.0 billion
at December 31, 2014.
|
•
|
We have invested in our direct banking activities to grow our deposit base. Total deposits have increased
35.9%
to
$35.0 billion
at December 31, 2014, compared to December 31, 2013, driven primarily by growth in our direct deposits of
79.1
% to
$19.7 billion
at
December 31, 2014
.
|
•
|
During the
year ended
December 31, 2014
, we extended
five
program agreements in Retail Card (American Eagle, Gap Inc., Lowe's, QVC and Sam’s Club), and in February 2015, we extended our program agreement with Amazon. These programs represented, in the aggregate
$22.2 billion
in loan receivables at
December 31, 2014
. In addition, we extended our program agreement with PayPal until October 2016 and do not expect it to extend beyond that date. Based on notices received to date, existing program agreements with
three
Retail Card partners representing
$0.5 billion
in loan receivables, including loan receivables held for sale, at
December 31, 2014
, are not expected to be renewed.
|
•
|
During the year ended December 31, 2014, we entered into an agreement with BP, for a Retail Card program we expect to commence in mid-2015, and which we expect will become one of our 20 largest program agreements.
|
•
|
In our Payment Solutions sales platform, we increased the number of participating partners in our network by over 2,000 partners, compared to the number of partners at December 31, 2013.
In our CareCredit network, we increased the number of provider locations by over
9,000
locations, compared to the number of locations at December 31, 2013.
|
•
|
Net earnings decreased 6.6% to $1,979 million for the year ended December 31, 2013 driven primarily by an increase in our provision for loan losses as a result of enhancements to our allowance for loan loss methodology.
|
•
|
Loan receivables increased 9.4% to $57,254 million at December 31, 2013 compared to December 31, 2012, primarily driven by purchase volume growth of 9.3% in 2013, which was driven by an increase in active accounts and higher purchase volume per account.
|
•
|
Net interest income increased 10.5% to $10,571 million in 2013 due to higher average loan receivables. Net interest income, after retailer share arrangements increased 8.2% to $8,198 million in 2013 as net interest income was offset in part by increased payments to partners under our retailer share arrangements.
|
•
|
Retailer share arrangements increased 19.6% to $2,373 million in 2013, primarily as a result of the growth and improved performance of the programs in which we have retailer share arrangements, as well as by changes to the terms of the retailer share arrangements for those partners with whom we extended programs agreements in 2013.
|
•
|
Loan delinquencies as a percentage of period-end loan receivables decreased with the over 30-day delinquency rate decreasing to 4.35% at December 31, 2013 from 4.58% at December 31, 2012. Reduced delinquency rates were driven by improvements in the quality of our loan receivables and continued improvement in the U.S. economy and employment rates. Net charge-off rates decreased to 4.68% in 2013 from 4.93% in 2012.
|
•
|
Provision for loan losses increased by $507 million, or 19.8%, to $3,072 million in 2013 as a result of enhancements to our allowance for loan loss methodology, offset in part by improved portfolio performance. Our allowance coverage ratio increased to 5.05% in 2013 from 4.35% in 2012.
|
•
|
Other expense increased to $2,484 million in 2013 from $2,123 million in 2012. The increase to other expense was driven primarily by a $133 million increase in our consumer regulatory expenses (primarily related to an increase in our reserves for the matters settled with the CFPB and the DOJ in late 2013 and 2014), $78 million increase in employee costs, $61 million increase in marketing expense, $35 million increase in professional fees and $24 million increase in GE allocations and assessments. These increases (excluding the consumer regulatory expenses) were predominantly driven by the growth in purchase volume, transactions and receivables of our business.
|
•
|
We acquired MetLife’s direct-to-consumer retail banking platform. Primarily as a result of the MetLife acquisition, we increased our deposit funding from 40% at December 31, 2012 to 51% of our total funding at December 31, 2013 (an increase of $6,915 million) while decreasing funding from securitized financings from 37% to 31% and related party debt from 23% to 18%.
|
•
|
In 2013, we launched new programs with 16 partners (two in Retail Card (EBates and Phillips 66) and 14 in Payment Solutions) and added 17,000 new providers to our CareCredit network. We extended four program agreements in Retail Card (Belk, Brooks Brothers, JCPenney and Walmart) and 55 program agreements in Payment Solutions, representing $16.7 billion in loan receivables at December 31, 2013, and did not extend agreements with 34 retailers in Payment Solutions, representing $0.1 billion in loan receivables at December 31, 2013.
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Interest income
|
$
|
12,242
|
|
|
$
|
11,313
|
|
|
$
|
10,309
|
|
Interest expense
|
922
|
|
|
742
|
|
|
745
|
|
|||
Net interest income
|
11,320
|
|
|
10,571
|
|
|
9,564
|
|
|||
Retailer share arrangements
|
(2,575
|
)
|
|
(2,373
|
)
|
|
(1,984
|
)
|
|||
Net interest income, after retailer share arrangements
|
8,745
|
|
|
8,198
|
|
|
7,580
|
|
|||
Provision for loan losses
|
2,917
|
|
|
3,072
|
|
|
2,565
|
|
|||
Net interest income, after retailer share arrangements and provision for loan losses
|
5,828
|
|
|
5,126
|
|
|
5,015
|
|
|||
Other income
|
485
|
|
|
500
|
|
|
484
|
|
|||
Other expense
|
2,927
|
|
|
2,484
|
|
|
2,123
|
|
|||
Earnings before provision for income taxes
|
3,386
|
|
|
3,142
|
|
|
3,376
|
|
|||
Provision for income taxes
|
1,277
|
|
|
1,163
|
|
|
1,257
|
|
|||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
At and for the years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Financial Position Data (Average):
|
|
|
|
|
|
||||||
Loan receivables, including held for sale
|
$
|
57,101
|
|
|
$
|
52,407
|
|
|
$
|
47,549
|
|
Total assets
|
$
|
66,152
|
|
|
$
|
56,184
|
|
|
$
|
49,905
|
|
Deposits
|
$
|
30,350
|
|
|
$
|
22,911
|
|
|
$
|
17,514
|
|
Borrowings
|
$
|
24,608
|
|
|
$
|
25,209
|
|
|
$
|
25,304
|
|
Total equity
|
$
|
7,888
|
|
|
$
|
5,121
|
|
|
$
|
4,764
|
|
Selected Performance Metrics:
|
|
|
|
|
|
||||||
Purchase volume
(1)
|
$
|
103,149
|
|
|
$
|
93,858
|
|
|
$
|
85,901
|
|
Retail Card
|
$
|
83,591
|
|
|
$
|
75,739
|
|
|
$
|
69,240
|
|
Payment Solutions
|
$
|
12,447
|
|
|
$
|
11,360
|
|
|
$
|
10,531
|
|
CareCredit
|
$
|
7,111
|
|
|
$
|
6,759
|
|
|
$
|
6,130
|
|
Average active accounts (in thousands)
(2)
|
60,009
|
|
|
56,253
|
|
|
53,021
|
|
|||
Net interest margin
(3)
|
17.20
|
%
|
|
18.78
|
%
|
|
19.69
|
%
|
|||
Net charge-offs
|
$
|
2,573
|
|
|
$
|
2,454
|
|
|
$
|
2,343
|
|
Net charge-offs as a % of average loan receivables, including held for sale
|
4.51
|
%
|
|
4.68
|
%
|
|
4.93
|
%
|
|||
Allowance coverage ratio
(4)
|
5.28
|
%
|
|
5.05
|
%
|
|
4.35
|
%
|
|||
Return on assets
(5)
|
3.2
|
%
|
|
3.5
|
%
|
|
4.2
|
%
|
|||
Return on equity
(6)
|
26.7
|
%
|
|
38.6
|
%
|
|
44.5
|
%
|
|||
Equity to assets
(7)
|
11.92
|
%
|
|
9.11
|
%
|
|
9.55
|
%
|
|||
Other expense as a % of average loan receivables, including held for sale
|
5.13
|
%
|
|
4.74
|
%
|
|
4.46
|
%
|
|||
Efficiency ratio
(8)
|
31.7
|
%
|
|
28.6
|
%
|
|
26.3
|
%
|
|||
Effective income tax rate
|
37.7
|
%
|
|
37.0
|
%
|
|
37.2
|
%
|
|||
Selected Period End Data:
|
|
|
|
|
|
||||||
Loan receivables
|
$
|
61,286
|
|
|
$
|
57,254
|
|
|
$
|
52,313
|
|
Allowance for loan losses
|
$
|
3,236
|
|
|
$
|
2,892
|
|
|
$
|
2,274
|
|
30+ days past due as a % of period-end loan receivables
|
4.14
|
%
|
|
4.35
|
%
|
|
4.58
|
%
|
|||
90+ days past due as a % of period-end loan receivables
|
1.90
|
%
|
|
1.96
|
%
|
|
2.02
|
%
|
|||
Total active accounts (in thousands)
(2)
|
64,286
|
|
|
61,957
|
|
|
57,099
|
|
(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. Purchase volume includes activity related to our portfolios classified as held for sale.
|
(2)
|
Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month.
|
(3)
|
Net interest margin represents net interest income divided by average interest-earning assets.
|
(4)
|
Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables.
|
(5)
|
Return on assets represents net earnings as a percentage of average total assets.
|
(6)
|
Return on equity represents net earnings as a percentage of average total equity.
|
(7)
|
Equity to assets represents average equity as a percentage of average total assets.
|
(8)
|
Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income.
|
|
2014
|
|
2013
|
2012
|
||||||||||||||||||||||||||||
Years ended December 31 ($ in millions)
|
Average
Balance
(1)
|
|
Interest
Income /
Expense
|
|
Average
Yield /
Rate
(2)
|
|
Average
Balance
(1)
|
|
Interest
Income/
Expense
|
|
Average
Yield /
Rate
(2)
|
|
Average
Balance
(1)
|
|
Interest
Income/
Expense
|
|
Average
Yield /
Rate
(2)
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest-earning cash and equivalents
(3)
|
$
|
8,230
|
|
|
$
|
16
|
|
|
0.19
|
%
|
|
$
|
3,651
|
|
|
$
|
10
|
|
|
0.27
|
%
|
|
$
|
787
|
|
|
$
|
2
|
|
|
0.25
|
%
|
Securities available for sale
|
487
|
|
|
10
|
|
|
2.05
|
%
|
|
217
|
|
|
8
|
|
|
3.69
|
%
|
|
189
|
|
|
7
|
|
|
3.70
|
%
|
||||||
Other short-term investment securities
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
50
|
|
|
—
|
|
|
—
|
%
|
||||||
Loan receivables
(4)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Credit cards, including held for sale
(5)
|
54,686
|
|
|
11,967
|
|
|
21.88
|
%
|
|
49,704
|
|
|
11,015
|
|
|
22.16
|
%
|
|
44,460
|
|
|
9,967
|
|
|
22.42
|
%
|
||||||
Consumer installment loans
|
1,025
|
|
|
99
|
|
|
9.66
|
%
|
|
1,336
|
|
|
129
|
|
|
9.66
|
%
|
|
1,705
|
|
|
176
|
|
|
10.32
|
%
|
||||||
Commercial credit products
|
1,373
|
|
|
149
|
|
|
10.85
|
%
|
|
1,355
|
|
|
150
|
|
|
11.07
|
%
|
|
1,366
|
|
|
156
|
|
|
11.42
|
%
|
||||||
Other
|
17
|
|
|
1
|
|
|
5.88
|
%
|
|
12
|
|
|
1
|
|
|
8.33
|
%
|
|
18
|
|
|
1
|
|
|
5.56
|
%
|
||||||
Total loan receivables
|
57,101
|
|
|
12,216
|
|
|
21.39
|
%
|
|
52,407
|
|
|
11,295
|
|
|
21.55
|
%
|
|
47,549
|
|
|
10,300
|
|
|
21.66
|
%
|
||||||
Total interest-earning assets
|
65,818
|
|
|
12,242
|
|
|
18.60
|
%
|
|
56,275
|
|
|
11,313
|
|
|
20.10
|
%
|
|
48,575
|
|
|
10,309
|
|
|
21.22
|
%
|
||||||
Non-interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Cash and due from banks
|
881
|
|
|
|
|
|
|
552
|
|
|
|
|
|
|
475
|
|
|
|
|
|
||||||||||||
Allowance for loan losses
|
(3,039
|
)
|
|
|
|
|
|
(2,693
|
)
|
|
|
|
|
|
(1,908
|
)
|
|
|
|
|
||||||||||||
Other assets
|
2,492
|
|
|
|
|
|
|
2,050
|
|
|
|
|
|
|
2,763
|
|
|
|
|
|
||||||||||||
Total non-interest-earning assets
|
334
|
|
|
|
|
|
|
(91
|
)
|
|
|
|
|
|
1,330
|
|
|
|
|
|
||||||||||||
Total assets
|
$
|
66,152
|
|
|
|
|
|
|
$
|
56,184
|
|
|
|
|
|
|
$
|
49,905
|
|
|
|
|
|
|||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest-bearing deposit accounts
|
$
|
30,110
|
|
|
$
|
470
|
|
|
1.56
|
%
|
|
$
|
22,405
|
|
|
$
|
374
|
|
|
1.67
|
%
|
|
$
|
17,039
|
|
|
$
|
362
|
|
|
2.12
|
%
|
Borrowings of consolidated securitization entities
|
14,835
|
|
|
215
|
|
|
1.45
|
%
|
|
16,209
|
|
|
211
|
|
|
1.30
|
%
|
|
15,172
|
|
|
228
|
|
|
1.50
|
%
|
||||||
Bank term loan
|
3,056
|
|
|
74
|
|
|
2.42
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||||
Senior unsecured notes
|
1,382
|
|
|
50
|
|
|
3.62
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||||
Related party debt
|
5,335
|
|
|
113
|
|
|
2.12
|
%
|
|
9,000
|
|
|
157
|
|
|
1.74
|
%
|
|
10,132
|
|
|
155
|
|
|
1.53
|
%
|
||||||
Total interest-bearing liabilities
|
54,718
|
|
|
922
|
|
|
1.69
|
%
|
|
47,614
|
|
|
742
|
|
|
1.56
|
%
|
|
42,343
|
|
|
745
|
|
|
1.76
|
%
|
||||||
Non-interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Non-interest-bearing deposit accounts
|
240
|
|
|
|
|
|
|
506
|
|
|
|
|
|
|
475
|
|
|
|
|
|
||||||||||||
Other liabilities
|
3,306
|
|
|
|
|
|
|
2,943
|
|
|
|
|
|
|
2,323
|
|
|
|
|
|
||||||||||||
Total non-interest-bearing liabilities
|
3,546
|
|
|
|
|
|
|
3,449
|
|
|
|
|
|
|
2,798
|
|
|
|
|
|
||||||||||||
Total liabilities
|
58,264
|
|
|
|
|
|
|
51,063
|
|
|
|
|
|
|
45,141
|
|
|
|
|
|
||||||||||||
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total equity
|
7,888
|
|
|
|
|
|
|
5,121
|
|
|
|
|
|
|
4,764
|
|
|
|
|
|
||||||||||||
Total liabilities and equity
|
$
|
66,152
|
|
|
|
|
|
|
$
|
56,184
|
|
|
|
|
|
|
$
|
49,905
|
|
|
|
|
|
|||||||||
Interest rate spread
(6)
|
|
|
|
|
16.91
|
%
|
|
|
|
|
|
18.54
|
%
|
|
|
|
|
|
19.46
|
%
|
||||||||||||
Net interest income
|
|
|
$
|
11,320
|
|
|
|
|
|
|
$
|
10,571
|
|
|
|
|
|
|
$
|
9,564
|
|
|
|
|||||||||
Net interest margin
(7)
|
|
|
|
|
17.20
|
%
|
|
|
|
|
|
18.78
|
%
|
|
|
|
|
|
19.69
|
%
|
(1)
|
Average balances are based on monthly balances, including beginning of period balances, except where monthly balances are unavailable and quarterly balances are used. Collection of daily averages involves undue burden and expense. We believe our average balance sheet data appropriately incorporates the seasonality in the level of our loan receivables and is representative of our operations.
|
(2)
|
Average yields/rates are based on total interest income/expense over average monthly balances.
|
(3)
|
Includes average restricted cash balances of $331 million, $58 million and $55 million for the years ended
December 31, 2014
, 2013 and 2012, respectively.
|
(4)
|
Non-accrual loans are included in the average loan receivables balances.
|
(5)
|
Interest income on credit cards includes fees on loans of
$2,129 million
, $2,029 million and $1,928 million for the years ended
December 31, 2014
, 2013 and 2012, respectively.
|
(6)
|
Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
|
(7)
|
Net interest margin represents net interest income divided by average total interest-earning assets.
