Form 8-K Synchrony Financial For: Jan 22
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
January 22, 2016
Date of Report
(Date of earliest event reported)
SYNCHRONY FINANCIAL
(Exact name of registrant as specified in its charter)
Delaware | 001-36560 | 51-0483352 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
777 Long Ridge Road, Stamford, Connecticut | 06902 | |
(Address of principal executive offices) | (Zip Code) | |
(203) 585-2400
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On January 22, 2016, Synchrony Financial (the “Company”) issued a press release setting forth the Company’s fourth quarter 2015 earnings. A copy of the Company’s press release is being furnished as Exhibit 99.1 and hereby incorporated by reference. The information furnished pursuant to this Item 2.02, including Exhibits, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibits are being furnished as part of this report:
Number | Description | |
99.1 | Press release, dated January 22, 2016, issued by Synchrony Financial | |
99.2 | Financial Data Supplement of the Company for the quarter ended December 31, 2015 | |
99.3 | Financial Results Presentation of the Company for the quarter ended December 31, 2015 | |
99.4 | Explanation of Non-GAAP Measures | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SYNCHRONY FINANCIAL | ||||||
Date: January 22, 2016 | By: | /s/ Jonathan Mothner | ||||
Name: | Jonathan Mothner | |||||
Title: | Executive Vice President, General Counsel and Secretary | |||||
EXHIBIT INDEX
Number | Description | |
99.1 | Press release, dated January 22, 2016, issued by Synchrony Financial | |
99.2 | Financial Data Supplement of the Company for the quarter ended December 31, 2015 | |
99.3 | Financial Results Presentation of the Company for the quarter ended December 31, 2015 | |
99.4 | Explanation of Non-GAAP Measures | |
Exhibit 99.1
Contact:
Investor Relations Media Relations
Greg Ketron Samuel Wang
(203) 585-6291 (203) 585-2933
For Immediate Release: January 22, 2016
Synchrony Financial Reports Fourth Quarter Net Earnings of $547 Million or $0.65 Per Diluted Share
STAMFORD, Conn. – Synchrony Financial (NYSE: SYF) today announced fourth quarter 2015 net earnings of $547 million, or $0.65 per diluted share. Net earnings for the full year 2015 totaled $2.2 billion, or $2.65 per diluted share. Highlights for the quarter included:
• | Total platform revenue increased 5% from the fourth quarter of 2014 to $2.8 billion |
• | Loan receivables grew $7 billion, or 11%, from the fourth quarter of 2014 to $68 billion |
• | Purchase volume increased 8% from the fourth quarter of 2014 |
• | Strong deposit growth continued, up $8 billion, or 24%, over the fourth quarter of 2014 |
• | Renewed key programs - Dick’s Sporting Goods, Discount Tire, P.C. Richard & Son, Polaris and Mohawk Flooring |
• | Launched Newegg and Stash Hotel Rewards card programs |
• | Piloting J.C. Penney private label credit card in Apple Pay |
• | Completed separation from the General Electric Company (GE) following the successful exchange offer |
• | Added to the S&P 500 Index |
“The fourth quarter marked a successful conclusion to a historic year for Synchrony Financial. We maintained strong momentum across each of our business platforms and our receivables, deposits, and revenue growth remained solid. We continue to leverage our array of value-added capabilities and vast experience to propel growth, expand our distribution, and attract new business. This past year alone we renewed five key relationships and signed a number of new partners, while expanding our network through new strategic alliances. And we were able to achieve this while executing on our separation from GE. We aim to continue to build on this momentum in 2016 and are excited about our future growth prospects and opportunities as a stand-alone company,” said Margaret Keane, President and Chief Executive Officer of Synchrony Financial.
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Business and Financial Highlights for the Fourth Quarter of 2015
All comparisons below are for the fourth quarter of 2015 compared to the fourth quarter of 2014, unless otherwise noted.
Earnings
• | Net interest income increased $230 million, or 8%, to $3.2 billion, primarily driven by strong loan receivables growth. Net interest income after retailer share arrangements increased 9%. |
• | Total platform revenue increased $131 million, or 5%. Platform revenue in the fourth quarter of 2014 included a $46 million gain from portfolio sales. |
• | Provision for loan losses increased $26 million to $823 million largely due to loan receivables growth, partially offset by asset quality improvement. |
• | Other income decreased $75 million to $87 million, driven primarily by the $46 million gain from portfolio sales in the fourth quarter of 2014. |
• | Other expense increased $78 million to $870 million, primarily driven by investments in growth and infrastructure build associated with the separation from GE. |
• | Net earnings totaled $547 million for the quarter compared to $531 million in the fourth quarter of 2014. The fourth quarter of 2014 included a $29 million after-tax gain associated with portfolio sales. |
Balance Sheet
• | Period-end loan receivables growth remained strong at 11%, primarily driven by purchase volume growth of 8% and average active account growth of 5%, and included the acquisition of the BP portfolio during the second quarter of 2015. |
• | Deposits grew to $43 billion, up $8 billion, or 24%, from the fourth quarter of 2014, and comprised 64% of funding compared to 56% last year. |
• | The Company’s balance sheet remained strong with total liquidity (liquid assets and undrawn securitization capacity) of $21 billion, or 25% of total assets. |
• | The estimated Common Equity Tier 1 ratio under Basel III subject to transition provisions was 16.8% and the estimated fully phased-in Common Equity Tier 1 ratio under Basel III was 15.9%. |
Key Financial Metrics
• | Return on assets was 2.6% and return on equity was 17.5%. |
• | Net interest margin increased 13 basis points to 15.73% due mainly to an improvement in interest-earning asset yields that resulted from carrying a higher mix of receivables versus lower-yielding liquidity. |
• | Efficiency ratio was 34.0% for the fourth quarter of 2015, and 33.5% for the full year 2015. |
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Credit Quality
• | Loans 30+ days past due as a percentage of period-end loan receivables improved 8 basis points to 4.06%. |
• | Net charge-offs as a percentage of total average loan receivables improved 9 basis points to 4.23%. |
• | The allowance for loan losses as a percentage of total period-end receivables was 5.12%. |
Sales Platforms
• | Retail Card platform revenue increased 5%, driven primarily by purchase volume growth of 8% and period-end loan receivables growth of 12%, which included the acquisition of the BP portfolio during the second quarter of 2015. Average active account growth was 4%. Loan receivables growth was broad-based across partner programs. Platform revenue in the fourth quarter of 2014 included the $46 million gain from portfolio sales. |
• | Payment Solutions platform revenue increased 7%, driven primarily by purchase volume growth of 9% and period-end loan receivables growth of 12%. Average active account growth was 11%. Loan receivables growth was led by the home furnishings and automotive product categories. |
• | CareCredit platform revenue increased 3%, driven primarily by purchase volume growth of 9% and period-end loan receivables growth of 7%. Average active account growth was 6%. Loan receivables growth was led by the dental and veterinary specialties. |
Corresponding Financial Tables and Information
No representation is made that the information in this news release is complete. Investors are encouraged to review the foregoing summary and discussion of Synchrony Financial's earnings and financial condition in conjunction with the detailed financial tables and information that follow and in the Company’s forthcoming Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The detailed financial tables and other information are also available on the Investor Relations page of the Company’s website at www.investors.synchronyfinancial.com. This information is also furnished in a Current Report on Form 8-K filed with the SEC today.
Conference Call and Webcast Information
On Friday, January 22, 2016, at 8:30 a.m. Eastern Time, Margaret Keane, President and Chief Executive Officer, and Brian Doubles, Executive Vice President and Chief Financial Officer, will host a conference call to review the financial results and outlook for certain business drivers. The conference call can be accessed via an audio webcast through the Investor Relations page on Synchrony Financial’s corporate website, www.investors.synchronyfinancial.com, under Events and Presentations. A replay will be available on the website or by dialing (888) 843-7419 (U.S. domestic) or (630) 652-3042 (international), passcode 42015#, and can be accessed beginning approximately two hours after the event through February 5, 2016.
About Synchrony Financial
Synchrony Financial (NYSE: SYF) is one of the nation’s premier consumer financial services companies. Our roots in consumer finance trace back to 1932, and today we are the largest provider of private label credit cards in the United States based on purchase volume and receivables*. We provide a range of
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credit products through programs we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations, and healthcare service providers to help generate growth for our partners and offer financial flexibility to our customers. Through our partners’ over 300,000 locations across the United States and Canada, and their websites and mobile applications, we offer our customers a variety of credit products to finance the purchase of goods and services. Our offerings include private label and co-branded Dual Card credit cards, promotional financing and installment lending, loyalty programs and FDIC-insured savings products through Synchrony Bank. More information can be found at www.synchronyfinancial.com and twitter.com/SYFNews.
*Source: The Nilson Report (April, 2015, Issue # 1062) - based on 2014 data.
Cautionary Statement Regarding Forward-Looking Statements
This news release contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our platform revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; our need for additional financing, higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our reliance on dividends, distributions and other payments from Synchrony Bank; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; significant and extensive regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank
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Act and the impact of the CFPB’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules; restrictions that limit Synchrony Bank’s ability to pay dividends; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; failure to comply with anti-money laundering and anti-terrorism financing laws; obligations associated with being a public company; and failure caused by us of GE’s distribution of our common stock to its stockholders in exchange for its common stock to qualify for tax-free treatment, which may result in significant tax liabilities to GE for which we may be required to indemnify GE.
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this news release and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed on February 23, 2015. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.
Non-GAAP Measures
The information provided herein includes measures we refer to as “platform revenue”, “platform revenue excluding retailer share arrangements” and “tangible common equity” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please see the detailed financial tables and information that follow. For a statement regarding the usefulness of these measures to investors, please see the Company’s Current Report on Form 8-K filed with the SEC today.
