Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to         
001-36560
(Commission File Number)
sflogoa01a09.jpg
SYNCHRONY FINANCIAL
(Exact name of registrant as specified in its charter) 
Delaware
 
51-0483352
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
777 Long Ridge Road
 
 
Stamford, Connecticut
 
06902
(Address of principal executive offices)
 
(Zip Code)
(Registrant’s telephone number, including area code) (203) 585-2400
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
ý
Accelerated filer
o
 
 
 
 
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
 
 
Emerging growth company
o



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of April 23, 2018 was 754,756,608.




Synchrony Financial
PART I - FINANCIAL INFORMATION
Page
 
 
Item 1. Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II - OTHER INFORMATION
 
 
 


3



Certain Defined Terms
Except as the context may otherwise require in this report, references to:
“we,” “us,” “our” and the “Company” are to SYNCHRONY FINANCIAL and its subsidiaries;
“Synchrony” are to SYNCHRONY FINANCIAL only;
“GE” are to General Electric Company and its subsidiaries;
the “Bank” are to Synchrony Bank (a subsidiary of Synchrony);
the “Board of Directors” are to Synchrony's board of directors;
the “Tax Act” are to P.L. 115-97, commonly referred to as the Tax Cuts and Jobs Act, signed into law on December 22, 2017;
“Separation” are to Synchrony's separation from GE in November 2015 when Synchrony became a stand-alone savings and loan holding company following the completion of GE's exchange offer, in which GE exchanged shares of GE common stock for all the remaining shares of our common stock it owned; and
“FICO” 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.
We provide a range of 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, which, in our business and in this report, we refer to as our “partners.” The terms of the programs all require cooperative efforts between us and our partners of varying natures and degrees to establish and operate the programs. Our use of the term “partners” to refer to these entities is not intended to, and does not, describe our legal relationship with them, imply that a legal partnership or other relationship exists between the parties or create any legal partnership or other relationship. The “average length of our relationship” with respect to a specified group of partners or programs is measured on a weighted average basis by interest and fees on loans for the year ended December 31, 2017 for those partners or for all partners participating in a program, based on the date each partner relationship or program, as applicable, started.
Unless otherwise indicated, references to “loan receivables” do not include loan receivables held for sale.
For a description of certain other terms we use, including “active account” and “purchase volume,” see the notes to “Item 7. Management’s Discussion and AnalysisResults of OperationsOther Financial and Statistical Data” in our Annual Report on Form 10-K for the year ended December 31, 2017 (our “2017 Form 10-K”). There is no standard industry definition for many of these terms, and other companies may define them differently than we do.

“Synchrony” and its logos and other trademarks referred to in this report, including CareCredit®, Quickscreen®, Dual Card™, Synchrony Car Care™ and SyPI™, belong to us. Solely for convenience, we refer to our trademarks in this report without the ™ and ® symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. Other service marks, trademarks and trade names referred to in this report are the property of their respective owners.
On our website at www.synchronyfinancial.com, we make available under the "Investors-SEC Filings" menu selection, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports or amendments are electronically filed with, or furnished to, the SEC. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.

4




Cautionary Note Regarding Forward-Looking Statements:
Various statements in this Quarterly Report on Form 10-Q may contain “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 (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “targets,” “outlook,” “estimates,” “will,” “should,” “may” or words of similar meaning, but these words are not the exclusive means of identifying forward-looking statements.
Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include global political, economic, business, competitive, market, regulatory and other factors and risks, such as: the impact of macroeconomic conditions and whether industry trends we have identified develop as anticipated; retaining existing partners and attracting new partners, concentration of our revenue in a small number of Retail Card partners, promotion and support of our products by our partners, and financial performance of our partners; cyber-attacks or other security breaches; higher borrowing costs and adverse financial market conditions impacting our funding and liquidity, and any reduction in our credit ratings; our ability to grow our deposits in the future; our ability to securitize our loan receivables, occurrence of an early amortization of our securitization facilities, loss of the right to service or subservice our securitized loan receivables, and lower payment rates on our securitized loan receivables; changes in market interest rates and the impact of any margin compression; effectiveness of our risk management processes and procedures, reliance on models which may be inaccurate or misinterpreted, our ability to manage our credit risk, 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 acquisitions and strategic investments; reductions in interchange fees; fraudulent activity; 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/or interpretations and state sales tax rules and regulations; a material indemnification obligation to GE under the Tax Sharing and Separation Agreement with GE if we cause the split-off from GE or certain preliminary transactions to fail to qualify for tax-free treatment or in the case of certain significant transfers of our stock following the split-off; regulation, supervision, examination and enforcement of our business by governmental authorities, the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the impact of the Consumer Financial Protection Bureau's (the “CFPB”) regulation of our business; impact of capital adequacy rules and liquidity requirements; restrictions that limit our ability to pay dividends and repurchase our common stock and restrictions that limit the Bank’s ability to pay dividends to us; regulations relating to privacy, information security and data protection; use of third-party vendors and ongoing third-party business relationships; and failure to comply with anti-money laundering and anti-terrorism financing laws.
For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this report and in our public filings, including under the heading “Risk Factors” in our 2017 Form 10-K. 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 the federal securities laws.

5



PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report and in our 2017 Form 10-K. The discussion below contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. See “Cautionary Note Regarding Forward-Looking Statements.”
Introduction and Business Overview
____________________________________________________________________________________________
We are a premier consumer financial services company delivering customized financing programs across key industries including retail, health, auto, travel and home, along with award-winning consumer banking products. We provide a range of credit products through our financing programs which we have established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers, which we refer to as our “partners.” For the three months ended March 31, 2018, we financed $29.6 billion of purchase volume and had 71.3 million average active accounts. At March 31, 2018, we had $77.9 billion of loan receivables.
We offer our credit products primarily through our wholly-owned subsidiary, the Bank. In addition, through the Bank, we offer, directly to retail and commercial customers, a range of deposit products insured by the Federal Deposit Insurance Corporation (“FDIC”), including certificates of deposit, individual retirement accounts (“IRAs”), money market accounts and savings accounts. We also take deposits at the Bank through third-party securities brokerage firms that offer our FDIC-insured deposit products to their customers. We have significantly expanded our online direct banking operations in recent years and our deposit base serves as a source of stable and diversified low cost funding for our credit activities. At March 31, 2018, we had $56.6 billion in deposits, which represented 73% of our total funding sources.
Our Sales Platforms
_________________________________________________________________
We conduct our operations through a single business segment. Profitability and expenses, including funding costs, loan losses and operating expenses, are managed for the business as a whole. Substantially all of our operations are within the United States. We offer our credit products through three sales platforms (Retail Card, Payment Solutions and CareCredit). Those platforms are organized by the types of products we offer and the partners we work with, and are measured on interest and fees on loans, loan receivables, new accounts and other sales metrics.



6



platformpiesa37.jpg
Retail Card
Retail Card is a leading provider of private label credit cards, and also provides Dual Cards, general purpose co-branded credit cards and small- and medium-sized business credit products. We offer one or more of these products primarily through 29 national and regional retailers with which we have ongoing program agreements. The average length of our relationship with these Retail Card partners is 20 years. Retail Card’s revenue primarily consists of interest and fees on our loan receivables. Other income primarily consists of interchange fees earned when our Dual Card or general purpose co-branded credit cards are used outside of our partners' sales channels and fees paid to us by customers who purchase our debt cancellation products, less loyalty program payments. In addition, the majority of our retailer share arrangements, which generally provide for payment to our partner if the economic performance of the program exceeds a contractually-defined threshold, are with partners in the Retail Card sales platform. Substantially all of the credit extended in this platform is on standard terms.
Payment Solutions
Payment Solutions is a leading provider of promotional financing for major consumer purchases, offering primarily private label credit cards and installment loans. Payment Solutions offers these products through participating partners consisting of national and regional retailers, local merchants, manufacturers, buying groups and industry associations. Substantially all of the credit extended in this platform is promotional financing. Payment Solutions’ revenue primarily consists of interest and fees on our loan receivables, including “merchant discounts,” which are fees paid to us by our partners in almost all cases to compensate us for all or part of foregone interest income associated with promotional financing.
CareCredit
CareCredit is a leading provider of promotional financing to consumers for health and personal care procedures, products or services. We have a network of CareCredit providers and health-focused retailers, the vast majority of which are individual or small groups of independent healthcare providers, through which we offer a CareCredit branded private label credit card and our CareCredit Dual Card offering. Substantially all of the credit extended in this platform is promotional financing. CareCredit’s revenue primarily consists of interest and fees on our loan receivables, including merchant discounts.