|
|
2014 vs. 2013
|
|
2013 vs. 2012
|
||||||||||||||||||||
|
Increase (decrease) due to change in:
|
|
Increase (decrease) due to change in:
|
||||||||||||||||||||
($ in millions)
|
Average Volume
|
|
Average Yield / Rate
|
|
Net Change
|
|
Average Volume
|
|
Average Yield / Rate
|
|
Net Change
|
||||||||||||
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest-earning cash and equivalents
|
$
|
10
|
|
|
$
|
(4
|
)
|
|
$
|
6
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Securities available for sale
|
7
|
|
|
(5
|
)
|
|
2
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Loan receivables:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Credit cards, including held for sale
|
1,092
|
|
|
(140
|
)
|
|
952
|
|
|
1,163
|
|
|
(115
|
)
|
|
1,048
|
|
||||||
Consumer installment loans
|
(30
|
)
|
|
—
|
|
|
(30
|
)
|
|
(36
|
)
|
|
(11
|
)
|
|
(47
|
)
|
||||||
Commercial credit products
|
2
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
(6
|
)
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total loan receivables
|
1,064
|
|
|
(143
|
)
|
|
921
|
|
|
1,126
|
|
|
(131
|
)
|
|
995
|
|
||||||
Change in interest income from total interest-earning assets
|
$
|
1,081
|
|
|
$
|
(152
|
)
|
|
$
|
929
|
|
|
$
|
1,135
|
|
|
$
|
(131
|
)
|
|
$
|
1,004
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest-bearing deposit accounts
|
$
|
122
|
|
|
$
|
(26
|
)
|
|
$
|
96
|
|
|
$
|
99
|
|
|
$
|
(87
|
)
|
|
$
|
12
|
|
Borrowings of consolidated securitization entities
|
(19
|
)
|
|
23
|
|
|
4
|
|
|
15
|
|
|
(32
|
)
|
|
(17
|
)
|
||||||
Related party debt
|
(73
|
)
|
|
29
|
|
|
(44
|
)
|
|
(18
|
)
|
|
20
|
|
|
2
|
|
||||||
Bank term loan
|
74
|
|
|
—
|
|
|
74
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Unsecured notes
|
50
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in interest expense from total interest-bearing liabilities
|
154
|
|
|
26
|
|
|
180
|
|
|
96
|
|
|
(99
|
)
|
|
(3
|
)
|
||||||
Change in net interest income from total interest-earning assets
|
$
|
927
|
|
|
$
|
(178
|
)
|
|
$
|
749
|
|
|
$
|
1,039
|
|
|
$
|
(32
|
)
|
|
$
|
1,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
purchase volumes, which are influenced by a number of factors including macroeconomic conditions and consumer confidence generally, our partners’ sales and our ability to increase our share of those sales;
|
•
|
payment rates, reflecting the extent to which customers maintain a credit balance;
|
•
|
charge-offs, reflecting the receivables that are deemed not to be collectible;
|
•
|
the size of our liquidity portfolio; and
|
•
|
portfolio acquisitions when we enter into new partner relationships.
|
•
|
pricing (contractual rates of interest, late fees and merchant discount rates);
|
•
|
changes to our mix of loans (e.g., the number of loans bearing promotional rates as compared to standard rates);
|
•
|
frequency of late fees incurred when account holders fail to make their minimum payment by the required due date;
|
•
|
credit performance and accrual status of our loans; and
|
•
|
yield earned on our liquidity portfolio.
|
•
|
Average interest-earning assets
. Interest-earning assets are comprised primarily of loan receivables. Average loan receivables, including loans held for sale, increased by
$4,694 million
, or
9.0%
, for the
year ended
December 31, 2014
. This increase in average loan receivables was driven primarily by higher purchase volume resulting from an increase in average active credit card accounts to
60.0 million
for the
year ended
December 31, 2014
from
56.3 million
for the
year ended
December 31, 2013
.
|
•
|
Yield on average interest-earning assets
. The yield on interest-earning assets decreased to
18.60%
for the
year ended
December 31, 2014
from
20.10%
for the
year ended
December 31, 2013
, driven primarily by an increase in our average interest-earning cash and equivalents which earn a lower yield than our loan receivables. The yield on our average loan receivables decreased slightly to
21.39%
for the
year ended
December 31, 2014
from
21.55%
for the
year ended
December 31, 2013
, reflecting the impact of higher payment rates from our customers.
|
•
|
Average interest-earning assets
. Interest-earning assets are comprised primarily of loan receivables. Average loan receivables increased by $4,858 million, or 10.2%, for the year ended December 31, 2013. This increase in average loan receivables was driven primarily by increased purchase volumes, as average annual purchase volume per account increased to $1,668 for the year ended December 31, 2013 from $1,620 for the year ended December 31, 2012, and the average active credit card accounts increased to 56.3 million for the year ended December 31, 2013 from 53.0 million for the year ended December 31, 2012. Our average account balance increased to $932 for the year ended December 31, 2013 from $897 for the year ended December 31, 2012, reflecting the increase in purchase volumes and lower payment rates. The increase in average loan receivables also reflects the addition of the assets related to the acquisition of the Phillips 66 portfolio, which was completed in the second quarter of 2013.
|
•
|
Yield on average interest-earning assets
. The yield on interest-earning assets decreased to
20.10%
for the year ended December 31, 2013 from 21.22% for the year ended December 31, 2012, driven primarily by yield on average interest-earning loan receivables and the size of our liquidity portfolio (which increased to $2,103 million for the year ended December 31, 2013 from $1,037 million for the year ended December 31, 2012). The lower interest yield on interest-earning loan receivables for the year ended December 31, 2013 was largely attributable to a decrease in late fees as a percentage of average interest-earning loan receivables.
|
•
|
the amounts outstanding of our borrowings, deposits and other funding sources;
|
•
|
the interest rate environment and its effect on interest rates paid on our funding sources; and
|
•
|
the changing mix in our funding sources among deposits, GECC financing and securitization borrowings and other third-party debt.
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Interchange revenue
|
$
|
389
|
|
|
$
|
324
|
|
|
$
|
287
|
|
Debt cancellation fees
|
275
|
|
|
324
|
|
|
309
|
|
|||
Loyalty programs
|
(281
|
)
|
|
(213
|
)
|
|
(199
|
)
|
|||
Other
|
102
|
|
|
65
|
|
|
87
|
|
|||
Total other income
|
$
|
485
|
|
|
$
|
500
|
|
|
$
|
484
|
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Employee costs
|
$
|
866
|
|
|
$
|
698
|
|
|
$
|
620
|
|
Professional fees
|
607
|
|
|
486
|
|
|
451
|
|
|||
Marketing and business development
|
460
|
|
|
269
|
|
|
208
|
|
|||
Information processing
|
212
|
|
|
193
|
|
|
165
|
|
|||
Other
|
782
|
|
|
838
|
|
|
679
|
|
|||
Total other expense
|
$
|
2,927
|
|
|
$
|
2,484
|
|
|
$
|
2,123
|
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Interest and fees on loans
|
$
|
12,216
|
|
|
$
|
11,295
|
|
|
$
|
10,300
|
|
Other income
|
485
|
|
|
500
|
|
|
484
|
|
|||
Retailer share arrangements
|
(2,575
|
)
|
|
(2,373
|
)
|
|
(1,984
|
)
|
|||
Platform revenue
|
$
|
10,126
|
|
|
$
|
9,422
|
|
|
$
|
8,800
|
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Purchase volume
|
$
|
83,591
|
|
|
$
|
75,739
|
|
|
$
|
69,240
|
|
Period-end loan receivables
|
$
|
42,308
|
|
|
$
|
39,834
|
|
|
$
|
35,952
|
|
Average loan receivables, including held for sale
|
$
|
39,278
|
|
|
$
|
35,716
|
|
|
$
|
31,907
|
|
Average active accounts (in thousands)
|
48,599
|
|
|
45,690
|
|
|
43,223
|
|
|||
|
|
|
|
|
|
||||||
Platform revenue:
|
|
|
|
|
|
||||||
Interest and fees on loans
|
$
|
9,040
|
|
|
$
|
8,317
|
|
|
$
|
7,531
|
|
Other income
|
407
|
|
|
419
|
|
|
400
|
|
|||
Retailer share arrangements
|
(2,530
|
)
|
|
(2,331
|
)
|
|
(1,943
|
)
|
|||
Platform revenue
|
$
|
6,917
|
|
|
$
|
6,405
|
|
|
$
|
5,988
|
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Purchase volume
|
$
|
12,447
|
|
|
$
|
11,360
|
|
|
$
|
10,531
|
|
Period-end loan receivables
|
$
|
12,095
|
|
|
$
|
10,893
|
|
|
$
|
10,430
|
|
Average loan receivables
|
$
|
11,171
|
|
|
$
|
10,469
|
|
|
$
|
10,000
|
|
Average active accounts (in thousands)
|
6,869
|
|
|
6,330
|
|
|
5,969
|
|
|||
|
|
|
|
|
|
||||||
Platform revenue:
|
|
|
|
|
|
||||||
Interest and fees on loans
|
$
|
1,582
|
|
|
$
|
1,506
|
|
|
$
|
1,441
|
|
Other income
|
32
|
|
|
36
|
|
|
40
|
|
|||
Retailer share arrangements
|
(41
|
)
|
|
(36
|
)
|
|
(35
|
)
|
|||
Platform revenue
|
$
|
1,573
|
|
|
$
|
1,506
|
|
|
$
|
1,446
|
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||
Purchase volume
|
$
|
7,111
|
|
|
$
|
6,759
|
|
|
$
|
6,130
|
|
Period-end loan receivables
|
$
|
6,883
|
|
|
$
|
6,527
|
|
|
$
|
5,931
|
|
Average loan receivables
|
$
|
6,652
|
|
|
$
|
6,222
|
|
|
$
|
5,642
|
|
Average active accounts (in thousands)
|
4,541
|
|
|
4,233
|
|
|
3,829
|
|
|||
|
|
|
|
|
|
||||||
Platform revenue:
|
|
|
|
|
|
||||||
Interest and fees on loans
|
$
|
1,594
|
|
|
$
|
1,472
|
|
|
$
|
1,328
|
|
Other income
|
46
|
|
|
45
|
|
|
44
|
|
|||
Retailer share arrangements
|
(4
|
)
|
|
(6
|
)
|
|
(6
|
)
|
|||
Platform revenue
|
$
|
1,636
|
|
|
$
|
1,511
|
|
|
$
|
1,366
|
|
|
2014
|
|
2013
|
|
2012
|
||||||||||||||||||
At December 31 ($ in millions)
|
Amortized
Cost
|
|
Estimated Fair Value
|
|
Amortized
Cost
|
|
Estimated Fair Value
|
|
Amortized
Cost |
|
Estimated Fair Value
|
||||||||||||
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and federal agency
|
$
|
1,252
|
|
|
$
|
1,252
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State and municipal
|
57
|
|
|
57
|
|
|
53
|
|
|
46
|
|
|
42
|
|
|
39
|
|
||||||
Residential mortgage-backed
|
271
|
|
|
271
|
|
|
183
|
|
|
175
|
|
|
144
|
|
|
149
|
|
||||||
U.S. corporate debt
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Equity
|
15
|
|
|
15
|
|
|
15
|
|
|
15
|
|
|
5
|
|
|
5
|
|
||||||
Total
|
$
|
1,598
|
|
|
$
|
1,598
|
|
|
$
|
251
|
|
|
$
|
236
|
|
|
$
|
191
|
|
|
$
|
193
|
|
($ in millions)
|
Due in 1 Year
or Less
|
|
Due After 1
through
5 Years
|
|
Due After 5
through
10 Years
|
|
Due After
10 years
|
|
Total
|
||||||||||
Debt:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government and federal agency
|
$
|
1,002
|
|
|
$
|
250
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,252
|
|
State and municipal
|
—
|
|
|
—
|
|
|
1
|
|
|
56
|
|
|
57
|
|
|||||
Residential mortgage-backed
|
—
|
|
|
—
|
|
|
—
|
|
|
271
|
|
|
271
|
|
|||||
U.S. corporate debt
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
Total
(1)
|
$
|
1,005
|
|
|
$
|
250
|
|
|
$
|
1
|
|
|
$
|
327
|
|
|
$
|
1,583
|
|
Weighted average yield
(2)
|
0.1
|
%
|
|
0.1
|
%
|
|
3.9
|
%
|
|
3.6
|
%
|
|
0.8
|
%
|
(1)
|
Amounts stated represent estimated fair value.
|
(2)
|
Weighted average yield is calculated based on the amortized cost of each security. In calculating yield, no adjustment has been made with respect to any tax exempt obligations.
|
At December 31 ($ in millions)
|
2014
|
|
(%)
|
|
2013
|
|
(%)
|
|
2012
|
|
(%)
|
|
2011
|
|
(%)
|
|
2010
|
|
(%)
|
|||||||||||||||
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Credit cards
|
$
|
58,880
|
|
|
96.1
|
%
|
|
$
|
54,958
|
|
|
96.0
|
%
|
|
$
|
49,572
|
|
|
94.8
|
%
|
|
$
|
44,287
|
|
|
92.7
|
%
|
|
$
|
40,960
|
|
|
90.6
|
%
|
Consumer installment loans
|
1,063
|
|
|
1.7
|
|
|
965
|
|
|
1.7
|
|
|
1,424
|
|
|
2.7
|
|
|
2,078
|
|
|
4.4
|
|
|
2,737
|
|
|
6.1
|
|
|||||
Commercial credit products
|
1,320
|
|
|
2.2
|
|
|
1,317
|
|
|
2.3
|
|
|
1,307
|
|
|
2.5
|
|
|
1,350
|
|
|
2.8
|
|
|
1,414
|
|
|
3.1
|
|
|||||
Other
|
23
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
26
|
|
|
0.1
|
|
|
119
|
|
|
0.2
|
|
|||||
Total loans
|
$
|
61,286
|
|
|
100.0
|
%
|
|
$
|
57,254
|
|
|
100.0
|
%
|
|
$
|
52,313
|
|
|
100.0
|
%
|
|
$
|
47,741
|
|
|
100.0
|
%
|
|
$
|
45,230
|
|
|
100.0
|
%
|
($ in millions)
|
Within 1
Year
(1)
|
|
1-5 Years
|
|
After
5 Years
|
|
Total
|
||||||||
Loans
|
|
|
|
|
|
|
|
||||||||
Credit cards
|
$
|
58,880
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
58,880
|
|
Consumer installment loans
|
21
|
|
|
566
|
|
|
476
|
|
|
1,063
|
|
||||
Commercial credit products
|
1,320
|
|
|
—
|
|
|
—
|
|
|
1,320
|
|
||||
Other
|
1
|
|
|
13
|
|
|
9
|
|
|
23
|
|
||||
Total loans
|
$
|
60,222
|
|
|
$
|
579
|
|
|
$
|
485
|
|
|
$
|
61,286
|
|
Loans due after one year at fixed interest rates
|
N/A
|
|
|
$
|
579
|
|
|
$
|
485
|
|
|
$
|
1,064
|
|
|
Loans due after one year at variable interest rates
|
N/A
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total loans due after one year
|
N/A
|
|
|
$
|
579
|
|
|
$
|
485
|
|
|
$
|
1,064
|
|
(1)
|
Credit card loans have minimum payment requirements but no stated maturity and therefore are included in the due within one year category. However, many of our credit card holders will revolve their balances, which may extend their repayment period beyond one year for balances at
December 31, 2014
.
|
($ in millions)
|
|
Loan Receivables
Outstanding
(1)
|
|
% of Total Loan
Receivables
Outstanding
|
|||
State
|
|
||||||
Texas
|
|
$
|
6,071
|
|
|
9.9
|
%
|
California
|
|
$
|
5,970
|
|
|
9.7
|
%
|
Florida
|
|
$
|
4,686
|
|
|
7.6
|
%
|
New York
|
|
$
|
3,508
|
|
|
5.7
|
%
|
Pennsylvania
|
|
$
|
2,739
|
|
|
4.5
|
%
|
(1)
|
Based on December 2014 customer statement-end balances extrapolated to
December 31, 2014
. Individual customer balances at
December 31, 2014
are not available without undue burden and expense.
|
At December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
Non-accrual loan receivables
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
1,042
|
|
|
$
|
1,003
|
|
|
$
|
1,216
|
|
Loans contractually 90 days past-due and still accruing interest
|
1,160
|
|
|
1,119
|
|
|
15
|
|
|
36
|
|
|
53
|
|
|||||
Earning TDRs
(1)
|
670
|
|
|
741
|
|
|
866
|
|
|
1,082
|
|
|
—
|
|
|||||
Non-accrual, past-due and restructured loan receivables
|
$
|
1,832
|
|
|
$
|
1,862
|
|
|
$
|
1,923
|
|
|
$
|
2,121
|
|
|
$
|
1,269
|
|
(1)
|
At December 31, 2014
and 2013, balances exclude
$54 million
and $70 million, respectively, of TDRs which are included in loans contractually 90 days past-due and still accruing interest balance. See Note 5.
