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What changed in BREAD FINANCIAL HOLDINGS, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BREAD FINANCIAL HOLDINGS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+745 added−654 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-20)

Top changes in BREAD FINANCIAL HOLDINGS, INC.'s 2024 10-K

745 paragraphs added · 654 removed · 498 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

154 edited+53 added−39 removed71 unchanged
Biggest changeRisk Factors” under the headings “Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use personal information”, “Failure to safeguard our data and consumer privacy could affect our reputation among our partners and their customers, and may expose us to legal claims”, and “Business interruptions, including loss of data center capacity, interruption due to cyber-attacks, loss of network connectivity or inability to utilize proprietary software of third party vendors, could affect our ability to timely meet the needs of our partners and customers and harm our business” and “Part I—Item 1C.
Biggest changeRisk Factors” under the headings “Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use Personal Information, and any actual or perceived failure to comply with any of these new or existing laws could adversely affect our business, results of operations, or financial condition”, “If we, our third-party providers, or brand partners fail to safeguard our confidential information and/or experience a data security incident, there may be damage to our brand and reputation, material financial penalties and legal claims, which could materially adversely affect our business, results of operations, and financial condition”, and “Business interruptions, including loss of data center capacity, interruption due to cyber-attacks, loss of network connectivity or inability to utilize proprietary software of third-party vendors, could affect our ability to timely meet the needs of our partners and customers and harm our business” and “Part I—Item 1C.
The terms and conditions of all of our credit card products are governed by a cardholder agreement and applicable laws and regulations. We assign each card account a credit limit when the account is initially opened by the customer.
The terms and conditions of all of our credit card products are governed by a cardholder agreement and applicable laws and regulations. We assign each credit card account a credit limit when the account is initially opened by the customer.
Specifically, we rely on third-parties to help us deliver systems and operational infrastructure, these relationships include (but are not limited to): Microsoft and Amazon Web Services, Inc. for our cloud infrastructure and Fiserv for credit card processing services.
Specifically, we rely on third parties to help us deliver systems and operational infrastructure, these relationships include (but are not limited to): Microsoft and Amazon Web Services, Inc. for our cloud infrastructure and Fiserv for our credit card processing services.
Other competitors are smaller or younger companies that may be more agile in responding quickly to regulatory and technological changes.
Other competitors may be smaller or younger companies that are more agile in responding quickly to regulatory and technological changes.
The required cash reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with Federal Reserve Banks; we maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system.
The required cash reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with the Federal Reserve Banks; we maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system.
Incentive Compensation The Dodd-Frank Act requires the Federal Banking Agencies and the Securities and Exchange Commission (SEC) to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Banks, that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits resulting from inappropriate risk taking, as these actions could lead to material financial loss to the entity.
The Dodd-Frank Act requires the Federal Banking Agencies and the Securities and Exchange Commission (SEC) to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Banks, that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits resulting from inappropriate risk taking, as these actions could lead to material financial loss to the entity.
USA PATRIOT Act Under Title III of the USA PATRIOT Act, all financial institutions are required to take certain measures to identify their customers, prevent money laundering, monitor customer transactions, and report suspicious activity to U.S. law enforcement agencies. Financial institutions also are required to respond to requests for information from Federal Banking Agencies and law enforcement agencies.
USA PATRIOT Act Under Title III of the USA PATRIOT Act, all financial institutions are required to take certain measures to identify their customers, prevent money laundering, monitor customer transactions, and report suspicious activity to U.S. law enforcement agencies. Financial institutions are also required to respond to requests for information from Federal Banking Agencies and law enforcement agencies.
We believe that our Bread Cashback TM credit card will continue to increase our total addressable market, 5 Tabl e of Contents including within the Millennial and Gen Z populations, offering unlimited 2% cashback, no annual fee, no foreign transaction fees, premium protection benefits, American Express ® lifestyle benefits and instant mobile acquisition and wallet provisioning.
We believe that our Bread Cashback credit card will continue to increase our total addressable market, including within the Millennial and Gen Z populations, offering unlimited 2% cashback, no annual fee, no foreign transaction fees, premium protection benefits, American Express lifestyle 5 Tabl e of Contents benefits and instant mobile acquisition and wallet provisioning.
Our “split-pay” loans are short-term, interest-free financing, to be repaid by the customer in four equal installments, with the first payment due at the time of purchase and the remaining three payments due in subsequent two-week intervals. The terms of our split-pay loans are governed by customer agreements and applicable laws and regulations.
Our Bread Pay “split-pay” loans are short-term, interest-free financing, to be repaid by the customer in four equal installments, with the first payment due at the time of purchase and the remaining three payments due in subsequent two-week intervals. The terms of our split-pay loans are governed by customer agreements and applicable laws and regulations.
CB is subject to prudential regulation, supervision and examination by the Delaware Office of the State Bank Commissioner, as its chartering authority, and the FDIC as its primary federal regulator. CB’s deposits are insured by the DIF of the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations.
CB is subject to prudential regulation, supervision and examination by the Delaware Office of the State Bank Commissioner, as its chartering authority, and the FDIC as its primary federal regulator. CB’s deposits are insured by the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations.
As a general matter, the financial terms and conditions governing our private label and co-brand credit card products vary by program and product type and change over time, although we seek to standardize the non-financial provisions consistently across all products.
As a general matter, the financial terms and conditions governing our private label and co-brand credit card products vary by program and product type and may change over time; although, we seek to standardize the non-financial provisions consistently across all products.
Despite the efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our products or technology that we consider proprietary and third parties may attempt to develop similar technology independently. We have a number of domestic and foreign patents and pending patent applications.
Despite our efforts to protect our technology and proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our technology that we consider proprietary, and third parties may attempt to develop similar technology independently. We have a number of domestic and foreign patents and pending patent applications.
The rewards can be mailed to the cardholder, accessed digitally or may be immediately redeemable at the partner’s retail location. Costs of cardholder reward arrangements are recognized when the rewards are earned by the cardholders and are generally recorded as a reduction of revenue.
The rewards can be mailed to the cardholder, accessed digitally, or may be immediately redeemable at the partner’s retail location. Costs of cardholder rewards arrangements are recognized when the rewards are earned by the cardholders and are generally recorded as a reduction of revenue.
As a DTC product, our Bread Cashback TM credit card and other proprietary cards we may issue are not dependent upon the performance of our brand partners or impacted by any partner revenue-sharing obligations.
As a DTC product, our Bread Cashback credit card and other proprietary credit cards we may issue are not dependent upon the performance of our brand partners or impacted by any partner revenue-sharing obligations.
In competing to acquire and retain the business of brand partners and customers, our primary competition is with other financial institutions whose marketing focus has been on developing credit card programs with attractive value propositions and consequentially large revolving balances. These competitors further drive their businesses by cross-selling their other financial products to their cardholders.
In competing to acquire and retain the business of brand partners and customers, our primary competition is with other financial institutions whose marketing focus has been on developing credit card programs with attractive value propositions, high spend and consequentially large revolving balances. These competitors further drive their businesses by cross-selling their other financial products to their cardholders.
We compete for deposits with traditional banks, and in seeking to grow our Bread Savings TM platform, we compete with other banks that have direct-banking models similar to ours.
We compete for deposits with traditional banks, and in seeking to grow our Bread Savings platform, we compete with other banks that have direct-banking models similar to ours.
Under the Volcker Rule, the term covered funds is defined as any issuer that would be an investment company under the Investment Company Act but for the exemption in section 3(c)(1) or 3(c)(7) of that Act, which includes collateralized loan obligation securities and collateralized debt obligation securities.
Under the Volcker Rule, the term covered funds is defined as any issuer that would be an investment company under the Investment Company Act but for the exemption in section 3(c)(1) or 3(c)(7) of that Act, which includes collateralized loan obligation securities, collateralized debt obligation securities, and certain foreign funds.
Our partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which we first began, specialty apparel.
Our partner base is well diversified across a broad range of industries and retail verticals, including travel and entertainment, health and beauty, jewelry, sporting goods, technology and electronics, home goods and the industry in which we first began, specialty apparel.
It has also strengthened our ability to ensure we are operating on a compliant core platform, and enabled efficient integration of digital technology, while supporting our data and analytics capabilities and improving operational efficiencies. See also “—Technology/Systems” below for additional information regarding our approach toward the systems and technologies that we use in the operation of our business.
It has also strengthened our ability to ensure we are operating on a compliant core platform, and enables efficient integration of digital technology, while supporting our data and analytics capabilities and improving operational efficiencies. See also “—Technology/Systems” below for additional information regarding our approach toward the systems and technologies we use in the operation of our business.
Restrictions on Transactions with Affiliates and Insiders Sections 23A and 23B of the Federal Reserve Act limit the extent to which the Parent Company and its non-bank affiliates (including non-bank subsidiaries) can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the Banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to the Parent Company or its non-bank affiliates.
Restrictions on Transactions with Affiliates and Insiders Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit the extent to which the Parent Company and its non-bank affiliates (including non-bank subsidiaries) can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the Banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to the Parent Company or its non-bank affiliates.
Through Bread Pay TM , we offer an omnichannel solution for more than 1,100 SMB retailers and merchants, and we continue to explore and pursue growth opportunities in various business adjacencies, including through the integration of our suite of products (primarily Bread Pay TM installment loans) into third-party platforms to gain efficient distribution of our lending solutions.
Through Bread Pay, we offer an omnichannel solution for more than 1,300 SMB retailers and merchants, and we continue to explore and pursue growth opportunities in various business adjacencies, including through the integration of our suite of products (primarily Bread Pay installment loans) into third-party platforms to gain efficient distribution of our lending solutions.
We post our Audit Committee, Risk & Technology Committee, Compensation & Human Capital Committee and Nominating and Corporate Governance Committee charters, our corporate governance guidelines, and our code of ethics, code of ethics for senior financial officers, and code of ethics for Board members on our website. 19 Tabl e of Contents
We post our Audit Committee, Risk & Technology Committee, Compensation & Human Capital Committee and Nominating & Corporate Governance Committee charters, our corporate governance guidelines, and our code of ethics, code of ethics for senior financial officers, and code of ethics for Board members on our website. 20 Tabl e of Contents
As a form of payment, our customers have numerous consumer credit and other payment options available to them, and our products compete with cash, checks, electronic bank transfers, debit cards, general purpose credit cards (including Visa, MasterCard, American Express and Discover Card), various forms of consumer installment loans and split-pay products, other private label card brands, prepaid cards, digital wallets and mobile payment solutions, and other tools that simplify and personalize shopping experiences for consumers and merchants.
As a form of payment, our customers have numerous consumer credit and other payment options available to them, and our products compete with cash, checks, electronic bank transfers, debit cards, general purpose credit cards (including those on the Visa, MasterCard, American Express and Discover Card networks), various forms of consumer installment loans and split-pay products, other private label credit card brands, prepaid cards, digital wallets and mobile payment solutions, and other tools that simplify and personalize shopping experiences for consumers and merchants.
In addition, we continue to develop and scale our direct-to-consumer lending and payment products for new and existing customers, including through our proprietary credit cards and Bread Savings TM products.
In addition, we continue to develop and scale our direct-to-consumer lending, payment and saving products for new and existing customers, including through our proprietary credit cards and Bread Savings products.
We are continually seeking to enhance customers’ self-service capabilities in our digital channels, which allows customers to address their own needs when and how they want, while also generating efficiencies for us over time by reducing the cost to serve our customers.
We are continually seeking to enhance customers’ self-service capabilities in our digital channels, which allows customers to address their needs when and how they want, while also generating efficiencies for us over time by reducing the costs to serve our customers.
Through our data and analytics capabilities, including machine learning and artificial intelligence, we focus on data insights that drive actionable strategies and enhance revenue growth and customer retention. We use multi-channel marketing communication tools, including in-store, web, permission-based email, permission-based mobile messaging and direct mail to engage customers in the channel of their choice. Digital and Mobile Capabilities .
Through our data and analytics capabilities, including the use of machine learning and artificial intelligence (AI) technology, we focus on data insights that drive actionable strategies and enhance revenue growth and customer retention. We use multi-channel marketing communication tools, including in-store, web, permission-based email, permission-based mobile messaging and direct mail to engage customers in the channels of their choice.
