Brian Wenzel
Chief Financial Officer, Executive Vice President at Synchrony Financial
Thanks, Brian, and good morning everyone. Synchrony's second-quarter results demonstrate the power of our differentiated model. Our broad reach across industries and verticals and the compelling value propositions offered on our products were key drivers of our resilient purchase volume. These core Synchrony strengths combined with our disciplined approach to underwriting, our diverse funding model, and our RSA arrangements continue to provide effective offsets to changes in the macroeconomic environment.
On a core basis ending receivables grew 15% versus last year. This was driven by a combination of approximately 130 basis-points decrease in payment rate and a 6% growth in core purchase volume. Our second-quarter payment rate of 16.8% remains approximately 150 basis-points higher than our five-year pre-pandemic historical average. Net interest income increased 8% to $4.1 billion, reflecting 90% growth in interest and fees from higher loan receivables and stronger loan receivable yields, partially offset by the impact of divestitures in the prior year period. On a core basis, interest and fees grew 25%, driven by loan receivables growth, higher benchmark rates, and a lower payment rate as credit continues to normalize towards pre-pandemic levels.
Our net interest margin of 14.94% declined 66 basis-points as higher funding costs more than offset the benefit of strong loan yields. More specifically, loan receivable yields grew 145 basis-points and contributed 124 basis-points to net interest margin. Higher liquidity portfolio yield contributed an additional 53 basis-points to net interest margin. Offsetting these improvements was higher interest-bearing liability costs, which increased 263 basis-points to 4.04% and reduced net interest margin by 215 basis-points.
Finally, our mix of interest-earning assets reduced net interest margin by approximately 20 basis-points. As continued deposit inflows, allowed us to build liquidity and pre-fund the anticipated receivables growth in the second-half of this year. RSAs of $887 million in the second-quarter were 3.85% of average loan receivables. The $240 million decline from the prior year reflected higher net charge-offs and the impact of portfolios sold-in the prior year, partially offset by higher net interest income.
The RSA continues to provide critical alignment with our partners and stability in Synchrony's risk-adjusted returns. As demonstrated during this period of credit normalization and higher funding costs. Provision for credit losses increased to $1.4 billion reflecting higher net charge-offs and a $287 million reserve builds, which was largely driven by growth in loan receivables. The decline in other income was driven by $120 million gain on portfolio sales recorded in the prior year period. Other expenses increased 8% to $1.2 billion. Primarily driven by growth-related items as well as operational losses and technology investments. Our efficiency ratio for the second-quarter improved by approximately 220 basis-points compared to last year to 35.5%. In total, Synchrony generated second-quarter net earnings of $569 million or $1.32 per diluted share.
The return on average assets of 2.1% and return on tangible common equity of 21.7%. Next, I'll cover our key credit trends on slide 8. As payment behavior continues to revert towards pre-pandemic historical averages. Our delinquency net charge-off rates continued to normalize towards pre-pandemic performance. Our 30-plus delinquency rate was 3.84% compared to 2.7% last year, which is approximately 60 basis-points lower than the second-quarter of 2019. Our 90-plus delinquency rate was 1.77% versus 1.22% in the prior year, which is approximately 40 basis-points lower than the second-quarter of 2019.
Our net charge-off rate was 4.75% versus 2.73% last year, which is approximately 100 basis-points below the midpoint of our underwriting target of 5.5% to 6%, where Synchrony's risk adjusted returns are more fully optimized. While credit continues to normalize in line with our expectations we are actively monitoring our portfolio and have undertaken some proactive targeted actions to position our portfolio into 2024. These actions have been focused on certain types of inactive accounts as well as segments of the portfolio where we're seeing significant score migration into nonprime and are unlikely to have a material impact on purchase volume.
Focusing on reserves, our allowance for credit losses as a percent of loan receivables was 10.34%, down 10 basis-points from the 10.44% in the first-quarter. The reserve build of $287 million in the quarter was largely driven by receivables growth. Our provision did not include any material changes in our qualitative reserves or significant changes in our macroeconomic assumptions. Turning to slide 10, funding capital and liquidity continue to be highlights of Synchrony's performance.