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Exhibit 99.2
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||||||||||||||||
FINANCIAL SUMMARY | |||||||||||||||||||||||||||||||||||||||
(unaudited, in millions, except per share statistics) | |||||||||||||||||||||||||||||||||||||||
Quarter Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | 4Q'15 vs. 4Q'14 | Dec 31, 2015 | Dec 31, 2014 | YTD'15 vs. YTD'14 | |||||||||||||||||||||||||||||||
EARNINGS | |||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 3,208 | $ | 3,103 | $ | 2,907 | $ | 2,875 | $ | 2,978 | $ | 230 | 7.7 | % | $ | 12,093 | $ | 11,320 | $ | 773 | 6.8 | % | |||||||||||||||||
Retailer share arrangements | (734 | ) | (723 | ) | (621 | ) | (660 | ) | (698 | ) | (36 | ) | 5.2 | % | (2,738 | ) | (2,575 | ) | (163 | ) | 6.3 | % | |||||||||||||||||
Net interest income, after retailer share arrangements | 2,474 | 2,380 | 2,286 | 2,215 | 2,280 | 194 | 8.5 | % | 9,355 | 8,745 | 610 | 7.0 | % | ||||||||||||||||||||||||||
Provision for loan losses | 823 | 702 | 740 | 687 | 797 | 26 | 3.3 | % | 2,952 | 2,917 | 35 | 1.2 | % | ||||||||||||||||||||||||||
Net interest income, after retailer share arrangements and provision for loan losses | 1,651 | 1,678 | 1,546 | 1,528 | 1,483 | 168 | 11.3 | % | 6,403 | 5,828 | 575 | 9.9 | % | ||||||||||||||||||||||||||
Other income | 87 | 84 | 120 | 101 | 162 | (75 | ) | (46.3 | )% | 392 | 485 | (93 | ) | (19.2 | )% | ||||||||||||||||||||||||
Other expense | 870 | 843 | 805 | 746 | 792 | 78 | 9.8 | % | 3,264 | 2,927 | 337 | 11.5 | % | ||||||||||||||||||||||||||
Earnings before provision for income taxes | 868 | 919 | 861 | 883 | 853 | 15 | 1.8 | % | 3,531 | 3,386 | 145 | 4.3 | % | ||||||||||||||||||||||||||
Provision for income taxes | 321 | 345 | 320 | 331 | 322 | (1 | ) | (0.3 | )% | 1,317 | 1,277 | 40 | 3.1 | % | |||||||||||||||||||||||||
Net earnings | $ | 547 | $ | 574 | $ | 541 | $ | 552 | $ | 531 | $ | 16 | 3.0 | % | $ | 2,214 | $ | 2,109 | $ | 105 | 5.0 | % | |||||||||||||||||
Net earnings attributable to common stockholders | $ | 547 | $ | 574 | $ | 541 | $ | 552 | $ | 531 | $ | 16 | 3.0 | % | $ | 2,214 | $ | 2,109 | $ | 105 | 5.0 | % | |||||||||||||||||
COMMON SHARE STATISTICS | |||||||||||||||||||||||||||||||||||||||
Basic EPS | $ | 0.66 | $ | 0.69 | $ | 0.65 | $ | 0.66 | $ | 0.64 | $ | 0.02 | 3.1 | % | $ | 2.66 | $ | 2.78 | $ | (0.12 | ) | (4.3 | )% | ||||||||||||||||
Diluted EPS | $ | 0.65 | $ | 0.69 | $ | 0.65 | $ | 0.66 | $ | 0.64 | $ | 0.01 | 1.6 | % | $ | 2.65 | $ | 2.78 | $ | (0.13 | ) | (4.7 | )% | ||||||||||||||||
Common stock price | $ | 30.41 | $ | 31.30 | $ | 32.93 | $ | 30.35 | $ | 29.75 | $ | 0.66 | 2.2 | % | $ | 30.41 | $ | 29.75 | $ | 0.66 | 2.2 | % | |||||||||||||||||
Book value per share | $ | 15.12 | $ | 14.58 | $ | 13.89 | $ | 13.24 | $ | 12.57 | $ | 2.55 | 20.3 | % | $ | 15.12 | $ | 12.57 | $ | 2.55 | 20.3 | % | |||||||||||||||||
Tangible book value per share(1) | $ | 13.14 | $ | 12.67 | $ | 12.06 | $ | 11.43 | $ | 10.81 | $ | 2.33 | 21.6 | % | $ | 13.14 | $ | 10.81 | $ | 2.33 | 21.6 | % | |||||||||||||||||
Beginning common shares outstanding | 833.8 | 833.8 | 833.8 | 833.8 | 833.8 | — | — | % | 833.8 | 705.3 | 128.5 | 18.2 | % | ||||||||||||||||||||||||||
Issuance of common shares through initial public offering | — | — | — | — | — | — | — | % | — | 128.5 | (128.5 | ) | (100.0 | )% | |||||||||||||||||||||||||
Shares repurchased | — | — | — | — | — | — | — | % | — | — | — | — | % | ||||||||||||||||||||||||||
Ending common shares outstanding | 833.8 | 833.8 | 833.8 | 833.8 | 833.8 | — | — | % | 833.8 | 833.8 | — | — | % | ||||||||||||||||||||||||||
Weighted average common shares outstanding | 833.8 | 833.8 | 833.8 | 833.8 | 833.8 | — | — | % | 833.8 | 757.4 | 76.4 | 10.1 | % | ||||||||||||||||||||||||||
Weighted average common shares outstanding (fully diluted) | 835.8 | 835.8 | 835.4 | 835.0 | 834.3 | 1.5 | 0.2 | % | 835.5 | 757.6 | 77.9 | 10.3 | % | ||||||||||||||||||||||||||
(1) Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. | |||||||||||||||||||||||||||||||||||||||
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SYNCHRONY FINANCIAL | |||||||||||||||||||||||||||||||||||||||
SELECTED METRICS | |||||||||||||||||||||||||||||||||||||||
(unaudited, $ in millions, except account data) | |||||||||||||||||||||||||||||||||||||||
Quarter Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | 4Q'15 vs. 4Q'14 | Dec 31, 2015 | Dec 31, 2014 | YTD'15 vs. YTD'14 | |||||||||||||||||||||||||||||||
PERFORMANCE METRICS | |||||||||||||||||||||||||||||||||||||||
Return on assets(1) | 2.6 | % | 2.9 | % | 2.9 | % | 3.0 | % | 2.7 | % | (0.1 | )% | 2.9 | % | 3.2 | % | (0.3 | )% | |||||||||||||||||||||
Return on equity(2) | 17.5 | % | 19.2 | % | 19.2 | % | 20.8 | % | 20.2 | % | (2.7 | )% | 19.1 | % | 26.7 | % | (7.6 | )% | |||||||||||||||||||||
Return on tangible common equity(3) | 20.1 | % | 22.0 | % | 22.2 | % | 24.1 | % | 23.4 | % | (3.3 | )% | 22.0 | % | 32.4 | % | (10.4 | )% | |||||||||||||||||||||
Net interest margin(4) | 15.73 | % | 15.97 | % | 15.77 | % | 15.79 | % | 15.60 | % | 0.13 | % | 15.77 | % | 17.20 | % | (1.43 | )% | |||||||||||||||||||||
Efficiency ratio(5) | 34.0 | % | 34.2 | % | 33.5 | % | 32.2 | % | 32.4 | % | 1.6 | % | 33.5 | % | 31.7 | % | 1.8 | % | |||||||||||||||||||||
Other expense as a % of average loan receivables, including held for sale | 5.28 | % | 5.35 | % | 5.37 | % | 5.06 | % | 5.16 | % | 0.12 | % | 5.25 | % | 5.13 | % | 0.12 | % | |||||||||||||||||||||
Effective income tax rate | 37.0 | % | 37.5 | % | 37.2 | % | 37.5 | % | 37.7 | % | (0.7 | )% | 37.3 | % | 37.7 | % | (0.4 | )% | |||||||||||||||||||||
CREDIT QUALITY METRICS | |||||||||||||||||||||||||||||||||||||||
Net charge-offs as a % of average loan receivables, including held for sale | 4.23 | % | 4.02 | % | 4.63 | % | 4.53 | % | 4.32 | % | (0.09 | )% | 4.33 | % | 4.51 | % | (0.18 | )% | |||||||||||||||||||||
30+ days past due as a % of period-end loan receivables(6) | 4.06 | % | 4.02 | % | 3.53 | % | 3.79 | % | 4.14 | % | (0.08 | )% | 4.06 | % | 4.14 | % | (0.08 | )% | |||||||||||||||||||||
90+ days past due as a % of period-end loan receivables(6) | 1.86 | % | 1.73 | % | 1.52 | % | 1.81 | % | 1.90 | % | (0.04 | )% | 1.86 | % | 1.90 | % | (0.04 | )% | |||||||||||||||||||||
Net charge-offs | $ | 697 | $ | 633 | $ | 693 | $ | 668 | $ | 663 | $ | 34 | 5.1 | % | $ | 2,691 | $ | 2,573 | $ | 118 | 4.6 | % | |||||||||||||||||
Loan receivables delinquent over 30 days(6) | $ | 2,772 | $ | 2,553 | $ | 2,171 | $ | 2,209 | $ | 2,536 | $ | 236 | 9.3 | % | $ | 2,772 | $ | 2,536 | $ | 236 | 9.3 | % | |||||||||||||||||
Loan receivables delinquent over 90 days(6) | $ | 1,273 | $ | 1,102 | $ | 933 | $ | 1,056 | $ | 1,162 | $ | 111 | 9.6 | % | $ | 1,273 | $ | 1,162 | $ | 111 | 9.6 | % | |||||||||||||||||
Allowance for loan losses (period-end) | $ | 3,497 | $ | 3,371 | $ | 3,302 | $ | 3,255 | $ | 3,236 | $ | 261 | 8.1 | % | $ | 3,497 | $ | 3,236 | $ | 261 | 8.1 | % | |||||||||||||||||
Allowance coverage ratio(7) | 5.12 | % | 5.31 | % | 5.38 | % | 5.59 | % | 5.28 | % | (0.16 | )% | 5.12 | % | 5.28 | % | (0.16 | )% | |||||||||||||||||||||
BUSINESS METRICS | |||||||||||||||||||||||||||||||||||||||
Purchase volume(8) | $ | 32,460 | $ | 29,206 | $ | 28,810 | $ | 23,139 | $ | 30,081 | $ | 2,379 | 7.9 | % | $ | 113,615 | $ | 103,149 | $ | 10,466 | 10.1 | % | |||||||||||||||||
Period-end loan receivables | $ | 68,290 | $ | 63,520 | $ | 61,431 | $ | 58,248 | $ | 61,286 | $ | 7,004 | 11.4 | % | $ | 68,290 | $ | 61,286 | $ | 7,004 | 11.4 | % | |||||||||||||||||
Credit cards | $ | 65,773 | $ | 60,920 | $ | 58,827 | $ | 55,866 | $ | 58,880 | $ | 6,893 | 11.7 | % | $ | 65,773 | $ | 58,880 | $ | 6,893 | 11.7 | % | |||||||||||||||||
Consumer installment loans | $ | 1,154 | $ | 1,171 | $ | 1,138 | $ | 1,062 | $ | 1,063 | $ | 91 | 8.6 | % | $ | 1,154 | $ | 1,063 | $ | 91 | 8.6 | % | |||||||||||||||||
Commercial credit products | $ | 1,323 | $ | 1,380 | $ | 1,410 | $ | 1,295 | $ | 1,320 | $ | 3 | 0.2 | % | $ | 1,323 | $ | 1,320 | $ | 3 | 0.2 | % | |||||||||||||||||
Other | $ | 40 | $ | 49 | $ | 56 | $ | 25 | $ | 23 | $ | 17 | 73.9 | % | $ | 40 | $ | 23 | $ | 17 | 73.9 | % | |||||||||||||||||
Average loan receivables, including held for sale | $ | 65,406 | $ | 62,504 | $ | 60,094 | $ | 59,775 | $ | 59,547 | $ | 5,859 | 9.8 | % | $ | 62,120 | $ | 57,101 | $ | 5,019 | 8.8 | % | |||||||||||||||||
Period-end active accounts (in thousands)(9) | 68,314 | 62,831 | 61,718 | 59,761 | 64,286 | 4,028 | 6.3 | % | 68,314 | 64,286 | 4,028 | 6.3 | % | ||||||||||||||||||||||||||
Average active accounts (in thousands)(9) | 64,892 | 62,247 | 60,923 | 61,604 | 61,667 | 3,225 | 5.2 | % | 62,643 | 60,009 | 2,634 | 4.4 | % | ||||||||||||||||||||||||||
LIQUIDITY | |||||||||||||||||||||||||||||||||||||||
Liquid assets | |||||||||||||||||||||||||||||||||||||||
Cash and equivalents | $ | 12,325 | $ | 12,271 | $ | 10,621 | $ | 11,218 | $ | 11,828 | $ | 497 | 4.2 | % | $ | 12,325 | $ | 11,828 | $ | 497 | 4.2 | % | |||||||||||||||||
Total liquid assets | $ | 14,836 | $ | 15,305 | $ | 13,660 | $ | 13,813 | $ | 12,942 | $ | 1,894 | 14.6 | % | $ | 14,836 | $ | 12,942 | $ | 1,894 | 14.6 | % | |||||||||||||||||
Undrawn credit facilities | |||||||||||||||||||||||||||||||||||||||