7



Our Credit Products
____________________________________________________________________________________________
Through our platforms, we offer three principal types of credit products: credit cards, commercial credit products and consumer installment loans. We also offer a debt cancellation product.
The following table sets forth each credit product by type and indicates the percentage of our total loan receivables that are under standard terms only or pursuant to a promotional financing offer at March 31, 2018.
 
 
 
Promotional Offer
 
 
Credit Product
Standard Terms Only
 
Deferred Interest
 
Other Promotional
 
Total
Credit cards
66.6
%
 
15.4
%
 
14.4
%
 
96.4
%
Commercial credit products
1.6

 

 

 
1.6

Consumer installment loans

 

 
2.0

 
2.0

Other

 

 

 

Total
68.2
%
 
15.4
%
 
16.4
%
 
100.0
%
Credit Cards
We offer the following principal types of credit cards:
Private Label Credit Cards. Private label credit cards are partner-branded credit cards (e.g., Lowe’s or Amazon) or program-branded credit cards (e.g., Synchrony Car Care or CareCredit) that are used primarily for the purchase of goods and services from the partner or within the program network. In addition, in some cases, cardholders may be permitted to access their credit card accounts for cash advances. 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 and General Purpose Co-Brand 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. We also offer general purpose co-branded credit cards that do not function as private label cards. Credit extended under our Dual Cards and general purpose co-branded credit cards typically is extended under standard terms only. Dual Cards and general purpose co-branded credit cards are primarily offered through our Retail Card platform. At March 31, 2018, we offered these credit cards through 21 of our 29 ongoing Retail Card programs, of which the majority are Dual Cards.
Commercial Credit Products
We offer private label cards and Dual Cards for commercial customers that are similar to our consumer offerings. We also offer a commercial pay-in-full accounts receivable product to a wide range of business customers. We offer our commercial credit products primarily through our Retail Card platform to the commercial customers of our Retail Card partners.
Installment Loans
In Payment Solutions, we originate installment loans to consumers (and a limited number of commercial customers) in the United States, primarily in the power products market (motorcycles, ATVs and lawn and garden). Installment loans are closed-end credit accounts where the customer pays down the outstanding balance in installments. Installment loans are assessed periodic finance charges using fixed interest rates.

8



Business Trends and Conditions
____________________________________________________________________________________________
We believe our business and results of operations will be impacted in the future by various trends and conditions. For a discussion of certain trends and conditions, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Trends and Conditions” in our 2017 Form 10-K. For a discussion of how certain trends and conditions impacted the three months ended March 31, 2018, see “—Results of Operations.
Seasonality
____________________________________________________________________________________________
In our Retail Card and Payment Solutions platforms, we experience fluctuations in transaction volumes and the level of loan receivables as a result of higher seasonal consumer spending and payment patterns that typically result in an increase of loan receivables from August through a peak in late December, with reductions in loan receivables occurring over the first and second quarters of the following year as customers pay their balances down.
The seasonal impact to transaction volumes and the loan receivables balance typically results in fluctuations in our results of operations, delinquency metrics and the allowance for loan losses as a percentage of total loan receivables between quarterly periods.
In addition to the seasonal variance in loan receivables discussed above, we also experience a seasonal increase in delinquency rates and delinquent loan receivables balances during the third and fourth quarters of each year due to lower customer payment rates resulting in higher net charge-off rates in the first and second quarters. Our delinquency rates and delinquent loan receivables balances typically decrease during the subsequent first and second quarters as customers begin to pay down their loan balances and return to current status resulting in lower net charge-off rates in the third and fourth quarters. Because customers who were delinquent during the fourth quarter of a calendar year have a higher probability of returning to current status when compared to customers who are delinquent at the end of each of our interim reporting periods, we expect that a higher proportion of delinquent accounts outstanding at an interim period end will result in charge-offs, as compared to delinquent accounts outstanding at a year end. Consistent with this historical experience, we generally experience a higher allowance for loan losses as a percentage of total loan receivables at the end of an interim period, as compared to the end of a calendar year. In addition, despite improving credit metrics such as declining past due amounts, we may experience an increase in our allowance for loan losses at an interim period end compared to the prior year end, reflecting these same seasonal trends.
The seasonal trends discussed above are most evident between the fourth quarter and the first quarter of the following year. Loan receivables decreased by $4.1 billion, or 5.0%, to $77.9 billion at March 31, 2018 compared to December 31, 2017, and our allowance for loan losses as a percentage of total loan receivables increased to 7.37% at March 31, 2018, from 6.80% at December 31, 2017, primarily reflecting the effects of these trends. Past due balances declined to $3.5 billion at March 31, 2018 from $3.8 billion at December 31, 2017, primarily due to collections from customers that were previously delinquent. The increase in the allowance for loan losses as a percentage of loan receivables at March 31, 2018 compared to December 31, 2017, despite a decrease in our past due balances, primarily reflects these same seasonal trends.





9



Results of Operations
____________________________________________________________________________________________
Highlights for the Three Months Ended March 31, 2018
Below are highlights of our performance for the three months ended March 31, 2018 compared to the three months ended March 31, 2017, as applicable, except as otherwise noted.
Net earnings increased 28.3% to $640 million for the three months ended March 31, 2018, driven by higher net interest income and lower provision for income taxes, partially offset by increases in other expense and provision for loan losses.
Loan receivables increased 6.1% to $77,853 million at March 31, 2018 compared to March 31, 2017, primarily driven by higher purchase volume and average active account growth.
Net interest income increased 7.1% to $3,842 million for the three months ended March 31, 2018, primarily due to higher average loan receivables.
Retailer share arrangements increased 5.3% to $720 million for the three months ended March 31, 2018, primarily as a result of growth and yield improvement of the programs in which we have retailer share arrangements, partially offset by higher program expenses.
Over-30 day loan delinquencies as a percentage of period-end loan receivables increased 27 basis points to 4.52% at March 31, 2018 from 4.25% at March 31, 2017, and net charge-off rate increased 81 basis points to 6.14% for the three months ended March 31, 2018.
Provision for loan losses increased by $56 million, or 4.3%, for the three months ended March 31, 2018, primarily due to higher net charge-offs, partially offset by a lower loan loss reserve build. Our allowance coverage ratio (allowance for loan losses as a percent of end of period loan receivables) increased to 7.37% at March 31, 2018, as compared to 6.37% at March 31, 2017.
Other expense increased by $80 million, or 8.8%, for the three months ended March 31, 2018, primarily driven by business growth and marketing investments.
Provision for income taxes decreased by $76 million, or 26.9%, for the three months ended March 31, 2018, primarily due to the reduction in the corporate tax rate included in the Tax Act.
At March 31, 2018, deposits represented 73% of our total funding sources. Total deposits remained relatively flat at $56.6 billion at March 31, 2018, compared to December 31, 2017, driven primarily by growth in our direct deposits of 5.4% to $45.0 billion, offset by a reduction in our brokered deposits.
During the three months ended March 31, 2018, we repurchased $410 million of our outstanding common stock, and declared and paid cash dividends of $0.15 per share, or $114 million.
New and Extended Partner Agreements during the three months ended March 31, 2018
We announced our new partnership with Crate and Barrel in our Retail Card sales platform.
We extended our Payment Solutions program agreements with American Signature Furniture, Briggs & Stratton and Nationwide Marketing Group and announced our new partnership with Mahindra. In April 2018, we also announced our program with jtv.
In our CareCredit sales platform, we expanded our network to include American Med Spa Association, the Spa Industry Association and the American Veterinary Medical Association.

10



Summary Earnings
The following table sets forth our results of operations for the periods indicated.
 
Three months ended March 31,
($ in millions)
2018
 
2017
Interest income
$
4,244

 
$
3,913

Interest expense
402

 
326

Net interest income
3,842

 
3,587

Retailer share arrangements
(720
)
 
(684
)
Net interest income, after retailer share arrangements
3,122

 
2,903

Provision for loan losses
1,362

 
1,306

Net interest income, after retailer share arrangements and provision for loan losses
1,760

 
1,597

Other income
75

 
93

Other expense
988

 
908

Earnings before provision for income taxes
847

 
782

Provision for income taxes
207

 
283

Net earnings
$
640

 
$
499


11



Other Financial and Statistical Data
The following table sets forth certain other financial and statistical data for the periods indicated.    
 