Loan Receivables and Allowance for Loan Losses
to our consolidated and combined financial statements for additional information on the financial effects of TDRs for the years ended
December 31, 2014
and 2013, respectively.
|
At December 31 ($ in millions)
|
2014
|
|
2013
|
||||
Gross amount of interest income that would have been recorded in accordance with the original contractual terms
|
$
|
142
|
|
|
$
|
180
|
|
Interest income recognized
|
56
|
|
|
81
|
|
||
Total interest income foregone
|
$
|
86
|
|
|
$
|
99
|
|
Years ended December 31
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|||||
Ratio of net charge-offs to average loan receivables, including held for sale
|
4.51
|
%
|
|
4.68
|
%
|
|
4.93
|
%
|
|
5.80
|
%
|
|
9.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
January 1,
2014
|
|
Provision
Charged to
Operations
|
|
Other
(1)
|
|
Gross Charge-Offs
(2)
|
|
Recoveries
(2)
|
|
Balance at
December 31, 2014
|
||||||||||||
($ in millions)
|
|
||||||||||||||||||||||
Credit cards
|
$
|
2,827
|
|
|
$
|
2,858
|
|
(3)
|
$
|
—
|
|
|
$
|
(3,111
|
)
|
|
$
|
595
|
|
|
$
|
3,169
|
|
Consumer installment loans
|
19
|
|
|
20
|
|
|
—
|
|
|
(30
|
)
|
|
13
|
|
|
22
|
|
||||||
Commercial credit products
|
46
|
|
|
39
|
|
|
—
|
|
|
(48
|
)
|
|
8
|
|
|
45
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
2,892
|
|
|
$
|
2,917
|
|
|
$
|
—
|
|
|
$
|
(3,189
|
)
|
|
$
|
616
|
|
|
$
|
3,236
|
|
|
Balance at
January 1,
2013
|
|
Provision
Charged to
Operations
|
|
Other
(1)
|
|
Gross Charge-Offs
(2)
|
|
Recoveries
(2)
|
|
Balance at
December 31,
2013
|
||||||||||||
($ in millions)
|
|
||||||||||||||||||||||
Credit cards
|
$
|
2,174
|
|
|
$
|
2,970
|
|
|
$
|
—
|
|
|
$
|
(2,847
|
)
|
|
$
|
530
|
|
|
$
|
2,827
|
|
Consumer installment loans
|
62
|
|
|
49
|
|
|
—
|
|
|
(111
|
)
|
|
19
|
|
|
19
|
|
||||||
Commercial credit products
|
38
|
|
|
53
|
|
|
—
|
|
|
(53
|
)
|
|
8
|
|
|
46
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
2,274
|
|
|
$
|
3,072
|
|
|
$
|
—
|
|
|
$
|
(3,011
|
)
|
|
$
|
557
|
|
|
$
|
2,892
|
|
|
Balance at
January 1,
2012
|
|
Provision
Charged to
Operations
|
|
Other
(1)
|
|
Gross Charge-Offs
(2)
|
|
Recoveries
(2)
|
|
Balance at
December 31,
2012
|
||||||||||||
($ in millions)
|
|
||||||||||||||||||||||
Credit cards
|
$
|
1,902
|
|
|
$
|
2,438
|
|
|
$
|
—
|
|
|
$
|
(2,680
|
)
|
|
$
|
514
|
|
|
$
|
2,174
|
|
Consumer installment loans
|
113
|
|
|
54
|
|
|
—
|
|
|
(130
|
)
|
|
25
|
|
|
62
|
|
||||||
Commercial credit products
|
37
|
|
|
69
|
|
|
—
|
|
|
(76
|
)
|
|
8
|
|
|
38
|
|
||||||
Other
|
—
|
|
|
4
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
2,052
|
|
|
$
|
2,565
|
|
|
$
|
—
|
|
|
$
|
(2,890
|
)
|
|
$
|
547
|
|
|
$
|
2,274
|
|
|
Balance at
January 1,
2011
|
|
Provision
Charged to
Operations
|
|
Other
(1)
|
|
Gross Charge-Offs
(2)
|
|
Recoveries
(2)
|
|
Balance at
December 31,
2011
|
||||||||||||
($ in millions)
|
|
||||||||||||||||||||||
Credit cards
|
$
|
2,137
|
|
|
$
|
2,130
|
|
|
$
|
(8
|
)
|
|
$
|
(2,850
|
)
|
|
$
|
493
|
|
|
$
|
1,902
|
|
Consumer installment loans
|
176
|
|
|
54
|
|
|
—
|
|
|
(151
|
)
|
|
34
|
|
|
113
|
|
||||||
Commercial credit products
|
49
|
|
|
74
|
|
|
—
|
|
|
(99
|
)
|
|
13
|
|
|
37
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
2,362
|
|
|
$
|
2,258
|
|
|
$
|
(8
|
)
|
|
$
|
(3,100
|
)
|
|
$
|
540
|
|
|
$
|
2,052
|
|
|
Balance at
January 1,
2010
|
|
Provision
Charged to
Operations
|
|
Other
(1)
|
|
Gross Charge-Offs
(2)
|
|
Recoveries
(2)
|
|
Balance at
December 31,
2010
|
||||||||||||
($ in millions)
|
|
||||||||||||||||||||||
Credit cards
|
$
|
3,058
|
|
|
$
|
2,899
|
|
|
$
|
3
|
|
|
$
|
(4,263
|
)
|
|
$
|
440
|
|
|
$
|
2,137
|
|
Consumer installment loans
|
135
|
|
|
135
|
|
|
—
|
|
|
(131
|
)
|
|
37
|
|
|
176
|
|
||||||
Commercial credit products
|
64
|
|
|
116
|
|
|
—
|
|
|
(142
|
)
|
|
11
|
|
|
49
|
|
||||||
Other
|
—
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
3,257
|
|
|
$
|
3,151
|
|
|
$
|
3
|
|
|
$
|
(4,537
|
)
|
|
$
|
488
|
|
|
$
|
2,362
|
|
(1)
|
Other primarily included the effects of foreign currency exchange.
|
(2)
|
Net charge-offs (gross charge-offs less recoveries) in certain portfolios may exceed the beginning allowance for loan losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the period due to information becoming available during the period, which may identify further deterioration of existing loan receivables.
|
(3)
|
Includes a $61 million reduction in provision for loan losses associated with the classification of certain loan receivables as held for sale.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
||||||||||||||||||||||||
Years ended December 31 ($ in millions)
|
Average
Balance
|
|
%
|
|
Average
Rate
|
|
Average
Balance
|
|
%
|
|
Average
Rate
|
|
Average
Balance |
|
%
|
|
Average
Rate |
||||||||||||
Deposits
(1)
|
$
|
30,110
|
|
|
55.0
|
%
|
|
1.6
|
%
|
|
$
|
22,405
|
|
|
47.1
|
%
|
|
1.7
|
%
|
|
$
|
17,039
|
|
|
40.2
|
%
|
|
2.1
|
%
|
Securitized financings
|
14,835
|
|
|
27.1
|
|
|
1.4
|
|
|
16,209
|
|
|
34.0
|
|
|
1.3
|
|
|
15,172
|
|
|
35.8
|
|
|
1.5
|
|
|||
Bank term loan
|
3,056
|
|
|
5.6
|
|
|
2.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Senior unsecured notes
|
1,382
|
|
|
2.5
|
|
|
3.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Related party debt
|
5,335
|
|
|
9.8
|
|
|
2.1
|
|
|
9,000
|
|
|
18.9
|
|
|
1.7
|
|
|
10,132
|
|
|
24.0
|
|
|
1.5
|
|
|||
Total
|
$
|
54,718
|
|
|
100.0
|
%
|
|
1.7
|
%
|
|
$
|
47,614
|
|
|
100.0
|
%
|
|
1.6
|
%
|
|
$
|
42,343
|
|
|
100.0
|
%
|
|
1.8
|
%
|
(1)
|
Excludes
$240 million
, $506 million and $475 million average balance of non-interest-bearing deposits for the years ended
December 31, 2014
, 2013 and 2012, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the years ended
December 31, 2014
, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 ($ in millions)
|
2014
|
|
2013
|
|
2012
|
||||||||||||||||||||||||
Average
Balance
(1)
|
|
% of
Total
|
|
Average
Rate
|
|
Average
Balance
(1)
|
|
% of
Total
|
|
Average
Rate
|
|
Average
Balance (1) |
|
% of
Total |
|
Average
Rate |
|||||||||||||
Direct deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit (including IRA certificates of deposit)
|
$
|
10,993
|
|
|
36.5
|
%
|
|
1.3
|
%
|
|
$
|
5,889
|
|
|
26.3
|
%
|
|
0.9
|
%
|
|
$
|
284
|
|
|
1.7
|
%
|
|
0.7
|
%
|
Savings accounts (including money market accounts)
|
4,365
|
|
|
14.5
|
|
|
0.9
|
|
|
2,193
|
|
|
9.8
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Brokered deposits
|
14,752
|
|
|
49.0
|
|
|
2.0
|
|
|
14,323
|
|
|
63.9
|
|
|
2.1
|
|
|
16,755
|
|
|
98.3
|
|
|
2.1
|
|
|||
Total interest-bearing deposits
|
$
|
30,110
|
|
|
100.0
|
%
|
|
1.6
|
%
|
|
$
|
22,405
|
|
|
100.0
|
%
|
|
1.7
|
%
|
|
$
|
17,039
|
|
|
100.0
|
%
|
|
2.1
|
%
|
(1)
|
Average balances are based on monthly balances. Calculation of daily averages at this time involves undue burden and expense. We believe our average balance data is representative of our operations.
|
($ in millions)
|
3 Months or
Less
|
|
Over
3 Months
but within
6 Months
|
|
Over
6 Months
but within
12 Months
|
|
Over
12 Months
|
|
Total
|
||||||||||
U.S. deposits (less than $100,000)
(1)
|
$
|
4,677
|
|
|
$
|
1,391
|
|
|
$
|
2,838
|
|
|
$
|
11,320
|
|
|
$
|
20,226
|
|
U.S. deposits ($100,000 or more)
|
|
|
|
|
|
|
|
|
|
||||||||||
Direct deposits:
|
|
|
|
|
|
|
|
|
|
||||||||||
Certificates of deposit (including IRA certificates of deposit)
|
1,667
|
|
|
1,465
|
|
|
3,077
|
|
|
3,156
|
|
|
9,365
|
|
|||||
Savings accounts (including money market accounts)
|
4,625
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,625
|
|
|||||
Brokered deposits:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sweep accounts
|
739
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
739
|
|
|||||
Total
|
$
|
11,708
|
|
|
$
|
2,856
|
|
|
$
|
5,915
|
|
|
$
|
14,476
|
|
|
$
|
34,955
|
|
(1)
|
Includes brokered certificates of deposit for which underlying individual deposit balances are assumed to be less than $100,000.
|
($ in millions)
|
Less Than
One Year
|
|
One Year
Through
Three
Years
|
|
Four
Years
Through
Five
Years
|
|
After Five
Years
|
|
Total
|
||||||||||
Scheduled maturities of long-term borrowings—owed to securitization investors:
|
|
|
|
|
|
|
|
|
|
||||||||||
MNT
(1)
|
$
|
2,451
|
|
|
$
|
7,653
|
|
|
$
|
2,614
|
|
|
$
|
—
|
|
|
$
|
12,718
|
|
SFT
|
—
|
|
|
1,767
|
|
|
233
|
|
|
—
|
|
|
2,000
|
|
|||||
SRT
|
153
|
|
|
96
|
|
|
—
|
|
|
—
|
|
|
249
|
|
|||||
Total long-term borrowings—owed to securitization investors
|
$
|
2,604
|
|
|
$
|
9,516
|
|
|
$
|
2,847
|
|
|
$
|
—
|
|
|
$
|
14,967
|
|
(1)
|
Excludes subordinated classes of MNT notes that we own.
|
|
Note Principal Balance
($ in millions)
|
|
# of Series
Outstanding
|
|
Three-Month Rolling
Average Excess
Spread
(1)
|
||||
MNT
(2)
|
$
|
14,051
|
|
|
22
|
|
|
13.8% to 18.0%
|
|
SFT
|
$
|
2,000
|
|
|
8
|
|
|
12.7
|
%
|
SRT
|
$
|
249
|
|
|
1
|
|
|
33.9
|
%
|
(1)
|
Represents the excess spread (generally calculated as interest income collected from the applicable pool of loan receivables less applicable net charge-offs, interest expense and servicing costs, divided by the aggregate principal amount of loan receivables in the applicable pool) for each trust (or, in the case of MNT, represents a range of the excess spreads relating to the particular series issued within the trust), in each case calculated in accordance with the applicable trust or series documentation, for the three securitization monthly periods ending prior to
December 31, 2014
.
|
(2)
|
Includes subordinated classes of MNT notes that we own.
|
|
Company
|
|
Minimum to be Well-
Capitalized under Prompt
Corrective Action
Provisions
|
||||||||||
At December 31, 2014 ($ in millions)
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
||||||
Total risk-based capital
|
$
|
10,106
|
|
|
16.2
|
%
|
|
$
|
6,227
|
|
|
10.0
|
%
|
Tier 1 risk-based capital
|
$
|
9,297
|
|
|
14.9
|
%
|
|
$
|
3,736
|
|
|
6.0
|
%
|
Tier 1 leverage
(1)
|
$
|
9,297
|
|
|
12.5
|
%
|
|
$
|
3,730
|
|
|
5.0
|
%
|
Tier 1 common equity
|
$
|
9,297
|
|
|
14.9
|
%
|
|
N/A
|
|
|
N/A
|
|
(1)
|
Tier 1 leverage ratio represents total tier 1 capital as a percentage of total leveraged assets.
|
($ in millions)
|
At December 31, 2014
|
||
Equity to Tier 1 capital, Tier 1 common equity and Risk-based capital
|
|
||
Total equity
|
$
|
10,478
|
|
Unrealized (gains) / losses on investment securities
(1)
|
—
|
|
|
Disallowed goodwill and other disallowed intangible assets
(2)
|
(1,181
|
)
|
|
|
|
||
Tier 1 capital / Tier 1 common equity - Basel I
|
$
|
9,297
|
|
|
|
||
Allowance for loan losses includible in risk-based capital
|
809
|
|
|
|
|
||
Risk-based capital
|
$
|
10,106
|
|
|
|
||
Tier 1 capital - Basel I
|
$
|
9,297
|
|
Adjustments related to certain other disallowed intangible assets and deferred tax liabilities
|
(20
|
)
|
|
|
|
||
Tier 1 capital - Basel III
|
$
|
9,277
|
|
|
|
||
|
|
||
Total assets to leveraged assets
|
|
||
Total assets
|
$
|
75,707
|
|
Disallowed goodwill and other disallowed intangible assets
(2)
|
(1,181
|
)
|
|
Other
|
79
|
|
|
|
|
||
Total assets for leverage capital purposes
|
$
|
74,605
|
|
|
|
|
|
||
Risk-weighted assets - Basel I
|
$
|
62,270
|
|
Additional risk weighting adjustments related to:
|
|
||
Deferred taxes
|
1,321
|
|
|
Loan receivables delinquent over 90 days
|
581
|
|
|
Other
|
(10
|
)
|
|
|
|
||
Risk-weighted assets - Basel III
|
$
|
64,162
|
|
|
|
(1)
|
Amounts are presented net of tax.
|
(2)
|
Amounts are net of related deferred tax liabilities.
|
|
Bank
|
|
Operating Agreement
Requirement
|
||||||||||
At December 31, 2014 ($ in millions)
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
||||||
Total risk-based capital
|
$
|
7,100
|
|
|
17.1
|
%
|
|
$
|
4,568
|
|
|
11.0
|
%
|
Tier 1 risk-based capital
|
$
|
6,559
|
|
|
15.8
|
%
|
|
$
|
2,907
|
|
|
7.0
|
%
|
Tier 1 leverage
|
$
|
6,559
|
|
|
13.4
|
%
|
|
$
|
2,938
|
|
|
6.0
|
%
|
|
Bank
|
|
Operating Agreement
Requirement
|
||||||||||
At December 31, 2013 ($ in millions)
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
||||||
Total risk-based capital
|
$
|
6,010
|
|
|
17.3
|
%
|
|
$
|
3,828
|
|
|
11.0
|
%
|
Tier 1 risk-based capital
|
$
|
5,559
|
|
|
16.0
|
%
|
|
$
|
2,436
|
|
|
7.0
|
%
|
Tier 1 leverage
|
$
|
5,559
|
|
|
14.9
|
%
|
|
$
|
2,243
|
|
|
6.0
|
%
|
|
Payments Due by Period
|
||||||||||||||||||
($ in millions)
|
Total
|
|
2015
|
|
2016 - 2017
|
|
2018 - 2019
|
|
2020 and Thereafter
|
||||||||||
Deposits
(1)(2)
|
$
|
34,955
|
|
|
$
|
20,479
|
|
|
$
|
6,009
|
|
|
$
|
5,774
|
|
|
$
|
2,693
|
|
Securitized financings
(3)
|
14,967
|
|
|
2,604
|
|
|
9,516
|
|
|
2,847
|
|
|
—
|
|
|||||
Bank term loan
(4)(5)
|
8,245
|
|
|
—
|
|
|
—
|
|
|
8,245
|
|
|
—
|
|
|||||
Senior unsecured notes
|
4,475
|
|
|
124
|
|
|
744
|
|
|
1,316
|
|
|
2,291
|
|
|||||
Related party debt
(4)(5)
|
655
|
|
|
—
|
|
|
—
|
|
|
655
|
|
|
—
|
|
|||||
Capital lease obligations
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases
|
146
|
|
|
29
|
|
|
45
|
|
|
39
|
|
|
33
|
|
|||||
Total contractual obligations
(6)
|
$
|
63,444
|
|
|
$
|
23,237
|
|
|
$
|
16,314
|
|
|
$
|
18,876
|
|
|
$
|
5,017
|
|
(1)
|
Savings accounts (including money market accounts), brokered network deposits sweeps, and non-interest-bearing deposits are assumed for purposes of this table to be due in 2015 because they may be withdrawn at any time without payment of any penalty.
|
(2)
|
Deposits do not include interest payments because the amount and timing of these payments cannot be reasonably estimated as certain deposits have early withdrawal rights and also the option to roll interest payments into the balance. The average interest rate on our interest-bearing deposits for the year ended December 31, 2014 was
1.6%
. See Note 8.