Undrawn committed securitization financings | $ | 6,075 | $ | 6,550 | $ | 6,125 | $ | 6,600 | $ | 6,100 | $ | (25 | ) | (0.4 | )% | $ | 6,075 | $ | 6,100 | $ | (25 | ) | (0.4 | )% | |||||||||||||||
Total liquid assets and undrawn credit facilities | $ | 20,911 | $ | 21,855 | $ | 19,785 | $ | 20,413 | $ | 19,042 | $ | 1,869 | 9.8 | % | $ | 20,911 | $ | 19,042 | $ | 1,869 | 9.8 | % | |||||||||||||||||
Liquid assets % of total assets | 17.63 | % | 19.27 | % | 18.03 | % | 18.99 | % | 17.09 | % | 0.54 | % | 17.63 | % | 17.09 | % | 0.54 | % | |||||||||||||||||||||
Liquid assets including undrawn committed securitization financings % of total assets | 24.85 | % | 27.51 | % | 26.12 | % | 28.07 | % | 25.15 | % | (0.30 | )% | 24.85 | % | 25.15 | % | (0.30 | )% | |||||||||||||||||||||
(1) Return on assets represents net earnings as a percentage of average total assets. | |||||||||||||||||||||||||||||||||||||||
(2) Return on equity represents net earnings as a percentage of average total equity. | |||||||||||||||||||||||||||||||||||||||
(3) Return on tangible common equity represents net earnings as a percentage of average tangible common equity. Tangible Common Equity ("TCE") is a non-GAAP measure. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. | |||||||||||||||||||||||||||||||||||||||
(4) Net interest margin represents net interest income divided by average interest-earning assets. | |||||||||||||||||||||||||||||||||||||||
(5) Efficiency ratio represents (i) other expense, divided by (ii) net interest income, after retailer share arrangements, plus other income. | |||||||||||||||||||||||||||||||||||||||
(6) Based on customer statement-end balances extrapolated to the respective period-end date. | |||||||||||||||||||||||||||||||||||||||
(7) Allowance coverage ratio represents allowance for loan losses divided by total period-end loan receivables. | |||||||||||||||||||||||||||||||||||||||
(8) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period. | |||||||||||||||||||||||||||||||||||||||
(9) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. | |||||||||||||||||||||||||||||||||||||||
2
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||||||||||||||||
STATEMENTS OF EARNINGS | |||||||||||||||||||||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||||||||||||||||||||
Quarter Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | 4Q'15 vs. 4Q'14 | Dec 31, 2015 | Dec 31, 2014 | YTD'15 vs. YTD'14 | |||||||||||||||||||||||||||||||
Interest income: | |||||||||||||||||||||||||||||||||||||||
Interest and fees on loans | $ | 3,494 | $ | 3,379 | $ | 3,166 | $ | 3,140 | $ | 3,252 | $ | 242 | 7.4 | % | $ | 13,179 | $ | 12,216 | $ | 963 | 7.9 | % | |||||||||||||||||
Interest on investment securities | 15 | 13 | 11 | 10 | 8 | 7 | 87.5 | % | 49 | 26 | 23 | 88.5 | % | ||||||||||||||||||||||||||
Total interest income | 3,509 | 3,392 | 3,177 | 3,150 | 3,260 | 249 | 7.6 | % | 13,228 | 12,242 | 986 | 8.1 | % | ||||||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||||||||||||||||||
Interest on deposits | 165 | 159 | 146 | 137 | 139 | 26 | 18.7 | % | 607 | 470 | 137 | 29.1 | % | ||||||||||||||||||||||||||
Interest on borrowings of consolidated securitization entities | 56 | 54 | 53 | 52 | 57 | (1 | ) | (1.8 | )% | 215 | 215 | — | — | % | |||||||||||||||||||||||||
Interest on third-party debt | 80 | 76 | 71 | 82 | 78 | 2 | 2.6 | % | 309 | 124 | 185 | 149.2 | % | ||||||||||||||||||||||||||
Interest on related party debt | — | — | — | 4 | 8 | (8 | ) | (100.0 | )% | 4 | 113 | (109 | ) | (96.5 | )% | ||||||||||||||||||||||||
Total interest expense | 301 | 289 | 270 | 275 | 282 | 19 | 6.7 | % | 1,135 | 922 | 213 | 23.1 | % | ||||||||||||||||||||||||||
Net interest income | 3,208 | 3,103 | 2,907 | 2,875 | 2,978 | 230 | 7.7 | % | 12,093 | 11,320 | 773 | 6.8 | % | ||||||||||||||||||||||||||
Retailer share arrangements | (734 | ) | (723 | ) | (621 | ) | (660 | ) | (698 | ) | (36 | ) | 5.2 | % | (2,738 | ) | (2,575 | ) | (163 | ) | 6.3 | % | |||||||||||||||||
Net interest income, after retailer share arrangements | 2,474 | 2,380 | 2,286 | 2,215 | 2,280 | 194 | 8.5 | % | 9,355 | 8,745 | 610 | 7.0 | % | ||||||||||||||||||||||||||
Provision for loan losses | 823 | 702 | 740 | 687 | 797 | 26 | 3.3 | % | 2,952 | 2,917 | 35 | 1.2 | % | ||||||||||||||||||||||||||
Net interest income, after retailer share arrangements and provision for loan losses | 1,651 | 1,678 | 1,546 | 1,528 | 1,483 | 168 | 11.3 | % | 6,403 | 5,828 | 575 | 9.9 | % | ||||||||||||||||||||||||||
Other income: | |||||||||||||||||||||||||||||||||||||||
Interchange revenue | 147 | 135 | 123 | 100 | 120 | 27 | 22.5 | % | 505 | 389 | 116 | 29.8 | % | ||||||||||||||||||||||||||
Debt cancellation fees | 62 | 61 | 61 | 65 | 67 | (5 | ) | (7.5 | )% | 249 | 275 | (26 | ) | (9.5 | )% | ||||||||||||||||||||||||
Loyalty programs | (125 | ) | (122 | ) | (94 | ) | (78 | ) | (91 | ) | (34 | ) | 37.4 | % | (419 | ) | (281 | ) | (138 | ) | 49.1 | % | |||||||||||||||||
Other | 3 | 10 | 30 | 14 | 66 | (63 | ) | (95.5 | )% | 57 | 102 | (45 | ) | (44.1 | )% | ||||||||||||||||||||||||
Total other income | 87 | 84 | 120 | 101 | 162 | (75 | ) | (46.3 | )% | 392 | 485 | (93 | ) | (19.2 | )% | ||||||||||||||||||||||||
Other expense: | |||||||||||||||||||||||||||||||||||||||
Employee costs | 285 | 268 | 250 | 239 | 227 | 58 | 25.6 | % | 1,042 | 866 | 176 | 20.3 | % | ||||||||||||||||||||||||||
Professional fees(1) | 165 | 162 | 156 | 162 | 139 | 26 | 18.7 | % | 645 | 563 | 82 | 14.6 | % | ||||||||||||||||||||||||||
Marketing and business development | 128 | 115 | 108 | 82 | 165 | (37 | ) | (22.4 | )% | 433 | 460 | (27 | ) | (5.9 | )% | ||||||||||||||||||||||||
Information processing | 83 | 77 | 74 | 63 | 60 | 23 | 38.3 | % | 297 | 212 | 85 | 40.1 | % | ||||||||||||||||||||||||||
Other(1) | 209 | 221 | 217 | 200 | 201 | 8 | 4.0 | % | 847 | 826 | 21 | 2.5 | % | ||||||||||||||||||||||||||
Total other expense | 870 | 843 | 805 | 746 | 792 | 78 | 9.8 | % | 3,264 | 2,927 | 337 | 11.5 | % | ||||||||||||||||||||||||||
Earnings before provision for income taxes | 868 | 919 | 861 | 883 | 853 | 15 | 1.8 | % | 3,531 | 3,386 | 145 | 4.3 | % | ||||||||||||||||||||||||||
Provision for income taxes | 321 | 345 | 320 | 331 | 322 | (1 | ) | (0.3 | )% | 1,317 | 1,277 | 40 | 3.1 | % | |||||||||||||||||||||||||
Net earnings attributable to common shareholders | $ | 547 | $ | 574 | $ | 541 | $ | 552 | $ | 531 | $ | 16 | 3.0 | % | $ | 2,214 | $ | 2,109 | $ | 105 | 5.0 | % | |||||||||||||||||
(1) We have reclassified certain amounts within Professional fees to Other for all periods in 2014 to conform to the current period classifications. | |||||||||||||||||||||||||||||||||||||||
3
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
STATEMENTS OF FINANCIAL POSITION | |||||||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Dec 31, 2015 vs. Dec 31, 2014 | ||||||||||||||||||||
Assets | |||||||||||||||||||||||||
Cash and equivalents | $ | 12,325 | $ | 12,271 | $ | 10,621 | $ | 11,218 | $ | 11,828 | $ | 497 | 4.2 | % | |||||||||||
Investment securities | 3,142 | 3,596 | 3,682 | 3,121 | 1,598 | 1,544 | 96.6 | % | |||||||||||||||||
Loan receivables: | |||||||||||||||||||||||||
Unsecuritized loans held for investment | 42,826 | 38,325 | 36,019 | 33,424 | 34,335 | 8,491 | 24.7 | % | |||||||||||||||||
Restricted loans of consolidated securitization entities | 25,464 | 25,195 | 25,412 | 24,824 | 26,951 | (1,487 | ) | (5.5 | )% | ||||||||||||||||
Total loan receivables | 68,290 | 63,520 | 61,431 | 58,248 | 61,286 | 7,004 | 11.4 | % | |||||||||||||||||
Less: Allowance for loan losses | (3,497 | ) | (3,371 | ) | (3,302 | ) | (3,255 | ) | (3,236 | ) | (261 | ) | 8.1 | % | |||||||||||
Loan receivables, net | 64,793 | 60,149 | 58,129 | 54,993 | 58,050 | 6,743 | 11.6 | % | |||||||||||||||||
Loan receivables held for sale | — | — | — | 359 | 332 | (332 | ) | (100.0 | )% | ||||||||||||||||
Goodwill | 949 | 949 | 949 | 949 | 949 | — | — | % | |||||||||||||||||
Intangible assets, net | 701 | 646 | 575 | 557 | 519 | 182 | 35.1 | % | |||||||||||||||||
Other assets | 2,225 | 1,831 | 1,794 | 1,524 | 2,431 | (206 | ) | (8.5 | )% | ||||||||||||||||
Total assets | $ | 84,135 | $ | 79,442 | $ | 75,750 | $ | 72,721 | $ | 75,707 | $ | 8,428 | 11.1 | % | |||||||||||
Liabilities and Equity | |||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||
Interest-bearing deposit accounts | $ | 43,295 | $ | 40,408 | $ | 37,629 | $ | 34,788 | $ | 34,847 | $ | 8,448 | 24.2 | % | |||||||||||
Non-interest-bearing deposit accounts | 152 | 140 | 143 | 162 | 108 | 44 | 40.7 | % | |||||||||||||||||
Total deposits | 43,447 | 40,548 | 37,772 | 34,950 | 34,955 | 8,492 | 24.3 | % | |||||||||||||||||
Borrowings: | |||||||||||||||||||||||||
Borrowings of consolidated securitization entities | 13,603 | 13,640 | 13,948 | 13,817 | 14,967 | (1,364 | ) | (9.1 | )% | ||||||||||||||||
Bank term loan | 4,151 | 4,651 | 5,151 | 5,651 | 8,245 | (4,094 | ) | (49.7 | )% | ||||||||||||||||
Senior unsecured notes | 6,590 | 5,590 | 4,593 | 4,592 | 3,593 | 2,997 | 83.4 | % | |||||||||||||||||
Related party debt | — | — | — | — | 655 | (655 | ) | (100.0 | )% | ||||||||||||||||
Total borrowings | 24,344 | 23,881 | 23,692 | 24,060 | 27,460 | (3,116 | ) | (11.3 | )% | ||||||||||||||||
Accrued expenses and other liabilities | 3,740 | 2,855 | 2,708 | 2,675 | 2,814 | 926 | 32.9 | % | |||||||||||||||||