At and for the
 
Three months ended March 31,
($ in millions)
2018
 
2017
Financial Position Data (Average):
 
 
 
Loan receivables, including held for sale
$
79,090

 
$
74,132

Total assets
$
95,707

 
$
89,468

Deposits
$
56,656

 
$
52,069

Borrowings
$
21,205

 
$
20,081

Total equity
$
14,276

 
$
14,323

Selected Performance Metrics:
 
 
 
Purchase volume(1)
$
29,626

 
$
28,880

Retail Card
$
23,382

 
$
22,952

Payment Solutions
$
3,823

 
$
3,686

CareCredit
$
2,421

 
$
2,242

Average active accounts (in thousands)(2)
71,323

 
69,629

Net interest margin(3)
16.05
%
 
16.18
%
Net charge-offs
$
1,198

 
$
974

Net charge-offs as a % of average loan receivables, including held for sale
6.14
%
 
5.33
%
Allowance coverage ratio(4)
7.37
%
 
6.37
%
Return on assets(5)
2.7
%
 
2.3
%
Return on equity(6)
18.2
%
 
14.1
%
Equity to assets(7)
14.92
%
 
16.01
%
Other expense as a % of average loan receivables, including held for sale
5.07
%
 
4.97
%
Efficiency ratio(8)
30.9
%
 
30.3
%
Effective income tax rate
24.4
%
 
36.2
%
Selected Period-End Data:
 
 
 
Loan receivables
$
77,853

 
$
73,350

Allowance for loan losses
$
5,738

 
$
4,676

30+ days past due as a % of period-end loan receivables(9)
4.52
%
 
4.25
%
90+ days past due as a % of period-end loan receivables(9)
2.28
%
 
2.06
%
Total active accounts (in thousands)(2)
68,891

 
67,905

______________________
(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.
(9)
Based on customer statement-end balances extrapolated to the respective period-end date.

12



Average Balance Sheet
The following tables set forth information for the periods indicated regarding average balance sheet data, which are used in the discussion of interest income, interest expense and net interest income that follows.
 
2018
 
2017
Three months ended March 31 ($ in millions)
Average
Balance
 
Interest
Income /
Expense
 
Average
Yield /
Rate(1)
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Yield /
Rate(1)
Assets
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Interest-earning cash and equivalents(2)
$
12,434

 
$
47

 
1.53
%
 
$
10,552

 
$
21

 
0.81
%
Securities available for sale
5,584

 
25

 
1.82
%
 
5,213

 
15

 
1.17
%
Loan receivables(3):
 
 
 
 
 
 
 
 
 
 
 
Credit cards, including held for sale
76,181

 
4,099

 
21.82
%
 
71,365

 
3,811

 
21.66
%
Consumer installment loans
1,572

 
36

 
9.29
%
 
1,389

 
32

 
9.34
%
Commercial credit products
1,286

 
36

 
11.35
%
 
1,317

 
34

 
10.47
%
Other
51

 
1

 
NM

 
61

 

 
%
Total loan receivables
79,090

 
4,172

 
21.39
%
 
74,132

 
3,877

 
21.21
%
Total interest-earning assets
97,108

 
4,244

 
17.72
%
 
89,897

 
3,913

 
17.65
%
Non-interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
1,197

 
 
 
 
 
802

 
 
 
 
Allowance for loan losses
(5,608
)
 
 
 
 
 
(4,408
)
 
 
 
 
Other assets
3,010

 
 
 
 
 
3,177

 
 
 
 
Total non-interest-earning assets
(1,401
)
 
 
 
 
 
(429
)
 
 
 
 
Total assets
$
95,707

 
 
 
 
 
$
89,468

 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposit accounts
$
56,356

 
$
249

 
1.79
%
 
$
51,829

 
$
194

 
1.52
%
Borrowings of consolidated securitization entities
12,410

 
74

 
2.42
%
 
12,321

 
65

 
2.14
%
Senior unsecured notes
8,795

 
79

 
3.64
%
 
7,760

 
67

 
3.50
%
Total interest-bearing liabilities
77,561

 
402

 
2.10
%
 
71,910

 
326

 
1.84
%
Non-interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing deposit accounts
300

 
 
 
 
 
240

 
 
 
 
Other liabilities
3,570

 
 
 
 
 
2,995

 
 
 
 
Total non-interest-bearing liabilities
3,870

 
 
 
 
 
3,235

 
 
 
 
Total liabilities
81,431

 
 
 
 
 
75,145

 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
Total equity
14,276

 
 
 
 
 
14,323

 
 
 
 
Total liabilities and equity
$
95,707

 
 
 
 
 
$
89,468

 
 
 
 
Interest rate spread(4)
 
 
 
 
15.62
%
 
 
 
 
 
15.81
%
Net interest income
 
 
$
3,842

 
 
 
 
 
$
3,587

 
 
Net interest margin(5)
 
 
 
 
16.05
%
 
 
 
 
 
16.18
%
 
 
 
 
 
 
 
 
 
 
 
 
______________________
(1)
Average yields/rates are based on total interest income/expense over average balances.
(2)
Includes average restricted cash balances of $771 million and $694 million for the three months ended March 31, 2018 and 2017, respectively.
(3)
Interest income on loan receivables includes fees on loans of $644 million and $628 million for the three months ended March 31, 2018 and 2017, respectively.
(4)
Interest rate spread represents the difference between the yield on total interest-earning assets and the rate on total interest-bearing liabilities.
(5)
Net interest margin represents net interest income divided by average total interest-earning assets.

13



For a summary description of the composition of our key line items included in our Statements of Earnings, see Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2017 Form 10-K.
Interest Income
Interest income increased by $331 million, or 8.5%, for the three months ended March 31, 2018 driven primarily by growth in our average loan receivables.
Average interest-earning assets
Three months ended March 31 ($ in millions)
2018
 
%
 
2017
 
%
Loan receivables, including held for sale
$
79,090

 
81.4
%
 
$
74,132

 
82.5
%
Liquidity portfolio and other
18,018

 
18.6
%
 
15,765

 
17.5
%
Total average interest-earning assets
$
97,108

 
100.0
%
 
$
89,897

 
100.0
%
 
 
 
 
 
 
 
 
The increase in average loan receivables of 6.7% for the three months ended March 31, 2018 was driven primarily by higher purchase volume of 2.6% and average active account growth of 2.4%.
Average active accounts increased 2.4% to 71.3 million for the three months ended March 31, 2018, and the average balance per active account increased 4.2%.
Yield on average interest-earning assets
The yield on average interest-earning assets increased for the three months ended March 31, 2018, primarily due to an increase in the yield on our average loan receivables of 18 basis points to 21.39%, partially offset by a decrease in the percentage of interest-earning assets attributable to loan receivables for the three months ended March 31, 2018. The decrease was driven primarily by higher liquidity related to the pre-funding strategy for the PayPal credit portfolio acquisition.
Interest Expense
Interest expense increased by $76 million, or 23.3%, for the three months ended March 31, 2018, primarily driven by higher cost of funds and the growth in our deposit liabilities. Our cost of funds increased to 2.10% for the three months ended March 31, 2018, compared to 1.84% for the three months ended March 31, 2017, due to higher benchmark interest rates, increased competition for retail deposits and the pre-funding strategy for the PayPal credit portfolio acquisition.
Average interest-bearing liabilities
Three months ended March 31 ($ in millions)
2018
 
%
 
2017
 
%
Interest-bearing deposit accounts
$
56,356

 
72.7
%
 
$
51,829

 
72.1
%
Borrowings of consolidated securitization entities
12,410

 
16.0
%
 
12,321

 
17.1
%
Third-party debt
8,795

 
11.3
%
 
7,760

 
10.8
%
Total average interest-bearing liabilities
$
77,561

 
100.0
%
 
$
71,910

 
100.0
%
 
 
 
 
 
 
 
 
The increase in average interest-bearing liabilities for the three months ended March 31, 2018 was driven primarily by growth in our direct deposits.
Net Interest Income
Net interest income increased by $255 million, or 7.1%, for the three months ended March 31, 2018, primarily driven by higher average loan receivables.