Our customer care operations are influenced by our retail heritage and we view every customer touch point as an opportunity to provide an exceptional experience. Our customer care operations offer omnichannel servicing, including phone, mail, fax, email, text, smartphone application and web.
Our customer care operations are influenced by our retail heritage, and we view every customer touch point as an opportunity to provide an exceptional experience. Our customer care operations offer omnichannel servicing, including through phone, mail, email, text, smartphone application and the web.
The FDIC’s claim under the cross guaranty provision is superior to claims of shareholders of the insured depository institution or its parent company and to most claims arising out of obligations or liabilities owed to affiliates of the institution, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution.
The FDIC’s claim under the cross guaranty provision is superior to claims of 13 Tabl e of Contents shareholders of the insured depository institution or its parent company and to most claims arising out of obligations or liabilities owed to affiliates of the institution, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution.
More broadly, the credit card programs we operate typically provide reward points, which are redeemable for a variety of products or awards, or merchandise discounts earned by the customer having achieved a pre-set spending level. Other programs may include cash back rewards or statement credits.
More broadly, the credit card programs we operate typically provide rewards points, which are redeemable for a variety of products or awards, or merchandise discounts earned by the customer having achieved a preset spending level. Other programs may include cash back rewards or statement credits.
As such a company, this means that Bread Financial Holdings, Inc. must stand ready to use available resources to provide adequate capital funds to the Banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional funding resources to support the Banks.
As such a company, this means that BFH must stand ready to use available resources to provide adequate capital funds to the Banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional funding resources to support the Banks.
For example, the CFPB’s rulemaking authority may allow it to change regulations adopted in the past by other regulators including regulations issued under the Truth in Lending Act by the Board of Governors of the Federal Reserve System (Federal Reserve Board).
For example, the CFPB’s rulemaking authority may allow it to change regulations adopted in the past by other regulators, including regulations issued under the Truth in Lending Act by the Federal Reserve Board.
Associate Health and Well-Being Associate health and well-being remains a top human capital priority, and we are committed to providing our associates with competitive total compensation, benefits and wellness resources. Our associates continue to value flexible remote work policies that allow them to find a balance of office-work time and remote-work time.
Associate Benefits and Well-Being Associate well-being remains a top human capital priority, and we are committed to providing our associates with competitive total compensation, benefits and wellness resources. Our associates continue to value flexible hybrid work policies that allow them to balance office work and remote work time.
The Federal Banking Agencies and the Secretary of the Treasury have adopted regulations to implement several of these provisions. All financial institutions also are required to establish internal anti-money laundering programs.
The Federal Banking Agencies and the Secretary of the Treasury have adopted regulations to implement several of these provisions. Furthermore, financial institutions are required to establish internal anti-money laundering programs.
Private Label and Co-Brand Credit Card Lending Our core business, historically, has been working with many of the country’s best-known brands and retailers (who we call our partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs.
Private Label and Co-Brand Credit Card Lending Our core business is working with many of the country’s best-known brands and retailers (who we call our partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs.
We typically do not charge interchange or other fees to our partners when customers use private label credit cards to purchase our partners’ goods and services through our payment system.
We typically do not charge interchange or other fees to our partners when customers use our private label credit cards to purchase our partners’ goods and services.
We manage and service the loans we originate for our private label and co-brand credit card programs, as well as our DTC credit cards and Bread Pay TM products.
We manage and service the accounts we originate for our private label and co-brand credit card programs, as well as our DTC credit cards and Bread Pay products.
However, CCB’s total assets then exceeded $10 billion for four consecutive quarters as of September 30, 2022, and both Banks are now again subject to supervision and examination by the CFPB with respect to federal consumer protection laws.
However, CCB’s total assets then exceeded $10 billion for four consecutive quarters as of September 30, 2022, and both Banks are now again subject to supervision and examination by the CFPB with respect to federal consumer protection laws. Regulation of Bread Financial Holdings, Inc.
Our Bread Savings TM products support loan growth and improve our funding mix, making us less reliant on other sources of wholesale funding. In recent years, retail deposits have become an increasingly important source of funds for us, growing 18% from $5.5 billion as of December 31, 2022 to $6.5 billion as of December 31, 2023.
Our Bread Savings products support loan growth and improve our funding mix, making us less reliant on other sources of wholesale funding. In recent years, retail deposits have become an increasingly important source of funds for us, growing 19% from $6.5 billion as of December 31, 2023 to $7.7 billion as of December 31, 2024.
Basel III capital rules, the Banks’ assets, exposures, and certain off-balance sheet items are subject to risk weights used to determine an institution’s risk-weighted assets, which then are used to determine the minimum capital that CB and CCB should keep as reserves to reduce the risk of insolvency.
Under the Basel III capital rules, the Banks’ assets, exposures, and certain off-balance sheet items are subject to risk weights used to determine CB’s and CCB’s risk-weighted assets, which then are used to determine the minimum capital that CB and CCB should keep as reserves to reduce the risk of insolvency.
The annual indexation of the reserve requirement exemption amount and the low reserve tranche for the years 2021-2024 was required by statute, but did not affect depository institutions’ reserve requirements, which remain at zero. 13 Tabl e of Contents Federal Deposit Insurance The deposits of the Banks are insured up to applicable limits by the DIF of the FDIC.
The annual indexation of the reserve requirement exemption amount and the low reserve tranche for the years 2021-2025 was required by statute, but did not affect depository institutions’ reserve requirements, which remain at zero. Federal Deposit Insurance The deposits of the Banks are insured up to applicable limits by the DIF of the FDIC.
Our private label and co-brand partner base, with approximately 100 brands and numerous online merchants, consists of many large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret.
Our private label and co-brand partner base, with approximately 100 brands and numerous online merchants, consists of many large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret.
Typically, each customer with an outstanding amount due on their credit card account must make a minimum payment each month; a customer may pay the total amount due at any time without penalty.
Typically, each customer with an outstanding amount due on his or her credit card account must make a minimum payment each month; a customer may pay the total amount due at any time without penalty.
However, under Section 616 of the Dodd-Frank Act, any company that directly or indirectly controls an insured depository institution is required to serve as a source of financial strength to its subsidiary institution and may not conduct its operations in an unsafe or unsound manner. This doctrine is commonly known as the “Source of Strength” doctrine.
However, under Section 616 of the Dodd-Frank Act, any company that directly or indirectly controls an insured depository institution is required to serve as a source of financial strength to its subsidiary institution and may not conduct its operations in an unsafe or unsound manner.
We have a number of safeguards in place that are designed to protect us from data-related risks and in the event of a disaster, to restore our data centers’ systems. For additional information, see “Item 1A. Risk Factors – Risk Management – Operational Risk”.
We have a number of safeguards in place that are designed to protect us from data-related risks and in the event of a disaster, to restore our data centers’ systems. For additional information, see “Item 1A.
Our credit card program agreements typically provide for royalty payments, or retailer share arrangements, to our brand partners based on purchased volume or if certain contractual incentives are met, such as if the economic performance of the program exceeds a contractually defined threshold, or for payments for new accounts.
Our credit card program agreements may also provide for royalty payments, or retailer share arrangements, to our brand partners based on purchase volume or if certain contractual incentives are met, such as if the economic performance of the program exceeds a contractually defined threshold, or for new accounts acquired.
The CFPB has broad rulemaking authority that has impacted, and is expected to continue impacting, the Banks’ operations, including with respect to credit card late fees and other amounts that we may charge.
The CFPB has broad rulemaking authority that has impacted, and may continue to impact, the Banks’ operations, including with respect to credit card late fees and other amounts that we may charge.
We also may enter into arrangements with delinquent customers to extend or otherwise change payment schedules and to waive interest charges and/or fees; we do not offer programs involving the forgiveness of principal. We make it easier for customers to make payments by offering recurring automatic payment functionality on all cardholder accounts and other electronic payments methods.
We also may enter into arrangements with delinquent customers to modify their payments and/or waive or reduce interest charges and/or fees; we do not offer programs involving the forgiveness of principal. We make it easier for customers to make payments by offering recurring automatic payment functionality and other electronic payments methods on all cardholder accounts.
No individual patent or license is material to us or our business. 8 Tabl e of Contents Competition The markets for our products and services are highly competitive, continuously changing, highly innovative, and subject to regulatory scrutiny and oversight. We compete with a wide range of businesses, including major financial institutions and financial technology firms, or fintechs.
No individual patent, copyright, or trademark is material to us or our business. Competition The markets for our products and services are highly competitive, continuously changing, highly innovative, and subject to regulatory scrutiny and oversight. We compete with a wide range of businesses, including major financial institutions and financial technology firms, or fintechs.
The Dodd-Frank Act also requires publicly traded companies to give stockholders a non-binding vote on executive compensation at least every three years and on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions. Bread Financial Holdings, Inc. has held our “say-on-pay” vote annually.
The Dodd-Frank Act also requires publicly traded companies to give stockholders a non-binding vote on executive compensation at least every three years and on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions. We have held our “say-on-pay” vote annually.
The CCPA/CPRA requires covered businesses to comply with requirements that give consumers the right to know what information is being collected from them and whether such information is sold or disclosed to third parties.
The CCPA/CPRA requires covered businesses to comply with requirements that give consumers the right to know what information is being collected from 17 Tabl e of Contents them and whether such information is sold or disclosed to third parties.
In 2023, for the eighteenth consecutive time, we were certified by BenchmarkPortal as a Center of Excellence for the quality of our operations, the most prestigious customer care industry ranking attainable. Founded by Purdue University in 1995, BenchmarkPortal is a global leader of best practices for customer care centers.
In 2024, for the nineteenth consecutive time, we were certified by BenchmarkPortal as a Center of Excellence for the quality of our operations, the most prestigious customer care industry ranking attainable. Founded by Purdue University in 1995, BenchmarkPortal is a global leader of best practices for customer care centers. Fraud Prevention.
We blend domestic and off-shore locations as an important part of our servicing strategy, to maintain service availability beyond normal work hours in the United States and to optimize our cost structure. Marketing, and Data & Analytics .
We blend domestic and off-shore locations as an important part of our servicing strategy, to maintain service availability beyond typical work hours in the United States and to optimize our cost structure.
Our Compensation & Human Capital Committee and our full Board of Directors receive regular updates from senior management and third-party consultants on human capital trends and developments, and other key human capital matters that drive our ongoing success and performance.
Our Board of Directors and Compensation & Human Capital Committee provide important oversight of our human capital management strategy, and receive regular updates from senior management and third-party consultants on human capital trends and developments and other key human capital matters that drive our ongoing success and performance.
Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).
Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).
We also continue to diversify and optimize our portfolio, prioritizing our investment in strong and profitable partners, industries and affinity brands, while also continuing to develop our Bread Pay TM products and exploring various strategic business opportunities adjacent to our core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.
We also continue to diversify and optimize our portfolio, prioritizing our investment in strong and profitable partners, industries and affinity brands, while continuing to develop our Bread Pay products, which are our installment loans and “split-pay” offerings, and exploring various strategic business opportunities adjacent to our core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.
Cybersecurity”. Human Capital Providing a meaningful value proposition for our associates is a top priority for us. We seek to enhance our associate value proposition continuously to ensure that we offer competitive rewards, career opportunities and workplace conditions, which we believe will allow us to attract and retain a highly qualified and motivated workforce.
Cybersecurity”. Human Capital Providing a meaningful value proposition for our associates is one of our top priorities. We seek to enhance our associate value proposition continuously to ensure that we offer competitive rewards, career opportunities and workplace conditions, which we believe enables us to attract and retain a highly qualified and motivated workforce.
The Banks are also subject to the requirements of a fourth ratio, the Leverage ratio, which itself does not incorporate risk-weighted assets: • Tier 1 Leverage Ratio - the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets, and certain other deductions). The U.S.
The Banks are also subject to the requirements of a fourth ratio, the Leverage ratio, which itself does not incorporate risk-weighted assets: 11 Tabl e of Contents • Tier 1 Leverage Ratio – the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets, and certain other deductions).
The Federal Banking Agencies and the SEC most recently proposed such regulations in 2016, but the regulations have not yet been finalized. If the regulations are adopted in the form initially proposed, the manner in which executive compensation is structured will be restricted.