Total liabilities | 71,531 | 67,284 | 64,172 | 61,685 | 65,229 | 6,302 | 9.7 | % | |||||||||||||||||
Equity: | |||||||||||||||||||||||||
Common stock | 1 | 1 | 1 | 1 | 1 | — | — | % | |||||||||||||||||
Additional paid-in capital | 9,351 | 9,431 | 9,422 | 9,418 | 9,408 | (57 | ) | (0.6 | )% | ||||||||||||||||
Retained earnings | 3,293 | 2,746 | 2,172 | 1,631 | 1,079 | 2,214 | NM | ||||||||||||||||||
Accumulated other comprehensive income: | (41 | ) | (20 | ) | (17 | ) | (14 | ) | (10 | ) | (31 | ) | NM | ||||||||||||
Total equity | 12,604 | 12,158 | 11,578 | 11,036 | 10,478 | 2,126 | 20.3 | % | |||||||||||||||||
Total liabilities and equity | $ | 84,135 | $ | 79,442 | $ | 75,750 | $ | 72,721 | $ | 75,707 | $ | 8,428 | 11.1 | % | |||||||||||
4
SYNCHRONY FINANCIAL | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited, $ in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | Average | Interest | Average | Interest | Average | Interest | Average | Interest | Average | |||||||||||||||||||||||||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||||||||||||||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning cash and equivalents | $ | 12,070 | $ | 9 | 0.30 | % | $ | 11,059 | $ | 7 | 0.25 | % | $ | 10,728 | $ | 6 | 0.22 | % | $ | 11,331 | $ | 6 | 0.21 | % | $ | 13,631 | $ | 7 | 0.20 | % | ||||||||||||||||||||||||
Securities available for sale | 3,445 | 6 | 0.69 | % | 3,534 | 6 | 0.67 | % | 3,107 | 5 | 0.65 | % | 2,725 | 4 | 0.60 | % | 962 | 1 | 0.40 | % | ||||||||||||||||||||||||||||||||||
Loan receivables: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards, including held for sale | 62,834 | 3,432 | 21.67 | % | 59,890 | 3,315 | 21.96 | % | 57,588 | 3,106 | 21.63 | % | 57,390 | 3,079 | 21.76 | % | 57,075 | 3,186 | 21.68 | % | ||||||||||||||||||||||||||||||||||
Consumer installment loans | 1,163 | 26 | 8.87 | % | 1,160 | 27 | 9.23 | % | 1,101 | 26 | 9.47 | % | 1,057 | 25 | 9.59 | % | 1,072 | 27 | 9.78 | % | ||||||||||||||||||||||||||||||||||
Commercial credit products | 1,361 | 36 | 10.49 | % | 1,400 | 36 | 10.20 | % | 1,372 | 34 | 9.94 | % | 1,305 | 36 | 11.19 | % | 1,379 | 38 | 10.70 | % | ||||||||||||||||||||||||||||||||||
Other | 48 | — | — | % | 54 | 1 | NM | 33 | — | — | % | 23 | — | — | % | 21 | 1 | NM | ||||||||||||||||||||||||||||||||||||
Total loan receivables, including held for sale | 65,406 | 3,494 | 21.19 | % | 62,504 | 3,379 | 21.45 | % | 60,094 | 3,166 | 21.13 | % | 59,775 | 3,140 | 21.30 | % | 59,547 | 3,252 | 21.21 | % | ||||||||||||||||||||||||||||||||||
Total interest-earning assets | 80,921 | 3,509 | 17.20 | % | 77,097 | 3,392 | 17.46 | % | 73,929 | 3,177 | 17.24 | % | 73,831 | 3,150 | 17.30 | % | 74,140 | 3,260 | 17.07 | % | ||||||||||||||||||||||||||||||||||
Non-interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 1,268 | 1,216 | 583 | 497 | 1,220 | |||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | (3,440 | ) | (3,341 | ) | (3,285 | ) | (3,272 | ) | (3,160 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Other assets | 3,280 | 3,023 | 2,916 | 2,802 | 2,831 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total non-interest-earning assets | 1,108 | 898 | 214 | 27 | 891 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 82,029 | $ | 77,995 | $ | 74,143 | $ | 73,858 | $ | 75,031 | ||||||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing deposit accounts | $ | 42,162 | $ | 165 | 1.55 | % | $ | 39,136 | $ | 159 | 1.61 | % | $ | 35,908 | $ | 146 | 1.63 | % | $ | 34,981 | $ | 137 | 1.59 | % | $ | 33,980 | $ | 139 | 1.59 | % | ||||||||||||||||||||||||
Borrowings of consolidated securitization entities | 13,565 | 56 | 1.64 | % | 13,730 | 54 | 1.56 | % | 14,026 | 53 | 1.52 | % | 14,101 | 52 | 1.50 | % | 14,766 | 57 | 1.50 | % | ||||||||||||||||||||||||||||||||||
Bank term loan(1) | 4,526 | 28 | 2.45 | % | 4,901 | 29 | 2.35 | % | 5,401 | 32 | 2.38 | % | 6,531 | 47 | 2.92 | % | 8,057 | 46 | 2.22 | % | ||||||||||||||||||||||||||||||||||
Senior unsecured notes | 5,840 | 52 | 3.53 | % | 5,340 | 47 | 3.49 | % | 4,592 | 39 | 3.41 | % | 4,093 | 35 | 3.47 | % | 3,593 | 32 | 3.46 | % | ||||||||||||||||||||||||||||||||||
Related party debt | — | — | — | % | — | — | — | % | — | — | — | % | 407 | 4 | 3.99 | % | 843 | 8 | 3.68 | % | ||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 66,093 | 301 | 1.81 | % | 63,107 | 289 | 1.82 | % | 59,927 | 270 | 1.81 | % | 60,113 | 275 | 1.86 | % | 61,239 | 282 | 1.79 | % | ||||||||||||||||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-interest-bearing deposit accounts | 147 | 149 | 166 | 142 | 182 | |||||||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 3,396 | 2,859 | 2,750 | 2,854 | 3,382 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total non-interest-bearing liabilities | 3,543 | 3,008 | 2,916 | 2,996 | 3,564 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 69,636 | 66,115 | 62,843 | 63,109 | 64,803 | |||||||||||||||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total equity | 12,393 | 11,880 | 11,300 | 10,749 | 10,228 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities and equity | $ | 82,029 | $ | 77,995 | $ | 74,143 | $ | 73,858 | $ | 75,031 | ||||||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 3,208 | $ | 3,103 | $ | 2,907 | $ | 2,875 | $ | 2,978 | ||||||||||||||||||||||||||||||||||||||||||||
Interest rate spread(2) | 15.39 | % | 15.64 | % | 15.43 | % | 15.44 | % | 15.28 | % | ||||||||||||||||||||||||||||||||||||||||||||
Net interest margin(3) | 15.73 | % | 15.97 | % | 15.77 | % | 15.79 | % | 15.60 | % | ||||||||||||||||||||||||||||||||||||||||||||
(1) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the quarters ended December 31, 2015, September 30, 2015, June 30, 2015, March 31, 2015, and December 31, 2014 were 2.26%, 2.23%, 2.21%, 2.21%, and 2.19%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(3) Net interest margin represents net interest income divided by average interest-earning assets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
5
SYNCHRONY FINANCIAL | |||||||||||||||||||||
AVERAGE BALANCES, NET INTEREST INCOME AND NET INTEREST MARGIN | |||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||
Twelve Months Ended Dec 31, 2015 | Twelve Months Ended Dec 31, 2014 | ||||||||||||||||||||
Interest | Average | Interest | Average | ||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||||||||
Assets | |||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Interest-earning cash and equivalents | $ | 11,406 | $ | 28 | 0.25 | % | $ | 8,230 | $ | 16 | 0.19 | % | |||||||||
Securities available for sale | 3,142 | 21 | 0.67 | % | 487 | 10 | 2.05 | % | |||||||||||||
Loan receivables: | |||||||||||||||||||||
Credit cards, including held for sale | 59,603 | 12,932 | 21.70 | % | 54,686 | 11,967 | 21.88 | % | |||||||||||||
Consumer installment loans | 1,119 | 104 | 9.29 | % | 1,025 | 99 | 9.66 | % | |||||||||||||
Commercial credit products | 1,359 | 142 | 10.45 | % | 1,373 | 149 | 10.85 | % | |||||||||||||
Other | 39 | 1 | 2.56 | % | 17 | 1 | 5.88 | % | |||||||||||||
Total loan receivables, including held for sale | 62,120 | 13,179 | 21.22 | % | 57,101 | 12,216 | 21.39 | % | |||||||||||||
Total interest-earning assets | 76,668 | 13,228 | 17.25 | % | 65,818 | 12,242 | 18.60 | % | |||||||||||||
Non-interest-earning assets: | |||||||||||||||||||||
Cash and due from banks | 904 | 881 | |||||||||||||||||||
Allowance for loan losses | (3,340 | ) | (3,039 | ) | |||||||||||||||||
Other assets | 3,013 | 2,492 | |||||||||||||||||||
Total non-interest-earning assets | 577 | 334 | |||||||||||||||||||
Total assets | $ | 77,245 | $ | 66,152 | |||||||||||||||||
Liabilities | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Interest-bearing deposit accounts | $ | 38,148 | $ | 607 | 1.59 | % | $ | 30,110 | $ | 470 | 1.56 | % | |||||||||
Borrowings of consolidated securitization entities | 13,868 | 215 | 1.55 | % | 14,835 | 215 | 1.45 | % | |||||||||||||
Bank term loan(1) | 5,383 | 136 | 2.53 | % | 3,056 | 74 | 2.42 | % | |||||||||||||
Senior unsecured notes | 4,976 | 173 | 3.48 | % | 1,382 | 50 | 3.62 | % | |||||||||||||
Related party debt | 125 | 4 | 3.20 | % | 5,335 | 113 | 2.12 | % | |||||||||||||
Total interest-bearing liabilities | 62,500 | 1,135 | 1.82 | % | 54,718 | 922 | 1.69 | % | |||||||||||||
Non-interest-bearing liabilities | |||||||||||||||||||||
Non-interest-bearing deposit accounts | 152 | 240 | |||||||||||||||||||
Other liabilities | 3,015 | 3,306 | |||||||||||||||||||
Total non-interest-bearing liabilities | 3,167 | 3,546 | |||||||||||||||||||
Total liabilities | 65,667 | 58,264 | |||||||||||||||||||
Equity | |||||||||||||||||||||
Total equity | 11,578 | 7,888 | |||||||||||||||||||
Total liabilities and equity | $ | 77,245 | $ | 66,152 | |||||||||||||||||
Net interest income | $ | 12,093 | $ | 11,320 | |||||||||||||||||
Interest rate spread(2) | 15.43 | % | 16.91 | % | |||||||||||||||||
Net interest margin(3) | 15.77 | % | 17.20 | % | |||||||||||||||||
(1) Average interest rate on liabilities calculated above utilizes monthly average balances. The effective interest rates for the Bank term loan for the 12 months ended December 31, 2015 and December 31, 2014 were 2.23% and 2.20%, respectively. The Bank term loan effective rate excludes the impact of charges incurred in connection with prepayments of the loan. | |||||||||||||||||||||