14



Retailer Share Arrangements
Retailer share arrangements increased by $36 million, or 5.3%, for the three months ended March 31, 2018, driven primarily by growth and yield improvement of the programs in which we have retailer share arrangements, partially offset by higher program expenses.
Provision for Loan Losses
Provision for loan losses increased by $56 million, or 4.3%, for the three months ended March 31, 2018, primarily due to higher net charge-offs, partially offset by a lower loan loss reserve build.
Our allowance coverage ratio increased to 7.37% at March 31, 2018, as compared to 6.37% at March 31, 2017, reflecting the increase in forecasted losses inherent in our loan portfolio.
Other Income
 
Three months ended March 31,
($ in millions)
2018
 
2017
Interchange revenue
$
158

 
$
145

Debt cancellation fees
66

 
68

Loyalty programs
(155
)
 
(137
)
Other
6

 
17

Total other income
$
75

 
$
93

Other income decreased by $18 million, or 19.4%, for the three months ended March 31, 2018, primarily due to higher loyalty costs, partially offset by increased interchange revenue driven by increased purchase volume outside of our retail partners' sales channels.

Other Expense
 
Three months ended March 31,
($ in millions)
2018
 
2017
Employee costs
$
358

 
$
323

Professional fees
166

 
151

Marketing and business development
121

 
94

Information processing
104

 
90

Other
239

 
250

Total other expense
$
988

 
$
908

Other expense increased by $80 million, or 8.8%, for the three months ended March 31, 2018, primarily due to increases in employee costs and marketing and business development, as well as increases in professional fees and information processing.
The increase in employee costs was primarily due to new employees added to support the continued growth of the business. Marketing and business development expense increased primarily due to strategic investments in our sales platforms and increased marketing on retail deposits. Information processing costs and professional fees increased primarily due to both business growth and technology investments.

15



Provision for Income Taxes
 
Three months ended March 31,
($ in millions)
2018
 
2017
Effective tax rate
24.4
%
 
36.2
%
Provision for income taxes
$
207

 
$
283

The effective tax rate for the three months ended March 31, 2018 decreased compared to the same period in the prior year primarily due to the reduction in the corporate tax rate from 35% to 21%. In each period the effective tax rate differs from the applicable U.S. federal statutory rate primarily due to state income taxes.
Platform Analysis
As discussed above under “—Our Sales Platforms,” we offer our products through three sales platforms (Retail Card, Payment Solutions and CareCredit), which management measures based on their revenue-generating activities. The following is a discussion of certain supplemental information for the three months ended March 31, 2018, for each of our sales platforms.
Retail Card
 
Three months ended March 31,
($ in millions)
2018
 
2017
Purchase volume
$
23,382

 
$
22,952

Period-end loan receivables
$
52,531

 
$
49,905

Average loan receivables
$
53,673

 
$
50,644

Average active accounts (in thousands)
55,927

 
55,049

 
 
 
 
Interest and fees on loans
$
3,096

 
$
2,888

Retailer share arrangements
$
(714
)
 
$
(681
)
Other income
$
65

 
$
77

Retail Card interest and fees on loans increased by $208 million, or 7.2%, for the three months ended March 31, 2018. The increase was primarily the result of growth in average loan receivables.
Retailer share arrangements increased by $33 million, or 4.8%, for the three months ended March 31, 2018, primarily as a result of the factors discussed under the heading “Retailer Share Arrangements” above.
Other income decreased by $12 million, or 15.6%, for the three months ended March 31, 2018, primarily as a result of the factors discussed under the heading “Other Income” above.

16



Payment Solutions
 
Three months ended March 31,
($ in millions)
2018
 
2017
Purchase volume
$
3,823

 
$
3,686

Period-end loan receivables
$
16,513

 
$
15,320

Average loan receivables
$
16,629

 
$
15,424

Average active accounts (in thousands)
9,545

 
9,090

 
 
 
 
Interest and fees on loans
$
562

 
$
515

Retailer share arrangements
$
(4
)
 
$
(1
)
Other income
$
2

 
$
4

Payment Solutions interest and fees on loans increased by $47 million, or 9.1%, for the three months ended March 31, 2018. The increase was primarily driven by growth in average loan receivables.
CareCredit
 
Three months ended March 31,
($ in millions)
2018
 
2017
Purchase volume
$
2,421

 
$
2,242

Period-end loan receivables
$
8,809

 
$
8,125

Average loan receivables
$
8,788

 
$
8,064

Average active accounts (in thousands)
5,851

 
5,490

 
 
 
 
Interest and fees on loans
$
514

 
$
474

Retailer share arrangements
$
(2
)
 
$
(2
)
Other income
$
8

 
$
12

CareCredit interest and fees on loans increased by $40 million, or 8.4%, for the three months ended March 31, 2018. The increase was primarily driven by growth in average loan receivables.
Debt Securities
____________________________________________________________________________________________
The following discussion provides supplemental information regarding our debt securities portfolio. All of our debt securities are classified as available-for-sale at March 31, 2018 and December 31, 2017, and are held to meet our liquidity objectives and to comply with the Community Reinvestment Act. Debt securities classified as available-for-sale are reported in our Condensed Consolidated Statements of Financial Position at fair value.

17



The following table sets forth the amortized cost and fair value of our portfolio of debt securities at the dates indicated:
 
At March 31, 2018
 
At December 31, 2017
($ in millions)
Amortized
Cost
 
Estimated Fair Value
 
Amortized
Cost
 
Estimated Fair Value
U.S. government and federal agency
$
3,361

 
$
3,352

 
$
2,419

 
$
2,416

State and municipal
42

 
42

 
44

 
44

Residential mortgage-backed
1,239

 
1,194

 
1,258

 
1,231

Asset-backed
1,672

 
1,669

 
781

 
780

U.S. corporate debt
2

 
2

 
2

 
2

Total
$
6,316

 
$
6,259

 
$
4,504

 
$
4,473

Unrealized gains and losses, net of the related tax effects, on available-for-sale debt securities that are not other-than-temporarily impaired are excluded from earnings and are reported as a separate component of comprehensive income (loss) until realized. At March 31, 2018, our debt securities had gross unrealized gains of $1 million and gross unrealized losses of $58 million. At December 31, 2017, our debt securities had gross unrealized gains of $1 million and gross unrealized losses of $32 million.
Our debt securities portfolio had the following maturity distribution at March 31, 2018.
($ 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
U.S. government and federal agency
$
2,885

 
$
467

 
$

 
$

 
$
3,352

State and municipal

 

 
2

 
40

 
42

Residential mortgage-backed

 

 
56

 
1,138

 
1,194

Asset-backed
1,083

 
586

 

 

 
1,669

U.S. corporate debt
2

 

 

 

 
2

Total(1)
$
3,970

 
$
1,053

 
$
58

 
$
1,178

 
$
6,259

Weighted average yield(2)
1.8
%
 
2.0
%
 
2.8
%
 
2.8
%
 
2.0
%
______________________
(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 March 31, 2018, we did not hold investments in any single issuer with an aggregate book value that exceeded 10% of equity, excluding obligations of the U.S. government.

18



Loan Receivables
____________________________________________________________________________________________
The following discussion provides supplemental information regarding our loan receivables portfolio.
Loan receivables are our largest category of assets and represent our primary source of revenue. The following table sets forth the composition of our loan receivables portfolio by product type at the dates indicated.
($ in millions)
At March 31, 2018
 
(%)
 
At December 31, 2017
 
(%)
Loans
 
 
 
 
 
Credit cards
$
74,952

 
96.4
%
 
$
79,026

 
96.5
%
Consumer installment loans
1,590

 
2.0

 
1,578

 
1.9

Commercial credit products
1,275

 
1.6

 
1,303

 
1.6

Other
36

 

 
40

 

Total loans
$
77,853

 
100.0
%
 
$
81,947

 
100.0
%
Loan receivables decreased by $4,094 million, or 5.0%, at March 31, 2018 compared to December 31, 2017, primarily driven by the seasonality of our business.
Loan receivables increased by $4,503 million, or 6.1%, at March 31, 2018 compared to March 31, 2017, primarily driven by higher purchase volume and average active account growth.
Our loan receivables portfolio had the following geographic concentration at March 31, 2018.
($ in millions)
 
Loan Receivables
Outstanding
 
% of Total Loan
Receivables
Outstanding
State
 
Texas
 
$
8,027

 
10.3
%
California
 
$
7,966

 
10.2
%
Florida
 
$
6,529

 
8.4
%
New York
 
$
4,326

 
5.6
%
Pennsylvania
 
$
3,238

 
4.2
%
Impaired Loans and Troubled Debt Restructurings
Our loss mitigation strategy is intended to minimize economic loss and at times can result in rate reductions, principal forgiveness, extensions or other actions, which may cause the related loan to be classified as a Troubled Debt Restructuring (“TDR”) and also be impaired. We use long-term modification programs for borrowers experiencing financial difficulty as a loss mitigation strategy to improve long-term collectability of the loans that are classified as TDRs. The long-term program involves changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months and reducing the interest rate on the loan. The long-term program does not normally provide for the forgiveness of unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. We also make loan modifications for some customers who request financial assistance through external sources, such as a consumer credit counseling agency program. The loans that are modified typically receive a reduced interest rate but continue to be subject to the original minimum payment terms and do not normally include waiver of unpaid principal, interest or fees. The determination of whether these changes to the terms and conditions meet the TDR criteria includes our consideration of all relevant facts and circumstances.
Loans classified as TDRs are recorded at their present value with impairment measured as the difference between the loan balance and the discounted present value of cash flows expected to be collected, discounted at the original effective interest rate of the loan.