The Federal Banking Agencies, apart from the Federal Reserve Board, and the SEC most recently proposed such regulations in 2024, but the regulations have not yet been finalized. If the regulations are adopted in the form initially proposed, the manner in which executive compensation is structured will be restricted.
With our range of offerings, we provide relevant products across consumer segments, including Gen Z and Millennials who we believe are more likely to be drawn to cash flow management products such as BNPL, while Gen X and Baby Boomers generally gravitate toward rewards and the convenience of a private label or co-brand card.
With our range of offerings, we provide relevant products across consumer segments, including Gen Z and Millennials who we believe are more likely to be drawn to cash flow management products such as our pay-over-time installment loans and “split-pay” offerings, while Gen X and Baby Boomers generally gravitate toward rewards and the convenience of a private label or co-brand credit card.
Regulatory Capital Requirements The Banks are subject to certain risk-based capital and leverage ratio requirements under the U.S. Basel III capital rules adopted by the FDIC. These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act.
Regulatory Capital Requirements The Banks are subject to certain risk-based capital and leverage ratio requirements under the Basel Committee on Banking Supervision standardized approach for U.S. banking organizations adopted by the FDIC. These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act.
Because neither CB nor CCB is considered a “bank” within the meaning of the BHC Act, Bread Financial Holdings, Inc. is not a bank holding company (BHC) subject to regulation thereunder.
Because neither CB nor CCB is considered a “bank” within the meaning of the BHC Act, the Parent Company is not a bank holding company (BHC) subject to regulation thereunder.
A final rule issued by the Federal Reserve, OCC, and FDIC, which became effective in May 2022, requires banking organizations to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.
Federal and state laws also require us to respond appropriately to data security breaches. A final rule issued by the Federal Reserve, OCC, and FDIC, which became effective in May 2022, requires banking organizations to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.
The Federal Banking Agencies have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice; a bank may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized.
The Federal Banking Agencies, being the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board and the FDIC, have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice; a bank may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized.
These quantitative calculations are minimums, and the FDIC may 11 Tabl e of Contents determine that a bank, based on our size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Under the U.S.
These quantitative calculations are minimums, and the FDIC may determine that a bank, based on size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
The Consumer Financial Protection Bureau (CFPB) promulgates regulations for the federal consumer financial protection laws and supervises and examines large banks (those with more than $10 billion of total assets) with respect to those laws.
CCB is not a member of the Federal Reserve System. The Consumer Financial Protection Bureau (CFPB) promulgates regulations for the federal consumer financial protection laws and supervises and examines large banks (those with more than $10 billion of total assets) with respect to those laws.
The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships.
The breadth and quality of our product and service offerings, coupled with our customer-centric approach, have enabled us to establish and maintain long-standing partner relationships.
Regulation O also imposes certain recordkeeping and reporting requirements. 14 Tabl e of Contents Volcker Rule Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as Bread Financial Holdings, Inc. and the Banks, from (i) engaging in proprietary trading and (ii) investing in or sponsoring covered funds, subject to certain limited exceptions.
Volcker Rule Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as Bread Financial Holdings, Inc. and the Banks, from (i) engaging in proprietary trading and (ii) investing in or sponsoring covered funds, subject to certain limited exceptions.
The payment of dividends by the Banks and Bread Financial Holdings, Inc. and any repurchases of our common stock may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements.
No assurances can be given that the Banks will, in any circumstances, pay dividends to Bread Financial Holdings, Inc. The payment of dividends by the Banks and Bread Financial Holdings, Inc. and any repurchases of our common stock may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements.
As macroeconomic conditions have weakened over recent years, we have continued to enhance our credit risk management, including through stronger underwriting resulting from enhanced technology, monitoring, and data, prudent and proactive credit line management, and well-established risk appetite metrics, and we are proactively applying our recession readiness playbook. Loan Processing and Servicing .
As macroeconomic conditions have changed in recent years, we have continued to enhance our credit risk management, including through stronger underwriting resulting from enhanced technology, monitoring, and data, prudent and proactive credit line management (as part of our recession readiness playbook), and well-established risk appetite metrics. Credit Card and Other Loan Processing and Servicing .
Direct-to-Consumer Credit Cards In the second quarter of 2022, we launched our branded Bread Cashback TM credit card, which is a DTC, general purpose cashback credit card, and is an important product for us to capture incremental, non-discretionary spend and build and retain customer relationships.
Direct-to-Consumer Credit Cards In 2022, we launched our branded Bread Cashback American Express Credit Card, which is a DTC, general purpose cashback credit card. Our DTC credit cards are an important component of our overall product offerings and allow for us to capture incremental, non-discretionary spend and build and retain customer relationships.
As of December 31, 2023, we employed approximately 7,000 associates worldwide, with the majority concentrated in the United States. Attracting, developing and retaining top talent is critical to our business. We promote an inclusive, engaged culture that empowers associates through opportunities to grow, develop and lead.
As of December 31, 2024, we employed approximately 6,000 associates worldwide, with the majority concentrated in the United States. Attracting, developing and retaining top talent is critical to our business. In making these employment-related decisions, we comply with all applicable laws. We promote an inclusive, engaged culture that empowers associates through opportunities to grow, develop and lead.
If any of our entities became subject to regulation as a BHC, among other things, Bread Financial Holdings, Inc. and our non-bank subsidiaries would be subject to regulation, supervision and examination by the Federal Reserve Board and our operations would be limited to certain activities that are closely related to banking or financial services in nature.
If any of our entities became subject to regulation as a BHC, among other things, BFH and our non-bank subsidiaries would be subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (Federal Reserve Board) and our operations would be limited to activities that are closely related to banking.
Prompt Corrective Action and Safety and Soundness Under applicable “prompt corrective action” (PCA) statutes and regulations, insured depository institutions, such as the Banks, are placed into one of five capital categories, ranging from “well capitalized” to “critically undercapitalized”. The PCA statute and regulations provide for progressively more stringent supervisory measures as an institution’s capital category declines.
Prompt Corrective Action and Safety and Soundness Under applicable “prompt corrective action” (PCA) statutes and regulations, insured depository institutions, such as the Banks, are placed into one of five capital categories, ranging from “well capitalized” to “critically undercapitalized”.
These risk-weighted assets are used to calculate the following minimum capital ratios for the Banks: • Common Equity Tier 1 (CET1) Risk-Based Capital Ratio - the ratio of CET1 capital to risk-weighted assets.
These risk-weighted assets are used to calculate the following minimum capital ratios for the Banks: • Common Equity Tier 1 (CET1) Risk-Based Capital Ratio – the ratio of CET1 capital to risk-weighted assets. In the calculation of CET1 capital, we follow the Basel III Standardized Approach.
For the year ended December 31, 2023, customer spending on our co-brand credit cards comprised approximately 50% of our credit sales (as compared to 37% for the year ended December 31, 2019, the last fiscal year prior to our current Chief Executive Officer joining the Company), which we believe enables us to capture incremental and non-discretionary sales as consumer spending patterns shift in response to evolving economic conditions.
For the year ended December 31, 2024, customer spending on our co-brand credit cards comprised approximately 50% of our credit sales, which we believe enables us to capture incremental and non-discretionary sales as consumer spending patterns shift in response to evolving economic conditions.
Basel III capital rules require a minimum CET1 Risk-Based Capital Ratio of 4.5%, a minimum Tier 1 Risk-Based Capital Ratio of 6.0%, and a minimum Total Risk-Based Capital Ratio of 8.0%. In addition to meeting the minimum capital requirements, under the U.S.
The Basel III capital rules require a minimum CET1 Risk-Based Capital Ratio of 4.5%, a minimum Tier 1 Risk-Based Capital Ratio of 6.0%, and a minimum Total Risk-Based Capital Ratio of 8.0%.
While the CFPB has taken public positions on certain matters, it is unclear what additional changes may be promulgated by the CFPB and what effect, if any, such changes would have on our credit accounts.
While the CFPB has taken public positions on certain matters, it is unclear what additional changes may be promulgated by the CFPB and what effect, if any, such changes would have on our credit accounts. With the recent change in Presidential Administration and the current congressional majorities in the U.S.
One requisite element of such a plan is that the institution’s parent holding company guarantee the institution’s compliance with the plan, subject to certain limitations. As of December 31, 2023, the Banks qualified as “well capitalized” under applicable regulatory capital standards.
An undercapitalized institution must submit an acceptable restoration plan to the appropriate Federal Banking Agency. One requisite element of such a plan is that the institution’s parent holding company guarantee the institution’s compliance with the plan, subject to certain limitations. As of December 31, 2024, the Banks qualified as “well capitalized” under applicable regulatory capital standards.
Our private label credit card loan balances are typically smaller, with an average customer balance of approximately $700; although, we do offer “big ticket” financing and financing for medical and dental procedures with certain private label brand partners, which often involves larger amounts.
Our private label credit card loan balances are typically smaller, with an average outstanding account balance for the year ended December 31, 2024 of $738; although, we do offer “big ticket” financing and financing for medical and dental procedures with certain private label brand partners, which often involve larger amounts.
In addition to periodic interest charges, we may impose other charges and fees on credit card accounts, including, as applicable and provided in the cardholder agreement, late fees where a customer has not paid at least the minimum payment due by the required due date.
In addition to periodic interest charges, we may impose other charges and fees on credit card accounts, including, as applicable and provided in the cardholder agreement, late fees where a customer has not paid at least the minimum payment due by the required due date, as well as paper statement fees which, in 2024 for selected brand partner programs, we began to charge on certain credit card accounts receiving monthly paper statements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, there are numerous risks associated with acquisitions, dispositions and the implementation of new business opportunities, including, but not limited to: • the difficulty and expense that we incur in connection with the acquisition, disposition or new business opportunity; • the inability to satisfy pre-closing conditions preventing consummation of the acquisition, disposition or new business opportunity; • the potential for adverse consequences when conforming the acquired company’s accounting policies to ours; • the diversion of management’s attention from other business concerns; • the potential loss of customers or key employees of the acquired company; • the impact on our financial condition due to the timing of the acquisition, disposition or new business implementation or the failure of the acquired or new business to meet operating expectations; • continued financial responsibility with respect to a divested business, including required equity ownership, guarantees, indemnities or other financial obligations; • the assumption of unknown liabilities of the acquired company; • the uncertainty of achieving expected benefits of an acquisition or disposition, including revenue, human resources, technological or other cost savings, operating efficiencies or synergies; • the inability to integrate systems, personnel or technologies from our acquisitions and strategic investments; • unforeseen legal, regulatory or other challenges that we may not be able to manage effectively; • the reduction of cash available for operations, payment of dividends, stock repurchase programs or other uses and potentially dilutive issuances of equity securities or incurrence of additional debt; • the requirement to provide transition services in connection with a disposition resulting in the diversion of resources and focus; and • the difficulty retaining and motivating key personnel from acquisitions or in connection with dispositions.
Biggest changeIn addition, there are numerous risks associated with acquisitions, dispositions and the implementation of new business opportunities, including, but not limited to: the diversion of management’s attention from other business concerns; continued financial responsibility with respect to a divested business, including required equity ownership, guarantees, indemnities or other financial obligations; the assumption of unknown liabilities of the acquired company; the uncertainty of achieving expected benefits of an acquisition or disposition, including revenue, human resources, technological or other cost savings, operating efficiencies or synergies; the inability to integrate systems, personnel or technologies from our acquisitions and strategic investments; unforeseen legal, regulatory or other challenges that we may not be able to manage effectively; and the reduction of cash available for operations, payment of dividends, stock repurchase programs or other uses and potentially dilutive issuances of equity securities or incurrence of additional debt.
The amount of this reserve build (which is included in the reporting period in which the portfolio is obtained) is often large relative to the amount of revenue generated through such date by the newly-acquired portfolio.
The amount of this reserve build (included in the reporting period in which the portfolio is obtained) is often large relative to the amount of revenue generated through such date by the newly-acquired portfolio.
Other examples of state and federal legislation we are tracking include legislation intended to place caps on the interest rates that we and other financial institutions are permitted to charge.
Other examples of federal and state legislation we are tracking include legislation intended to place caps on the interest rates that we and other financial institutions are permitted to charge.