Deposits
to our consolidated and combined financial statements.
|
(3)
|
The amounts shown exclude interest as the majority of our securitized financing require payments of interest based on floating rates. The average interest rate for the year ended December 31, 2014 was
1.4%
. See Note 9.
Borrowings
to our consolidated and combined financial statements.
|
(4)
|
These amounts shown exclude interest as payments of interest on these borrowings are based on floating rate. The average interest rates for the year ended December 31, 2014 were
2.4%
and
2.1%
for Bank Term Loan and related party debt, respectively. See Note 9.
Borrowings
to our consolidated and combined financial statements.
|
(5)
|
Amounts represent obligations at December 31, 2014 and do not give effect to the 2015 aggregate prepayments to the Bank Term Loan and GECC Term Loan of $2.5 billion and $206 million, respectively.
|
(6)
|
The table above does not include estimated payments of liabilities associated with uncertain income tax positions. The inherent complexity and uncertainty around the timing and amount of future outflows for uncertain tax positions do not permit a reasonably reliable estimate of payments, if any, to be made in connection with these liabilities. As of December 31, 2014, we had gross unrecognized tax benefits of
$102 million
, excluding related interest and penalties. See Note 15.
Income Taxes
to the consolidated and combined financial statements.
|
For the years ended December 31 ($ in millions, except per share data)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Interest income:
|
|
|
|
|
|
||||||
Interest and fees on loans (Note 5)
|
$
|
12,216
|
|
|
$
|
11,295
|
|
|
$
|
10,300
|
|
Interest on investment securities
|
26
|
|
|
18
|
|
|
9
|
|
|||
Total interest income
|
12,242
|
|
|
11,313
|
|
|
10,309
|
|
|||
Interest expense:
|
|
|
|
|
|
||||||
Interest on deposits
|
470
|
|
|
374
|
|
|
362
|
|
|||
Interest on borrowings of consolidated securitization entities
|
215
|
|
|
211
|
|
|
228
|
|
|||
Interest on third-party debt
|
124
|
|
|
—
|
|
|
—
|
|
|||
Interest on related party debt (Note 16)
|
113
|
|
|
157
|
|
|
155
|
|
|||
Total interest expense
|
922
|
|
|
742
|
|
|
745
|
|
|||
Net interest income
|
11,320
|
|
|
10,571
|
|
|
9,564
|
|
|||
Retailer share arrangements
|
(2,575
|
)
|
|
(2,373
|
)
|
|
(1,984
|
)
|
|||
Net interest income, after retailer share arrangements
|
8,745
|
|
|
8,198
|
|
|
7,580
|
|
|||
Provision for loan losses (Note 5)
|
2,917
|
|
|
3,072
|
|
|
2,565
|
|
|||
Net interest income, after retailer share arrangements and provision for loan losses
|
5,828
|
|
|
5,126
|
|
|
5,015
|
|
|||
Other income:
|
|
|
|
|
|
||||||
Interchange revenue
|
389
|
|
|
324
|
|
|
287
|
|
|||
Debt cancellation fees
|
275
|
|
|
324
|
|
|
309
|
|
|||
Loyalty programs
|
(281
|
)
|
|
(213
|
)
|
|
(199
|
)
|
|||
Other
|
102
|
|
|
65
|
|
|
87
|
|
|||
Total other income
|
485
|
|
|
500
|
|
|
484
|
|
|||
Other expense:
|
|
|
|
|
|
||||||
Employee costs
|
866
|
|
|
698
|
|
|
620
|
|
|||
Professional fees
|
607
|
|
|
486
|
|
|
451
|
|
|||
Marketing and business development
|
460
|
|
|
269
|
|
|
208
|
|
|||
Information processing
|
212
|
|
|
193
|
|
|
165
|
|
|||
Other
|
782
|
|
|
838
|
|
|
679
|
|
|||
Total other expense
|
2,927
|
|
|
2,484
|
|
|
2,123
|
|
|||
Earnings before provision for income taxes
|
3,386
|
|
|
3,142
|
|
|
3,376
|
|
|||
Provision for income taxes (Note 15)
|
1,277
|
|
|
1,163
|
|
|
1,257
|
|
|||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
|
|
|
|
|
|
||||||
Earnings per share
|
|
|
|
|
|
||||||
Basic
|
$
|
2.78
|
|
|
$
|
2.81
|
|
|
$
|
3.00
|
|
Diluted
|
$
|
2.78
|
|
|
$
|
2.81
|
|
|
$
|
3.00
|
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
|
|
|
|
|
|
||||||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss)
|
|
|
|
|
|
||||||
Investment securities
|
9
|
|
|
(10
|
)
|
|
2
|
|
|||
Currency translation adjustments
|
(5
|
)
|
|
(4
|
)
|
|
2
|
|
|||
Other
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Other comprehensive income (loss)
|
3
|
|
|
(15
|
)
|
|
4
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
2,112
|
|
|
$
|
1,964
|
|
|
$
|
2,123
|
|
At December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
||
|
|
|
|
||||
Assets
|
|
|
|
||||
Cash and equivalents
|
$
|
11,828
|
|
|
$
|
2,319
|
|
Investment securities (Note 4)
|
1,598
|
|
|
236
|
|
||
Loan receivables: (Notes 5 and 6)
|
|
|
|
||||
Unsecuritized loans held for investment
|
34,335
|
|
|
31,183
|
|
||
Restricted loans of consolidated securitization entities
|
26,951
|
|
|
26,071
|
|
||
Total loan receivables
|
61,286
|
|
|
57,254
|
|
||
Less: Allowance for loan losses
|
(3,236
|
)
|
|
(2,892
|
)
|
||
Loan receivables, net
|
58,050
|
|
|
54,362
|
|
||
Loan receivables held for sale (Note 5)
|
332
|
|
|
—
|
|
||
Goodwill (Note 7)
|
949
|
|
|
949
|
|
||
Intangible assets, net (Note 7)
|
519
|
|
|
300
|
|
||
Other assets
(a)
|
2,431
|
|
|
919
|
|
||
Total assets
|
$
|
75,707
|
|
|
$
|
59,085
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
||||
Deposits: (Note 8)
|
|
|
|
||||
Interest-bearing deposit accounts
|
$
|
34,847
|
|
|
$
|
25,360
|
|
Non-interest-bearing deposit accounts
|
108
|
|
|
359
|
|
||
Total deposits
|
34,955
|
|
|
25,719
|
|
||
Borrowings: (Notes 6 and 9)
|
|
|
|
||||
Borrowings of consolidated securitization entities
|
14,967
|
|
|
15,362
|
|
||
Bank term loan
|
8,245
|
|
|
—
|
|
||
Senior unsecured notes
|
3,593
|
|
|
—
|
|
||
Related party debt (Note 16)
|
655
|
|
|
8,959
|
|
||
Total borrowings
|
27,460
|
|
|
24,321
|
|
||
Accrued expenses and other liabilities
|
2,814
|
|
|
3,085
|
|
||
Total liabilities
|
$
|
65,229
|
|
|
$
|
53,125
|
|
|
|
|
|
||||
Equity:
|
|
|
|
||||
Common Stock, par share value $0.001 per share; 4,000,000,000 shares authorized, 833,764,589 shares issued and outstanding at December 31, 2014
|
$
|
1
|
|
|
$
|
—
|
|
Additional paid-in capital
|
9,408
|
|
|
—
|
|
||
Retained earnings
|
1,079
|
|
|
—
|
|
||
Parent’s net investment
|
—
|
|
|
5,973
|
|
||
Accumulated other comprehensive income (loss):
|
|
|
|
||||
Investment securities
|
—
|
|
|
(9
|
)
|
||
Currency translation adjustments
|
(8
|
)
|
|
(3
|
)
|
||
Other
|
(2
|
)
|
|
(1
|
)
|
||
Total equity
|
10,478
|
|
|
5,960
|
|
||
Total liabilities and equity
|
$
|
75,707
|
|
|
$
|
59,085
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
($ in millions, shares in thousands)
|
Shares
|
|
Amount
|
|
Additional Paid-in Capital
|
|
Parent's Net Investment
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Equity
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at January 1, 2012
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,330
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
4,328
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
2,119
|
|
|
—
|
|
|
—
|
|
|
2,119
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||
Changes in Parent's net investment
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,869
|
)
|
|
—
|
|
|
—
|
|
|
(1,869
|
)
|
||||||
Balance at December 31, 2012
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,580
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
4,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at January 1, 2013
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,580
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
4,582
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
1,979
|
|
|
—
|
|
|
—
|
|
|
1,979
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(15
|
)
|
||||||
Changes in Parent's net investment
|
—
|
|
|
—
|
|
|
—
|
|
|
(586
|
)
|
|
—
|
|
|
—
|
|
|
(586
|
)
|
||||||
Balance at December 31, 2013
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,973
|
|
|
$
|
—
|
|
|
$
|
(13
|
)
|
|
$
|
5,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at January 1, 2014
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,973
|
|
|
$
|
—
|
|
|
$
|
(13
|
)
|
|
$
|
5,960
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
1,030
|
|
|
1,079
|
|
|
—
|
|
|
2,109
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
||||||
Changes in Parent's net investment
|
—
|
|
|
—
|
|
|
—
|
|
|
(603
|
)
|
|
—
|
|
|
—
|
|
|
(603
|
)
|
||||||
Conversion of parent's net investment into common stock
|
705,271
|
|
|
1
|
|
|
6,399
|
|
|
(6,400
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of common stock
|
128,494
|
|
|
—
|
|
|
2,842
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,842
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
155
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
155
|
|
||||||
Balance at December 31, 2014
|
833,765
|
|
|
$
|
1
|
|
|
$
|
9,408
|
|
|
$
|
—
|
|
|
$
|
1,079
|
|
|
$
|
(10
|
)
|
|
$
|
10,478
|
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Cash flows - operating activities
|
|
|
|
|
|
||||||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
Adjustments to reconcile net earnings to cash provided from operating activities
|
|
|
|
|
|
||||||
Provision for loan losses
|
2,917
|
|
|
3,072
|
|
|
2,565
|
|
|||
Deferred income taxes
|
(203
|
)
|
|
(237
|
)
|
|
(18
|
)
|
|||
Depreciation and amortization
|
131
|
|
|
104
|
|
|
83
|
|
|||
(Increase) decrease in interest and fees receivable
|
68
|
|
|
(152
|
)
|
|
(541
|
)
|
|||
(Increase) decrease in other assets
|
196
|
|
|
40
|
|
|
1,180
|
|
|||
Increase (decrease) in accrued expenses and other liabilities
|
(172
|
)
|
|
810
|
|
|
189
|
|
|||
All other operating activities
|
294
|
|
|
63
|
|
|
60
|
|
|||
Cash from operating activities
|
5,340
|
|
|
5,679
|
|
|
5,637
|
|
|||
|
|
|
|
|
|
||||||
Cash flows - investing activities
|
|
|
|
|
|
||||||
Maturity and redemption of investment securities
|
27
|
|
|
40
|
|
|
40
|
|
|||
Purchases of investment securities
|
(1,376
|
)
|
|
(100
|
)
|
|
(31
|
)
|
|||
Acquisition of loan receivables
|
—
|
|
|
(206
|
)
|
|
(815
|
)
|
|||
Net cash from principal business purchased (Note 3)
|
—
|
|
|
6,393
|
|
|
—
|
|
|||
Net (increase) decrease in restricted cash and equivalents
|
(1,028
|
)
|
|
(20
|
)
|
|
(17
|
)
|
|||
Net (increase) decrease in loan receivables
|
(8,755
|
)
|
|
(7,355
|
)
|
|
(5,902
|
)
|
|||
Proceeds from sale of loan receivables
|
1,510
|
|
|
289
|
|
|
379
|
|
|||
All other investing activities
|
(446
|
)
|
|
(107
|
)
|
|
(106
|
)
|
|||
Cash (used for) from investing activities
|
(10,068
|
)
|
|
(1,066
|
)
|
|
(6,452
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows - financing activities
|
|
|
|
|
|
||||||
Borrowings of consolidated securitization entities
|
|
|
|
|
|
||||||
Proceeds from issuance of securitized debt
|
5,176
|
|
|
866
|
|
|
7,799
|
|
|||
Maturities and repayment of securitized debt
|
(5,569
|
)
|
|
(2,708
|
)
|
|
(4,775
|
)
|
|||
Third-party debt
|
|
|
|
|
|
||||||
Proceeds from issuance of third-party debt
|
12,343
|
|
|
—
|
|
|
—
|
|
|||
Maturities and repayment of third-party debt
|
(505
|
)
|
|
—
|
|
|
—
|
|
|||
Related party debt
|
|
|
|
|
|
||||||
Proceeds from borrowings of related party debt
|
1,615
|
|
|
—
|
|
|
—
|
|
|||
Maturities and repayment of related party debt
|
(10,015
|
)
|
|
(1,649
|
)
|
|
(1,099
|
)
|
|||
Net increase (decrease) in deposits
|
9,088
|
|
|
481
|
|
|
972
|
|
|||
Proceeds from initial public offering
|
2,842
|
|
|
—
|
|
|
—
|
|
|||
Net transfers (to) from Parent
|
(603
|
)
|
|
(586
|
)
|
|
(1,869
|
)
|
|||
All other financing activities
|
(135
|
)
|
|
(32
|
)
|
|
(66
|
)
|
|||
Cash from (used for) financing activities
|
14,237
|
|
|
(3,628
|
)
|
|
962
|
|
|||
|
|
|
|
|
|
||||||
Increase in cash and equivalents
|
9,509
|
|
|
985
|
|
|
147
|
|
|||
Cash and equivalents at beginning of year
|
2,319
|
|
|
1,334
|
|
|
1,187
|
|
|||
Cash and equivalents at end of year
|
$
|
11,828
|
|
|
$
|
2,319
|
|
|
$
|
1,334
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of cash flow information
|
|
|
|
|
|
||||||
Cash paid during the year for interest
|
$
|
(839
|
)
|
|
$
|
(729
|
)
|
|
$
|
(736
|
)
|
Cash paid during the year for income taxes
|
$
|
(1,787
|
)
|
|
$
|
(1,183
|
)
|
|
$
|
(228
|
)
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||||||||||||||||||
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
||||||||||||
|
Amortized
|
|
|
unrealized
|
|
|
unrealized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
unrealized
|
|
|
unrealized
|
|
|
Estimated
|
|
||||||||
($ in millions)
|
cost
|
|
|
gains
|
|
|
losses
|
|
|
fair value
|
|
|
cost
|
|
|
gains
|
|
|
losses
|
|
|
fair value
|
|
||||||||
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. government and federal agency
|
$
|
1,252
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,252
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State and municipal
|
57
|
|
|
1
|
|
|
(1
|
)
|
|
57
|
|
|
53
|
|
|
—
|
|
|
(7
|
)
|
|
46
|
|
||||||||
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
mortgage-backed
(a)
|
271
|
|
|
3
|
|
|
(3
|
)
|
|
271
|
|
|
183
|
|
|
1
|
|
|
(9
|
)
|
|
175
|
|
||||||||
U.S. corporate debt
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Equity
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||||||
Total
|
$
|
1,598
|
|
|
$
|
4
|
|
|
$
|
(4
|
)
|
|
$
|
1,598
|
|
|
$
|
251
|
|
|
$
|
1
|
|
|
$
|
(16
|
)
|
|
$
|
236
|
|
(a)
|
At
December 31, 2014
and
2013
all of our residential mortgage-backed securities related to securities issued by government-sponsored entities and are pledged by the Bank as collateral to the Federal Reserve to secure Federal Reserve Discount Window advances. All residential mortgage-backed securities are collateralized by U.S. mortgages.
|
|
In loss position for
|
||||||||||||||
|
Less than 12 months
|
|
12 months or more
|
||||||||||||
|
|
|
Gross
|
|
|
|
|
Gross
|
|
||||||
|
Estimated
|
|
|
unrealized
|
|
|
Estimated
|
|
|
unrealized
|
|
||||
($ in millions)
|
fair value
|
|
|
losses
|
|
|
fair value
|
|
|
losses
|
|
||||
|
|
|
|
|
|
|
|
||||||||
At December 31, 2014
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
|
|
|
|
|
|
||||||||
State and municipal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
(1
|
)
|
Residential mortgage-backed
|
30
|
|
|
—
|
|
|
85
|
|
|
(3
|
)
|
||||
U.S. government and federal agency
|
700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
730
|
|
|
$
|
—
|
|
|
$
|
119
|
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2013
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
|
|
|
|
|
|
||||||||
State and municipal
|
$
|
23
|
|
|
$
|
(2
|
)
|
|
$
|
20
|
|
|
$
|
(5
|
)
|
Residential mortgage-backed
|
127
|
|
|
(7
|
)
|
|
20
|
|
|
(2
|
)
|
||||
Equity
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
164
|
|
|
$
|
(9
|
)
|
|
$
|
40
|
|
|
$
|
(7
|
)
|
|
Amortized
|
|
|
Estimated
|
|
||
At December 31, 2014 ($ in millions)
|
cost
|
|
|
fair value
|
|
||
|
|
|
|
||||
Due
|
|
|
|
||||
Within one year
|
$
|
1,005
|
|
|
$
|
1,005
|
|
After one year through five years
|
$
|
250
|
|
|
$
|
250
|
|
After five years through ten years
|
$
|
1
|
|
|
$
|
1
|
|
After ten years
|
$
|
56
|
|
|
$
|
56
|
|
At December 31 ($ in millions)
|
2014
|
|
2013
|
||||
|
|
|
|
||||
Credit cards
|
$
|
58,880
|
|
|
$
|
54,958
|
|
Consumer installment loans
|
1,063
|
|
|
965
|
|
||
Commercial credit products
|
1,320
|
|
|
1,317
|
|
||
Other
|
23
|
|
|
14
|
|
||
Total loan receivables, before allowance for losses
(a)(b)
|
$
|
61,286
|
|
|
$
|
57,254
|
|
(a)
|
Total loan receivables include
$27.0 billion
and
$26.1 billion
of restricted loans of consolidated securitization entities at
December 31, 2014
and
2013
, respectively. See Note 6.