19



Interest income from loans accounted for as TDRs is accounted for in the same manner as other accruing loans. We accrue interest on credit card balances until the accounts are charged-off in the period the accounts become 180 days past due. The following table presents the amount of loan receivables that are not accruing interest, loans that are 90 days or more past-due and still accruing interest, and earning TDRs for the periods presented.
($ in millions)
At March 31, 2018
 
At December 31, 2017
Non-accrual loan receivables
$
4

 
$
5

Loans contractually 90 days past-due and still accruing interest
1,772

 
1,864

Earning TDRs(1)
969

 
940

Non-accrual, past-due and restructured loan receivables
$
2,745

 
$
2,809

______________________
(1)
At March 31, 2018 and December 31, 2017, balances exclude $110 million and $103 million, respectively, of TDRs which are included in loans contractually 90 days past-due and still accruing interest on the balance. See Note 4. Loan Receivables and Allowance for Loan Losses to our condensed consolidated financial statements for additional information on the financial effects of TDRs for the three months ended March 31, 2018 and 2017.
 
Three months ended March 31,
($ in millions)
2018
 
2017
Gross amount of interest income that would have been recorded in accordance with the original contractual terms
$
62

 
$
51

Interest income recognized
12

 
12

Total interest income foregone
$
50

 
$
39

Delinquencies
Over-30 day loan delinquencies as a percentage of period-end loan receivables increased to 4.52% at March 31, 2018 from 4.25% at March 31, 2017, and decreased from 4.67% at December 31, 2017. The 27 basis point increase compared to the same period in the prior year was primarily driven by the factors discussed in "Business Trends and Conditions — Asset Quality" in our 2017 Form 10-K. The decrease as compared to December 31, 2017 was primarily driven by the seasonality of our business, partially offset by the various factors referenced above.
Net Charge-Offs
Net charge-offs consist of the unpaid principal balance of loans held for investment that we determine are uncollectible, net of recovered amounts. We exclude accrued and unpaid finance charges and fees and third-party fraud losses from charge-offs. Charged-off and recovered finance charges and fees are included in interest and fees on loans while third-party fraud losses are included in other expense. Charge-offs are recorded as a reduction to the allowance for loan losses and subsequent recoveries of previously charged-off amounts are credited to the allowance for loan losses. Costs incurred to recover charged-off loans are recorded as collection expense and included in other expense in our Condensed Consolidated Statements of Earnings.
The table below sets forth the ratio of net charge-offs to average loan receivables, including held for sale, for the periods indicated.
 
Three months ended March 31,
 
2018
 
2017
Ratio of net charge-offs to average loan receivables, including held for sale
6.14
%
 
5.33
%

20



Allowance for Loan Losses
The allowance for loan losses totaled $5,738 million at March 31, 2018, compared with $5,574 million at December 31, 2017 and $4,676 million at March 31, 2017, representing our best estimate of probable losses inherent in the portfolio. Our allowance for loan losses as a percentage of total loan receivables increased to 7.37% at March 31, 2018, from 6.80% at December 31, 2017 and 6.37% at March 31, 2017, which reflects the increase in forecasted net charge-offs over the next twelve months. The increase from December 31, 2017 also includes the effects of the seasonality of our business. See "Business Trends and Conditions — Asset Quality" in our 2017 Form 10-K for discussion of the various factors that contribute to forecasted net charge-offs over the next twelve months.
The following tables provide changes in our allowance for loan losses for the periods presented:
 ($ in millions)
Balance at
January 1, 2018

 
Provision charged to operations

 
Gross charge-offs

 
Recoveries

 
Balance at
March 31, 2018

 
 
 
 
 
 
 
 
 
 
Credit cards
$
5,483

 
$
1,334

 
$
(1,372
)
 
$
195

 
$
5,640

Consumer installment loans
40

 
16

 
(15
)
 
4

 
45

Commercial credit products
50

 
12

 
(12
)
 
2

 
52

Other
1

 

 

 

 
1

Total
$
5,574

 
$
1,362

 
$
(1,399
)
 
$
201

 
$
5,738

($ in millions)
Balance at
January 1, 2017

 
Provision charged to operations

 
Gross charge-offs

 
Recoveries

 
Balance at
March 31, 2017

 
 
 
 
 
 
 
 
 
 
Credit cards
$
4,254

 
$
1,278

 
$
(1,184
)
 
$
237

 
$
4,585

Consumer installment loans
37

 
13

 
(14
)
 
4

 
40

Commercial credit products
52

 
15

 
(18
)
 
1

 
50

Other
1

 

 

 

 
$
1

Total
$
4,344

 
$
1,306

 
$
(1,216
)
 
$
242

 
$
4,676

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funding, Liquidity and Capital Resources
____________________________________________________________________________________________
We maintain a strong focus on liquidity and capital. Our funding, liquidity and capital policies are designed to ensure that our business has the liquidity and capital resources to support our daily operations, our business growth, our credit ratings and our regulatory and policy requirements, in a cost effective and prudent manner through expected and unexpected market environments.
Funding Sources
Our primary funding sources include cash from operations, deposits (direct and brokered deposits), securitized financings and third-party debt.
The following table summarizes information concerning our funding sources during the periods indicated:

21



 
2018
 
2017
Three months ended March 31 ($ in millions)
Average
Balance
 
%
 
Average
Rate
 
Average
Balance
 
%
 
Average
Rate
Deposits(1)
$
56,356

 
72.7
%
 
1.8
%
 
$
51,829

 
72.1
%
 
1.5
%
Securitized financings
12,410

 
16.0

 
2.4

 
12,321

 
17.1

 
2.1

Senior unsecured notes
8,795

 
11.3

 
3.6

 
7,760

 
10.8

 
3.5

Total
$
77,561

 
100.0
%
 
2.1
%
 
$
71,910

 
100.0
%
 
1.8
%
 
 
 
 
 
 
 
 
 
 
 
 
______________________
(1)
Excludes $300 million and $240 million average balance of non-interest-bearing deposits for the three months ended March 31, 2018 and 2017, respectively. Non-interest-bearing deposits comprise less than 10% of total deposits for the three months ended March 31, 2018 and 2017.

