Brian J. Wenzel
Executive Vice President and Chief Financial Officer at Synchrony Financial
Thanks, Brian, and good morning, everyone. Synchrony's first quarter performance reflect a continued strength across our diversified sales platforms and in particular, the powerful combination of our digitally powered product suite, seamless customer experiences and compelling value propositions which resonate deeply with the needs of our customers and partners. We generated over $40 billion of purchase volume in the first quarter 2022, reflecting a 17% increase compared to last year.
From a platform perspective, our home & auto, diversified & value, digital, and health and wellness platforms each continue to experience a double-digit year-over-year growth in purchase volume, reflecting strong demand for both our products and attractive partner and provider networks. At the platform level, home & auto purchase volume was 10% higher due to the continued strength in home and improvement in auto as more consumers returned to the road. In diversified & value, purchase volume increased 25%, driven by strong retail performance and higher customer engagement. The 20% year-over-year increase in digital purchase volume generally reflected the growth across the platform. We experienced greater customer engagement, including higher active accounts and higher spend per active among our more established programs and continued momentum in our new program launches.
The 17% increase in health and wellness purchase volume was driven by broad-based strength led by dental, given the benefit of increases in patient volume compared to the prior year. Our lifestyle platform generated purchase volume growth of 4%, reflecting strong retailer sales and growth in music and specialty, partially offset by the ongoing impact of inventory shortages in power and particularly strong growth in the prior year period.
Loans grew 8% year-over-year to $83 billion, including loan receivables of $78.9 billion and held for sale receivables of $4 billion. At the platform level, year-over-year loan growth rates accelerated from the fourth quarter as strong purchase volume and some easing in payment rates contributed to balance growth. Net interest income increased 10% to $3.8 billion, primarily reflecting a 7% increase in interest and fees due to higher average loan receivables.
On a sequential basis, first quarter payment rate was down approximately 25 basis points to 18.1%, but were still approximately 45 basis points higher than last year and approximately 225 basis points higher than our five-year historical average. As we progressed through the first quarter, payment rate declined 17.2% in February, but increased in March, reflecting normal seasonality associated with the tax refund season. That said, March was the first month where payment rate was lower versus the prior year since the pandemic began in 2020.
Net interest margin was 15.8% in the first quarter, a year-over-year increase of 182 basis points. The primary driver of this NIM expansion was a 6.5% increase in the mix of loan receivables relative to total interest earning assets due to the growth in average receivables and lower liquidity. This accounted for 126 basis points of the year-over-year increase in our net interest margin. In addition, the first quarters 32 basis points improvement in loan yield and 33 basis point reduction in interest bearing liabilities cost each contributed 26 basis points of NIM improvement.
RSAs were $1.1 billion in the first quarter and 5.41% of average receivables. The $150 million year-over-year increase was primarily driven by the continued strong performance of our partner programs. Provision for credit losses was $521 million, an increase of 56% versus last year due to lower reserve release that was partially offset by lower net charge-offs in the first quarter 2022. Included in this quarters provision was a reserve release of $37 million, inclusive of the reserve reduction from our held-for-sale portfolios of $29 million. Excluding the impact of our held-for-sales portfolios, the $8 million reserve release reflected an improvement in our loss forecast and credit normalization trends based on a continued strong performance, partially offset by an uncertain macroeconomic environment.
Other income decreased $23 million, primarily reflecting higher loyalty costs due to purchase volume growth. The year-over-year comparison was also adversely impacted by lower investment gains from our ventures portfolio. Other expenses increased 11% to $1 billion due to the impact of higher employee, marketing and business development and technology costs. Other expense also includes the impact of $10 million related to certain employee and legal matters.
Our efficiency ratio for the first quarter was 37.2% compared to 36.1% last year. In total, Synchrony generated net earnings of $932 million or $1.77 per diluted share during the first quarter. We also generated a return on average assets of 4% and return on tangible common equity of 34.9%. These strong net earnings and returns demonstrate the power and efficiency of our digitally-enabled model, combined with the compelling value of the financial products and services we offer through our financial ecosystem. Not only were we able to support our strong customer demand with a diverse range of products, but we're able to do so while maintaining cost discipline and strong risk-adjusted returns.