Variable Interest Entities
for further information on these restricted loans.
|
(b)
|
At
December 31, 2014
and
2013
, loan receivables included deferred expense, net of deferred income, of
$46
million and
$8
million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions)
|
Balance at January 1, 2014
|
|
|
Provision charged to operations
|
|
|
Gross charge-offs
|
|
|
Recoveries
|
|
|
Balance at December 31, 2014
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit cards
|
$
|
2,827
|
|
|
$
|
2,858
|
|
(a)
|
$
|
(3,111
|
)
|
|
$
|
595
|
|
|
$
|
3,169
|
|
Consumer installment loans
|
19
|
|
|
20
|
|
|
(30
|
)
|
|
13
|
|
|
22
|
|
|||||
Commercial credit products
|
46
|
|
|
39
|
|
|
(48
|
)
|
|
8
|
|
|
45
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
2,892
|
|
|
$
|
2,917
|
|
|
$
|
(3,189
|
)
|
|
$
|
616
|
|
|
$
|
3,236
|
|
($ in millions)
|
Balance at January 1, 2013
|
|
|
Provision charged to operations
|
|
|
Gross charge-offs
|
|
|
Recoveries
|
|
|
Balance at December 31, 2013
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit cards
|
$
|
2,174
|
|
|
$
|
2,970
|
|
|
$
|
(2,847
|
)
|
|
$
|
530
|
|
|
$
|
2,827
|
|
Consumer installment loans
|
62
|
|
|
49
|
|
|
(111
|
)
|
|
19
|
|
|
19
|
|
|||||
Commercial credit products
|
38
|
|
|
53
|
|
|
(53
|
)
|
|
8
|
|
|
46
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
2,274
|
|
|
$
|
3,072
|
|
|
$
|
(3,011
|
)
|
|
$
|
557
|
|
|
$
|
2,892
|
|
($ in millions)
|
Balance at January 1, 2012
|
|
|
Provision charged to operations
|
|
|
Gross charge-offs
|
|
|
Recoveries
|
|
|
Balance at December 31, 2012
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit cards
|
$
|
1,902
|
|
|
$
|
2,438
|
|
|
$
|
(2,680
|
)
|
|
$
|
514
|
|
|
$
|
2,174
|
|
Consumer installment loans
|
113
|
|
|
54
|
|
|
(130
|
)
|
|
25
|
|
|
62
|
|
|||||
Commercial credit products
|
37
|
|
|
69
|
|
|
(76
|
)
|
|
8
|
|
|
38
|
|
|||||
Other
|
—
|
|
|
4
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
2,052
|
|
|
$
|
2,565
|
|
|
$
|
(2,890
|
)
|
|
$
|
547
|
|
|
$
|
2,274
|
|
(a)
|
Includes a
$61 million
reduction in provision for loan losses associated with the classification of certain loan receivables as held for sale.
|
At December 31, 2014 ($ in millions)
|
30-89 days delinquent
|
|
|
90 or more days delinquent
|
|
|
Total Past Due
|
|
|
90 or more days delinquent and accruing
|
|
|
Total non-accruing (a)
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit cards
|
$
|
1,331
|
|
|
$
|
1,147
|
|
|
$
|
2,478
|
|
|
$
|
1,147
|
|
|
$
|
—
|
|
Consumer installment loans
|
15
|
|
|
2
|
|
|
17
|
|
|
—
|
|
|
2
|
|
|||||
Commercial credit products
|
28
|
|
|
13
|
|
|
41
|
|
|
13
|
|
|
—
|
|
|||||
Total delinquent loans
|
$
|
1,374
|
|
|
$
|
1,162
|
|
|
$
|
2,536
|
|
|
$
|
1,160
|
|
|
$
|
2
|
|
Percentage of total loan receivables
(a)
|
2.2
|
%
|
|
1.9
|
%
|
|
4.1
|
%
|
|
1.9
|
%
|
|
—
|
%
|
At December 31, 2013 ($ in millions)
|
30-89 days delinquent
|
|
|
90 or more days delinquent
|
|
|
Total Past Due
|
|
|
90 or more days delinquent and accruing
|
|
|
Total non-accruing (a)
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit cards
|
$
|
1,327
|
|
|
$
|
1,105
|
|
|
$
|
2,432
|
|
|
$
|
1,105
|
|
|
$
|
—
|
|
Consumer installment loans
|
12
|
|
|
2
|
|
|
14
|
|
|
—
|
|
|
2
|
|
|||||
Commercial credit products
|
28
|
|
|
14
|
|
|
42
|
|
|
14
|
|
|
—
|
|
|||||
Total delinquent loans
|
$
|
1,367
|
|
|
$
|
1,121
|
|
|
$
|
2,488
|
|
|
$
|
1,119
|
|
|
$
|
2
|
|
Percentage of total loan receivables
(a)
|
2.4
|
%
|
|
2.0
|
%
|
|
4.3
|
%
|
|
2.0
|
%
|
|
—
|
%
|
(a)
|
Percentages are calculated based on period-end balances.
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
||
Credit cards
|
$
|
423
|
|
|
$
|
506
|
|
Consumer installment loans
|
—
|
|
|
26
|
|
||
Commercial credit products
|
5
|
|
|
7
|
|
||
Total
|
$
|
428
|
|
|
$
|
539
|
|
At December 31, 2014 ($ in millions)
|
Total recorded
investment
|
|
|
Related allowance
|
|
|
Net recorded investment
|
|
|
Unpaid principal balance
|
|
||||
Credit cards
|
$
|
716
|
|
|
$
|
(217
|
)
|
|
$
|
499
|
|
|
$
|
613
|
|
Consumer installment loans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Commercial credit products
|
8
|
|
|
(3
|
)
|
|
5
|
|
|
8
|
|
||||
Total
|
$
|
724
|
|
|
$
|
(220
|
)
|
|
$
|
504
|
|
|
$
|
621
|
|
At December 31, 2013 ($ in millions)
|
Total recorded
investment
|
|
|
Related allowance
|
|
|
Net recorded investment
|
|
|
Unpaid principal balance
|
|
||||
Credit cards
|
$
|
799
|
|
|
$
|
(246
|
)
|
|
$
|
553
|
|
|
$
|
692
|
|
Consumer installment loans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Commercial credit products
|
12
|
|
|
(5
|
)
|
|
7
|
|
|
12
|
|
||||
Total
|
$
|
811
|
|
|
$
|
(251
|
)
|
|
$
|
560
|
|
|
$
|
704
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
2014
|
|
2013
|
|
2012
|
||||||||||||||||||||||||
($ in millions)
|
Interest income recognized during period when loans were impaired
|
|
Interest income that would have been recorded with original terms
|
|
Average recorded investment
|
|
|
Interest income recognized during period when loans were impaired
|
|
Interest income that would have been recorded with original terms
|
|
Average recorded investment
|
|
|
Interest income recognized during period when loans were impaired
|
|
Interest income that would have been recorded with original terms
|
|
Average recorded investment
|
|
|||||||||
Credit cards
|
$
|
56
|
|
$
|
140
|
|
$
|
745
|
|
|
$
|
79
|
|
$
|
175
|
|
$
|
890
|
|
|
$
|
75
|
|
$
|
173
|
|
$
|
908
|
|
Consumer installment loans
|
—
|
|
—
|
|
—
|
|
|
1
|
|
3
|
|
—
|
|
|
1
|
|
4
|
|
80
|
|
|||||||||
Commercial credit products
|
—
|
|
2
|
|
10
|
|
|
1
|
|
2
|
|
12
|
|
|
1
|
|
3
|
|
5
|
|
|||||||||
Total
|
$
|
56
|
|
$
|
142
|
|
$
|
755
|
|
|
$
|
81
|
|
$
|
180
|
|
$
|
902
|
|
|
$
|
77
|
|
$
|
180
|
|
$
|
993
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||
($ in millions)
|
Accounts defaulted
|
|
|
Loans defaulted
|
|
|
Accounts defaulted
|
|
|
Loans defaulted
|
|
|
Accounts defaulted
|
|
|
Loans defaulted
|
|
|||
Credit cards
|
29,313
|
|
|
$
|
60
|
|
|
30,640
|
|
|
$
|
56
|
|
|
43,609
|
|
|
$
|
82
|
|
Consumer installment loans
|
—
|
|
|
—
|
|
|
98
|
|
|
3
|
|
|
129
|
|
|
4
|
|
|||
Commercial credit products
|
159
|
|
|
1
|
|
|
42
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|||
Total
|
29,472
|
|
|
$
|
61
|
|
|
30,780
|
|
|
$
|
59
|
|
|
43,833
|
|
|
$
|
86
|
|
At December 31
|
2014
|
|
2013
|
||||||||||||||
|
661 or
|
|
|
601 to
|
|
|
600 or
|
|
|
661 or
|
|
|
601 to
|
|
|
600 or
|
|
|
higher
|
|
|
660
|
|
|
less
|
|
|
higher
|
|
|
660
|
|
|
less
|
|
Credit cards
|
72.5
|
%
|
|
19.9
|
%
|
|
7.6
|
%
|
|
71.7
|
%
|
|
20.0
|
%
|
|
8.3
|
%
|
Consumer installment loans
|
78.9
|
%
|
|
15.7
|
%
|
|
5.4
|
%
|
|
78.2
|
%
|
|
15.5
|
%
|
|
6.3
|
%
|
Commercial credit products
|
86.5
|
%
|
|
8.6
|
%
|
|
4.8
|
%
|
|
85.3
|
%
|
|
9.4
|
%
|
|
5.3
|
%
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Credit cards
|
$
|
11,967
|
|
|
$
|
11,015
|
|
|
$
|
9,967
|
|
Consumer installment loans
|
99
|
|
|
129
|
|
|
176
|
|
|||
Commercial credit products
|
149
|
|
|
150
|
|
|
156
|
|
|||
Other
|
1
|
|
|
1
|
|
|
1
|
|
|||
Total
|
$
|
12,216
|
|
|
$
|
11,295
|
|
|
$
|
10,300
|
|
At December 31 ($ in millions)
|
2014
|
|
2013
|
||||
Assets
|
|
|
|
||||
Loan receivables, net
(a)
|
$
|
25,645
|
|
|
$
|
24,766
|
|
Other assets
|
1,134
|
|
|
20
|
|
||
Total
|
$
|
26,779
|
|
|
$
|
24,786
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Borrowings
|
$
|
14,967
|
|
|
$
|
15,362
|
|
Other liabilities
|
368
|
|
|
228
|
|
||
Total
|
$
|
15,335
|
|
|
$
|
15,590
|
|
(a)
|
Includes
$1.3 billion
of related allowance for loan losses for both periods presented, resulting in gross restricted loans of
$27.0 billion
and
$26.1 billion
at
December 31, 2014
and
2013
, respectively.
|
($ in millions)
|
2014
|
|
2013
|
||||
Balance at January 1
|
$
|
949
|
|
|
$
|
936
|
|
Acquisitions
|
—
|
|
|
13
|
|
||
Balance at December 31
|
$
|
949
|
|
|
$
|
949
|
|
|
2014
|
|
2013
|
||||||||||||||||||||
At December 31 ($ in millions)
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Net
|
|
|
Gross carrying amount
|
|
|
Accumulated amortization
|
|
|
Net
|
|
||||||
Customer-related
|
$
|
849
|
|
|
$
|
(405
|
)
|
|
$
|
444
|
|
|
$
|
586
|
|
|
$
|
(312
|
)
|
|
$
|
274
|
|
Capitalized software
|
120
|
|
|
(45
|
)
|
|
75
|
|
|
55
|
|
|
(29
|
)
|
|
26
|
|
||||||
Total
|
$
|
969
|
|
|
$
|
(450
|
)
|
|
$
|
519
|
|
|
$
|
641
|
|
|
$
|
(341
|
)
|
|
$
|
300
|
|
($ in millions)
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|||||
Amortization expense
|
$
|
116
|
|
|
$
|
114
|
|
|
$
|
92
|
|
|
$
|
64
|
|
|
$
|
54
|
|
|
2014
|
|
2013
|
||||||||||
At December 31 ($ in millions)
|
Amount
|
|
Average rate
(a)
|
|
Amount
|
|
Average rate
(a)
|
||||||
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits
|
$
|
34,847
|
|
|
1.6
|
%
|
|
$
|
25,360
|
|
|
1.7
|
%
|
Non-interest-bearing deposits
|
108
|
|
|
—
|
|
|
359
|
|
|
—
|
|
||
Total deposits
|
$
|
34,955
|
|
|
|
|
$
|
25,719
|
|
|
|
(a)
|
Based on interest expense for the years ended
December 31, 2014
and
2013
and average deposits balances.
|
($ in millions)
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Thereafter
|
|
||||||
Deposits
|
$
|
11,626
|
|
|
$
|
3,453
|
|
|
$
|
2,556
|
|
|
$
|
1,894
|
|
|
$
|
3,880
|
|
|
$
|
2,693
|
|
|
|
|
2014
|
|
2013
|
|
||||||||||
At December 31 ($ in millions)
|
Maturity date
|
|
Amount
(a)
|
|
Weighted average interest rate
|
|
Amount
(a)
|
|
Weighted average interest rate
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||
Borrowings of consolidated securitization entities
|
2015 - 2019
|
|
$
|
14,967
|
|
|
1.2
|
%
|
|
$
|
15,362
|
|
|
1.2
|
%
|
|
Bank term loan
|
2019
|
|
8,245
|
|
|
2.1
|
%
|
|
—
|
|
|
—
|
%
|
|
||
Senior unsecured notes
|
2017 - 2024
|
|
3,593
|
|
|
3.4
|
%
|
|
—
|
|
|
—
|
%
|
|
||
Related party debt
|
2019
|
|
655
|
|
|
4.2
|
%
|
|
8,959
|
|
|
1.7
|
%
|
(b)
|
||
Total borrowings
|
|
|
$
|
27,460
|
|
|
|
|
$
|
24,321
|
|
|
|
|
(a)
|
The amounts presented for outstanding borrowings include unamortized debt premiums and discounts.
|
(b)
|
Represents average rate based on interest expense for the year ended
December 31, 2013
and average borrowing balance.