(2) Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities. | |||||||||||||||||||||
(3) Net interest margin represents net interest income divided by average interest-earning assets. | |||||||||||||||||||||
6
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||
BALANCE SHEET STATISTICS | |||||||||||||||||||||||||
(unaudited, $ in millions, except per share statistics) | |||||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | Dec 31, 2015 vs. Dec 31, 2014 | ||||||||||||||||||||
BALANCE SHEET STATISTICS | |||||||||||||||||||||||||
Total common equity | $ | 12,604 | $ | 12,158 | $ | 11,578 | $ | 11,036 | $ | 10,478 | $ | 2,126 | 20.3 | % | |||||||||||
Total common equity as a % of total assets | 14.98 | % | 15.30 | % | 15.28 | % | 15.18 | % | 13.84 | % | 1.14 | % | |||||||||||||
Tangible assets | $ | 82,485 | $ | 77,847 | $ | 74,226 | $ | 71,215 | $ | 74,239 | $ | 8,246 | 11.1 | % | |||||||||||
Tangible common equity(1) | $ | 10,954 | $ | 10,563 | $ | 10,054 | $ | 9,530 | $ | 9,010 | $ | 1,944 | 21.6 | % | |||||||||||
Tangible common equity as a % of tangible assets(1) | 13.28 | % | 13.57 | % | 13.55 | % | 13.38 | % | 12.14 | % | 1.14 | % | |||||||||||||
Tangible common equity per share(1) | $ | 13.14 | $ | 12.67 | $ | 12.06 | $ | 11.43 | $ | 10.81 | $ | 2.33 | 21.6 | % | |||||||||||
REGULATORY CAPITAL RATIOS(2) | |||||||||||||||||||||||||
Basel III Transition | Basel I | ||||||||||||||||||||||||
Total risk-based capital ratio(3)(8) | 18.1 | % | 18.8 | % | 18.5 | % | 18.2 | % | 16.2 | % | |||||||||||||||
Tier 1 risk-based capital ratio(4)(8) | 16.8 | % | 17.5 | % | 17.2 | % | 16.9 | % | 14.9 | % | |||||||||||||||
Tier 1 common ratio(5)(8) | n/a | n/a | n/a | 16.9 | % | 14.9 | % | ||||||||||||||||||
Tier 1 leverage ratio(6)(8) | 14.3 | % | 14.6 | % | 14.6 | % | 13.7 | % | 12.5 | % | |||||||||||||||
Common equity Tier 1 capital ratio(7)(8) | 16.8 | % | 17.5 | % | 17.2 | % | n/a | n/a | |||||||||||||||||
Basel III Fully Phased-in | |||||||||||||||||||||||||
Common equity Tier 1 capital ratio(7) | 15.9 | % | 16.6 | % | 16.4 | % | 16.4 | % | 14.5 | % | |||||||||||||||
(1) Tangible common equity ("TCE") is a non-GAAP measure. We believe TCE is a more meaningful measure of the net asset value of the Company to investors. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of Non-GAAP Measures and Calculations of Regulatory Measures. | |||||||||||||||||||||||||
(2) Regulatory capital metrics at December 31, 2015 are preliminary and therefore subject to change. As a new savings and loan holding company, the Company historically has not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these ratios are non-GAAP measures. See Reconciliation of Non-GAAP Measures and Calculation of Regulatory Measures for components of capital ratio calculations. | |||||||||||||||||||||||||
(3) Total risk-based capital ratio is the ratio of total risk-based capital divided by risk-weighted assets. | |||||||||||||||||||||||||
(4) Tier 1 risk-based capital ratio is the ratio of Tier 1 capital divided by risk-weighted assets. | |||||||||||||||||||||||||
(5) Tier 1 common ratio is the ratio of common equity Tier 1 capital divided by risk-weighted assets. | |||||||||||||||||||||||||
(6) Tier 1 leverage ratio reported under Basel III transition rules is calculated based on Tier 1 capital divided by total average assets, after certain adjustments. Total assets, after certain adjustments is used as the denominator for prior periods calculated under Basel I rules. | |||||||||||||||||||||||||
(7) Common equity Tier 1 capital ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated under Basel III rules. Common equity Tier 1 capital ratio (fully phased-in) is a preliminary estimate reflecting management’s interpretation of the final Basel III rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance. | |||||||||||||||||||||||||
(8) Beginning June 30, 2015, regulatory capital ratios are calculated under Basel III rules subject to transition provisions. The Company reported under Basel I rules for periods prior to June 30, 2015. | |||||||||||||||||||||||||
7
SYNCHRONY FINANCIAL | |||||||||||||||||||||||||||||||||||||||
PLATFORM RESULTS AND RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||||||||||||||||||||||||||
(unaudited, $ in millions) | |||||||||||||||||||||||||||||||||||||||
Quarter Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | 4Q'15 vs. 4Q'14 | Dec 31, 2015 | Dec 31, 2014 | YTD'15 vs. YTD'14 | |||||||||||||||||||||||||||||||
RETAIL CARD | |||||||||||||||||||||||||||||||||||||||
Purchase volume(1)(2) | $ | 26,768 | $ | 23,560 | $ | 23,452 | $ | 18,410 | $ | 24,855 | $ | 1,913 | 7.7 | % | $ | 92,190 | $ | 83,591 | $ | 8,599 | 10.3 | % | |||||||||||||||||
Period-end loan receivables | $ | 47,412 | $ | 43,432 | $ | 42,315 | $ | 39,685 | $ | 42,308 | $ | 5,104 | 12.1 | % | $ | 47,412 | $ | 42,308 | $ | 5,104 | 12.1 | % | |||||||||||||||||
Average loan receivables, including held for sale | $ | 44,958 | $ | 42,933 | $ | 41,303 | $ | 40,986 | $ | 40,929 | $ | 4,029 | 9.8 | % | $ | 42,687 | $ | 39,278 | $ | 3,409 | 8.7 | % | |||||||||||||||||
Average active accounts (in thousands)(2)(3) | 52,038 | 49,953 | 48,981 | 49,617 | 49,871 | 2,167 | 4.3 | % | 50,358 | 48,599 | 1,759 | 3.6 | % | ||||||||||||||||||||||||||
Interest and fees on loans(2) | $ | 2,594 | $ | 2,508 | $ | 2,335 | $ | 2,337 | $ | 2,405 | $ | 189 | 7.9 | % | $ | 9,774 | $ | 9,040 | $ | 734 | 8.1 | % | |||||||||||||||||
Other income(2) | 76 | 70 | 107 | 86 | 141 | (65 | ) | (46.1 | )% | 339 | 407 | (68 | ) | (16.7 | )% | ||||||||||||||||||||||||
Platform revenue, excluding retailer share arrangements(2) | 2,670 | 2,578 | 2,442 | 2,423 | 2,546 | 124 | 4.9 | % | 10,113 | 9,447 | 666 | 7.0 | % | ||||||||||||||||||||||||||
Retailer share arrangements(2) | (723 | ) | (708 | ) | (606 | ) | (651 | ) | (686 | ) | (37 | ) | 5.4 | % | (2,688 | ) | (2,530 | ) | (158 | ) | 6.2 | % | |||||||||||||||||
Platform revenue(2) | $ | 1,947 | $ | 1,870 | $ | 1,836 | $ | 1,772 | $ | 1,860 | $ | 87 | 4.7 | % | $ | 7,425 | $ | 6,917 | $ | 508 | 7.3 | % | |||||||||||||||||
PAYMENT SOLUTIONS | |||||||||||||||||||||||||||||||||||||||
Purchase volume(1) | $ | 3,714 | $ | 3,635 | $ | 3,371 | $ | 2,948 | $ | 3,419 | $ | 295 | 8.6 | % | $ | 13,668 | $ | 12,447 | $ | 1,221 | 9.8 | % | |||||||||||||||||
Period-end loan receivables | $ | 13,543 | $ | 12,933 | $ | 12,194 | $ | 11,833 | $ | 12,095 | $ | 1,448 | 12.0 | % | $ | 13,543 | $ | 12,095 | $ | 1,448 | 12.0 | % | |||||||||||||||||
Average loan receivables | $ | 13,192 | $ | 12,523 | $ | 11,971 | $ | 11,970 | $ | 11,772 | $ | 1,420 | 12.1 | % | $ | 12,436 | $ | 11,171 | $ | 1,265 | 11.3 | % | |||||||||||||||||
Average active accounts (in thousands)(3) | 7,896 | 7,468 | 7,231 | 7,271 | 7,113 | 783 | 11.0 | % | 7,478 | 6,869 | 609 | 8.9 | % | ||||||||||||||||||||||||||
Interest and fees on loans | $ | 462 | $ | 442 | $ | 412 | $ | 403 | $ | 426 | $ | 36 | 8.5 | % | $ | 1,719 | $ | 1,582 | $ | 137 | 8.7 | % | |||||||||||||||||
Other income | 3 | 5 | 4 | 5 | 9 | (6 | ) | (66.7 | )% | 17 | 32 | (15 | ) | (46.9 | )% | ||||||||||||||||||||||||
Platform revenue, excluding retailer share arrangements | 465 | 447 | 416 | 408 | 435 | 30 | 6.9 | % | 1,736 | 1,614 | 122 | 7.6 | % | ||||||||||||||||||||||||||
Retailer share arrangements | (10 | ) | (13 | ) | (14 | ) | (8 | ) | (11 | ) | 1 | (9.1 | )% | (45 | ) | (41 | ) | (4 | ) | 9.8 | % | ||||||||||||||||||
Platform revenue | $ | 455 | $ | 434 | $ | 402 | $ | 400 | $ | 424 | $ | 31 | 7.3 | % | $ | 1,691 | $ | 1,573 | $ | 118 | 7.5 | % | |||||||||||||||||
CARECREDIT | |||||||||||||||||||||||||||||||||||||||
Purchase volume(1) | $ | 1,978 | $ | 2,011 | $ | 1,987 | $ | 1,781 | $ | 1,807 | $ | 171 | 9.5 | % | $ | 7,757 | $ | 7,111 | $ | 646 | 9.1 | % | |||||||||||||||||
Period-end loan receivables | $ | 7,335 | $ | 7,155 | $ | 6,922 | $ | 6,730 | $ | 6,883 | $ | 452 | 6.6 | % | $ | 7,335 | $ | 6,883 | $ | 452 | 6.6 | % | |||||||||||||||||
Average loan receivables | $ | 7,256 | $ | 7,048 | $ | 6,820 | $ | 6,819 | $ | 6,846 | $ | 410 | 6.0 | % | $ | 6,997 | $ | 6,652 | $ | 345 | 5.2 | % | |||||||||||||||||
Average active accounts (in thousands)(3) | 4,958 | 4,826 | 4,711 | 4,716 | 4,683 | 275 | 5.9 | % | 4,807 | 4,541 | 266 | 5.9 | % | ||||||||||||||||||||||||||
Interest and fees on loans | $ | 438 | $ | 429 | $ | 419 | $ | 400 | $ | 421 | $ | 17 | 4.0 | % | $ | 1,686 | $ | 1,594 | $ | 92 | 5.8 | % | |||||||||||||||||
Other income | 8 | 9 | 9 | 10 | 12 | (4 | ) | (33.3 | )% | 36 | 46 | (10 | ) | (21.7 | )% | ||||||||||||||||||||||||
Platform revenue, excluding retailer share arrangements | 446 | 438 | 428 | 410 | 433 | 13 | 3.0 | % | 1,722 | 1,640 | 82 | 5.0 | % | ||||||||||||||||||||||||||
Retailer share arrangements | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (1 | ) | — | — | % | (5 | ) | (4 | ) | (1 | ) | 25.0 | % | ||||||||||||||||||
Platform revenue | $ | 445 | $ | 436 | $ | 427 | $ | 409 | $ | 432 | $ | 13 | 3.0 | % | $ | 1,717 | $ | 1,636 | $ | 81 | 5.0 | % | |||||||||||||||||
TOTAL SYF | |||||||||||||||||||||||||||||||||||||||
Purchase volume(1)(2) | $ | 32,460 | $ | 29,206 | $ | 28,810 | $ | 23,139 | $ | 30,081 | $ | 2,379 | 7.9 | % | $ | 113,615 | $ | 103,149 | $ | 10,466 | 10.1 | % | |||||||||||||||||