During the second-quarter, our consumer bank offerings continued to resonate with customers. We experienced positive net flows each week culminating in direct deposit growth of $2.3 million in the first-quarter, which has partially offset by lower-broker deposits. Deposits at quarter-end, representing 84% of our total funding. The remainder of our funding stack is comprised of securitized and unsecured debt at 6% and 10% of our funding respectively. We remain focused on being active issuers in both markets as conditions allow. Total liquidity including undrawn credit facilities was $19.4 billion up $521 million from last year. As a percent of total assets, liquidity represented 17.9% down 198 basis-points from last year as we manage our liquidity portfolio and fund strong loan receivables growth.
Focusing our capital ratios as a reminder, we elected to take the benefit of the CECL transition rules issued by the joint federal banking agencies. Synchrony made its annual transitional adjustment of approximately 60 basis points in January and will continue to make annual adjustments of approximately 60 basis points each year, until January of 2025. The impact of CECL has already been recognized in our income statement and balance sheet. Under the CECL transition rules, we ended the second-quarter with a CET1 ratio of 12.3%, 290 basis-points lower than last year's levels of 15.2%.
The Tier-one capital ratio was 13.1% under the CECL transition rules, compared to 16.1% last year. The total capital ratio decreased 220 basis-points to 15.2% and the Tier-one capital plus reserve ratio on a fully phased in basis decreased to 22.4% compared to 25% last year. Continuing our commitment to robust capital returns, synchrony announced approval of an incremental $1 billion share repurchase authorization through June of 2024 in addition to the $300 million remaining on the prior authorization.
We also announced our intention to increase the company's common stock dividend by 9% to $0.25 per share from $0.23 per share beginning in the third-quarter. During the second-quarter, we returned $399 million to shareholders, reflecting $300 million of share repurchases and $99 million of common stock dividends. At the end-of-the quarter, we had $1 billion remaining in our share repurchase authorization. Synchrony will continue to execute on our capital plan as guided by our business performance, market conditions, regulatory restrictions, and subject to our capital plan.
We also continue to seek opportunities to complete our fully developed capital structure through the issuance of additional preferred stock. We have a strong history of capital generation and management, which is empowered by our resilient business model. Given the uncertainties in both the macroeconomic environment and the financial services industry Synchrony remains focused on actively managing the assets we originate and prudently managing the capital we generate to optimize our long-term value-creation and resiliency.
Finally, please refer to slide 12, of our presentation for more detail on our full-year 2023 outlook. We expect our ending loan receivables to grow by 10% or more for 2023, reflecting the combined impact of the payment rate moderation and purchase volume growth. We continue to expect payment rates to normalize, but remain above pre-pandemic levels through the remainder of this year. We now expect our net interest margin within a range of 15% to 15.15% for the full-year. The interest margin in the first-half was influenced by higher liquidity due to stronger-than-anticipated deposit flows and receivables gross pre-funding.
Deposit betas also trended better-than-expected in the first-half, but we are sensing growing competition for deposits. Our revised full-year outlook incorporates these first-half trends as well as the anticipated impacts of further interest-rate increases by the Federal Reserve and the possibility of higher deposit betas in the second-half of the year. As a reminder, we expect our net interest margin to fluctuate quarter-to-quarter driven by higher liquidity as we pre-fund growth resulting in variations in the mix of interest-earning assets and interest and fee growth, partially offset by rising reversals as credit continues to normalize.
Turning to our credit outlook, we now expect delinquencies to reach pre-pandemic levels during the second-half of 2023 versus our previous expectation of an approaching peak in mid-year. Net charge-offs should follow a similar but lacked progression through the year. Generally speaking, loss dollars will not reach a fully normalized level until approximately six months following the peak in delinquencies. Given the slightly more moderate pace of delinquency normalization, we now expect net charge-offs to trend towards the lower-end of our prior outlook between 4.75% and 4.90%.
We continue to anticipate losses reaching fully normalized levels on an annual basis in 2024. We expect the RSA to trend below our prior outlook and be between 3.95% and 4.10% of average loan receivables for the full-year. This improved range reflects the impact of continued credit normalization, lower net interest margin, and the mix of our loan receivables growth and given our higher-than-anticipated growth in the first-half, we now anticipate quarterly operating expenses to trend at approximately $1.15 billion for 2023. We remain committed to delivering our operating leverage for the full year. Taken together Synchrony's differentiated model continues to power resilient financial results to a range of environments and we look forward to delivering on our commitments as we close out the second-half of 2023. I'll now turn the call-back over to Brian for his closing thoughts.