The “safe harbor” dollar amounts referenced in the CFPB’s rulemaking refer to the amounts that credit card issuers may charge as late fees under the Credit Card Accountability Responsibility and Disclosure Act of 2009 without reference to the issuer’s cost to collect.
The “safe harbor” dollar amounts referenced in the CFPB’s rulemaking refer to the amounts that credit card issuers may charge as late fees under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) without reference to the issuer’s cost to collect.
Interest rate risk results from: • differences between the timing of rate changes and the timing of cash flows (repricing risk); • changing rate relationships among different yield curves affecting an organization’s activities (basis risk); • changing rate relationships across the spectrum of maturities (yield curve risk); and • interest-related options embedded in certain products (options risk).
Interest rate risk results from: • Repricing risk – differences between the timing of rate changes and the timing of cash flows; • Basis risk – changing rate relationships among different yield curves affecting an organization’s activities; • Yield curve risk – changing rate relationships across the spectrum of maturities; and • Options risk – interest-related options embedded in certain products.
Operational losses result from internal fraud; external fraud; inadequate or inappropriate employment practices and workplace safety; failure to meet obligations involving customers, partners, products, and business practices; damage to physical assets; business disruption and systems failures; and/or failures in execution, delivery, and process management.
Operational losses result from internal or external fraud, inadequate or inappropriate employment practices and workplace safety, failure to meet obligations involving customers, partners, products and business practices, damage to physical assets, business disruption and systems failures, and/or failures in execution, delivery and process management.
While we closely monitor economic conditions and indicators, including inflation, interest rates, changes in monetary policy, housing values, the state of the commercial real estate industry, energy prices, consumer wages, consumer saving rates and debt levels, including student loan debt, consumer and business spending, unemployment, and concerns about the level of U.S. government debt, as well as economic and political conditions in the U.S. and global markets, the outcome of any of these conditions and indicators remains difficult to predict.
While we closely monitor economic conditions and indicators, including inflation, interest rates, changes in monetary policy, housing values, the state of the commercial real estate industry, energy prices, consumer wages, consumer saving rates and debt levels, including student loan debt, consumer and business spending, unemployment, financial markets, government policy and concerns about the level of U.S. government debt, as well as economic and political conditions in the U.S. and global markets, the outcome of any of these conditions and indicators remains difficult to predict.
Risks related to our liquidity, market and credit risk include: • Adverse financial market conditions or our inability to effectively manage our funding and liquidity risk could have a material adverse effect on our business, liquidity and ability to meet our debt service requirements and other obligations. • Our inability to effectively access the securitization or other capital markets could limit our funding opportunities for loans and other business opportunities. • Competition for deposits and regulatory restrictions on deposit products can impact availability and cost of funds. • Our level of indebtedness may restrict our ability to compete and grow our business. • Our market valuation has been, and may continue to be, volatile, and returns to stockholders may be limited. • We are a holding company and depend on dividends and other payments from our Banks, which are subject to various legal and regulatory restrictions. 20 Tabl e of Contents Risks related to our legal, regulatory and compliance environment include: • We face various risks related to the extensive government regulation and supervision of our business, including by the FDIC, CFPB and other federal and state authorities.
Risks related to our liquidity, market and credit risk include: • Adverse financial market conditions or our inability to effectively manage our funding and liquidity risk could have a material adverse effect on our business, liquidity and ability to meet our debt service requirements and other obligations. • Our inability to effectively access the securitization or other capital markets could limit our funding opportunities for loans and other business opportunities. • Competition for deposits and regulatory restrictions on deposit products can impact availability and cost of funds. • Our level of indebtedness may restrict our ability to compete and grow our business. • Our market valuation has been, and may continue to be, volatile, and returns to stockholders may be limited. • We are a holding company and depend on dividends and other payments from our Banks, which are subject to various legal and regulatory restrictions. 21 Tabl e of Contents Risks related to our legal, regulatory and compliance environment include: • We face various risks related to the extensive government regulation and supervision of our business, including by the FDIC, CFPB and other federal and state authorities.
Our failure to comply with the laws, regulations, and supervisory actions to which we are subject, even if the failure is inadvertent or reflects a difference in interpretation, could subject us to fines, other penalties, and restrictions on our business activities, any of which could adversely affect our business, results of operations, financial condition, cash flows, capital base, and the price of our securities.
Our failure to comply with the laws, executive actions, regulations, and supervisory actions to which we are subject, even if the failure is inadvertent or reflects a difference in interpretation, could subject us to fines, other penalties, and restrictions on our business activities, any of which could adversely affect our business, results of operations, financial condition, cash flows, capital base, and the price of our securities.
We fund credit card and other loans with a combination of fixed rate and floating rate funding sources that include deposits and securitized financings. We also have unsecured term debt that is subject to variable interest rates, and we may in the future incur additional debt or issue preferred equity that rely on variable interest rates.
We fund Credit card and other loans with a combination of fixed rate and floating rate funding sources that include deposits and securitized financings. We also have unsecured debt that is subject to variable interest rates, and we may in the future incur additional debt or issue preferred equity that may rely on variable interest rates.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with our Company policies. We seek to manage strategic and business risks through risk controls embedded in these processes, as well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by various of our Committees and executive management.
Strategic decisions are reviewed and approved by business leaders and various committees and must be aligned with our policies. We seek to manage strategic and business risks through risk controls embedded in these processes, as well as overall risk management oversight over business goals. Existing product performance is reviewed periodically by various of our Committees and executive management.
These such events could affect us directly (for example, by interrupting our systems, impacting the power grid, damaging our facilities or otherwise preventing us from conducting our business in the ordinary course) or indirectly (for example, by damaging or destroying brand partner businesses, impacting our service providers or otherwise impairing customers’ ability to repay their loans).
These such events could affect us directly (for example, by interrupting our systems, impacting the power grid, damaging our facilities or otherwise preventing us from conducting our business in the ordinary course) or indirectly (for example, by damaging or destroying brand partner businesses or customers’ homes, impacting our service providers or otherwise impairing customers’ ability to repay their loans).
Moreover, any such final rule (and certain of our mitigating strategies) may present other risks and adverse impacts to our business, results of operations and financial condition, which could include, without limitation, the loss of customers due to tightened underwriting standards or negative customer response to higher rates and fees, impacts to customer payment behavior due to decreased incentives to pay, further regulatory action in response to mitigating strategies that may be employed by us or other credit card issuers, adverse impacts to or disputes with our brand partners, strategic non-renewals of certain brand partner relationships that cease to be profitable and balance sheet impairments, including of goodwill, long-lived assets and other prepaid or intangible assets.
Moreover, the final rule (and certain of our mitigating strategies) may present other risks and adverse impacts to our business, results of operations and financial condition, which could include, without limitation, the loss of customers due to tightened underwriting standards or negative customer response to higher rates and fees, impacts to customer payment behavior due to decreased incentives to pay, further regulatory action in response to mitigating strategies that may be employed by us or other credit card issuers, adverse impacts to or disputes with our brand partners, strategic non-renewals of certain brand partner relationships that cease to be profitable, and balance sheet impairments, including of goodwill, long-lived assets and other prepaid or intangible assets.
To the extent interchange fees are reduced, one of our current competitive advantages with our partners—that we typically do not charge interchange fees when our private label credit card products are used to purchase our partners’ goods and services—may be reduced.
Furthermore, to the extent interchange fees are reduced, one of our current competitive advantages with our partners—that we typically do not charge interchange fees when our private label credit card products are used to purchase our partners’ goods and services—may be reduced.
We include the risk information provided by the BRMCs and the ITGCs, and these management risk committees, along with additional risk information that is identified at the Parent Company level in our determination and assessment of the risks that are presented to and discussed with our Board and Board Committees.
We include the risk information provided by the BRMCs and these risk management committees, along with additional risk information that is identified at the Parent Company level, in our determination and assessment of the risks that are presented to and discussed with our Board and Board Committees.
The primary liquidity objective is to maintain a liquidity profile that will enable us, even in times of stress or market disruption, to fund our existing assets and meet liabilities in a timely manner and at an acceptable cost.
Our primary liquidity objective is to maintain a liquidity profile that will enable us, even in times of stress or market disruption, to fund our existing assets and meet liabilities in a timely manner and at an acceptable cost.
The second line of defense is responsible for, among other things, formulating our ERM Framework and related policies and procedures, effectively challenging the first line of defense and identifying, monitoring and reporting on aggregate risks of the business and support functions.
The second line of defense is responsible for, among other things, formulating and overseeing our ERM Framework and related policies and procedures, effectively challenging the first line of defense and identifying, monitoring and reporting on aggregate risks of the business and support functions.
Changes in market interest rates could negatively affect our profitability. Changes in market interest rates cause our finance charges and our interest expense to increase or decrease, as certain of our assets and liabilities carry interest rates that fluctuate with market benchmarks.
Changes in market interest rates could negatively affect our profitability. Changes in market interest rates cause our finance charges and our interest expense to increase or decrease, as certain of our assets and liabilities carry interest rates that fluctuate with market rates.
Reputational Risk Reputational Risk is the risk arising from negative public opinion. This risk may impair our competitiveness by affecting our ability to establish new relationships or services, or continue servicing existing relationships.
Reputational Risk Reputational Risk is the risk arising from negative public opinion. This risk may impair competitiveness by affecting the ability to establish new relationships or services or continue servicing existing relationships.
Subject to the limits contained in our credit agreement, the indentures governing our senior notes and our other debt instruments, we may be able to incur substantial additional indebtedness from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our level of indebtedness could intensify.
Subject to the limits contained in our credit agreement, the indenture governing our senior notes and our other debt instruments, we may be able to incur substantial additional indebtedness from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our level of indebtedness could intensify.
Enforcement and other supervisory actions also can result in the imposition of civil monetary penalties or injunctions, related litigation by private plaintiffs, damage to our reputation, and a loss of customer or investor confidence. We could be required, as well, to dispose of specified assets and liabilities within a prescribed period of time.
Enforcement and other supervisory actions also can result in the imposition of civil monetary penalties or injunctions, related litigation by private plaintiffs, damage to our reputation, and a loss of customer or investor confidence. We could be required, as well, to dispose of specified assets and liabilities within a prescribed time-frame.
Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain a corporate culture that fosters innovation, 27 Tabl e of Contents creativity and teamwork could harm our overall business and results of operations. We rely on key personnel to lead with integrity and decency.
Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain a corporate culture that fosters innovation, creativity and teamwork could harm our overall business and results of operations. We rely on key personnel to lead with 28 Tabl e of Contents integrity and decency.
A number of factors affect our ability to fund our credit card loans in the securitization market, some of which are beyond our control, including: • conditions in the securities markets in general and the asset-backed securitization market in particular; • availability of loans for securitization; • conformity in the quality of our credit card loans to rating agency requirements and changes in that quality or those requirements; • costs of securitizing our credit card loans; • ability to fund required over-collateralization or credit enhancements, which are routinely utilized in order to achieve better credit ratings to lower borrowing cost; and • the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally.
A number of factors affect our ability to fund our credit card loans in the securitization market, some of which are beyond our control, including: • conditions in the securities markets in general and the asset-backed securitization market in particular; • availability of loans for securitization; • conformity in the quality of our credit card loans to rating agency requirements and changes in that quality or those requirements; • costs of securitizing our credit card loans; • ability to fund required over-collateralization or credit enhancements, which are routinely used to achieve better credit ratings to lower borrowing cost; and • the legal, regulatory, accounting or tax rules affecting securitization transactions and asset-backed securities, generally.
There are no such restrictions under the FDIA on a bank that is “well capitalized” and as of December 31, 2023, each of our Banks met or exceeded all applicable requirements to be deemed “well capitalized” for purposes of the FDIA. However, there can be no assurance that our Banks will continue to meet those requirements.
There are no such restrictions under the FDIA on a bank that is “well capitalized” and as of December 31, 2024, each of our Banks met or exceeded all applicable requirements to be deemed “well capitalized” for purposes of the FDIA. However, there can be no assurance that our Banks will continue to meet those requirements.
The different financial products we offer, including deposit products, are susceptible to different types of fraud, and, depending on our product mix and channel mix, we may continue to experience variations in, or levels of, fraud-related expense that are different from or higher than those experienced by some of our competitors or the industry generally.