Period-end loan receivables | $ | 68,290 | $ | 63,520 | $ | 61,431 | $ | 58,248 | $ | 61,286 | $ | 7,004 | 11.4 | % | $ | 68,290 | $ | 61,286 | $ | 7,004 | 11.4 | % | |||||||||||||||||
Average loan receivables, including held for sale | $ | 65,406 | $ | 62,504 | $ | 60,094 | $ | 59,775 | $ | 59,547 | $ | 5,859 | 9.8 | % | $ | 62,120 | $ | 57,101 | $ | 5,019 | 8.8 | % | |||||||||||||||||
Average active accounts (in thousands)(2)(3) | 64,892 | 62,247 | 60,923 | 61,604 | 61,667 | 3,225 | 5.2 | % | 62,643 | 60,009 | 2,634 | 4.4 | % | ||||||||||||||||||||||||||
Interest and fees on loans(2) | $ | 3,494 | $ | 3,379 | $ | 3,166 | $ | 3,140 | $ | 3,252 | $ | 242 | 7.4 | % | $ | 13,179 | $ | 12,216 | $ | 963 | 7.9 | % | |||||||||||||||||
Other income(2) | 87 | 84 | 120 | 101 | 162 | (75 | ) | (46.3 | )% | 392 | 485 | (93 | ) | (19.2 | )% | ||||||||||||||||||||||||
Platform revenue, excluding retailer share arrangements(2) | 3,581 | 3,463 | 3,286 | 3,241 | 3,414 | 167 | 4.9 | % | 13,571 | 12,701 | 870 | 6.8 | % | ||||||||||||||||||||||||||
Retailer share arrangements(2) | (734 | ) | (723 | ) | (621 | ) | (660 | ) | (698 | ) | (36 | ) | 5.2 | % | (2,738 | ) | (2,575 | ) | (163 | ) | 6.3 | % | |||||||||||||||||
Platform revenue(2) | $ | 2,847 | $ | 2,740 | $ | 2,665 | $ | 2,581 | $ | 2,716 | $ | 131 | 4.8 | % | $ | 10,833 | $ | 10,126 | $ | 707 | 7.0 | % | |||||||||||||||||
(1) Purchase volume, or net credit sales, represents the aggregate amount of charges incurred on credit cards or other credit product accounts less returns during the period. | |||||||||||||||||||||||||||||||||||||||
(2) Includes activity and balances associated with loan receivables held for sale. | |||||||||||||||||||||||||||||||||||||||
(3) Active accounts represent credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. | |||||||||||||||||||||||||||||||||||||||
8
SYNCHRONY FINANCIAL | |||||||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES AND CALCULATIONS OF REGULATORY MEASURES(1) | |||||||||||||||||||
(unaudited, $ in millions, except per share statistics) | |||||||||||||||||||
Quarter Ended | |||||||||||||||||||
Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Mar 31, 2015 | Dec 31, 2014 | |||||||||||||||
COMMON EQUITY MEASURES | |||||||||||||||||||
GAAP Total common equity | $ | 12,604 | $ | 12,158 | $ | 11,578 | $ | 11,036 | $ | 10,478 | |||||||||
Less: Goodwill | (949 | ) | (949 | ) | (949 | ) | (949 | ) | (949 | ) | |||||||||
Less: Intangible assets, net | (701 | ) | (646 | ) | (575 | ) | (557 | ) | (519 | ) | |||||||||
Tangible common equity | $ | 10,954 | $ | 10,563 | $ | 10,054 | $ | 9,530 | $ | 9,010 | |||||||||
Adjustments for certain other intangible assets, deferred tax liabilities and certain items in accumulated comprehensive income (loss) | 293 | 287 | |||||||||||||||||
Basel I - Tier 1 capital and Tier 1 common equity | $ | 9,823 | $ | 9,297 | |||||||||||||||
Adjustments for certain other intangible assets and deferred tax liabilities | (12 | ) | (20 | ) | |||||||||||||||
Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss) | 280 | 291 | 293 | ||||||||||||||||
Basel III - Common equity Tier 1 (fully phased-in) | $ | 11,234 | $ | 10,854 | $ | 10,347 | $ | 9,811 | $ | 9,277 | |||||||||
Adjustment related to capital components during transition | 399 | 375 | 331 | ||||||||||||||||
Basel III - Common equity Tier I (transition) | $ | 11,633 | $ | 11,229 | $ | 10,678 | |||||||||||||
RISK-BASED CAPITAL | |||||||||||||||||||
Tier 1 capital and Tier 1 common equity(2) | $ | 11,633 | $ | 11,229 | $ | 10,678 | $ | 9,823 | $ | 9,297 | |||||||||
Add: Allowance for loan losses includible in risk-based capital | 900 | 835 | 806 | 759 | 809 | ||||||||||||||
Risk-based capital(2) | $ | 12,533 | $ | 12,064 | $ | 11,484 | $ | 10,582 | $ | 10,106 | |||||||||
ASSET MEASURES | |||||||||||||||||||
Total assets(3) | $ | 82,029 | $ | 77,995 | $ | 74,143 | $ | 72,721 | $ | 75,707 | |||||||||
Adjustments for: | |||||||||||||||||||
Disallowed goodwill and other disallowed intangible assets, net of related deferred tax liabilities | (992 | ) | (931 | ) | (903 | ) | (1,213 | ) | (1,181 | ) | |||||||||
Other | 92 | 104 | 60 | 136 | 79 | ||||||||||||||
Total assets for leverage purposes(2) | $ | 81,129 | $ | 77,168 | $ | 73,300 | $ | 71,644 | $ | 74,605 | |||||||||
Risk-weighted assets - Basel I | n/a | n/a | n/a | $ | 58,184 | $ | 62,270 | ||||||||||||
Risk-weighted assets - Basel III (fully phased-in)(4) | $ | 70,654 | $ | 65,278 | $ | 62,970 | $ | 59,926 | $ | 64,162 | |||||||||
Risk-weighted assets - Basel III (transition)(4) | $ | 69,386 | $ | 64,244 | $ | 61,985 | n/a | n/a | |||||||||||
TANGIBLE COMMON EQUITY PER SHARE | |||||||||||||||||||
GAAP book value per share | $ | 15.12 | $ | 14.58 | $ | 13.89 | $ | 13.24 | $ | 12.57 | |||||||||
Less: Goodwill | (1.14 | ) | (1.14 | ) | (1.14 | ) | (1.14 | ) | (1.14 | ) | |||||||||
Less: Intangible assets, net | (0.84 | ) | (0.77 | ) | (0.69 | ) | (0.67 | ) | (0.62 | ) | |||||||||
Tangible common equity per share | $ | 13.14 | $ | 12.67 | $ | 12.06 | $ | 11.43 | $ | 10.81 | |||||||||
(1) Regulatory capital metrics at December 31, 2015 are preliminary and therefore subject to change. | |||||||||||||||||||
(2) Beginning June 30, 2015, regulatory capital amounts are calculated under Basel III rules subject to transition provisions. The company reported under Basel I rules for periods prior to June 30, 2015. | |||||||||||||||||||
(3) Represents total average assets beginning June 30, 2015 and total assets for all periods prior to June 30, 2015. | |||||||||||||||||||
(4) Key differences between Basel III transitional rules and fully phased-in Basel III rules in the calculation of risk-weighted assets include, but not limited to, risk weighting of deferred tax assets and adjustments for certain intangible assets. | |||||||||||||||||||
9
4Q’15 Financial Results January 22, 2016 Exhibit 99.3
2 Cautionary Statement Regarding Forward-Looking Statements The following slides are part of a presentation by Synchrony Financial in connection with reporting quarterly financial results. No representation is made that the information in these slides is complete. For additional information, see the earnings release and financial supplement included as exhibits to our Current Report on Form 8-K filed today and available on our website (www.synchronyfinancial.com) and the SEC’s website (www.sec.gov). All references to net earnings and net income are intended to have the same meaning. This presentation contains certain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified by words such as “outlook,” “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our platform revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; our need for additional financing, higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to securitize our loans, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loans, and lower payment rates on our securitized loans; our reliance on dividends, distributions and other payments from Synchrony Bank; our ability to grow our deposits in the future; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, the sufficiency of our allowance for loan losses and the accuracy of the assumptions or estimates used in preparing our financial statements; our ability to offset increases in our costs in retailer share arrangements; competition in the consumer finance industry; our concentration in the U.S. consumer credit market; our ability to successfully develop and commercialize new or enhanced products and services; our ability to realize the value of strategic investments; reductions in interchange fees; fraudulent activity; cyber-attacks or other security breaches; failure of third parties to provide various services that are important to our operations; disruptions in the operations of our computer systems and data centers; international risks and compliance and regulatory risks and costs associated with international operations; alleged infringement of intellectual property rights of others and our ability to protect our intellectual property; litigation and regulatory actions; damage to our reputation; our ability to attract, retain and motivate key officers and employees; tax legislation initiatives or challenges to our tax positions and state sales tax rules and regulations; significant and extensive regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Act and the impact of the CFPB’s regulation of our business; changes to our methods of offering our CareCredit products; impact of capital adequacy rules; restrictions that limit Synchrony Bank’s ability to pay dividends; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; failure to comply with anti-money laundering and anti-terrorism financing laws; obligations associated with being a public company; and failure caused by us of GE’s distribution of our common stock to its stockholders in exchange for its common stock to qualify for tax-free treatment, which may result in significant tax liabilities to GE for which we may be required to indemnify GE. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this presentation and in our public filings, including under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed on February 23, 2015. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. Differences between this presentation and the supplemental financials may occur due to rounding. Non-GAAP Measures The information provided herein includes measures we refer to as “platform revenue” and “platform revenue excluding retailer share arrangements” and certain capital ratios, which are not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The reconciliations of such measures to the most directly comparable GAAP measures are included in the appendix of this presentation. Disclaimers