|
($ in millions)
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Thereafter
|
|
||||||
Borrowings of consolidated securitization entities
|
$
|
2,604
|
|
|
$
|
2,165
|
|
|
$
|
7,351
|
|
|
$
|
1,684
|
|
|
$
|
1,163
|
|
|
$
|
—
|
|
At December 31, 2014 ($ in millions)
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Investment securities
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
|
|
|
|
|
|
||||||||
U.S. Government and Federal Agency
|
$
|
—
|
|
|
$
|
1,252
|
|
|
$
|
—
|
|
|
$
|
1,252
|
|
State and municipal
|
—
|
|
|
—
|
|
|
57
|
|
|
57
|
|
||||
Residential mortgage-backed
|
—
|
|
|
271
|
|
|
—
|
|
|
271
|
|
||||
U.S. Corporate
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
||||
Equity
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||
Total
|
$
|
15
|
|
|
$
|
1,523
|
|
|
$
|
60
|
|
|
$
|
1,598
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2013 ($ in millions)
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Investment securities
|
|
|
|
|
|
|
|
||||||||
Debt
|
|
|
|
|
|
|
|
||||||||
State and municipal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
46
|
|
Residential mortgage-backed
|
—
|
|
|
175
|
|
|
—
|
|
|
175
|
|
||||
Equity
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||
Total
|
$
|
15
|
|
|
$
|
175
|
|
|
$
|
46
|
|
|
$
|
236
|
|
Years ended December 31, ($ in millions)
|
2014
|
|
|
2013
|
|
||
|
|
|
|
||||
Balance at beginning of period
|
$
|
46
|
|
|
$
|
39
|
|
Net realized/unrealized gains (losses) included in accumulated other comprehensive income
|
7
|
|
|
(4
|
)
|
||
Purchases
|
11
|
|
|
16
|
|
||
Settlements
|
(4
|
)
|
|
(5
|
)
|
||
Balance at end of period
|
$
|
60
|
|
|
$
|
46
|
|
|
|
|
|
||||
Net change in unrealized gains (losses) relating to instruments still held at December 31
|
$
|
7
|
|
|
$
|
(4
|
)
|
|
Carrying
|
|
|
Corresponding fair value amount
|
|||||||||||||||
At December 31, 2014
($ in millions)
|
value
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial assets for which carrying values equal or approximate fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and equivalents
(c)
|
$
|
11,828
|
|
|
$
|
11,828
|
|
|
$
|
8,153
|
|
|
$
|
3,675
|
|
|
$
|
—
|
|
Other assets
(a)
|
$
|
1,104
|
|
|
$
|
1,104
|
|
|
$
|
1,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial assets carried at other than fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loan receivables, net
(d)
|
$
|
58,050
|
|
|
$
|
64,113
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
64,113
|
|
Loan receivables held for sale
(d)
|
$
|
332
|
|
|
$
|
351
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
351
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial liabilities carried at other than fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits
|
$
|
34,955
|
|
|
$
|
35,442
|
|
|
$
|
—
|
|
|
$
|
35,442
|
|
|
$
|
—
|
|
Borrowings of consolidated securitization entities
|
$
|
14,967
|
|
|
$
|
14,985
|
|
|
$
|
—
|
|
|
$
|
7,912
|
|
|
$
|
7,073
|
|
Bank term loan
|
$
|
8,245
|
|
|
$
|
8,204
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,204
|
|
Senior unsecured notes
|
$
|
3,593
|
|
|
$
|
3,660
|
|
|
$
|
—
|
|
|
$
|
3,660
|
|
|
$
|
—
|
|
Related party debt
|
$
|
655
|
|
|
$
|
655
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
655
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Carrying
|
|
|
Corresponding fair value amount
|
|||||||||||||||
At December 31, 2013
($ in millions)
|
value
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial assets for which carrying values equal or approximate fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and equivalents
|
$
|
2,319
|
|
|
$
|
2,319
|
|
|
$
|
2,319
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other assets
(a)
|
$
|
76
|
|
|
$
|
76
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial assets carried at other than fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loan receivables, net
|
$
|
54,362
|
|
|
$
|
60,344
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60,344
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial liabilities carried at other than fair value:
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits
|
$
|
25,719
|
|
|
$
|
25,994
|
|
|
$
|
—
|
|
|
$
|
25,994
|
|
|
$
|
—
|
|
Borrowings of consolidated securitization entities
|
$
|
15,362
|
|
|
$
|
15,308
|
|
|
$
|
—
|
|
|
$
|
8,206
|
|
|
$
|
7,102
|
|
Related party debt
(b)
|
$
|
8,959
|
|
|
$
|
209
|
|
|
$
|
—
|
|
|
$
|
209
|
|
|
$
|
—
|
|
(a)
|
This balance relates to restricted cash and equivalents which is included in other assets.
|
(b)
|
The fair value of the related party debt at December 31, 2013 relates to
$195 million
of debt issued by one of our securitization entities which was held by a GECC affiliate. This related party debt was repurchased by the Company during the
year ended
December 31, 2014
and is now eliminated in our consolidated and combined financial statements at
December 31, 2014
.
|
(c)
|
For cash and cash equivalents carrying value approximates fair value due to the liquid nature and short maturity of these instruments. Cash equivalents classified as Level 2 represent U.S. Government and Federal Agency debt securities with original maturities of three months or less.
|
(d)
|
Under certain retail partner program agreements, the expected sales proceeds related to the sale of their credit card portfolio may be limited to the amounts owed by our customers, which may be less than the fair value indicated above.
|
At December 31, 2014 ($ in millions)
|
Actual
|
|
Minimum for capital
adequacy purposes
(b)
|
|
Minimum to be well-capitalized under prompt corrective action provisions
|
|||||||||||||||
|
Amount
|
|
Ratio
(a)
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total risk-based capital
|
$
|
7,100
|
|
|
17.1
|
%
|
|
$
|
3,322
|
|
|
8.0
|
%
|
|
$
|
4,152
|
|
|
10.0
|
%
|
Tier 1 risk-based capital
|
$
|
6,559
|
|
|
15.8
|
%
|
|
$
|
1,661
|
|
|
4.0
|
%
|
|
$
|
2,491
|
|
|
6.0
|
%
|
Tier 1 leverage
|
$
|
6,559
|
|
|
13.4
|
%
|
|
$
|
1,959
|
|
|
4.0
|
%
|
|
$
|
2,449
|
|
|
5.0
|
%
|
At December 31, 2013 ($ in millions)
|
Actual
|
|
Minimum for capital
adequacy purposes
(b)
|
|
Minimum to be well-capitalized under prompt corrective action provisions
|
|||||||||||||||
|
Amount
|
|
Ratio
(a)
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total risk-based capital
|
$
|
6,010
|
|
|
17.3
|
%
|
|
$
|
2,784
|
|
|
8.0
|
%
|
|
$
|
3,480
|
|
|
10.0
|
%
|
Tier 1 risk-based capital
|
$
|
5,559
|
|
|
16.0
|
%
|
|
$
|
1,392
|
|
|
4.0
|
%
|
|
$
|
2,088
|
|
|
6.0
|
%
|
Tier 1 leverage
|
$
|
5,559
|
|
|
14.9
|
%
|
|
$
|
1,495
|
|
|
4.0
|
%
|
|
$
|
1,869
|
|
|
5.0
|
%
|
(a)
|
Represent Basel I capital ratios calculated for the Bank.
|
(b)
|
In addition to the Basel I requirements, under the Bank’s Operating Agreement with the OCC entered into on January 11, 2013, the Bank must maintain minimum levels of capital as follows:
|
At December 31 ($ in millions)
|
2014
|
|
2013
|
||||||||||
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
||
Total risk-based capital
|
$
|
4,568
|
|
|
11.0
|
%
|
|
$
|
3,828
|
|
|
11.0
|
%
|
Tier 1 risk-based capital
|
$
|
2,907
|
|
|
7.0
|
%
|
|
$
|
2,436
|
|
|
7.0
|
%
|
Tier 1 leverage
|
$
|
2,938
|
|
|
6.0
|
%
|
|
$
|
2,243
|
|
|
6.0
|
%
|
|
Years ended December 31,
|
||||||||||
(in millions, except per share data)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding, basic
|
757.4
|
|
|
705.3
|
|
|
705.3
|
|
|||
Effect of dilutive securities
|
0.2
|
|
|
—
|
|
|
—
|
|
|||
Weighted average common shares outstanding, dilutive
|
757.6
|
|
|
705.3
|
|
|
705.3
|
|
|||
|
|
|
|
|
|
||||||
Earnings per basic common share
|
$
|
2.78
|
|
|
$
|
2.81
|
|
|
$
|
3.00
|
|
Earnings per diluted common share
|
$
|
2.78
|
|
|
$
|
2.81
|
|
|
$
|
3.00
|
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
U.S.
|
$
|
3,377
|
|
|
$
|
3,124
|
|
|
$
|
3,352
|
|
Non-U.S.
|
9
|
|
|
18
|
|
|
24
|
|
|||
Earnings before provision for income taxes
|
$
|
3,386
|
|
|
$
|
3,142
|
|
|
$
|
3,376
|
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Current provision for income taxes
|
|
|
|
|
|
||||||
U.S. Federal
|
$
|
(1,320
|
)
|
|
$
|
(1,280
|
)
|
|
$
|
(1,152
|
)
|
Non-U.S.
|
(7
|
)
|
|
(5
|
)
|
|
(7
|
)
|
|||
U.S. state and local
|
(153
|
)
|
|
(115
|
)
|
|
(116
|
)
|
|||
Total current provision for income taxes
|
(1,480
|
)
|
|
(1,400
|
)
|
|
(1,275
|
)
|
|||
|
|
|
|
|
|
||||||
Deferred benefit (provision) for income taxes
|
|
|
|
|
|
||||||
U.S. Federal
|
181
|
|
|
215
|
|
|
16
|
|
|||
Non-U.S.
|
(1
|
)
|
|
1
|
|
|
—
|
|
|||
U.S. state and local
|
23
|
|
|
21
|
|
|
2
|
|
|||
Deferred benefit (provision) for income taxes from temporary differences
|
203
|
|
|
237
|
|
|
18
|
|
|||
Total provision for income taxes
|
$
|
(1,277
|
)
|
|
$
|
(1,163
|
)
|
|
$
|
(1,257
|
)
|
For the years ended December 31
|
2014
|
|
|
2013
|
|
|
2012
|
|
U.S. federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
U.S. state and local income taxes, net of federal benefit
|
2.5
|
%
|
|
1.9
|
%
|
|
2.2
|
%
|
All other, net
|
0.2
|
%
|
|
0.1
|
%
|
|
—
|
%
|
Effective tax rate
|
37.7
|
%
|
|
37.0
|
%
|
|
37.2
|
%
|
At December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
||
Assets
|
|
|
|
||||
Allowance for loan losses
|
$
|
1,147
|
|
|
$
|
1,027
|
|
Reward programs
|
68
|
|
|
34
|
|
||
State and local income taxes
|
56
|
|
|
40
|
|
||
State net operating losses
|
12
|
|
|
—
|
|
||
Other assets
|
100
|
|
|
55
|
|
||
Total deferred income tax assets before valuation allowance
|
1,383
|
|
|
1,156
|
|
||
Valuation allowance
|
(10
|
)
|
|
—
|
|
||
Total deferred income tax assets
|
1,373
|
|
|
1,156
|
|
||
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Original issue discount
|
(488
|
)
|
|
(508
|
)
|
||
Goodwill and identifiable intangibles
|
(229
|
)
|
|
(216
|
)
|
||
Other liabilities
|
(53
|
)
|
|
(24
|
)
|
||
Total deferred income tax liabilities
|
(770
|
)
|
|
(748
|
)
|
||
Net deferred income tax assets
|
$
|
603
|
|
|
$
|
408
|
|
($ in millions)
|
2014
|
|
|
2013
|
|
||
Balance at January 1
|
$
|
202
|
|
|
$
|
167
|
|
Additions:
|
|
|
|
||||
Tax positions of the current year
|
75
|
|
|
59
|
|
||
Tax positions of prior years
|
20
|
|
|
—
|
|
||
Reductions:
|
|
|
|
||||
Prior year tax positions
|
(194
|
)
|
|
—
|
|
||
Settlements with tax authorities
|
—
|
|
|
(4
|
)
|
||
Expiration of the statute of limitation
|
(1
|
)
|
|
(20
|
)
|
||
Balance at December 31
|
$
|
102
|
|
|
$
|
202
|
|
•
|
Transitional Services Agreement
- pursuant to which, among other things, we and GECC provide each other, on a transitional basis, certain administrative and support services and other assistance consistent with the services we and GECC provided to each other before the IPO.
|
•
|
Registration Rights Agreement
- pursuant to which, among other things, we provided GECC with registration rights relating to shares of our common stock held by GECC or permitted transferees after the IPO.
|
•
|
Employee Matters Agreement
- which, among other things, governs certain employee, compensation and benefits matters among us, GECC and GE. Under the Employee Matters Agreement, among other things, the Company generally assumes or retains liabilities relating to the employment or services of any person with respect to our business before or after the completion of the IPO. The Employee Matters Agreement also generally provides for continued participation by our employees in GE benefits for so long as GE owns at least
50%
of our common stock.
|
•
|
Transitional Trademark License Agreement
- pursuant to which, among other things, GE granted us a limited, non-exclusive, royalty-free, non-transferable license (with no right to sublicense) to use (i) certain marks, logos, and the GE monogram in connection with our products and services until such time as GE ceases to beneficially own more than
50%
of our outstanding common stock, subject to certain exceptions and (ii) a specified tagline in connection with our products and services and in the general promotion of our business for a period of
three years
after GE ceases to beneficially own more than
50%
of our outstanding common stock.
|
•
|
Intellectual Property Cross License Agreement
- pursuant to which, among other things, we and GE grant each other a non-exclusive, irrevocable, royalty-free, fully paid-up, worldwide, perpetual license under certain intellectual property rights that they each own or license.
|
•
|
Subservicing Agreement -
pursuant to which we will continue to act as subservicer for one of our securitization entities for which GECC provides servicing relating to loan receivables owned by the securitization entity. In connection with the IPO, we terminated all other servicing and subservicing agreements with GECC and they were replaced by the Transitional Services Agreement to the extent these services will continue to be received from, or provided to, GECC following the IPO.
|
($ in millions)
|
Years ended December 31,
|
||||||||||
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Direct costs
(a)
|
$
|
294
|
|
|
$
|
207
|
|
|
$
|
184
|
|
Indirect costs
(a)
|
134
|
|
|
230
|
|
|
206
|
|
|||
Interest expense
(b)
|
113
|
|
|
157
|
|
|
155
|
|
|||
Total expenses for services and funding provided by GECC
|
$
|
541
|
|
|
$
|
594
|
|
|
$
|
545
|
|
(a)
|
Direct and indirect costs are included in the other expense line items in our Consolidated and Combined Statements of Earnings.
|
(b)
|
Included in interest expense in our Consolidated and Combined Statements of Earnings.
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Interest income:
|
|
|
|
|
|
||||||
Interest income from subsidiaries
|
$
|
85
|
|
|
$
|
143
|
|
|
$
|
154
|
|
Interest on investment securities
|
1
|
|
|
—
|
|
|
—
|
|
|||
Total interest income
|
86
|
|
|
143
|
|
|
154
|
|
|||
Interest expense:
|
|
|
|
|
|
||||||
Interest on third-party debt
|
(124
|
)
|
|
—
|
|
|
—
|
|
|||
Interest on related party debt
|
(109
|
)
|
|
(143
|
)
|
|
(154
|
)
|
|||
Total interest expense
|
(233
|
)
|
|
(143
|
)
|
|
(154
|
)
|
|||
Net interest income
|
(147
|
)
|
|
—
|
|
|
—
|
|
|||
Dividends from bank subsidiaries
|
885
|
|
|
1,400
|
|
|
745
|
|
|||
Dividends from nonbank subsidiaries
|
1,206
|
|
|
2,500
|
|
|
—
|
|
|||
Other income
|
6
|
|
|
—
|
|
|
—
|
|
|||
Other expense:
|
|
|
|
|
|
|
|
||||
Employee costs
|
23
|
|
|
—
|
|
|
—
|
|
|||
Professional fees
|
14
|
|
|
—
|
|
|
—
|
|
|||
Other
(a)
|
380
|
|
|
26
|
|
|
—
|
|
|||
Total other expense
|
417
|
|
|
26
|
|
|
—
|
|
|||
Earnings before benefit from income taxes
|
1,533
|
|
|
3,874
|
|
|
745
|
|
|||
Benefit from income taxes
|
215
|
|
|
7
|
|
|
—
|
|
|||
Equity in undistributed net earnings of subsidiaries
|
361
|
|
|
(1,902
|
)
|
|
1,374
|
|
|||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
2,112
|
|
|
$
|
1,964
|
|
|
$
|
2,123
|
|
(a)
|
Other expense primarily includes various intercompany charges that are eliminated in consolidation.
|
At December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
||
Assets
|
|
|
|
||||
Cash and equivalents
|
$
|
5,643
|
|
|
$
|
—
|
|
Investment securities
|
1,255
|
|
|
—
|
|
||
Investments in and amounts due from subsidiaries
(a)(b)(c)
|
16,723
|
|
|
14,713
|
|
||
Goodwill
|
17
|
|
|
17
|
|
||
Other assets
|
148
|
|
|
8
|
|
||
Total assets
|
$
|
23,786
|
|
|
$
|
14,738
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
||||
Amounts due to subsidiaries
|
$
|
296
|
|
|
$
|
—
|
|
Bank term loan
|
8,245
|
|
|
—
|
|
||
Senior unsecured notes
|
3,593
|
|
|
—
|
|
||
Related party debt
(b)
|
655
|
|
|
8,764
|
|
||
Accrued expenses and other liabilities
|
519
|
|
|
14
|
|
||
Total liabilities
|
13,308
|
|
|
8,778
|
|
||
Equity:
|
|
|
|
||||
Total equity
|
10,478
|
|
|
5,960
|
|
||
Total liabilities and equity
|
$
|
23,786
|
|
|
$
|
14,738
|
|
(a)
|
Includes investments in and amounts due from bank subsidiaries of
$8.5 billion
at December 31, 2014.
|
(b)
|
Related party debt at
December 31,
2013
included
$195 million
of related party debt issued by a subsidiary of the Company. As described in Note 16.
Related Party Transactions
, the portion of our parent’s total investment in our combined business on which we were assessed an interest cost is presented as related party debt at
December 31,
2013
. Except for the subsidiary-issued debt referred to above, we have reflected related party debt at
December 31,
2013
as loans to the Company at the parent level. This funding was used by our subsidiaries and is reflected above as interest-bearing loan receivables.
|
(c)
|
At
December 31,
2013
,
$651 million
of deposits issued by the Bank were held by GECC and have been reflected as being held by our company. While these amounts have been eliminated in our consolidated and combined financial statements, in accordance with the basis of presentation described in Note 2.