The different financial products we offer, including deposit products, are susceptible to different types of fraud, and, depending on our product mix and channel mix, we may continue to experience variations in, or levels of, fraud-related expenses that are different from or higher than those experienced by some of our competitors or the industry generally.
Due to the mix of fixed and floating rate assets and liabilities on our Consolidated Balance Sheet as of December 31, 2023, this hypothetical instantaneous 100 basis point increase or decrease in interest rates would have an insignificant impact on our annual Net interest income.
Due to the mix of fixed and floating rate assets and liabilities on our Consolidated Balance Sheet as of December 31, 2024, this hypothetical instantaneous 100 basis point increase or decrease in interest rates would have an insignificant impact on our annual net interest income.
For example, partner sales have been, and in the future may be adversely affected by pandemic or endemic diseases like COVID-19 or other macroeconomic conditions having a national, regional or more local effect on consumer spending, business conditions affecting the general retail environment, such as supply chain distributions or the ability to maintain sufficient staffing levels or a particular partner or industry, or natural disasters or other catastrophes affecting broad or more discrete geographic areas.
For example, partner sales have been, and in the future may be adversely affected by pandemic or endemic diseases or other macroeconomic conditions having a national, regional or more local effect on consumer spending, business conditions affecting the general retail environment, such as supply chain distributions or the ability to maintain sufficient staffing levels or a particular partner or industry, or natural disasters or other catastrophes affecting broad or more discrete geographic areas.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or other contractual protections regarding infringement, misappropriation, security vulnerabilities, defects or errors in the code or other violations, any of which could result in liability to us and negatively impact our business, results of operations, profitability and financial condition.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software because open source software licensors generally do not provide any warranties or other contractual protections for the open source software, including contractual protections regarding infringement, misappropriation, security vulnerabilities, or defects or errors in the code, any of which could result in liability to us and negatively impact our business, results of operations, profitability and financial condition.
Statements in this and other filings we make with the SEC and other public statements, including in our annual ESG reports, related to these initiatives reflect our current plans and expectations and are not a guarantee that these initiatives will be achieved or achieved on the currently anticipated timeline.
Statements in this and other filings we make with the SEC and other public statements, including in our annual sustainability reports, related to these initiatives reflect our current plans and expectations and are not a guarantee that these initiatives will be achieved or achieved on the currently anticipated timeline.
In addition, work from home policies by other companies may create more job opportunities for employees and make it more difficult for us to attract and retain key talent, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models.
Moreover, work from home policies by other companies may create more job opportunities for employees and make it more difficult for us to attract and retain key talent, especially in light of changing worker expectations and talent marketplace variability regarding flexible work models.
Moreover, under the CECL accounting rules, the acquisition of an existing credit card or BNPL portfolio typically has a negative impact on certain key financial metrics in the near-term, including Net income and Earnings per share, because we are required to include a reserve build in our Provision for credit losses for the estimated credit losses to be experienced over the life of the acquired portfolio.
Moreover, under the CECL accounting rules, the acquisition of an existing credit card or other loan portfolio typically has a negative impact on certain key financial metrics in the near-term, including Net income and Earnings per share, because we are required to include a reserve build in our Provision for credit losses for the estimated credit losses to be experienced over the life of the acquired portfolio.
These risks include pending and future laws and regulations that may adversely impact our business, such as the CFPB’s proposed rulemaking with respect to late fees, as well as supervisory and other actions that may be taken against us by our regulators. • Pending and future litigation could subject us to significant fines, penalties, judgments and/or requirements. • Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. • Financial institution capital requirements may limit cash available for business operations, growth and returns to stockholders.
These risks include pending and future laws and regulations that may adversely impact our business, such as the CFPB’s final rule with respect to late fees, as well as supervisory and other actions that may be taken against us by our regulators. • Pending and future litigation could subject us to significant fines, penalties, judgments and/or requirements. • Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. • Financial institution capital requirements may limit cash available for business operations, growth and returns to stockholders.
We are also closely monitoring the effects of the lifting of the moratorium on federal student loan payments in October 2023, which moratorium had been originally implemented as part of the federal government’s COVID-19 response under the CARES Act in March 2020.
We are also closely monitoring the effects on our business of the lifting of the moratorium on federal student loan payments in October 2023, which moratorium had been originally implemented as part of the federal government’s COVID-19 response under the CARES Act in March 2020.
Each of these Committees is responsible for one or more of the Banks’ eight risk categories, which are described in greater detail below under the heading “Risk Categories”. For its risk category(ies) of responsibility, each Committee provides risk governance, risk oversight and monitoring.
Each of these Committees is responsible for one or more of the eight risk categories, which are described in detail below under the heading “Risk Categories”. For its risk category(ies) of responsibility, each Committee provides risk governance, risk oversight and monitoring.
Operational risk is inherent in all business activities and can impact us through direct or indirect financial loss, brand damage, customer dissatisfaction, and legal and regulatory penalties. We have implemented an operational risk framework that is defined in the Operational Risk Management Policy.
Operational risk is inherent in all business activities and can impact us through direct or indirect financial loss, brand damage, customer dissatisfaction and legal and regulatory penalties. We have implemented an operational risk framework that is defined in our Operational Risk Management Policy.
In addition, any failure to successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and technologies in a timely manner could have an adverse impact on our business if we are not able to be competitive with other financial services companies, and could also adversely impact our internal controls (including internal controls over financial reporting), results of operations, and financial condition.
In addition, any failure to successfully implement new IT Systems, or improvements or upgrades to existing IT Systems in a timely manner could have an adverse impact on our business if we are not able to be competitive with other financial services companies and could also adversely impact our internal controls (including internal controls over financial reporting), results of operations, and financial condition.
The Compliance Risk Management Committee, chaired by the Chief Compliance Officer, oversees the implementation and execution of the Compliance Management System and monitors compliance exposures to manage compliance risks. Model Risk Model Risk is the risk arising from decisions based on incorrect or misused model outputs and reports.
The Compliance Risk Management Committee of each Bank, chaired by the Chief Compliance Officer, oversees the implementation and execution of the Compliance Management System and monitors compliance exposures to manage compliance risks. Model Risk Model Risk is the risk arising from decisions based on incorrect or misused model outputs and reports.
In addition, digital sales on the internet and through mobile channels continue to be a larger part of our business, and fraudulent activity is higher as a percentage of sales in those channels than in brick-and-mortar store locations.
In addition, digital sales on the internet and through mobile channels continue to be a larger part of our business, and fraudulent activity is higher as a percentage of sales in those channels than in brick-and-mortar store transactions.
Pursuant to provisions of the BHC Act and regulations promulgated by the Federal Reserve Board thereunder, a BHC may only engage in, or own companies that engage in, activities deemed by the Federal Reserve Board to be permissible for BHCs or financial holding companies.
Pursuant to provisions of the BHC Act and regulations promulgated by the Federal Reserve Board thereunder, a BHC may only engage in, or own companies that engage in, activities deemed by the Federal Reserve Board to be permissible for BHCs.
Further, e ven if our arbitration clause remains enforceable, we may be subject to mass arbitrations in which large groups of 36 Tabl e of Contents consumers bring arbitrations against us simultaneously. The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions.
Further, e ven if our arbitration clause remains enforceable, we may be subject to mass arbitrations in which large groups of consumers bring arbitrations against us simultaneously. The continued focus of merchants on issues relating to the acceptance of various forms of payment may lead to additional litigation and other legal actions.
During 2023, the economic scenario weightings in our credit reserve modeling continued to reflect an increased probability of a recession, high interest rates, persistent inflation, and the increased cost of overall consumer debt.
During 2024, the economic scenario weightings in our credit reserve modeling continued to reflect an increased probability of a recession, high interest rates, persistent inflation, and the increased cost of overall consumer debt.
Although not a bank holding company as defined, Bread Financial Holdings, Inc. is our parent holding company and, as such, depends on dividends, distributions and other payments from subsidiaries, particularly our Banks, to fund dividend payments, any potential share repurchases, payment obligations, including debt obligations, and to provide funding and capital, as needed, to our other operating subsidiaries.
Although not a bank holding company as defined under the Bank Holding Company Act, Bread Financial Holdings, Inc. is our parent holding company and, as such, depends on dividends, distributions and other payments from subsidiaries, particularly our Banks, to fund dividend payments, any potential share repurchases, payment obligations, including debt obligations, and to provide funding and capital, as needed, to our other operating subsidiaries.
Legislators and regulators in the United States and other countries are increasingly adopting or revising privacy, data protection, data governance, account access, and information and cyber security laws, including data localization, authentication and notification laws.
Legislators and regulators in the United States are increasingly adopting or revising privacy, data protection, data governance, account access, and information and cyber security laws, including data localization, authentication and notification laws.
Compliance with current or future privacy, data protection, data governance, account access, and information and cyber security laws could significantly impact our collection, use, sharing, retention and safeguarding of consumer and/or employee information and could restrict our ability to provide certain products and services, which could materially and adversely affect our profitability.
Compliance with current or future privacy, data protection, data governance, account access, and information and cyber security laws could significantly impact our collection, use, sharing, retention and safeguarding of Personal Information and could restrict our ability to provide certain products and services, which could materially and adversely affect our profitability.
To minimize our risk of credit card or other loan write-offs, we have developed automated proprietary scoring technology and verification procedures to make risk-based origination decisions when approving new account-holders, establishing or adjusting account-holder credit limits and applying our risk-based pricing.
As part of our efforts to minimize our risk of credit card or other loan write-offs, we have developed automated proprietary scoring technology and verification procedures to make risk-based origination decisions when approving new account holders, establishing or adjusting account holder credit limits and applying our risk-based pricing.
All deposits on the Consolidated Balance Sheets of our Banks categorized as non-brokered in accordance with the updated regulations mentioned above comply with all application requirements of those regulations.
All deposits on the Consolidated Balance Sheets of our Banks categorized as non-brokered in accordance with the current regulations mentioned above comply with all application requirements of those regulations.
If we are unable to continue to fund our business operations, access capital markets for debt refinancings and otherwise, and attract deposits on 29 Tabl e of Contents favorable terms and in a timely manner, or if we experience an increase in our borrowing costs or otherwise fail to manage our liquidity effectively, our results of operations and financial condition may be materially adversely affected.
If we are unable to continue to fund our business operations, access capital markets for debt refinancings and otherwise, and attract deposits on favorable terms and in a timely manner, or if we experience an increase in our borrowing costs or otherwise fail to manage our liquidity effectively, our results of operations and financial condition may be materially adversely affected.
The terms of the indentures governing our senior notes, our credit agreement and agreements governing our other debt instruments limit us and our subsidiaries from engaging in specified types of transactions.
The terms of the indenture governing our senior notes, our credit agreement and agreements governing our other debt instruments limit us and our subsidiaries from engaging in specified types of transactions.
In addition to being affected by general economic conditions and the success of our collection and recovery efforts, the stability of our Delinquency and Net loss rates are affected by the credit risk inherent in our Credit card and other loans portfolio, as well as the vintage of the accounts in our various credit card portfolios.
In addition to being affected by general economic conditions and the success of our collection and recovery efforts, the stability of our Delinquency and Net loss rates are affected by the credit risk inherent in our Credit card and other loan portfolios, as well as the vintage of the accounts in our various credit card portfolios.
We have international operations, primarily in India, and some of our third-party service providers provide services to us from other countries, all of which subject us to a number of international risks, including, among other things, sovereign volatility and socio-political instability.
We have international operations, primarily in India, and some of our third-party service providers provide services to us from other countries, all of which subject us to a number of international risks, including, among other things, sovereign volatility and sociopolitical instability.
A recession or prolonged period of economic weakness would likely, among other things, adversely affect consumer discretionary spending levels and the ability and willingness of customers to pay amounts owed to us and could have a material adverse effect on our business, key credit trends, results of operations and financial condition.
A recession or prolonged period of economic weakness would likely, among other things, adversely affect consumer discretionary spending levels 22 Tabl e of Contents and the ability and willingness of customers to pay amounts owed to us and could have a material adverse effect on our business, key credit trends, results of operations and financial condition.