3 4Q'15 Highlights Financial highlights • $547 million Net earnings, $0.65 diluted EPS • Strong growth across the business Purchase volume +8%, Loan receivables +11%, Platform revenue +5% Strong holiday sales … online/mobile sales +23% in 4Q’15 • Asset quality continues to improve Net charge-offs improved from 4.32% to 4.23% compared to prior year 30+ delinquency improved from 4.14% to 4.06% compared to prior year • Expenses in-line with expectations … increase driven by growth and infrastructure • Delivering on our funding plan, deposits +$8.5 billion compared to prior year • Strong capital and liquidity 16.8% CET1 & $14.8 billion liquid assets (b) Business highlights Executed exchange offer to complete separation from GE on November 17th Renewed key relationships Launched two new mobile applications Launched JCP PLCC pilot in Apple Pay (a) (a) From November 1 through December 31, 2015 (b) CET1 % calculated under the Basel III transition guidelines Launched new programs
4 Growth Metrics +8% Purchase volume $ in billions Loan receivables $ in billions Active accounts Average active accounts in millions Platform revenue $ in millions 4Q'14 4Q'15 $30.1 $32.5 $61.3 $68.3 $2,847 $2,716 64.9 61.7 +5% +5% +11% 4Q'14 4Q'15 4Q'14 4Q'15 4Q'14 4Q'15
5 Platform Results Retail Card Loan receivables, $ in billions $42.3 $47.5 4Q'14 4Q'15 Strong receivable growth across partner programs 4Q’14 Platform revenue included $46 million gain on portfolio sales, which did not repeat Platform revenue up 5% driven by receivable growth Payment Solutions Loan receivables, $ in billions $12.1 $13.5 4Q'14 4Q'15 Broad receivable growth led by home furnishings and auto Platform revenue up 7% driven by receivable growth CareCredit Loan receivables, $ in billions $6.9 $7.3 4Q'14 4Q'15 Receivable growth led by dental and veterinary Platform revenue up 3% driven by receivable growth Purchase volume Accounts $24.9 49.9 $26.8 52.0 +8% +4% $3.4 7.1 $3.7 7.9 +9% +11% $1.8 4.7 $2.0 5.0 +9% +6% Platform revenue $1,860 $1,947 +5% $424 $455 +7% $432 $445 +3% +12% +12% +7% (a) (a) Accounts represent average active accounts in millions, which are credit card or installment loan accounts on which there has been a purchase, payment or outstanding balance in the current month. Purchase volume $ in billions and Platform revenue $ in millions V% V% V%
6 Financial Results Summary earnings statement Fourth quarter 2015 highlights $ in millions, except ratios Total interest income $3,509 $3,260 $249 8% Total interest expense 301 282 (19) (7)% Net interest income (NII) 3,208 2,978 230 8% Retailer share arrangements (RSA) (734) (698) (36) (5)% NII, after RSA 2,474 2,280 194 9% Provision for loan losses 823 797 (26) (3)% Other income 87 162 (75) (46)% Other expense 870 792 (78) (10)% Pre-Tax earnings 868 853 15 2% Provision for income taxes 321 322 1 0% Net earnings $547 $531 $16 3% Return on assets 2.6% 2.7% (0.1)pts. 4Q'15 4Q'14 % $ B/(W) • $547 million Net earnings, 2.6% ROA • Net interest income up 8% driven by growth in loan receivables Interest and fees on loan receivables up 7% driven by average receivable growth Interest expense increase driven by growth, liquidity and funding mix • Provision for loan losses driven by receivable growth, partially offset with improved asset quality Asset quality improved … 30+ delinquencies down 8bps. and NCO rate down 9bps. vs. prior year • Other income down 46% $46 million gain on portfolio sales in 4Q’14, which did not repeat • Other expense in-line with expectations Other expense increase primarily driven by growth and infrastructure build
7 Net Interest Income Fourth quarter 2015 highlights • Net interest income up 8% driven by growth in receivables Interest and fees on loans up 7% driven by average loan receivable growth • Net interest margin +13bps. driven by lower average liquidity as a % of total interest-earning assets Liquid assets increased to $14.8 billion, conservatively invested in cash and short-term U.S. Treasuries Receivable yield 21.19%, down 2bps. reflecting change in promotional balances Interest expense relatively flat at 1.81% compared to 1.79% in 4Q’14 Net interest income $ in millions, % of average interest-earning assets 15.60% 15.73% 4Q'14 4Q'15 +8% $2,978 $3,208
8 Asset Quality Metrics Net charge-offs $ in millions, % of average loan receivables including held for sale 30+ days past due $ in millions, % of period-end loan receivables 90+ days past due $ in millions, % of period-end loan receivables 4.26% $1,051 1Q’14 1Q’15 4.02% $2,772 $2,416 $673 1.85% $579 $658 3.82% $2,097 4.09% $2,220 $908 1.65% $1,046 1.93% 2Q’14 3Q’14 4Q’14 1Q’14 1Q’15 2Q’14 3Q’14 4Q’14 1Q’14 1Q’15 2Q’14 3Q’14 4Q’14 4.14% $2,536 2Q’15 $1,162 2Q’15 1.90% $663 2Q’15 3.79% $2,209 3Q’15 $1,056 3Q’15 1.81% $668 3Q’15 3.53% $2,171 4Q’15 $933 4Q’15 1.52% $693 4Q’15 $1,102 1.73% $633 $2,553 4.06% $697 $1,273 1.86% 4.88% 4.86% 4.05% 4.32% 4.53% 4.63% 4.02% 4.23% Allowance for loan losses $ in millions, % of period-end loan receivables 5.46% $3,102 5.48% $3,006 5.52% $2,998 1Q’14 1Q’15 2Q’14 3Q’14 4Q’14 5.28% $3,236 2Q’15 5.59% $3,255 3Q’15 5.38% $3,302 4Q’15 5.31% $3,371 5.12% $3,497
9 Other expense $ in millions Other Expense Employee costs $227 $285 $58 26% Professional fees 139 165 26 19% Marketing/BD 165 128 (37) (22)% Information processing 60 83 23 38% Other 201 209 8 4% Other expense $792 $870 $78 10% Efficiency 32.4% 34.0% +1.6pts. $792 • Expense increase primarily driven by investments in growth and infrastructure build • Employee costs up $58 million Driven by employees added for separation and growth • Professional fees up $26 million Driven primarily by growth • Marketing/BD costs down $37 million Driven by lower portfolio marketing investments and lower brand advertising • Information processing up $23 million Driven by IT investments and purchase volume growth • 2015 Efficiency ratio of 33.5% (a) “Other Expense” divided by sum of “NII, after RSA” plus “Other income” (1) V$ V% +10% (a) $870 4Q'14 4Q'15 Fourth quarter 2015 highlights
10 Funding, Capital and Liquidity (c) Liquid assets $12.9 $14.8 Undrawn securitization capacity 6.1 6.1 Total liquidity $19.0 $20.9 % of total assets 25.2% 24.9% Tier 1 common equity $11.6 $11.2 Risk-weighted assets $69.4 $70.7 Liquidity $ in billions 4Q'15 $20.9 $19.0 4Q'14 Capital ratios 4Q'15, $ in billions BIII CET1 T% (d) Does not include unencumbered assets in the Bank that could be pledged (d) BIII CET1 % (a) Estimated percentages and amounts (b) Calculated under the Basel III transition guidelines (c) Calculated under the fully phased-in Basel III guidelines 16.8% 15.9% Funding sources $ in billions 4Q'14 4Q'15 Variance Deposits 56% 64% +8pts. Securitization 24% 20% (4)pts. GE Capital loan 1% - (1)pts. 3rd Party Debt 19% 16% (3)pts. $62.4 $67.8 Deposits Securitization GECC Loan 3rd Party Debt $35.0 $14.9 $11.8 $43.5 $13.6 $10.7 V$ (1.1) (1.3) +8.5 (a) (b) $0.7
11 2015 Performance Loan Receivables Growth 6% - 8% 11% Strategies delivering strong growth Net Interest Margin 15.0% - 15.5% 15.8% Excess liquidity utilization Net Charge-off Rate Stable (18) bps Improved consumer fundamentals Efficiency Ratio < 34% 33.5% Reflects stand-alone costs ROA 2.5% - 3.0% 2.9% Slightly better margin and lower charge-offs 2015 Outlook 2015 Actual Drivers (a) 2015 outlook provided in January 23, 2015 earnings presentation. Synchrony Financial does not affirm guidance during the year (a)
12 2016 Outlook Receivable Growth 7% - 9% Net Interest Margin ~15.5% Net Charge-off Rate Stable Efficiency Ratio < 34% ROA 2.5% - 3.0% 2016 Outlook
13 Strategic Priorities Grow our business through our three sales platforms • Grow existing retailer penetration • Continue to innovate and provide robust cardholder value propositions • Add new partners and programs with attractive risk and return profiles Position business for long-term growth • Build Synchrony Bank into a leading full-scale online bank … develop broad product suite to increase loyalty, diversify funding and drive profitability • Explore opportunities to expand the core business (e.g., grow small business platform) Operate with a strong balance sheet and financial profile • Maintain strong capital and liquidity • Deliver earnings growth at attractive returns Leverage strong capital position • Organic growth, program acquisitions, and start-up opportunities • Establish dividend and share repurchase programs, subject to Board and regulatory approvals • Invest in capability-enhancing technologies and businesses Expand robust data, analytics and technology offerings • Accelerate capabilities: marketing, analytics and loyalty • Continue to leverage SKU level data and invest in CRM to differentiate marketing capabilities • Deliver leading capabilities across digital and mobile technologies