Basis of Presentation and Summary of Significant Accounting Policies
, we have presented them above as investments in and amounts due from subsidiaries.
|
For the years ended December 31 ($ in millions)
|
2014
|
|
|
2013
|
|
|
2012
|
|
|||
Cash flows - operating activities
|
|
|
|
|
|
||||||
Net earnings
|
$
|
2,109
|
|
|
$
|
1,979
|
|
|
$
|
2,119
|
|
Adjustments to reconcile net earnings to cash provided from operating activities
|
|
|
|
|
|
||||||
Deferred income taxes
|
(36
|
)
|
|
—
|
|
|
—
|
|
|||
(Increase) decrease in other assets
|
47
|
|
|
(8
|
)
|
|
—
|
|
|||
Increase (decrease) in accrued expenses and other liabilities
|
489
|
|
|
13
|
|
|
—
|
|
|||
Equity in undistributed net earnings of subsidiaries
|
(361
|
)
|
|
1,902
|
|
|
(1,374
|
)
|
|||
All other operating activities
|
(223
|
)
|
|
—
|
|
|
—
|
|
|||
Cash from operating activities
|
2,025
|
|
|
3,886
|
|
|
745
|
|
|||
|
|
|
|
|
|
||||||
Cash flows - investing activities
|
|
|
|
|
|
||||||
Net (increase) decrease in investments in and amounts due from subsidiaries
|
(1,030
|
)
|
|
(1,848
|
)
|
|
2,614
|
|
|||
Purchases of investment securities
|
(1,256
|
)
|
|
—
|
|
|
—
|
|
|||
All other investing activities
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Cash (used for) from investing activities
|
(2,288
|
)
|
|
(1,848
|
)
|
|
2,614
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Cash flows - financing activities
|
|
|
|
|
|
||||||
Third-party debt
|
|
|
|
|
|
||||||
Proceeds from issuance of third-party debt
|
12,343
|
|
|
—
|
|
|
—
|
|
|||
Maturities and repayment of third-party debt
|
(505
|
)
|
|
—
|
|
|
—
|
|
|||
Related party debt
|
|
|
|
|
|
||||||
Proceeds from issuance of related party debt
|
1,615
|
|
|
—
|
|
|
—
|
|
|||
Maturities and repayment of related party debt
|
(9,820
|
)
|
|
(1,452
|
)
|
|
(1,490
|
)
|
|||
Proceeds from initial public offering
|
2,842
|
|
|
—
|
|
|
—
|
|
|||
Net transfers to Parent
|
(603
|
)
|
|
(586
|
)
|
|
(1,869
|
)
|
|||
Increase (decrease) in amounts due to subsidiaries
|
98
|
|
|
—
|
|
|
—
|
|
|||
All other financing activities
|
(64
|
)
|
|
—
|
|
|
—
|
|
|||
Cash (used for) from financing activities
|
5,906
|
|
|
(2,038
|
)
|
|
(3,359
|
)
|
|||
|
|
|
|
|
|
||||||
Increase (decrease) in cash and equivalents
|
5,643
|
|
|
—
|
|
|
—
|
|
|||
Cash and equivalents at beginning of year
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cash and equivalents at end of year
|
$
|
5,643
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Quarterly Periods Ended
|
||||||||||||||||||||||||||||||
($ in millions)
|
December 31,
2014
|
|
September 30,
2014
|
|
June 30,
2014
|
|
March 31,
2014
|
|
December 31,
2013 |
|
September 30,
2013 |
|
June 30,
2013 |
|
March 31,
2013 |
||||||||||||||||
Interest income
|
$
|
3,260
|
|
|
$
|
3,123
|
|
|
$
|
2,926
|
|
|
$
|
2,933
|
|
|
$
|
3,037
|
|
|
$
|
2,886
|
|
|
$
|
2,686
|
|
|
$
|
2,704
|
|
Interest expense
|
282
|
|
|
244
|
|
|
206
|
|
|
190
|
|
|
188
|
|
|
183
|
|
|
178
|
|
|
193
|
|
||||||||
Net interest income
|
2,978
|
|
|
2,879
|
|
|
2,720
|
|
|
2,743
|
|
|
2,849
|
|
|
2,703
|
|
|
2,508
|
|
|
2,511
|
|
||||||||
Earnings before provision for income taxes
|
853
|
|
|
879
|
|
|
764
|
|
|
890
|
|
|
692
|
|
|
1,021
|
|
|
856
|
|
|
573
|
|
||||||||
Provision for income taxes
|
322
|
|
|
331
|
|
|
292
|
|
|
332
|
|
|
249
|
|
|
380
|
|
|
320
|
|
|
214
|
|
||||||||
Net earnings
|
$
|
531
|
|
|
$
|
548
|
|
|
$
|
472
|
|
|
$
|
558
|
|
|
$
|
443
|
|
|
$
|
641
|
|
|
$
|
536
|
|
|
$
|
359
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
$
|
0.64
|
|
|
$
|
0.70
|
|
|
$
|
0.67
|
|
|
$
|
0.79
|
|
|
$
|
0.63
|
|
|
$
|
0.91
|
|
|
$
|
0.76
|
|
|
$
|
0.51
|
|
Diluted
|
$
|
0.64
|
|
|
$
|
0.70
|
|
|
$
|
0.67
|
|
|
$
|
0.79
|
|
|
$
|
0.63
|
|
|
$
|
0.91
|
|
|
$
|
0.76
|
|
|
$
|
0.51
|
|
Reports of Independent Registered Public Accounting Firm
|
|
Consolidated and Combined Statements of Earnings for the years ended December 31, 2014, 2013 and 2012
|
|
Consolidated and Combined Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012
|
|
Consolidated and Combined Statements of Financial Position as of December 31, 2014 and 2013
|
|
Consolidated Statements of Changes in Equity for the years ended December 31, 2014, 2013 and 2012
|
|
Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012
|
|
Notes to the Consolidated and Combined Financial Statements
|
|
|
/s/ Brian D. Doubles
|
|
|
Brian D. Doubles
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
|
Signature
|
|
Title
|
Date
|
|
|
|
|
/s/ Margaret M. Keane
|
|
Principal Executive Officer
|
February 23, 2015
|
Margaret M. Keane
President and Chief Executive Officer |
|
|
|
|
|
|
|
/s/ Brian D. Doubles
|
|
Principal Financial Officer
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February 23, 2015
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Brian D. Doubles
Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) |
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/s/ David P. Melito
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Principal Accounting Officer
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February 23, 2015
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David P. Melito
Senior Vice President and Controller |
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/s/ William H. Cary
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Director
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February 23, 2015
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William H. Cary
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/s/ Daniel O. Colao
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Director
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February 23, 2015
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Daniel O. Colao
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/s/ Alexander Dimitrief
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Director
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February 23, 2015
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Alexander Dimitrief
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/s/ Roy A. Guthrie
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Director
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February 23, 2015
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Roy A. Guthrie
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/s/ Richard C. Hartnack
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Director
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February 23, 2015
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Richard C. Hartnack
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/s/ Anne Kennelly Kratky
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Director
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February 23, 2015
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Anne Kennelly Kratky
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/s/ Jeffrey G. Naylor
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Director
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February 23, 2015
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Jeffrey G. Naylor
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/s/ Dmitri L. Stockton
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Director
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February 23, 2015
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Dmitri L. Stockton
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Exhibit Number
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Description
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3.1
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Amended and Restated Certificate of Incorporation of Synchrony Financial (incorporated by reference to Exhibit 3.2 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
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3.2
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Amended and Restated Bylaws of Synchrony Financial (incorporated by reference to Exhibit 3.1 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
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4.1
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Indenture, dated as of August 11, 2014, between Synchrony Financial and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 of Form 8-K filed by Synchrony Financial on August 13, 2014)
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4.2
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First Supplemental Indenture, dated as of August 11, 2014, between Synchrony Financial and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.2 of Form 8-K filed by Synchrony Financial on August 13, 2014)
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4.3
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Second Supplemental Indenture, dated as of February 2, 2015, between Synchrony Financial and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 of Form 8-K filed by Synchrony Financial on February 2, 2015)
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4.4
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Form of 2.700% Senior Notes due 2020 (incorporated by reference to Exhibit 4.2 of Form 8-K filed by Synchrony Financial on February 2, 2015)
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4.5
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Form of Floating Rate Senior Notes due 2020 (incorporated by reference to Exhibit 4.3 of Form 8-K filed by Synchrony Financial on February 2, 2015)
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4.6
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Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
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10.1
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Master Agreement, dated as of July 30, 2014, among General Electric Capital Corporation, Synchrony Financial, and, solely for purposes of certain sections and articles set forth therein, General Electric Company (incorporated by reference to Exhibit 10.1 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.2
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Transitional Services Agreement, dated August 5, 2014, by and among General Electric Capital Corporation, Synchrony Financial and Retail Finance International Holdings, Inc. (incorporated by reference to Exhibit 10.1 of Form 8-K filed by Synchrony Financial on August 11, 2014)
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10.3
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Registration Rights Agreement, dated as of August 5, 2014, by and between Synchrony Financial and General Electric Capital Corporation (incorporated by reference to Exhibit 10.2 of Form 8-K filed by Synchrony Financial on August 11, 2014)
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10.4
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Tax Sharing and Separation Agreement, dated as of August 5, 2014, by and between General Electric Company and Synchrony Financial (incorporated by reference to Exhibit 10.3 of Form 8-K filed by Synchrony Financial on August 11, 2014)
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10.5
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Employee Matters Agreement, dated as of August 5, 2014, by and among General Electric Company, General Electric Capital Corporation and Synchrony Financial (incorporated by reference to Exhibit 10.4 of Form 8-K filed by Synchrony Financial on August 11, 2014)
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10.6
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Transitional Trademark License Agreement, dated as of August 5, 2014, by and between GE Capital Registry, Inc. and Synchrony Financial (incorporated by reference to Exhibit 10.5 of Form 8-K filed by Synchrony Financial on August 11, 2014)
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10.7
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Intellectual Property Cross License Agreement, dated as of August 5, 2014, by and between General Electric Company and General Electric Capital Corporation, on the one hand, and Synchrony Financial, on the other hand (incorporated by reference to Exhibit 10.6 of Form 8-K filed by Synchrony Financial on August 11, 2014)
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10.8
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Credit Agreement, dated as of July 30, 2014, among Synchrony Financial, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other Lenders party thereto (incorporated by reference to Exhibit 1.1 of Amendment No. 8 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.9
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Credit Agreement, dated as of July 30, 2014, among Synchrony Financial, as borrower, General Electric Capital Corporation, as administrative agent, and the other Lenders party thereto (incorporated by reference to Exhibit 10.9 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.10
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Amendment No. 1 to Credit Agreement, dated October 1, 2014, by and among Synchrony Financial and General Electric Capital Corporation (incorporated by reference to Exhibit 10.1 to Form 8-K filed by Synchrony Financial on October 6, 2014)
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10.11
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Amendment No. 1 to Credit Agreement, dated October 1, 2014, by and among Synchrony Financial, the Lenders party thereto and JP Morgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.2 to Form 8-K filed by Synchrony Financial on October 6, 2014)
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10.12
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Form of Synchrony 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.10 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.13
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Form of agreement for awards under Synchrony 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.11 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.14
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Form of Transaction Award Agreement, by and between GE Capital Retail Bank/GE Capital Retail Finance, Inc. and each of Margaret M. Keane, Brian D. Doubles, Jonathan S. Mothner, Thomas M. Quindlen and Glenn P. Marino (incorporated by reference to Exhibit 10.12 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.15
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Operating Agreement, dated as of January 11, 2013, between GE Capital Retail Bank and the Office of the Comptroller of the Currency (incorporated by reference to Exhibit 10.13 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.16
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Capital Assurance and Liquidity Maintenance Agreement, dated as of January 11, 2013, among GE Capital Retail Bank, General Electric Capital Corporation and GE Consumer Finance, Inc. (incorporated by reference to Exhibit 10.14 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.17
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Master Indenture, dated as of September 25, 2003, between Synchrony Credit Card Master Note Trust (formerly known as GE Capital Credit Card Master Note Trust), as Issuer and Deutsche Bank Trust Company Americas, as Indenture Trustee (incorporated by reference to Exhibit 4.1 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.18
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Omnibus Amendment No. 1 to Securitization Documents, dated as of February 9, 2004, among RFS Holding, L.L.C., RFS Funding Trust, GE Capital Retail Bank (formerly known as Monogram Credit Card Bank of Georgia), Synchrony Credit Card Master Note Trust, Deutsche Bank Trust Company Delaware, as Trustee of RFS Funding Trust, RFS Holding, Inc. and Deutsche Bank Trust Company Americas, as Indenture Trustee (incorporated by reference to Exhibit 4.16 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.19
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Second Amendment to Master Indenture, dated as of June 17, 2004, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.4 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on July 2, 2004)
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10.20
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Third Amendment to Master Indenture, dated as of August 31, 2006, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on September 5, 2006)
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10.21
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Fourth Amendment to Master Indenture, dated as of June 28, 2007, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on July 3, 2007)
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10.22
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Fifth Amendment to Master Indenture, dated as of May 22, 2008, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 28, 2008)
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10.23
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Sixth Amendment to Master Indenture, dated as of August 7, 2009, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on August 7, 2009)
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10.24
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Seventh Amendment to Master Indenture, dated as of January 21, 2014, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on January 21, 2014)
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10.25
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Eighth Amendment to Master Indenture and Omnibus Supplement to Specified Indenture Supplements, dated as of March 11, 2014, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on March 14, 2014)
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10.26
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Form of Indenture Supplement, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 4.8 of Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 16, 2012 (333-181466))
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10.27
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Form of VFN Indenture Supplement, between Synchrony Credit Card Master Note Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.24 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.28
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Form of Loan Agreement (VFN Series, Class A), among Synchrony Credit Card Master Note Trust, the Lenders party thereto from time to time, and the Managing Agents party thereto from time to time (incorporated by reference to Exhibit 10.25 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.29
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Trust Agreement, dated as of September 25, 2003, between RFS Holding, L.L.C. and The Bank of New York (Delaware) (incorporated by reference to Exhibit 4.3 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.30
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First Amendment to Trust Agreement, dated as of January 21, 2014, between RFS Holding, L.L.C. and BNY Mellon Trust of Delaware (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Master Note Trust and RFS Holding, L.L.C. on January 21, 2014)
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10.31
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Second Amendment to Trust Agreement, dated as of September 8, 2014, between RFS Holding, L.L.C. and BNY Mellon Trust of Delaware (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Master Note Trust and RFS Holding, L.L.C. on September 11, 2014)
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10.32
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Custody and Control Agreement, dated as of September 25, 2003 by and among Deutsche Bank Trust Company of Americas, in its capacity as Custodian and in its capacity as Indenture Trustee, and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.8 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.33
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Receivables Sale Agreement, dated as of June 27, 2003, between GE Capital Retail Bank (formerly known as Monogram Credit Card Bank of Georgia) and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.9 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.34
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RSA Assumption Agreement and Second Amendment to Receivables Sale Agreement, dated as of February 7, 2005, between GE Capital Retail Bank (formerly known as GE Money Bank) and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on February 11, 2005)
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10.35
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Third Amendment to Receivables Sale Agreement, dated as of December 21, 2006, between GE Capital Retail Bank (formerly known as GE Money Bank) and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on December 21, 2006)
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10.36
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Fourth Amendment to Receivables Sale Agreement, dated as of May 21, 2008, between GE Capital Retail Bank (formerly known as GE Money Bank) and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 28, 2008)
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10.37
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Designation of Removed Accounts and Fifth Amendment to Receivables Sale Agreement, dated as of December 29, 2008, between GE Capital Retail Bank (formerly known as GE Money Bank) and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on December 30, 2008)
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10.38
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Designation of Removed Accounts and Sixth Amendment to Receivables Sale Agreement, dated as of February 26, 2009, between GE Capital Retail Bank (formerly known as GE Money Bank) and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on February 26, 2009)
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10.39
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Seventh Amendment to Receivables Sale Agreement, dated as of November 23, 2010, between GE Capital Retail Bank (formerly known as GE Money Bank), and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on November 24, 2010)
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10.40
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Eighth Amendment to Receivables Sale Agreement, dated as of March 20, 2012, among GE Capital Retail Bank, RFS Holding, Inc., PLT Holding, L.L.C. and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on March 21, 2012)
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10.41
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Ninth Amendment to Receivables Sale Agreement, dated as of March 11, 2014, among GE Capital Retail Bank, RFS Holding, Inc., PLT Holding, L.L.C. and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on March 14, 2014)
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10.42