Litigation and other actions and disputes could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business. Businesses in the financial services and payments industry has historically been, and continues to be, subject to significant legal actions, including class action lawsuits.
Litigation and other actions and disputes could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business. Businesses in the financial services and payments industry have historically been, and continue to be, subject to significant legal actions, including class action lawsuits.
The Financial Crimes Enforcement Network (FinCEN), a unit of the Treasury Department that administers the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the Federal Banking Agencies , as well as the U.S.
The 39 Tabl e of Contents Financial Crimes Enforcement Network (FinCEN), a unit of the Treasury Department that administers the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the Federal Banking Agencies , as well as the U.S.
Additionally, downturns in the economy or the performance of our retail or other partners, including as a result of macroeconomic conditions, geopolitical events or global health events such as COVID-19 or other pandemic or endemic diseases, may result in a decrease in the demand for our products and services.
Additionally, downturns in the economy or the performance of our retail or other partners, including as a result of macroeconomic conditions, geopolitical events or global health events or other pandemic or endemic diseases, may result in a decrease in the demand for our products and services.
Specifically, availability of capital from the non-investment grade debt markets is currently subject to significant volatility, and there can be no assurance that we will be able to access those markets at attractive rates, or at all.
Specifically, availability of capital from the non-investment grade debt markets may be subject to significant volatility, and there can be no assurance that we will be able to access those markets at attractive rates, or at all.
In addition, our contractual arrangements may not effectively prevent disclosure of our intellectual property or confidential and proprietary information, or provide an adequate remedy in the event of an unauthorized disclosure. Aspects of our platform include software covered by open source licenses.
In addition, our contractual arrangements may not effectively prevent disclosure of our intellectual property or confidential and proprietary information or provide an adequate remedy in the event of an unauthorized disclosure. Our platform utilizes software covered by open source licenses.
The first line of defense identifies and manages key risk indicators and risks and controls consistent with our risk appetite. The executive officers who serve as leaders in the “first line of defense,” are responsible for ensuring that their respective functions operate within established risk limits, in accordance with our risk appetite.
The first line of defense identifies and manages key risk indicators and risks and controls consistent with our risk appetite. The executive officers who serve as leaders in the “first line of defense,” are responsible for ensuring that their respective functions operate within established risk limits, in accordance 46 Tabl e of Contents with our risk appetite.
Any damage to our data centers or other facilities and systems, or those of our third-party service providers or brand partners, any failure of our network links that interrupts our operations or any impairment of our ability to use our software or the proprietary software of third party vendors, including impairments due to cyber-attacks, could adversely affect our ability to meet our partners’ and customers’ needs and their confidence in utilizing us for future services.
Any damage to our IT Systems, including those of our third-party service providers or brand partners, any failure of our network links that interrupts our operations or any impairment of our ability to use our software or the proprietary software of third-party vendors, including impairments due to cyber-attacks, could adversely affect our ability to meet our partners’ and customers’ needs and their confidence in utilizing us for future services.
See also “ –The amount of our Allowance for credit losses could adversely affect our business and may prove to be insufficient to cover actual losses on our loans. ” below. Our risk management policies and procedures may not be effective, and the models we rely on may not be accurate or may be misinterpreted.
See also “ –The amount of our Allowance for credit losses could adversely affect our business and may prove to be insufficient to cover actual losses on our loans. ” below. 24 Tabl e of Contents Our risk management policies and procedures may not be effective, and the models we rely on may not be accurate or may be misinterpreted.
In order to compete in our industry, we need to continue to invest in advanced digital and other technology across all areas of our business, including in access management, vulnerability management, transaction processing, data management and analytics, machine learning and artificial intelligence, customer interactions and communications, alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement, and risk management and compliance systems.
In order to compete in our industry, we need to continue to invest in advanced digital and other technology across all areas of our business, including in access management, vulnerability management, transaction processing, data management and analytics, AI technology, customer interactions and communications, alternative payment and financing mechanisms, authentication technologies and digital identification, tokenization, real-time settlement, and risk management and compliance systems.
We manage model risk through a comprehensive model governance framework, including policies and procedures for model development, maintenance and performance monitoring activities, independent model validation and change management capabilities. We also assess model performance on an ongoing basis. Model Risk oversight and monitoring is conducted by the Model Risk Management Committee.
We manage model risk through a comprehensive model governance framework, including policies and procedures for model development, maintenance and performance monitoring activities, independent model testing and validation and change management capabilities. We also assess model performance on an ongoing basis. Model Risk oversight and monitoring is conducted by the Model Risk Management Committee of each Bank.
We have been investing in promoting the use of our DTC credit cards, including our Bread Cashback TM credit card that we launched in 2022 and our recently-launched Bread Rewards TM credit card, but there can be no assurance that our investments to acquire cardholders, provide differentiated features and services and increase the use of our DTC credit cards will be effective, particularly with increasing competition from other card issuers and fintechs, as well as changing consumer and business behaviors.
We have been investing in promoting the use of our DTC credit cards, including our Bread Cashback American Express Credit Card and our Bread Rewards American Express Credit Card, but there can be no assurance that our investments to acquire cardholders, provide differentiated features and services and increase the use of our DTC credit cards will be effective, particularly with increasing competition from other card issuers and fintechs, as well as changing consumer and business behaviors.
We cannot assure that we will be able to 32 Tabl e of Contents maintain compliance with these covenants in the future. If we fail to comply with such covenants, we may not be able to obtain waivers of non-compliance from the lenders and/or amend the covenants so that we are in compliance therewith.
We cannot assure that we will be able to maintain compliance with these covenants in the future. If we fail to comply with such covenants, we may not be able to obtain waivers of non-compliance from the lenders and/or amend the covenants so that we are in compliance therewith.
In particular, our programs with (alphabetically) Signet Jewelers, Ulta Beauty and Victoria’s Secret & Co. and its retail affiliates each accounted for more than 10% of our Total net interest and non-interest income for the year ended December 31, 2023.
In particular, our programs with (alphabetically) Signet Jewelers, Ulta Beauty and Victoria’s Secret & Co. and its retail affiliates, each accounted for 10% or more of our Total net interest and non-interest income for the year ended December 31, 2024.
The Financial Accounting Standards Board’s CECL accounting standard became effective for us on January 1, 2020 and requires us to determine periodic estimates of the lifetime expected credit losses on loans, and reserve for those expected credit losses through an allowance for credit losses against the loans.
The Financial Accounting Standards Board’s CECL accounting standard became effective for us on January 1, 2020 and requires us to determine periodic estimates of the lifetime expected credit losses on loans, and reserve for those expected 25 Tabl e of Contents credit losses through an allowance for credit losses against the loans.
We also make assumptions, judgments and estimates for items such as the fair value of financial instruments, any impairment of goodwill, long-lived assets and other prepaid or intangible assets, the fair value of stock awards, as well as the recognition of revenue.
We also make assumptions, judgments and estimates for items such as the fair value of financial instruments, any 35 Tabl e of Contents impairment of goodwill, long-lived assets and other prepaid or intangible assets, the fair value of stock awards, as well as the recognition of revenue.
Moreover, the current macroeconomic environment may have a disproportionately adverse impact 21 Tabl e of Contents on us, as compared to our peers, due to our relatively higher proportion of private label credit card accounts and our deeper underwriting.
Moreover, the current macroeconomic environment may have a disproportionately adverse impact on us, as compared to our peers, due to our relatively higher proportion of private label credit card accounts and our deeper underwriting.
The occurrence of an early amortization event may significantly limit our ability to securitize additional loans and materially adversely affect our liquidity. 30 Tabl e of Contents Lower payment rates on our securitized credit card loans could materially adversely affect our liquidity and financial condition .
The occurrence of an early amortization event may significantly limit our ability to securitize additional loans and materially adversely affect our liquidity. Lower payment rates on our securitized credit card loans could materially adversely affect our liquidity and financial condition .
If either of our Banks were to fail to meet any of the capital requirements to which it is subject, we may be required to provide them with additional capital, which could also impair our ability to service our indebtedness.
If either of our Banks were to fail to meet any of 38 Tabl e of Contents the capital requirements to which it is subject, we may be required to provide them with additional capital, which could also impair our ability to service our indebtedness.
Our level of indebtedness, combined with our other financial obligations and contractual commitments, could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under our credit agreement, the indentures governing our senior notes and the agreements governing our other indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions or other new business and other corporate purposes; • increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage or require us to dispose of assets to raise funds if needed for working capital or to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we and our brand partners operate; • limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions or other new business and other corporate purposes; • delay or abandon investments and capital expenditures; • cause any refinancing of our indebtedness to be at higher interest rates and require us to comply with more onerous covenants, which could further restrict our business operations; and • prevent us from raising the funds necessary to repurchase all senior notes tendered to us upon the occurrence of certain changes of control.
Our level of indebtedness, combined with our other financial obligations and contractual commitments, could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under our credit agreement, the indenture governing our senior notes and the agreements governing our other indebtedness; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions or other new business and other corporate purposes; • increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage or require us to dispose of assets to raise funds if needed for working capital or to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we and our brand partners operate; • limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions or other new business and other corporate purposes; • delay or abandon investments and capital expenditures; • cause any refinancing of our indebtedness to be at higher interest rates and require us to comply with more onerous covenants, which could further restrict our business operations; and • prevent us from raising the funds necessary to repurchase all senior notes tendered to us upon the occurrence of certain changes of control. 33 Tabl e of Contents Restrictions imposed by the indenture governing our senior notes, our credit agreement and our other outstanding or future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities.
Moreover, we may underestimate our expected credit losses, and we cannot assure that our Allowance for credit losses will be sufficient to cover actual losses. 24 Tabl e of Contents We may not be successful in realizing the benefits associated with our acquisitions, dispositions and strategic investments, and our business and reputation could be materially adversely affected.
Moreover, we may underestimate our expected credit losses, and we cannot assure that our Allowance for credit losses will be sufficient to cover actual losses. We may not be successful in realizing the benefits associated with our acquisitions, dispositions and strategic investments, and our business and reputation could be materially adversely affected.
Risks related to our macroeconomic, global, strategic, business and competitive environment include: • Market conditions, inflation, interest rates, unemployment levels and the increased probability of a recession or prolonged economic slowdown, and the related impact on consumer spending behavior, payments, debt levels, savings rates and other behavior, could have a material adverse effect on our business. • Global political, public health and social events or conditions, including ongoing wars and military conflicts, may harm our business. • Our unsecured loans make us reliant on the future credit performance of our customers, and if customers are unable to repay our loans, our level of future delinquency and write-off rates will increase. • A significant percentage of our revenue is generated through relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners, could have an adverse effect on our business. • Our business is heavily concentrated in U.S. consumer credit, and therefore our results are more susceptible to fluctuations in the U.S. consumer credit market than a more diversified company. • The amount of our Allowance for credit losses could adversely affect our business and may be insufficient to cover actual losses on our loans. • We may be unable to successfully identify, complete or successfully integrate or disaggregate business acquisitions, divestitures and other strategic initiatives. • Competition in our industry is intense. • Our results of operations and growth depend on our ability to retain existing partners and attract new partners, and our results are impacted, to a significant extent, on the active and effective promotion and support of our products by our partners and on the financial performance of our partners. • Underwriting performance of acquired or new lending programs may not be consistent with existing experience. • We rely extensively on models in managing many aspects of our business, and if they are not accurate or are misinterpreted, such factors could have a material adverse effect on our business and results of operations.
Risks related to our macroeconomic, global, strategic, business and competitive environment include: • Market conditions, inflation, interest rates, labor market conditions, recessionary pressures or concerns over a prolonged economic slowdown, and the related impact on consumer spending behavior, payments, debt levels, savings rates and other behavior, could have a material adverse effect on our business. • Global political, public health and social events or conditions, including ongoing wars and military conflicts, may harm our business. • Our unsecured loans make us reliant on the future credit performance of our customers, and if customers are unable to repay our loans, our level of future delinquency and write-off rates will increase. • A significant percentage of our revenue is generated through relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners, could have an adverse effect on our business. • Our business is heavily concentrated in U.S. consumer credit, and therefore our results are more susceptible to fluctuations in the U.S. consumer credit market than a more diversified company. • The amount of our Allowance for credit losses could adversely affect our business and may be insufficient to cover actual losses on our loans. • We may be unable to successfully identify, complete or successfully integrate or disaggregate business acquisitions, divestitures and other strategic initiatives. • Competition in our industry is intense. • Our results of operations and growth depend on our ability to retain existing partners and attract new partners, and our results are impacted, to a significant extent, on the active and effective promotion and support of our products by our partners and on the financial performance of our partners. • Underwriting performance of acquired or new lending programs may not be consistent with existing experience. • We rely extensively on models in managing many aspects of our business, and if they are not accurate or are misinterpreted, such factors could have a material adverse effect on our business and results of operations. • Fraudulent activity associated with our products and services could negatively impact our operating results, brand and reputation, decreasing the use of our products and services and increasing our fraud losses.