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15 Appendix
16 Non-GAAP Reconciliations In order to assess and internally report the revenue performance of our three sales platforms, we use measures we refer to as “platform revenue” and “platform revenue excluding retailer share arrangements.” Platform revenue is the sum of three line items in our Condensed Consolidated and Combined Statements of Earnings prepared in accordance with GAAP: “interest and fees on loans,” plus “other income,” less “retailer share arrangements.” Platform revenue and platform revenue excluding retailer share arrangements are not measures presented in accordance with GAAP. To calculate platform revenue we deduct retailer share arrangements but do not deduct other line item expenses, such as interest expense, provision for loan losses and other expense, because those items are managed for the business as a whole. We believe that platform revenue is a useful measure to investors because it represents management’s view of the net revenue contribution of each of our platforms. Platform revenue excluding retailer share arrangements represents management’s view of the gross revenue contribution of each of our platforms. These measures should not be considered a substitute for interest and fees on loans or other measures of performance we have reported in accordance with GAAP. We present certain capital ratios. As a new savings and loan holding company, we historically have not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these capital ratios are non-GAAP measures. We believe these capital ratios are useful measures to investors because they are widely used by analysts and regulators to assess the capital position of financial services companies, although our Basel I Tier 1 common ratio is not a Basel I defined regulatory capital ratio, and our Basel I and Basel III Tier 1 common ratios may not be comparable to similarly titled measures reported by other companies. Our Basel I Tier 1 common ratio is the ratio of Tier 1 common equity to total risk-weighted assets as calculated in accordance with the U.S. Basel I capital rules. Our Basel III Tier 1 common ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated in accordance with the U.S. Basel III capital rules. Our Basel III Tier 1 common ratio (on a fully phased-in basis) is a preliminary estimate reflecting management’s interpretation of the final Basel III capital rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance.
17 Non-GAAP Reconciliation The following table sets forth each component of our platform revenue for periods indicated below. ($ in millions) 2015 2014 Platform Revenue Total: Interest and fees on loans . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,494 $3,252 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $87 $162 Retailer share arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(734) $(698) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,847 $2,716 Retail Card: Interest and fees on loans . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,594 $2,405 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $76 $141 Retailer share arrangements . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(723) $(686) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,947 $1,860 Payment Solutions: Interest and fees on loans . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $462 $426 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3 $9 Retailer share arrangements . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(10) $(11) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $455 $424 CareCredit: Interest and fees on loans . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $438 $421 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8 $12 Retailer share arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1) $(1) Platform revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $445 $432 For the Three Months Ended Dec 31,
18 Non-GAAP Reconciliation The following table sets forth a reconciliation of each component of our capital ratios to the comparable GAAP component at December 31, 2015. COMMON EQUITY MEASURES GAAP Total common equity .................................................................................................... Less: Goodwill ............................................................................................................... Less: Intangible assets, net ............................................................................................. Tangible common equity ........................................................................................................ Adjustments for certain deferred tax liabilities and certain items in accumulated comprehensive income (loss) ................................................................ Basel III – Common equity Tier 1 (fully phased-in) ............................................................ Adjustments related to capital components during transition ........................................ Basel III – Common equity Tier 1 (transition) ................................................................... Risk-weighted assets – Basel III (fully phased-in) .............................................................. Risk-weighted assets – Basel III (transition) ....................................................................... $12,604 (949) (701) $10,954 280 $11,234 399 $11,633 $70,654 $69,386 $ in millions at December 31, 2015
Exhibit 99.4
Explanation of Non-GAAP Measures
The information provided in this Form 8-K and exhibits includes measures which are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
In order to assess and internally report the revenue performance of our three sales platforms, we use measures we refer to as “platform revenue" and “platform revenue excluding retailer share arrangements.” Platform revenue is the sum of three line items in our Condensed Consolidated and Combined Statements of Earnings prepared in accordance with GAAP: “interest and fees on loans,” plus “other income,” less “retailer share arrangements.” Platform revenue and platform revenue excluding retailer share arrangements are not measures presented in accordance with GAAP. To calculate platform revenue, we deduct retailer share arrangements but do not deduct other line item expenses, such as interest expense, provision for loan losses and other expense, because those items are managed for the business as a whole. We believe that platform revenue is a useful measure to investors because it represents management’s view of the net revenue contribution of each of our platforms. Platform revenue excluding retailer share arrangements represents management’s view of the gross revenue contribution of each of our platforms. These measures should not be considered a substitute for interest and fees on loans or other measures of performance we have reported in accordance with GAAP. The reconciliation of platform revenue, and platform revenue excluding retailer share arrangements, to interest and fees on loans for each platform is included in the detailed financial tables included in Exhibit 99.2.
We present certain capital ratios in this Form 8-K and exhibits. As a new savings and loan holding company, the Company historically has not been required by regulators to disclose capital ratios prior to December 31, 2015, and therefore these capital ratios are non-GAAP measures. We believe these capital ratios are useful measures to investors because they are widely used by analysts and regulators to assess the capital position of financial services companies, although our Basel I Tier 1 common ratio is not a Basel I defined regulatory capital ratio, and our Basel I and Basel III Tier 1 common ratios may not be comparable to similarly titled measures reported by other companies. Our Basel I Tier 1 common ratio is the ratio of Tier 1 common equity to total risk-weighted assets as calculated in accordance with the U.S. Basel I capital rules. Our Basel III Tier 1 common ratio is the ratio of common equity Tier 1 capital to total risk-weighted assets, each as calculated in accordance with the U.S. Basel III capital rules. Our Basel III Tier 1 common ratio (on a fully phased-in basis) is a preliminary estimate reflecting management’s interpretation of the final Basel III capital rules adopted in July 2013 by the Federal Reserve Board, which have not been fully implemented, and our estimate and interpretations are subject to, among other things, ongoing regulatory review and implementation guidance. The reconciliation of each component of our capital ratios included in this Form 8-K and exhibits to the comparable GAAP component at December 31, 2015 is included in the detailed financial tables included in Exhibit 99.2.
We also present a measure we refer to as “tangible common equity” in this Form 8-K and exhibits. Tangible common equity itself is not a measure presented in accordance with GAAP. We believe tangible common equity is a more meaningful measure to investors of the net asset value of the Company. The reconciliation of tangible common equity, to total equity reported in accordance with GAAP is included in the detailed financial tables included in Exhibit 99.2.