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Designation of Removed Accounts and Tenth Amendment to Receivables Sale Agreement, dated as of November 7, 2014, among Synchrony Bank (formerly known as GE Capital Retail Bank), RFS Holding Inc., PLT Holding, L.L.C. and RFS Holding, L.L.C. (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on November 14, 2014)
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10.43
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Transfer Agreement, dated as of September 25, 2003, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.12 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.44
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Second Amendment to Transfer Agreement, dated as of June 17, 2004, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.3 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on July 2, 2004)
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10.45
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Third Amendment to Transfer Agreement, dated as of November 21, 2004, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on November 24, 2004)
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10.46
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Fourth Amendment to Transfer Agreement, dated as of August 31, 2006, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on September 5, 2006)
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10.47
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Fifth Amendment to Transfer Agreement, dated as of December 21, 2006, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on December 21, 2006)
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10.48
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Sixth Amendment to Transfer Agreement, dated as of May 21, 2008, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.4 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 28, 2008)
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10.49
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Reassignment of Receivables in Removed Accounts and Seventh Amendment to Transfer Agreement, dated as of December 29, 2008, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on December 30, 2008)
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10.50
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Reassignment No. 4 of Receivables in Removed Accounts and Eighth Amendment to Transfer Agreement, dated as of February 26, 2009, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on February 26, 2009)
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10.51
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Ninth Amendment to Transfer Agreement, dated as of March 31, 2010, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on March 31, 2010)
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10.52
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Tenth Amendment to Transfer Agreement, dated as of March 20, 2012, between RFS Holding, L.L.C. and Synchrony Credit Card Master Note Trust (incorporated by reference to Exhibit 4.2 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on March 21, 2012)
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10.53
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Servicing Agreement, dated as of June 27, 2003, by and among RFS Funding Trust Synchrony Credit Card Master Note Trust and General Electric Capital Corporation, successor to GE Capital Retail Bank (formerly known as Monogram Credit Card Bank of Georgia) (incorporated by reference to Exhibit 4.13 of Amendment No. 1 to Form S-3 Registration Statement filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.54
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Servicing Assumption Agreement, dated as of February 7, 2005, by GE Capital Retail Bank (formerly known as GE Money Bank) (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on February 11, 2005)
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10.55
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First Amendment to Servicing Agreement, dated as of May 22, 2006, between Synchrony Credit Card Master Note Trust and GE Capital Retail Bank (formerly known as GE Money Bank) (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 25, 2006)
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10.56
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Second Amendment to Servicing Agreement, dated as of June 28, 2007, between Synchrony Credit Card Master Note Trust and GE Capital Retail Bank (formerly known as GE Money Bank) (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on June 28, 2007)
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10.57
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Instrument of Resignation, Appointment and Acceptance and Third Amendment to Servicing Agreement, dated as of May 22, 2008, by and among Synchrony Credit Card Master Note Trust, GE Capital Retail Bank (formerly known as GE Money Bank) and General Electric Capital Corporation (incorporated by reference to Exhibit 4.3 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 28, 2008)
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10.58
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Fourth Amendment to Servicing Agreement, dated as of July 16, 2014, between Synchrony Master Note Trust and General Electric Capital Corporation (incorporated by reference to Exhibit 4.14 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on July 16, 2014)
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10.59
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Administration Agreement, dated as of September 25, 2003, among Synchrony Credit Card Master Note Trust, General Electric Capital Corporation, as Administrator, and The Bank of New York (Delaware), not in its individual capacity but solely as Trustee (incorporated by reference to Exhibit 4.14 of Amendment No. 1 to Form S-3 Registration Statement filed on May 20, 2004 (No. 333-107495, 333-107495-01 and 333-107495-02))
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10.60
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First Amendment to Administration Agreement, dated as of May 4, 2009, between Synchrony Credit Card Master Note Trust and General Electric Capital Corporation (incorporated by reference to Exhibit 4.1 of the current report on Form 8-K filed by Synchrony Credit Card Master Note Trust and RFS Holding, L.L.C. on May 6, 2009)
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10.61
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Master Indenture, dated as of February 29, 2012, between GE Sales Finance Master Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.55 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.62
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Supplement No. 1 to Master Indenture, dated as of September 19, 2012, between GE Sales Finance Master Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.56 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.63
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Supplement No. 2 to Master Indenture, dated as of March 21, 2014, between GE Sales Finance Master Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.57 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.64
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Form of Indenture Supplement, between GE Sales Finance Master Trust and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.58 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.65
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Form of Loan Agreement, among GE Sales Finance Master Trust, the Lenders party thereto from time to time, and the Lender Group Agents for the Lender Groups party thereto from time to time (incorporated by reference to Exhibit 10.59 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
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10.66
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Amended and Restated Trust Agreement of GE Sales Finance Master Trust, dated as of February 29, 2012, between GE Sales Finance Holding, L.L.C. and BNY Mellon Trust of Delaware (incorporated by reference to Exhibit 10.60 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.67
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Amended and Restated Receivables Participation Agreement, dated as of February 29, 2012, between GE Capital Retail Bank and GEMB Lending Inc. (incorporated by reference to Exhibit 10.61 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.68
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First Amendment to Amended and Restated Receivables Participation Agreement, dated as of August 17, 2012, between GE Capital Retail Bank and GEMB Lending Inc. (incorporated by reference to Exhibit 10.62 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.69
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Second Amendment to Amended and Restated Receivables Participation Agreement, dated as of August 5, 2013, between GE Capital Retail Bank and GEMB Lending Inc. (incorporated by reference to Exhibit 10.63 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.70
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Participation Interest Sale Agreement, dated as of February 29, 2012, between GEMB Lending Inc. and GE Sales Finance Holding, L.L.C. (incorporated by reference to Exhibit 10.64 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.71
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First Amendment to Participation Interest Sale Agreement, dated as of September 19, 2012, between GEMB Lending Inc. and GE Sales Finance Holding, L.L.C. (incorporated by reference to Exhibit 10.65 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.72
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Second Amendment to Participation Interest Sale Agreement, dated as of March 21, 2014, between GEMB Lending Inc. and GE Sales Finance Holding, L.L.C. (incorporated by reference to Exhibit 10.66 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.73
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Transfer Agreement, dated as of February 29, 2012, between GE Sales Finance Holding, L.L.C. and GE Sales Finance Master Trust (incorporated by reference to Exhibit 10.67 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.74
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First Amendment to Transfer Agreement, dated as of September 19, 2012, between GE Sales Finance Holding, L.L.C. and GE Sales Finance Master Trust (incorporated by reference to Exhibit 10.68 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
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10.75
|
Second Amendment to Transfer Agreement, dated as of March 21, 2014, between GE Sales Finance Holding, L.L.C. and GE Sales Finance Master Trust (incorporated by reference to Exhibit 10.69 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
|
10.76
|
Servicing Agreement, dated as of February 29, 2012, between GE Capital Retail Bank and GE Sales Finance Master Trust (incorporated by reference to Exhibit 10.70 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
|
10.77
|
Administration Agreement, dated as of February 29, 2012, between GE Sales Finance Master Trust and GE Capital Retail Bank (incorporated by reference to Exhibit 10.71 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on April 25, 2014 (No. 333-194528))
|
10.78†
|
First Amended and Restated Technology Sourcing Agreement, dated as of December 10, 1998, between Retailer Credit Services, Inc. and First Data Resources, Inc., as amended (incorporated by reference to Exhibit 10.72 of Amendment No. 4 to Form S-1 Registration Statement filed by Synchrony Financial on June 27, 2014 (No. 333-194528))
|
10.79†
|
First Amended and Restated Production Services Agreement, dated as of December 1, 2009, by and between Retailer Credit Services, Inc. and First Data Resources, LLC, as amended (incorporated by reference to Exhibit 10.73 of Amendment No. 4 to Form S-1 Registration Statement filed by Synchrony Financial on June 27, 2014 (No. 333-194528))
|
10.80
|
Stock Contribution Agreement, dated as of April 1, 2013, between GE Capital Retail Finance Corporation and GE Consumer Finance, Inc. (incorporated by reference to Exhibit 10.74 of Amendment No. 3 to Form S-1 Registration Statement filed by Synchrony Financial on June 6, 2014 (No. 333-194528))
|
10.81
|
Stock Contribution Agreement, dated as of August 5, 2013, between GE Capital Retail Finance Corporation and General Electric Capital Corporation (incorporated by reference to Exhibit 10.75 of Amendment No. 3 to Form S-1 Registration Statement filed by Synchrony Financial on June 6, 2014 (No. 333-194528))
|
10.82
|
General Electric Company 2007 Long-Term Incentive Plan (as amended and restated April 25, 2012) (incorporated by reference to Exhibit 99.1 of the Registration Statement on Form S-8 filed by General Electric Company on May 4, 2012 (No. 333-181177))
|
10.83
|
Form of Agreement for Stock Option Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan, as amended January 1, 2009 (incorporated by reference to Exhibit 10(n) of the annual report on Form 10-K filed by General Electric Company on February 18, 2009)
|
10.84
|
Form of Agreement for Periodic Restricted Stock Unit Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (incorporated by reference to Exhibit 10.4 of the current report on Form 8-K filed by General Electric Company on April 27, 2007)
|
10.85
|
Form of Agreement for Long Term Performance Award Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (as amended and restated April 25, 2012) (incorporated by reference to Exhibit 10(a) of the quarterly report on Form 10-Q filed by General Electric Company on July 26, 2013)
|
10.86
|
General Electric Supplementary Pension Plan, as amended effective January 1, 2011 (incorporated by reference to Exhibit 10(g) of the annual report on Form 10-K filed by General Electric Company on February 25, 2011)
|
10.87
|
GE Excess Benefits Plan, effective January 1, 2009 (incorporated by reference to Exhibit 10(k) to the annual report on Form 10-K filed by General Electric Company on February 18, 2009)
|
10.88
|
General Electric Leadership Life Insurance Program, effective January 1, 1994 (incorporated by reference to Exhibit 10(r) to the annual report on Form 10-K filed by General Electric Company on March 11, 1994)
|
10.89
|
General Electric Supplemental Life Insurance Program, as amended February 8, 1991 (incorporated by reference to Exhibit 10(i) to the annual report on Form 10-K filed by General Electric Company for the fiscal year ended December 31, 1990)
|
10.90
|
General Electric 2006 Executive Deferred Salary Plan, as amended January 1, 2009 (incorporated by reference to Exhibit 10(l) to the annual report on Form 10-K filed by General Electric Company on February 18, 2009)
|
10.91
|
Amendment to Nonqualified Deferred Compensation Plans, dated as of December 14, 2004 (incorporated by reference to Exhibit 10(w) to the annual report on Form 10-K filed by General Electric Company on March 1, 2005)
|
10.92
|
General Electric Financial Planning Program, as amended through September 1993 (incorporated by reference to Exhibit 10(h) to the annual report on Form 10-K filed by General Electric Company on March 11, 1994)
|
10.93
|
GE Capital Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.87 of Amendment No. 4 to Form S-1 Registration Statement filed by Synchrony Financial on June 27, 2014 (No. 333-194528))
|
10.94
|
Assumption Agreement, dated as of June 20, 2014, by and between General Electric Capital Corporation and Synchrony Financial (incorporated by reference to Exhibit 10.88 of Amendment No. 4 to Form S-1 Registration Statement filed by Synchrony Financial on June 27, 2014 (No. 333-194528))
|
10.95
|
Form of Indemnification Agreement for directors, executive officers and key employees (incorporated by reference to Exhibit 10.89 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
|
10.96
|
Sub-Servicing Agreement, dated as of July 30, 2014, between Synchrony Financial and General Electric Capital Corporation (incorporated by reference to Exhibit 10.90 of Amendment No. 1 to Form S-1 Registration Statement filed by Synchrony Financial on August 1, 2014 (333-197244))
|
10.97
|
Synchrony Financial Non-Employee Director Deferred Compensation Plan (incorporated by reference to Exhibit 10.91 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 33-194528))
|
10.98
|
Revolving Credit Agreement, dated as of March 29, 1996, between GE Capital Consumer Card Co. (Macy’s) and General Electric Capital Corporation (incorporated by reference to Exhibit 10.93 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.99
|
Revolving Credit Agreement, dated as of March 29, 1996, between GE Capital Consumer Card Co. and General Electric Capital Corporation (incorporated by reference to Exhibit 10.94 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.100
|
Revolving Credit Agreement, dated as of March 29, 1996, between GE Capital Consumer Card Co. (Macy’s) and GECFS, Inc. (Macy’s) (incorporated by reference to Exhibit 10.95 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.101
|
Revolving Credit Agreement, dated as of March 29, 1996, between GE Capital Consumer Card Co. and GECFS, Inc. (Card Services) (incorporated by reference to Exhibit 10.96 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.102
|
Amendment No. 1 to Revolving Credit Agreement, dated as of October 6, 1997, between GE Capital Consumer Card Co. and GECFS, Inc. (Card Services) (incorporated by reference to Exhibit 10.97 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.103
|
Revolving Credit Agreement, dated as of May 1996, between Monogram Credit Card Bank of Georgia and General Electric Capital Corporation (incorporated by reference to Exhibit 10.98 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.104
|
Amendment No. 1 to Revolving Credit Agreement, dated as of April 18, 2003, between Monogram Credit Card Bank of Georgia and General Electric Capital Corporation (incorporated by reference to Exhibit 10.99 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.105
|
Amendment to Revolving Credit Agreements, dated as of October 1, 2008, between GE Money Bank and General Electric Capital Corporation (incorporated by reference to Exhibit 10.100 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.106
|
Amendment to Revolving Credit Agreements, dated as of June 13, 2012, between GE Capital Retail Bank and General Electric Capital Corporation (incorporated by reference to Exhibit 10.101 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.107
|
Letter, dated as of March 20, 2013, from General Electric Capital Corporation to GE Capital Retail Bank relating to revolving credit agreements (incorporated by reference to Exhibit 10.102 of Amendment No. 5 to Form S-1 Registration Statement filed by Synchrony Financial on July 18, 2014 (No. 333-194528))
|
10.108
|
Form of Synchrony Financial Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to Form 8-K filed by Synchrony Financial on September 22, 2014)
|
10.109*
|
First Amendment to the Synchrony Financial Deferred Compensation Plan
|
10.110
|
Form of Restricted Stock Unit and Non-Qualified Stock Option Award (incorporated by reference to Exhibit 10.2 to Form 8-K filed by Synchrony Financial on September 22, 2014)
|
10.111
|
Form of Synchrony Financial Annual Incentive Plan (incorporated by reference to Exhibit 10.1 to Form 8-K filed by Synchrony Financial on December 12, 2014)
|
12.1*
|
Statement of Ratio of Earnings to Fixed Charges
|
21.1*
|
Subsidiaries of the Registrant
|
23.1*
|
Consent of KPMG LLP
|
24.1*
|
Powers of Attorney (included on the signature page)
|
31(a)*
|
Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended
|
31(b)*
|
Certification Pursuant to Rules 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended
|
32*
|
Certification Pursuant to 18 U.S.C. Section 1350
|
101
|
The following materials from Synchrony Financial’s Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated and Combined Statements of Earnings for the years ended December 31, 2014, 2013 and 2012, (ii) Consolidated and Combined Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012, (iii) Consolidated and Combined Statements of Financial Position at December 31, 2014 and 2013, (iv) Consolidated and Combined Statements of Changes in Equity for the years ended December 31, 2014, 2013 and 2012, (v) Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012, and (vi) Notes to Consolidated and Combined Financial Statements
|
*
|
Filed electronically herewith.
|
†
|
Confidential treatment granted to certain portions, which portions have been provided separately to the Securities and Exchange Commission.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
SYNCHRONY FINANCIAL
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of Earnings to Fixed Charges
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
||||||||||
|
|
|
|
||||||||||||||||||||
Earnings
(a)
|
|
$
|
3,386
|
|
|
$
|
3,142
|
|
|
$
|
3,376
|
|
|
$
|
3,010
|
|
|
$
|
2,029
|
|
|
||
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Interest included in expense
(b)
|
|
877
|
|
|
703
|
|
|
694
|
|
|
884
|
|
|
1,051
|
|
|
||||||
|
Amortization of debt expense and discount or premium on indebtedness
|
|
45
|
|
|
39
|
|
|
51
|
|
|
48
|
|
|
43
|
|
|
||||||
|
One third of rental expense
(c)
|
|
21
|
|
|
17
|
|
|
17
|
|
|
17
|
|
|
20
|
|
|
||||||
|
Adjusted "earnings"
|
|
$
|
4,329
|
|
|
$
|
3,901
|
|
|
$
|
4,138
|
|
|
$
|
3,959
|
|
|
$
|
3,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Interest included in expense
(b)
|
|
$
|
877
|
|
|
$
|
703
|
|
|
$
|
694
|
|
|
$
|
884
|
|
|
$
|
1,051
|
|
|
|
|
Amortization of debt expense and discount or premium on indebtedness
|
|
45
|
|
|
39
|
|
|
51
|
|
|
48
|
|
|
43
|
|
|
||||||
|
One third of rental expense
(c)
|
|
21
|
|
|
17
|
|
|
17
|
|
|
17
|
|
|
20
|
|
|
||||||
Total fixed charges
|
|
$
|
943
|
|
|
$
|
759
|
|
|
$
|
762
|
|
|
$
|
949
|
|
|
$
|
1,114
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges
|
|
4.6
|
|
|
5.1
|
|
|
5.4
|
|
|
4.2
|
|
|
2.8
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(a)
|
Earnings before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(b)
|
Includes interest on tax deficiencies
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(c)
|
Considered to be representative of interest factor in rental expense
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this annual report on Form 10-K of Synchrony Financial;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have
:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Margaret M. Keane
|
Margaret M. Keane
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Synchrony Financial;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have
:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
c.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Brian D. Doubles
|
Brian D. Doubles
Chief Financial Officer
|
1.
|
The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
|
/s/ Margaret M. Keane
|
Margaret M. Keane
President and Chief Executive Officer
|
/s/ Brian D. Doubles
|
Brian D. Doubles
Chief Financial Officer
|