LoyaltyOne, Co. is also contesting our entitlement to certain potential tax refunds under the tax matters agreement, and we may also become 43 Tabl e of Contents involved in other disputes with respect to the spinoff agreements with LVI, or incur other liabilities or obligations under contractual arrangements with LVI.
LoyaltyOne, Co. is also contesting our entitlement to certain potential tax refunds under the tax matters agreement, and we may also become involved in other disputes with respect to the spinoff agreements with LVI or incur other liabilities or obligations under contractual arrangements with LVI.
Our ERM Framework defines our “three lines of defense” risk management model, which includes the following: • The “first line of defense” is comprised of the business areas that engage in activities that generate revenue or provide operational support or services that introduce risk to us.
Our “three lines of defense” risk management model is defined within our ERM Framework and includes the following: • The “first line of defense” is comprised of the business areas that engage in activities that generate revenue or provide operational support or services that introduce risk to us.
Permissible activities for financial holding 37 Tabl e of Contents companies include those “so closely related to banking as to be a proper incident thereto” as well as certain additional activities deemed “financial in nature or incidental to such financial activity” or complementary to a financial activity and that do not pose a substantial risk to the safety and soundness of the depository institution or the financial system.
Permissible activities for FHCs include those “so closely related to banking as to be a proper incident thereto” as well as certain additional activities deemed “financial in nature or incidental to such financial activity” or complementary to a financial activity and that do not pose a substantial risk to the safety and soundness of the depository institution or the financial system.
Our ability to generate significant revenue from partners and customers will depend on our ability to differentiate ourselves through the products and services we provide and the attractiveness of our programs to consumers.
Our ability to 26 Tabl e of Contents generate significant revenue from partners and customers will depend on our ability to differentiate ourselves through the products and services we provide and the attractiveness of our programs to consumers.
This risk is particularly acute with respect to our largest partners that account for a significant amount of our Total net interest and non-interest income.
This risk is particularly acute with respect to our largest partners that account for a significant amount of our Total net 27 Tabl e of Contents interest and non-interest income.
The bankruptcy of one or more retailers or other partners could lead to a decline in the amount of new loans and could lead to increased delinquencies and defaults on the associated loans.
The bankruptcy of one 31 Tabl e of Contents or more retailers or other partners could lead to a decline in the amount of new loans and could lead to increased delinquencies and defaults on the associated loans.
The Operational Risk Management Committee, chaired by our Chief Operational Risk Officer, oversees and monitors operational risk exposures, including escalating issues and recommending policies, procedures and practices to manage operational risks.
The Operational Risk Management Committee of each Bank, chaired by our Chief Operational Risk Officer (CORO), oversees and monitors operational risk exposures, including escalating issues and recommending policies, procedures and practices to manage operational risks.
Moreover, the consumer credit and payments 25 Tabl e of Contents industry is highly competitive and we face an increasingly dynamic industry as emerging technologies enter the marketplace. For a more detailed discussion regarding the manner in which we compete with respect to each of our product categories, see “Item 1. Business—Competition” of this Form 10-K above.
Moreover, the consumer credit and payments industry is highly competitive and we face an increasingly dynamic industry as emerging technologies enter the marketplace. For a more detailed discussion regarding how we compete with respect to each of our product categories, see “Item 1. Business—Competition” of this Form 10-K above.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe program is designed based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) ; provided that t his does not imply that we meet any particular technical standards, specifications or requirements, only that we use the NIST CSF as a guide to help us identify, assess and manage cybersecurity risks relevant to our business. 47 Tabl e of Contents Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Biggest changeThe program is designed based on the NIST CSF ; provided that t his does not imply that we meet any particular technical standards, specifications or requirements, only that we use the NIST CSF as a guide to help us identify, assess and manage cybersecurity risks relevant to our business.
We face certain ongoing risks from cybersecurity threats such as loss or theft of data, ransomware or other disruptive attacks from financially motivated bad actors, and third party supply chain issues that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. For further discussion, see “Item 1A.
We face certain ongoing risks from cybersecurity threats such as loss or theft of data, ransomware or other disruptive attacks from financially motivated bad actors, and third-party supply chain issues that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, and financial condition. For further discussion, see “Item 1A.
Each of our CRO (who reports to our Chief Executive Officer) and CORO (who reports to our CRO) has over 25 years of financial services experience in operations and risk management.
Each of our CRO (who reports to our Chief Executive Officer) and CORO (who reports to our CRO) has over 20 years of financial services experience in operations and risk management.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, and, as appropriate, provides briefings from internal security personnel; threat intelligence and 48 Tabl e of Contents other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, and, as appropriate, provides briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the IT environment.
Board members receive presentations on cybersecurity topics from our CISO or external experts as part of the Board’s continuing education on topics that impact public companies. Our management team, including our CISO, Chief Risk Officer (CRO) and Chief Operational Risk Officer (CORO), is responsible for assessing and managing our material risks from cybersecurity threats.
Board members receive presentations on cybersecurity topics from our CISO or external experts as part of the Board’s continuing education on topics that impact public companies. Our management team, including our CISO, CRO and CORO, is responsible for assessing and managing our material risks from cybersecurity threats.
Our management team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our CISO works closely with our CRO and CORO, who are responsible for providing effective oversight and challenge to the activities of our CISO.
Our management team has primary responsibility for our overall cybersecurity risk 51 Tabl e of Contents management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our CISO works closely with our CRO and CORO, who are responsible for providing effective oversight and challenge to the activities of our CISO.
The Risk & Technology Committee periodically reports to the Board of Directors regarding its activities, including those related to cybersecurity. As part of its oversight of major financial risk exposures , the Audit Committee also reviews with management and the Company’s internal and independent auditors the Company’s risk assessments and risk management program, including with respect to cybersecurity.
As part of its oversight of major financial risk exposures , the Audit Committee also reviews with management and our internal and independent auditors our risk assessments and risk management program, including with respect to cybersecurity.
Risk Factors – Risk Management”. Cybersecurity Governance Our Board of Directors considers cybersecurity risk to be a critical part of its risk oversight function and has delegated to the Risk & Technology Committee primary oversight of cybersecurity and other information technology risks. The Audit Committee also reviews cybersecurity matters are part of its oversight of major financial risk exposures .
Risk Factors – Risk Management” and “Item 1A. Risk Factors – Cybersecurity, Technology and Vendor Risks”. Cybersecurity Governance Our Board of Directors considers cybersecurity risk to be a critical part of its risk oversight function and has delegated to the Risk & Technology Committee primary oversight of cybersecurity and other information technology risks.
The Risk & Technology Committee oversees management’s implementation of our cybersecurity risk management program. The Risk & Technology Committee receives regular reports from management on our cybersecurity risks. In addition, management updates the Risk & Technology Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
In addition, management updates the Risk & Technology Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. The Risk & Technology Committee periodically reports to the Board of Directors regarding its activities, including those related to cybersecurity.
Our CISO, who reports to our Executive Vice President and Chief Technology Officer, has 30 years of cybersecurity, risk and technology experience across the financial services, banking and insurance industries. She maintains both Certified Enterprise Risk Professional (CERP) and Certified Information Systems Auditor (CISA) certifications.
Our CISO, who reports to our Executive Vice President and Chief Technology Officer, has 25 years of cybersecurity and information security experience across a number of regulated industries, including financial services, healthcare and defense and national security.
Removed
She serves on CyberOhio as an advisor to the State of Ohio and is active as a Board member at Ohio University Grid Computing and Emerging Technologies program. She is an active member in several CISO forums.
Added
Our cybersecurity risk management program is integrated into our overall ERM program, and shares common methodologies, reporting channels and governance processes that apply across the ERM program to other legal, compliance, strategic, operational, and financial risk areas.
Added
The Audit Committee also reviews cybersecurity matters as part of its oversight of major financial risk exposures . The Risk & Technology Committee oversees management’s implementation of our cybersecurity risk management program, and receives regular reports from management on our cybersecurity risks.
Added
Our CISO has been a Certified Information System Security Professional (CISSP) for over 20 years and serves on the governing body of various organizations focused on technology and cybersecurity, including as an Advisory Council Member to the Harvard Business Review and a Governing Board Member of Evanta, an organization of peer-CISOs.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal facilities used to carry out our operational, sales and administrative functions are as follows (in alphabetical order, by city): Location Approximate Square Footage Lease Expiration Date Bangalore, Karnataka, India 87,400 January 31, 2029 Chadds Ford, Pennsylvania 9,900 April 30, 2027 Coeur D'Alene, Idaho 46,000 July 31, 2038 Columbus, Ohio 326,400 September 12, 2032 Columbus, Ohio 17,500 June 30, 2024 Draper, Utah 22,900 (1) August 31, 2031 New York, New York 18,500 January 31, 2026 Plano, Texas 28,000 (1) June 30, 2026 Wilmington, Delaware 5,200 June 30, 2025 ______________________________ (1) Excludes square footage of subleased portion.
Biggest changeOur principal facilities used to carry out our operational, sales and administrative functions are as follows (in alphabetical order, by city): Location Approximate Square Footage Lease Expiration Date Bangalore, Karnataka, India 87,400 January 31, 2029 Chadds Ford, Pennsylvania 9,900 April 30, 2027 Coeur D'Alene, Idaho 23,500 (1) July 31, 2038 Columbus, Ohio 326,400 September 12, 2032 Draper, Utah 22,900 (1) August 31, 2031 New York, New York 18,500 January 31, 2026 Plano, Texas 28,000 (1) June 30, 2026 Wilmington, Delaware 5,200 July 31, 2027 ______________________________ (1) Excludes square footage of subleased portion.
Item 2. Properties. As of December 31, 2023, we leased 14 general office properties, comprised of approximately 1.6 million square feet, of which approximately 0.9 million square feet are subleased or on the sublease market.
Item 2. Properties. As of December 31, 2024, we leased 12 general office properties, comprised of approximately 1.3 million square feet, of which approximately 0.8 million square feet are subleased or on the sublease market.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Refer to Part I, Item 1A, “Risk Factors—Legal, Regulatory and Compliance Risks”, “Risk Factors—Risks Related to the LoyaltyOne Spinoff” and Note 15 “Commitments and Contingencies” to our audited Consolidated Financial Statements, which are incorporated herein by reference.
Biggest changeItem 3. Legal Proceedings. Refer to Part I, Item 1A, “Risk Factors—Legal, Regulatory and Compliance Risks”, “Risk Factors—Risks Related to the LoyaltyOne Spinoff” and Note 16 “Commitments and Contingencies” to our audited Consolidated Financial Statements, which are incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table presents information with respect to purchases of our common stock made during the three months ended December 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ( Millions) October 1-31 6,788 $ 28.23 — $ — November 1-30 8,450 28.35 — — December 1-31 707 32.43 — — Total 15,945 $ 28.48 — $ — ______________________________ (1) During the periods presented, 15,945 shares of our common stock were purchased by the administrator of our Bread Financial 401(k) Plan for the benefit of the employees who participated in that portion of the Plan.
Biggest changeIssuer Purchases of Equity Securities The following table presents information with respect to purchases of our common stock made by or on behalf of us during the three months ended December 31, 2024: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ( Millions) October 1-31 1,969 $ 48.98 — $ 19 November 1-30 1,286 54.74 — 44 December 1-31 686,292 64.35 683,728 — Total 689,547 $ 64.29 683,728 $ — ______________________________ (1) During the periods presented, (i) 5,819 shares of our common stock were purchased by the administrator of our Bread Financial 401(k) Plan for the benefit of the employees who participated in that portion of the Plan and (ii) 683,728 shares of our common stock were repurchased by the Company, pursuant to a Rule 10b5-1 trading plan previously adopted by the Company, during an open trading window.