Deposits
We obtain deposits directly from retail and commercial customers (“direct deposits”) or through third-party brokerage firms that offer our deposits to their customers (“brokered deposits”). At March 31, 2018, we had $45.0 billion in direct deposits and $11.6 billion in deposits originated through brokerage firms (including network deposit sweeps procured through a program arranger that channels brokerage account deposits to us). A key part of our liquidity plan and funding strategy is to continue to expand our direct deposits base as a source of stable and diversified low cost funding.
Our direct deposits include a range of FDIC-insured deposit products, including certificates of deposit, IRAs, money market accounts and savings accounts.
Brokered deposits are primarily from retail customers of large brokerage firms. We have relationships with 10 brokers that offer our deposits through their networks. Our brokered deposits consist primarily of certificates of deposit that bear interest at a fixed rate and at March 31, 2018, had a weighted average remaining life of 3.0 years. These deposits generally are not subject to early withdrawal.
Our ability to attract deposits is sensitive to, among other things, the interest rates we pay, and therefore, we bear funding risk if we fail to pay higher rates, or interest rate risk if we are required to pay higher rates, to retain existing deposits or attract new deposits. To mitigate these risks, our funding strategy includes a range of deposit products, and we seek to maintain access to multiple other funding sources, including securitized financings (including our undrawn committed capacity) and unsecured debt.
The following table summarizes certain information regarding our interest-bearing deposits by type (all of which constitute U.S. deposits) for the periods indicated:
Three months ended March 31 ($ in millions)
2018
 
2017
Average
Balance
 
% of
Total
 
Average
Rate
 
Average
Balance
 
% of
Total
 
Average
Rate
Direct deposits:
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit (including IRA certificates of deposit)
$
26,025

 
46.2
%
 
1.7
%
 
$
21,235

 
41.0
%
 
1.5
%
Savings accounts (including money market accounts)
17,813

 
31.6

 
1.5

 
17,345

 
33.5

 
1.0

Brokered deposits
12,518

 
22.2

 
2.4

 
13,249

 
25.5

 
2.1

Total interest-bearing deposits
$
56,356

 
100.0
%
 
1.8
%
 
$
51,829

 
100.0
%
 
1.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Our deposit liabilities provide funding with maturities ranging from one day to ten years. At March 31, 2018, the weighted average maturity of our interest-bearing time deposits was 1.6 years. See Note 7. Deposits to our condensed consolidated financial statements for more information on their maturities.

22



The following table summarizes deposits by contractual maturity at March 31, 2018.
($ 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)
$
7,663

 
$
1,106

 
$
5,063

 
$
9,570

 
$
23,402

U.S. deposits ($100,000 or more)
 
 
 
 
 
 
 
 
 
Direct deposits:
 
 
 
 
 
 
 
 
 
Certificates of deposit (including IRA certificates of deposit)
2,391

 
1,646

 
7,713

 
5,607

 
17,357

Savings accounts (including money market accounts)
14,033

 

 

 

 
14,033

Brokered deposits:
 
 
 
 
 
 
 
 
 
Sweep accounts
1,778

 

 

 

 
1,778

Total
$
25,865

 
$
2,752

 
$
12,776

 
$
15,177

 
$
56,570

______________________
(1)
Includes brokered certificates of deposit for which underlying individual deposit balances are assumed to be less than $100,000.
Securitized Financings
We have been engaged in the securitization of our credit card receivables since 1997. We access the asset-backed securitization market using the Synchrony Credit Card Master Note Trust (“SYNCT”) through which we issue asset-backed securities through both public transactions and private transactions funded by financial institutions and commercial paper conduits. In addition, we issue asset-backed securities in private transactions through the Synchrony Sales Finance Master Trust (“SFT”) and the Synchrony Card Issuance Trust (“SYNIT”).
The following table summarizes expected contractual maturities of the investors’ interests in securitized financings, excluding debt premiums, discounts and issuance costs at March 31, 2018.
($ in millions)
Less Than
One Year
 
One Year
Through
Three
Years
 
After
Three
Through
Five
Years
 
After Five
Years
 
Total
Scheduled maturities of long-term borrowings—owed to securitization investors:
 
 
 
 
 
 
 
 
 
SYNCT(1)
$
2,528

 
$
3,957

 
$
1,590

 
$

 
$
8,075

SFT

 
2,850

 

 

 
2,850

SYNIT

 
1,300

 

 

 
1,300

Total long-term borrowings—owed to securitization investors
$
2,528

 
$
8,107

 
$
1,590

 
$

 
$
12,225

______________________
(1)
Excludes subordinated classes of SYNCT notes that we own.
We retain exposure to the performance of trust assets through: (i) in the case of SYNCT, SFT and SYNIT, subordinated retained interests in the receivables transferred to the trust in excess of the principal amount of the notes for a given series to provide credit enhancement for a particular series, as well as a pari passu seller’s interest in each trust and (ii) in the case of SYNCT, subordinated classes of notes that we own.

23



All of our securitized financings include early repayment triggers, referred to as early amortization events, including events related to material breaches of representations, warranties or covenants, inability or failure of the Bank to transfer loan receivables to the trusts as required under the securitization documents, failure to make required payments or deposits pursuant to the securitization documents, and certain insolvency-related events with respect to the related securitization depositor, Synchrony (solely with respect to SYNCT) or the Bank. In addition, an early amortization event will occur with respect to a series if the excess spread as it relates to a particular series or for the trust, as applicable, falls below zero. Following an early amortization event, principal collections on the loan receivables in the applicable trust are applied to repay principal of the trust's asset-backed securities rather than being available on a revolving basis to fund the origination activities of our business. The occurrence of an early amortization event also would limit or terminate our ability to issue future series out of the trust in which the early amortization event occurred. No early amortization event has occurred with respect to any of the securitized financings in SYNCT, SFT or SYNIT.
The following table summarizes for each of our trusts the three-month rolling average excess spread at March 31, 2018.
 
Note Principal Balance
($ in millions)
 
# of Series
Outstanding
 
Three-Month Rolling
Average Excess
Spread(1)
SYNCT(2)
$
9,331

 
16

 
~14.4% to 15.5%

SFT
$
2,850

 
10

 
12.4
%
SYNIT
$
1,300

 
3

 
~20.1% to 21.2%

______________________
(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 SYNCT, 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 ended March 31, 2018.
(2)
Includes subordinated classes of SYNCT notes that we own.

24



Third-Party Debt
Senior Unsecured Notes
The following table provides a summary of our outstanding senior unsecured notes at March 31, 2018.
($ in millions)
 
Maturity
 
Principal Amount Outstanding(1)
Fixed rate senior unsecured notes:
 
 
 
 
Synchrony Financial
 
 
 
 
2.600% senior unsecured notes
 
January, 2019
 
$
1,000

3.000% senior unsecured notes
 
August, 2019
 
1,100

2.700% senior unsecured notes
 
February, 2020
 
750

3.750% senior unsecured notes
 
August, 2021
 
750

4.250% senior unsecured notes
 
August, 2024
 
1,250

4.500% senior unsecured notes
 
July, 2025
 
1,000

3.700% senior unsecured notes

 
August, 2026
 
500

3.950% senior unsecured notes
 
December, 2027
 
1,000

Synchrony Bank
 
 
 
 
3.000% senior unsecured notes
 
June, 2022
 
750

Total fixed rate senior unsecured notes
 
 
 
$
8,100

 
 
 
 
 
Floating rate senior unsecured notes:
 
 
 
 
Synchrony Financial
 
 
 
 
Three-month LIBOR plus 1.23% senior unsecured notes
 
February, 2020
 
250

Synchrony Bank
 
 
 
 
Three-month LIBOR plus 0.625% senior unsecured notes
 
March, 2020
 
500

Total floating rate senior unsecured notes
 
 
 
$
750

______________________
(1)
The amounts shown exclude unamortized debt discount, premiums and issuance cost.
At March 31, 2018, the aggregate amount of outstanding senior unsecured notes was $8.8 billion and the weighted average interest rate was 3.48%.
Short-Term Borrowings
Except as described above, there were no material short-term borrowings for the periods presented.
Other
At March 31, 2018, we had 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 or to be pledged to the Federal Reserve Board for credit at the discount window.
Covenants
The indenture pursuant to which our senior unsecured notes have been issued includes various covenants. If we do not satisfy any of these covenants, the maturity of amounts outstanding thereunder may be accelerated and become payable. We were in compliance with all of these covenants at March 31, 2018.
At March 31, 2018, we were not in default under any of our credit facilities or senior unsecured notes.