Next, I'll cover our key credit trends on Slide 9. Elevated payment rates continue to drive year-over-year improvement in our delinquency metrics. Our 30-plus delinquency rate was 2.78% compared to 2.83% last year, and our 90-plus delinquency rate was 1.30% compared to 1.52% last year. When removing the impact of the held for sale portfolios on our delinquency measures for the quarter of this year and last year, the 30-plus delinquency metrics would have been down about 15 basis points versus 5, and the 90 plus metric would be down about 30 basis points instead of 22. Our portfolio of strong delinquency trends have continued to drive year-over-year improvements in our net charge-off rate which was 2.73% compared to 3.62% last year, an 89 basis point improvement year-over-year, primarily reflecting a very healthy consumer and a 45 basis point higher payment rate. The 36 basis point sequential increase from our fourth quarter net charge off rate of 2.37% primarily reflected the impact of approximately 25 basis point sequential decline in the payment rate as some consumers continue to revert back towards pre-pandemic payment behaviors. Our allowance for credit losses as a percent of loan receivables was 10.96%, up 20 basis points from the 10.76% in the fourth quarter.
Let's focus on some key trends that have supported our strong performance and the confidence we have in our business. First, as we just discussed, the underlying trends within our portfolio are performing better than our expectations heading into the year. Our portfolio of payment trends continue to show gradual normalization across the credit spectrum, reflecting the strength of the consumer more broadly. In addition, the population of customers within our portfolio that are now in post expiration forbearance programs from other lenders has performed better than our expectations. This suggest to us with the benefit of excess savings due to stimulus, modified spending behaviors and widespread forbearance, these borrowers managed their personal balance sheet well through the pandemic and therefore have a lower probability of default.
According to data from [Indecipherable], two thirds of consumers have you only spent a portion of their stimulus or have the entire amount of stimulus they received still saved, the remaining third of consumers have spent the entirety of the cash stimulus they received during the last two years. When tracking consumer balance trends by, tiers, 0 to 2,500, 2,500 to 5,000 and balances greater than 5,000, the [Indecipherable] data indicates that while all balanced tiers of stimulus receiving customers have seen balance declines between $200 to $300 from peak levels observed last fall, the two higher tier is continue to show growth in their savings balances since the third stimulus Jag. The lower tier with balances of 2,500 or less has generally remained flat, aside from the stimulus checks over the last two years.
Meanwhile, labor markets continue to be robust as unemployment levels decline and wage growth continues. Through mid April, consumer spending continues to be strong, reflecting broad-based spending across our platforms and products. Finally, our portfolio is well positioned to navigate changing market conditions given its inherent diversification across many categories, financing options and channels and customer demographics. Synchrony sales platforms encompass a broader range of discretionary and non-discretionary industry through a wide network of distribution channels. With a quarter of our purchase volume in 2022 came from each of our diversified value, home & auto and digital platforms, another 8% of purchase volume came from health and wellness. And almost half of our overall spend in 2022 was comprised of bill pay, discount store, drugstore, grocery and non-grocery food, and auto and gas spend.
In addition, our disciplined approach to driving consistent growth and attractive risk-adjusted returns means that our portfolio of credit mix remains balanced and favorably positioned compared to the mix in the first quarter of 2020. At the end of the first quarter of 2022, approximately 40% of our balances represented super-prime customers, another 35% came from prime, and the remaining 25% came from non-prime. And in terms of average credit line by Credit segment, our portfolio is super-prime, prime and nonprime lines are still lower by an average of 8% compared to two years ago.
Moving on to notice Synchrony strength, our funding, capital and liquidity. Deposits at the end of the first quarter were $63.6 billion, an increase of $814 million compared to last year. Our securitized and unsecured funding sources declined by $1.8 billion. This resulted in deposits being 83% of our funding compared to 81% last year, with securitized funding comprising 8% of our funding sources and unsecured funding comprising 9% at quarter end. Total liquidity including undrawn credit facilities was $17.8 billion, which equated to 18.7% of our total assets, down from 9.20% last year.
As a reminder, before I provide the details of our capital position, it should be noted we elected to take the benefit of the CECL transition rules issued by the joint federal banking agencies. The impact of CECL has already been recognized in our income statement and balance sheet. This transitional adjustment pertains strictly to our regulatory capital metrics. To that end, the first year phasing of the impact of CECL on a regulatory capital resulted in a reduction of our CET1 ratio of approximately 60 basis points in the first quarter. We ended the quarter at 15.0% CET1 under the CECL transition rules, 240 basis points below last year's level of 17.4%. The Tier 1 capital ratio was 15.9% under the CECL transition rules compared to 18.3% last year. The total capital ratio decreased 250 basis points to 17.2%, and the Tier 1 capital plus reserve ratio on a fully phased in basis decreased 24.5% compared to 28.7% last year.