25



Credit Ratings
Our borrowing costs and capacity in certain funding markets, including securitizations and senior and subordinated debt, may be affected by the credit ratings of the Company, the Bank and the ratings of our asset-backed securities.
Synchrony's senior unsecured debt is rated BBB- (stable outlook) by Fitch and BBB- (stable outlook) by S&P. The Bank’s senior unsecured debt is rated BBB- (stable outlook) by Fitch and BBB (stable outlook) by S&P. In addition, certain of the asset-backed securities issued by SYNCT are rated by Fitch, S&P and/or Moody’s. A credit rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. Downgrades in these credit ratings could materially increase the cost of our funding from, and restrict our access to, the capital markets.
Liquidity
____________________________________________________________________________________________
We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth, satisfy debt obligations and to meet regulatory expectations under normal and stress conditions.
We maintain policies outlining the overall framework and general principles for managing liquidity risk across our business, which is the responsibility of our Asset and Liability Management Committee, a subcommittee of our Risk Committee. We employ a variety of metrics to monitor and manage liquidity. We perform regular liquidity stress testing and contingency planning as part of our liquidity management process. We evaluate a range of stress scenarios including Company specific and systemic events that could impact funding sources and our ability to meet liquidity needs.
We maintain a liquidity portfolio, which at March 31, 2018 had $18.6 billion of liquid assets, primarily consisting of cash and equivalents and short-term obligations of the U.S. Treasury, less cash in transit which is not considered to be liquid, compared to $15.1 billion of liquid assets at December 31, 2017. The increase in liquid assets was primarily due to the retention of excess cash flows from operations within our Company as part of our pre-funding strategy for the PayPal credit portfolio acquisition.
As additional sources of liquidity, at March 31, 2018, we had an aggregate of $5.5 billion of undrawn committed capacity on our securitized financings, subject to customary borrowing conditions, from private lenders under our securitization programs and $0.5 billion of undrawn committed capacity under our unsecured revolving credit facility with private lenders, and we had 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 or to be pledged to the Federal Reserve Board for credit at the discount window.
As a general matter, investments included in our liquidity portfolio are expected to be highly liquid, giving us the ability to readily convert them to cash. The level and composition of our liquidity portfolio may fluctuate based upon the level of expected maturities of our funding sources as well as operational requirements and market conditions.
We rely significantly on dividends and other distributions and payments from the Bank for liquidity; however, bank regulations, contractual restrictions and other factors limit the amount of dividends and other distributions and payments that the Bank may pay to us. For a discussion of regulatory restrictions on the Bank’s ability to pay dividends, see “Item 1A. Risk Factors—Risks Relating to Regulation—We are subject to restrictions that limit our ability to pay dividends and repurchase our common stock; the Bank is subject to restrictions that limit its ability to pay dividends to us, which could limit our ability to pay dividends, repurchase our common stock or make payments on our indebtedness” and “Item 1A. Business—Regulation—Savings Association Regulation—Dividends and Stock Repurchases” in our 2017 Form 10-K.

26



Capital
____________________________________________________________________________________________
Our primary sources of capital have been earnings generated by our business and existing equity capital. We seek to manage capital to a level and composition sufficient to support the risks of our business, meet regulatory requirements, adhere to rating agency targets and support future business growth. The level, composition and utilization of capital are influenced by changes in the economic environment, strategic initiatives and legislative and regulatory developments. Within these constraints, we are focused on deploying capital in a manner that will provide attractive returns to our stockholders.
Synchrony and the Bank are required to conduct stress tests on an annual basis. Under the Office of the Comptroller of the Currency of the U.S. Treasury's (the “OCC”) and the Federal Reserve Board's stress test regulations, the Bank and Synchrony are required to use stress-testing methodologies providing for results under various scenarios of economic and financial market stress. In addition, while as a savings and loan holding company and a financial holding company, we currently are not subject to the Federal Reserve Board's capital planning rule, we submitted a capital plan to the Federal Reserve Board in 2018.
Dividend and Share Repurchases
Cash Dividends Declared
 
Month of Payment
 
Amount per Common Share
 
Amount
($ in millions, except per share data)
 
 
 
 
 
 
Three months ended March 31, 2018
 
February 2018
 
$
0.15

 
$
114

Total dividends declared
 
 
 
$
0.15

 
$
114

 
 
 
 
 
 
 
The declaration and payment of future dividends to holders of our common stock will be at the discretion of the Board and will depend on many factors. For a discussion of regulatory and other restrictions on our ability to pay dividends and repurchase stock, see “Risk Factors—Risks Relating to Regulation—We are subject to restrictions that limit its ability to pay dividends and repurchase its common stock; the Bank is subject to restrictions that limit its ability to pay dividends to Synchrony, which could limit Synchrony's ability to pay dividends, repurchase its common stock or make payments on its indebtedness” in our 2017 Form 10-K.
Shares Repurchased Under Publicly Announced Programs
 
Total Number of Shares Purchased
 
Dollar Value of Share Purchased
 
 
 
 
 
($ and shares in millions)
 
 
 
 
Three months ended March 31, 2018
 
10.4

 
$
410

Total
 
10.4

 
$
410

 
 
 
 
 
On May 18, 2017, the Company approved a share repurchase program of up to $1.64 billion through June 30, 2018. Through the end of the first quarter of 2018, we have repurchased approximately $1.43 billion of common stock as part of the share repurchase program and expect to complete the share repurchase program by the end of the second quarter of 2018. We made, and expect to continue to make, share repurchases subject to market conditions and other factors, including legal and regulatory restrictions and required approvals.
Regulatory Capital Requirements - Synchrony Financial
As a savings and loan holding company, we are required to maintain minimum capital ratios, under the applicable U.S. Basel III capital rules. For more information, see “Regulation—Savings and Loan Holding Company Regulation” in our 2017 Form 10-K.

27



For Synchrony Financial to be a well-capitalized savings and loan holding company, Synchrony Bank must be well-capitalized and Synchrony Financial must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve Board to meet and maintain a specific capital level for any capital measure. As of March 31, 2018, Synchrony Financial met all the requirements to be deemed well-capitalized.
The following table sets forth at March 31, 2018 and December 31, 2017 the composition of our capital ratios for the Company calculated under the Basel III regulatory capital standards, respectively.
 
Basel III
 
At March 31, 2018(1)
 
At December 31, 2017(2)
($ in millions)
Amount
 
Ratio(3)
 
Amount
 
Ratio(3)
Total risk-based capital
$
13,878

 
18.1
%
 
$
13,954

 
17.3
%
Tier 1 risk-based capital
$
12,863

 
16.8
%
 
$
12,890

 
16.0
%
Tier 1 leverage
$
12,863

 
13.7
%
 
$
12,890

 
13.8
%
Common equity Tier 1 capital
$
12,863

 
16.8
%
 
$
12,890

 
16.0
%
Risk-weighted assets
$
76,509

 
 
 
$
80,669

 
 
______________________
(1)
Amounts presented do not reflect certain modifications to the regulatory capital rules proposed by the federal banking agencies in September 2017, which among other things, may increase the risk weighting of certain deferred tax assets from 100% to 250% if the proposed rule becomes effective.
(2)
Amounts at December 31, 2017 are presented in accordance with applicable transition guidelines.
(3)
Tier 1 leverage ratio represents total tier 1 capital as a percentage of total average assets, after certain adjustments. All other ratios presented above represent the applicable capital measure as a percentage of risk-weighted assets.
The increase in our Common equity Tier 1 capital ratio was primarily due to the seasonal decline in loan receivables which resulted in a corresponding decrease in risk-weighted assets in the three months ended March 31, 2018.
Regulatory Capital Requirements - Synchrony Bank
At March 31, 2018 and December 31, 2017, the Bank met all applicable requirements to be deemed well-capitalized pursuant to OCC regulations and for purposes of the Federal Deposit Insurance Act. The following table sets forth the composition of the Bank’s capital ratios calculated under the Basel III rules at March 31, 2018 and December 31, 2017.
 
At March 31, 2018
 
At December 31, 2017
 
Minimum to be Well-
Capitalized under 
Prompt Corrective Action Provisions
 - Basel III
($ in millions)
Amount
 
Ratio
 
Amount
 
Ratio
 
Amount
 
Ratio
Total risk-based capital
$
11,054

 
17.4
%
 
$
10,842

 
16.2
%
 
$
6,364

 
10.0
%
Tier 1 risk-based capital
$
10,205

 
16.0
%
 
$
9,958

 
14.9
%
 
$
5,091

 
8.0
%
Tier 1 leverage
$
10,205

 
13.1
%
 
$
9,958

 
12.9
%
 
$
3,909

 
5.0
%
Common equity Tier 1 capital
$
10,205

 
16.0
%
 
$
9,958

 
14.9
%
 
$
4,136

 
6.5
%
Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit our business activities and have a material adverse effect on our business, results of operations and financial condition. See “Risk Factors—Risks Relating to Regulation—Failure by Synchrony and the Bank to meet applicable capital adequacy and liquidity requirements could have a material adverse effect on us” in our 2017 Form 10-K.