We continue our track record of robust capital returns to shareholders. In the first quarter, we returned $1.1 billion to shareholders through 967 million of share repurchases and $114 million of common stock dividends. Even when factoring in the roughly 180 basis points of remaining CECL transition impacts on our capital ratios over the next three years, Synchrony still has considerable excess capital on our balance sheet to deploy in order to get to our 11% CET1 target ratio. This, coupled with the meaningful earnings and capital generation of our business, thanks to our disciplined approach to growth at appropriate risk adjusted returns, means that Synchrony is particularly well positioned to execute our capital plan as guided by our business performance, market conditions and subject to our capital plan and regulatory restrictions.
As part of our capital plan, the Board has approved a 5% increase in our common dividend, bringing it to $0.23 per share beginning in the third quarter of 2022. In addition, our Board has approved an incremental share repurchase authorization of $2.8 billion for the period ending June 2023. Inclusive of the remaining $251 million authorization we had at March 31st, this brings our total share repurchase authorization to $3.1 million.
Finally, let's turn to our updated outlook for the full year, which is summarized on Slide 12 of our presentation. We've assumed that the pandemic remains well controlled than any rising cases when they have a material impact on the economy or our customers. Our macroeconomic scenarios include a minimum of 5 interest rate increases during 2022, qualitative tightening measures starting in the second quarter, a slowing economy resulting from these actions and continued higher inflationary conditions. While the macroeconomic environment is uncertain given the dynamics of the portfolio as we see them today, we do not anticipate a material impact on our full year 2022 outlook for loan receivables and credit performance, we expect consumer demand to remain robust, supporting broad-based purchase volume growth across the various industries and markets we serve. As consumer savings to begin to decline and payment rate moderates while on lag, we would expect purchase volume growth to moderate as the year progresses.
Given the strong purchase volume and loan receivables growth we've achieved, we expect ending loan receivables growth of approximately 10% versus the prior year. The extent that payment rate moderates further, we would anticipate purchase volume to moderate and loan growth to accelerate. We expect our net interest margin to be between 15.25% and 15.50% for the full year. As we move through the year, NIM will be impacted by the fluctuation in the percentage average loan receivables to average earning assets to the impacts of seasonal growth, portfolio conveyances, and the timing of funding. As mentioned earlier, our NIM outlook also reflects the anticipated impact of rising benchmark rates as well as rising interest and fees which were partially offset by higher reversal as credit normalizes.
In terms of credit performance, we expect a rise in delinquency and loss from current levels. For the full year 2022, we expect net charge-offs to be less than 3.50%. Based on the performance we've seen across the portfolio, we do not expect the portfolio to reach our mean annual loss rate of 5.5% until 2024 unless significant changes in the macroeconomic environment develop. Of course, as credit normalization continues to take shape, we expect interest and fee yields to increase. As charge-offs peak, this growth in interest and fees will be partially offset by peak reversals. We expect reserve builds in 2022 to be generally asset revenue. RSA expense will continue to reflect the strength of our program performance and purchase volume growth, but should begin to moderate as net charge-off price. For the full year, we expect the RSA as a percentage of average loan receivables to be between 5.25% and 5.50%.
As a reminder, we anticipate the GAAP of BP portfolio conveyances to occur in the second quarter, producing a non-recurring gain on the sale of approximately $130 million. We expect to completely offset this gain through increased investments or incurring certain discrete items and thus be EPS neutral for the full year. Included in this quarter was $10 million of certain employee and legal matters, leaving approximately $120 million of the incremental costs remaining for the full year.
In terms of other expense, we continue to expect the quarter levels be approximately $1.05 billion. This outlook excludes the impact of the $130 million gain on sale we are reinvesting or incurring in our business. We remain committed to delivering positive operating leverage. To the extent that receivables or revenue growth is not tracking ahead of expense growth for the full year, we will moderate our spending where appropriate while still prioritizing the best long-term prospects for our business. An example of such an opportunity might be through fewer workforce additions or reducing other discretionary spend.
So to conclude, Synchrony is operating from a position of strength as we progress through 2022. We're confident in our business ability to deliver sustainable, attractive, risk-adjusted growth even if the market conditions change. Our innovative customer experiences, compelling value propositions and flexible product offerings are resonating across the diverse industries, partners and customer demographics we serve. Our sophisticated cycle tested underwriting as well as our deep domain experience of lending and servicing at scale, means that the predictive power of our credit decisioning and account management capabilities will continue to support the stability of Synchrony's target loss range.
Finally, our RSA functions as an economic buffer. As interest and fees rise with credit normalization and receivables growth, the RSA absorbs the impact of both rising net charge-offs and a large proportion of any increases in growth oriented costs. These factors enable Synchrony to deliver consistent results with peer-leading range of risk adjusted returns over time.
I'll now turn the call back over to Brian for his closing thoughts.