28



Off-Balance Sheet Arrangements and Unfunded Lending Commitments
____________________________________________________________________________________________
We do not have any significant off-balance sheet arrangements, including guarantees of third-party obligations. Guarantees are contracts or indemnification agreements that contingently require us to make a guaranteed payment or perform an obligation to a third-party based on certain trigger events. At March 31, 2018, we had not recorded any contingent liabilities in our Condensed Consolidated Statement of Financial Position related to any guarantees.
We extend credit, primarily arising from agreements with customers for unused lines of credit on our credit cards, in the ordinary course of business. See Note 4 - Loan Receivables and Allowance for Loan Losses to our condensed consolidated financial statements for more information on our unfunded lending commitments.
Critical Accounting Estimates
____________________________________________________________________________________________
In preparing our condensed consolidated financial statements, we have identified certain accounting estimates and assumptions that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. The critical accounting estimates we have identified relate to allowance for loan losses, income taxes and fair value measurements. All of these estimates reflect our best judgment about current, and for some estimates future, economic and market conditions and their effects based on information available as of the date of these financial statements. If these conditions change from those expected, it is reasonably possible that these judgments and estimates could change, which may result in incremental losses on loan receivables and the establishment of valuation allowances on deferred tax assets and increases in our tax liabilities, among other effects. See “Management's Discussion and Analysis—Critical Accounting Estimates” in our 2017 Form 10-K, for a detailed discussion of these critical accounting estimates.
New Accounting Standards
____________________________________________________________________________________________
See Note 2. Basis of Presentation and Summary of Significant Accounting Policies — New Accounting Standards, for additional information related to recent accounting pronouncements.
Regulation and Supervision
____________________________________________________________________________________________
Our business, including our relationships with our customers, is subject to regulation, supervision and examination under U.S. federal, state and foreign laws and regulations. These laws and regulations cover all aspects of our business, including lending practices, treatment of our customers, safeguarding deposits, customer privacy and information security, capital structure, liquidity, dividends and other capital distributions, transactions with affiliates, and conduct and qualifications of personnel.
As a savings and loan holding company and a financial holding company, Synchrony is subject to regulation, supervision and examination by the Federal Reserve Board. As a large provider of consumer financial services, we are also subject to regulation, supervision and examination by the CFPB.
The Bank is a federally chartered savings association. As such, the Bank is subject to regulation, supervision and examination by the OCC, which is its primary regulator, and by the CFPB. In addition, the Bank, as an insured depository institution, is supervised by the FDIC.
See “Regulation” in our 2017 Form 10-K for additional information. See also “—Capital above, for discussion of the impact of regulations and supervision on our capital and liquidity, including our ability to pay dividends and repurchase stock.

29



ITEM 1. FINANCIAL STATEMENTS
Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Earnings
(Unaudited)
____________________________________________________________________________________________
 
Three months ended March 31,
($ in millions, except per share data)
2018
 
2017
Interest income:
 
 
 
Interest and fees on loans (Note 4)
$
4,172

 
$
3,877

Interest on debt securities
72

 
36

Total interest income
4,244

 
3,913

Interest expense:
 
 
 
Interest on deposits
249

 
194

Interest on borrowings of consolidated securitization entities
74

 
65

Interest on third-party debt
79

 
67

Total interest expense
402

 
326

Net interest income
3,842

 
3,587

Retailer share arrangements
(720
)
 
(684
)
Net interest income, after retailer share arrangements
3,122

 
2,903

Provision for loan losses (Note 4)
1,362

 
1,306

Net interest income, after retailer share arrangements and provision for loan losses
1,760

 
1,597

Other income:
 
 
 
Interchange revenue
158

 
145

Debt cancellation fees
66

 
68

Loyalty programs
(155
)
 
(137
)
Other
6

 
17

Total other income
75

 
93

Other expense:
 
 
 
Employee costs
358

 
323

Professional fees
166

 
151

Marketing and business development
121

 
94

Information processing
104

 
90

Other
239

 
250

Total other expense
988

 
908

Earnings before provision for income taxes
847

 
782

Provision for income taxes (Note 12)
207

 
283

Net earnings
$
640

 
$
499

 
 
 
 
Earnings per share
 
 
 
Basic
$
0.84

 
$
0.61

Diluted
$
0.83

 
$
0.61

 
 
 
 
Dividends declared per common share
$
0.15

 
$
0.13


See accompanying notes to condensed consolidated financial statements.

30



Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
____________________________________________________________________________________________
 
Three months ended March 31,
($ in millions)
2018
 
2017
 
 
 
 
Net earnings
$
640

 
$
499

 
 
 
 
Other comprehensive income (loss)
 
 
 
Debt securities
(20
)
 
(1
)
Currency translation adjustments
(3
)
 
(1
)
Employee benefit plans
1

 

Other comprehensive income (loss)
(22
)
 
(2
)
 
 
 
 
Comprehensive income
$
618

 
$
497

Amounts presented net of taxes.




































See accompanying notes to condensed consolidated financial statements.


31



Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Financial Position
____________________________________________________________________________________________
($ in millions)
At March 31, 2018
 
At December 31, 2017
 
(Unaudited)
 
 
Assets
 
 
 
Cash and equivalents
$
13,044

 
$
11,602

Debt securities (Note 3)
6,259

 
4,473

Loan receivables: (Notes 4 and 5)
 
 
 
Unsecuritized loans held for investment
52,469

 
55,526

Restricted loans of consolidated securitization entities
25,384

 
26,421

Total loan receivables
77,853

 
81,947

Less: Allowance for loan losses
(5,738
)
 
(5,574
)
Loan receivables, net
72,115

 
76,373

Goodwill
991

 
991

Intangible assets, net (Note 6)
780

 
749

Other assets
2,370

 
1,620

Total assets
$
95,559

 
$
95,808

 
 
 
 
Liabilities and Equity
 
 
 
Deposits: (Note 7)
 
 
 
Interest-bearing deposit accounts
$
56,285

 
$
56,276

Non-interest-bearing deposit accounts
285

 
212

Total deposits
56,570

 
56,488

Borrowings: (Notes 5 and 8)
 
 
 
Borrowings of consolidated securitization entities
12,214

 
12,497

Senior unsecured notes
8,801

 
8,302

Total borrowings
21,015

 
20,799

Accrued expenses and other liabilities
3,618

 
4,287

Total liabilities
$
81,203

 
$
81,574

 
 
 
 
Equity:
 
 
 
Common Stock, par share value $0.001 per share; 4,000,000,000 shares authorized; 833,984,684 shares issued at both March 31, 2018 and December 31, 2017; 760,278,930 and 770,531,433 shares outstanding at March 31, 2018 and December 31, 2017, respectively
$
1

 
$
1

Additional paid-in capital
9,470

 
9,445

Retained earnings
7,334

 
6,809

Accumulated other comprehensive income (loss):
 
 
 
Debt securities
(39
)
 
(19
)
Currency translation adjustments
(20
)
 
(17
)
Other
(27
)
 
(28
)
Treasury Stock, at cost; 73,705,754 and 63,453,251 shares at March 31, 2018 and December 31, 2017, respectively
(2,363
)
 
(1,957
)
Total equity
14,356

 
14,234

Total liabilities and equity
$
95,559

 
$
95,808


See accompanying notes to condensed consolidated financial statements.

32



Synchrony Financial and subsidiaries
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
____________________________________________________________________________________________
 
Common Stock
 
 
 
 
 
 
 
 
 
 
($ in millions, shares in thousands)
Shares Issued
 
Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2017
833,985

 
$
1

 
$
9,393

 
$
5,330

 
$
(53
)
 
$
(475
)
 
$
14,196

Net earnings

 

 

 
499

 

 

 
499

Other comprehensive income

 

 

 

 
(2
)
 

 
(2
)
Purchases of treasury stock

 

 

 

 

 
$
(238
)
 
(238
)
Stock-based compensation

 

 
12

 

 

 
1

 
13

Dividends - common stock

 

 

 
(105
)
 

 

 
(105
)
Balance at March 31, 2017
833,985

 
$
1

 
$
9,405

 
$
5,724

 
$
(55
)
 
$
(712
)
 
$
14,363

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
833,985

 
$
1

 
$
9,445

 
$
6,809

 
$
(64
)
 
$
(1,957
)
 
$
14,234

Net earnings

 

 

 
640

 

 

 
640

Other comprehensive income

 

 

 

 
(22
)
 

 
(22
)
Purchases of treasury stock

 

 

 

</