The stock price performance on the graph below is not necessarily indicative of future performance. 50 Tabl e of Contents *$100 invested on December 31, 2018 in stock or index, including reinvestment of dividends. Fiscal year end December 31. Copyright© 2024 Standard & Poor’s, a division of S&P Global. All rights reserved. Bread Financial Holdings, Inc.
The stock price performance on the graph below is not necessarily indicative of future performance. 53 Tabl e of Contents *$100 invested on December 31, 2019 in stock or index, including reinvestment of dividends. Fiscal year end December 31. Copyright© 2025 Standard & Poor’s, a division of S&P Global. All rights reserved. Bread Financial Holdings, Inc.
Stock Performance Graph The following Stock Performance Graph shows the cumulative total stockholder return on our common stock compared to an overall stock market index, the S&P Composite 500 Stock Index (S&P 500 Index), and a published industry index, the S&P Financial Composite Index (S&P Financial Index), over the five-year period commencing December 31, 2018 and ended December 31, 2023.
Stock Performance Graph The following Stock Performance Graph shows the cumulative total stockholder return on our common stock compared to an overall stock market index, the S&P Composite 500 Stock Index (S&P 500 Index), and a published industry index, the S&P Financial Composite Index (S&P Financials Index), over the five-year period commencing December 31, 2019 and ended December 31, 2024.
Subject to these qualifications, we presently expect to continue to pay dividends on a quarterly basis. On January 25, 2024, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on March 15, 2024, to stockholders of record at the close of business on February 9, 2024.
Subject to these qualifications, we presently expect to continue to pay dividends on a quarterly basis. On January 30, 2025, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on March 21, 2025, to stockholders of record at the close of business on February 14, 2025.
Holders As of February 12, 2024, the closing price of our common stock was $37.37 per share, there were 49,424,247 shares of our common stock outstanding, and there were 93 holders of record of our common stock. Dividends Payment of future dividends is subject to declaration by our Board of Directors.
Holders As of February 7, 2025, the closing price of our common stock was $62.03 per share, there were 49,092,356 shares of our common stock outstanding, and there were 92 holders of record of our common stock. Dividends Payment of future dividends is subject to declaration by our Board of Directors.
S&P 500 Index S&P Financial Index December 31, 2018 $ 100.00 $ 100.00 $ 100.00 December 31, 2019 76.57 131.49 132.13 December 31, 2020 51.82 155.68 129.89 December 31, 2021 59.01 200.37 175.40 December 31, 2022 33.96 164.08 156.92 December 31, 2023 30.48 207.21 175.99 Our future filings with the SEC may “incorporate information by reference,” including this Annual Report on Form 10-K.
S&P 500 Index S&P Financials Index December 31, 2019 $ 100.00 $ 100.00 $ 100.00 December 31, 2020 67.68 118.40 98.31 December 31, 2021 77.06 152.39 132.75 December 31, 2022 44.35 124.79 118.77 December 31, 2023 39.81 157.59 133.20 December 31, 2024 75.19 197.02 173.90 Our future filings with the SEC may “incorporate information by reference,” including this Annual Report on Form 10-K.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTable 6: Reconciliation of GAAP to Non-GAAP Financial Measures Years Ended December 31, % Change 2023 2022 2021 2023 to 2022 2022 to 2021 (Millions, except percentages) Pretax pre-provision earnings (PPNR) Income from continuing operations before income taxes $ 968 $ 300 $ 1,044 nm (71) Provision for credit losses 1,229 1,594 544 (23) nm Pretax pre-provision earnings (PPNR) $ 2,197 $ 1,894 $ 1,588 16 19 Less: Gain on portfolio sale $ (230) $ — $ (10) nm nm Pretax pre-provision earnings less gain on portfolio sale $ 1,967 $ 1,894 $ 1,578 4 20 Tangible common equity (TCE) Total stockholders’ equity $ 2,918 $ 2,265 $ 2,086 29 9 Less: Goodwill and intangible assets, net (762) (799) (687) (5) 16 Tangible common equity (TCE) $ 2,156 $ 1,466 $ 1,399 47 5 Tangible assets (TA) Total assets $ 23,141 $ 25,407 $ 21,746 (9) 17 Less: Goodwill and intangible assets, net (762) (799) (687) (5) 16 Tangible assets (TA) $ 22,379 $ 24,608 $ 21,059 (9) 17 ______________________________ (nm) Not meaningful, denoting a variance of 100 percent or more. 60 Tabl e of Contents ASSET QUALITY Given the nature of our business, the credit quality of our assets, in particular our Credit card and other loans, is a key determinant underlying our ongoing financial performance and overall financial condition.
Biggest change(2) Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. 63 Tabl e of Contents Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures Years Ended December 31, % Change 2024 2023 2022 2024 to 2023 2023 to 2022 (Millions, except per share amounts and percentages) Adjusted net income Net income $ 277 $ 718 $ 223 (61) 222 Impact from repurchased Convertible Notes 104 — — nm — Adjusted net income $ 381 $ 718 $ 223 (47) 222 Adjusted net income per diluted share Net income per diluted share $ 5.49 $ 14.34 $ 4.46 (62) 222 Impact from repurchased Convertible Notes $ 2.06 $ — $ — nm — Adjusted net income per diluted share $ 7.55 $ 14.34 $ 4.46 (47) 222 Adjusted income from continuing operations per diluted share Income from continuing operations per diluted share $ 5.54 $ 14.74 $ 4.47 (62) 230 Impact from repurchased Convertible Notes $ 2.06 $ — $ — nm — Adjusted income from continuing operations per diluted share $ 7.60 $ 14.74 $ 4.47 (48) 230 Adjusted total non-interest expenses Total non-interest expenses $ 2,060 $ 2,092 $ 1,932 (2) 8 Impact from repurchased Convertible Notes 107 — — nm — Adjusted total non-interest expenses 1,953 2,092 1,932 (7) 8 Pretax pre-provision earnings (PPNR) Income from continuing operations before income taxes 381 968 300 (61) 223 Provision for credit losses 1,397 1,229 1,594 14 (23) Pretax pre-provision earnings (PPNR) 1,778 2,197 1,894 (19) 16 Less: Gain on portfolio sale (11) (230) — (95) nm Add: Impact from repurchased Convertible Notes 107 — — nm — PPNR excluding gain on portfolio sale and impact from repurchased Convertible Notes 1,874 1,967 1,894 (5) 4 Average tangible common equity Average total stockholders’ equity 3,214 2,722 2,286 18 19 Less: Average goodwill and intangible assets, net (753) (780) (716) (4) 9 Average tangible common equity 2,461 1,942 1,570 27 24 Tangible common equity (TCE) Total stockholders’ equity 3,051 2,918 2,265 5 29 Less: Goodwill and intangible assets, net (746) (762) (799) (2) (5) Tangible common equity (TCE) $ 2,305 $ 2,156 $ 1,466 7 47 64 Tabl e of Contents Years Ended December 31, % Change 2024 2023 2022 2024 to 2023 2023 to 2022 Tangible assets (TA) Total assets $ 22,891 $ 23,141 $ 25,407 (1) (9) Less: Goodwill and intangible assets, net (746) (762) (799) (2) (5) Tangible assets (TA) $ 22,145 $ 22,379 $ 24,608 (1) (9) ______________________________ (nm) Not meaningful, denoting a variance of 1,000 percent or more.
In connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call transactions (the Capped Call) with certain financial institution counterparties.
In connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call (Capped Call) transactions with certain financial institution counterparties.
The preparation of audited Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments in determination of our financial position and operating results.
The preparation of the audited Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates and judgments in determination of our financial position and operating results.
We consider the macroeconomic forecast used to be reasonable and supportable over the estimated life of the Credit card and other loans portfolio, with no reversion period. Since the implementation of the CECL guidance, we have maintained a consistent approach to the modeling of life of loan losses in establishing our Allowance for credit losses.
We consider the macroeconomic forecast used to be reasonable and supportable over the estimated life of the Credit card and other loans portfolio, with no reversion period. Since our implementation of the CECL guidance, we have maintained a consistent approach to modeling the life of loan losses in establishing our Allowance for credit losses.
If we used different assumptions in estimating current expected credit losses, the impact on the Allowance for credit losses could have a material effect on our consolidated financial position and results of operations.
If we used different assumptions in estimating our current expected credit losses, the impact on the Allowance for credit losses could have a material effect on our consolidated financial position and results of operations.
Qualitative factors considered in evaluating goodwill impairment include macroeconomic conditions, industry and market considerations, our overall financial performance, other relevant entity-specific factors and/or a sustained decrease in our share price.
Qualitative factors considered in evaluating goodwill impairment include macroeconomic conditions, industry and market considerations, our overall financial performance and other relevant entity-specific factors, and/or a sustained decrease in our share price.
Contractual Obligations In the normal course of business, we enter into various contractual obligations that may require future cash payments, the vast majority of which relate to deposits, debt issued by consolidated VIEs, long-term and other debt and operating leases. We believe that we will have access to sufficient resources to meet these commitments.
Contractual Obligations In the normal course of business, we enter into various contractual obligations that may require future cash payments, the vast majority of which relate to deposits, debt issued by consolidated VIEs, long-term and other debt and operating contracts and leases. We believe that we will have access to sufficient resources to meet these commitments.
Our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of unsecured or convertible debt securities by our Parent Company, financings through our securitization programs, and deposits with the Banks. More broadly, we continuously evaluate opportunities to renew and expand our various sources of liquidity.
Our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured or convertible debt securities by our Parent Company, financings through our securitization programs, and deposits with the Banks. More broadly, we continuously evaluate opportunities to renew and expand our various sources of liquidity.
If after assessing qualitative factors we conclude that it is not more likely than not that the fair value of our reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is not necessary.
If, after assessing these qualitative factors we conclude that it is not more likely than not that the fair value of our reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is not necessary.
We may from time to time retire or purchase our outstanding debt or convertible debt securities through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.
We may from time to time retire or purchase our outstanding debt or convertible debt securities through redemptions, cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.
Based on these regulations, as of December 31, 2023 and 2022, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The Banks seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer.
Based on these regulations, as of December 31, 2024 and 2023, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The Banks seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer.
In addition to the quantitative estimate of expected credit losses, we also incorporate qualitative adjustments to the modeled output in order to address risks not inherently captured by the model output, such as Company-specific risks, changes in current macroeconomic conditions, or other relevant factors to ensure the Allowance for credit losses reflects our best estimate of current expected credit losses.
In addition to the quantitative estimate of expected credit losses, we also incorporate qualitative adjustments to the modeled output in order to address risks not inherently captured by that modeled output, such as Company-specific risks, changes in current macroeconomic conditions, or other relevant factors to ensure the Allowance for credit losses reflects our best estimate of current expected credit losses.
Discontinued Operations The (Loss) income from discontinued operations, net of income taxes includes amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019, and primarily relate to the after-tax impact of contractual indemnification and tax-related matters.
Discontinued Operations The Loss from discontinued operations, net of income taxes includes amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019, and primarily relate to contractual indemnification and tax-related matters.
Accordingly, changes in the magnitude of our portfolio (whether due to credit tightening, acquisitions or dispositions of portfolios or otherwise) may cause movements in our Delinquency and Net principal loss rates that are not necessarily indicative of the underlying credit quality of the overall portfolio.
Accordingly, changes in the size of our portfolio (whether due to credit tightening, acquisitions or dispositions of portfolios or otherwise) may cause movements in our Delinquency and Net principal loss rates that are not necessarily indicative of the underlying credit quality of the overall portfolio.
Our partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which we first began, specialty apparel.
Our partner base is well diversified across a broad range of industries and retail verticals, including travel and entertainment, health and beauty, jewelry, sporting goods, technology and electronics, home goods and the industry in which we first began, specialty apparel.
The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit cards and other loans as of the same period-end.
The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., principal balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit card and other loans as of the same period-end.
BUSINESS ENVIRONMENT This Business Environment section provides an overview of our results of operations and financial position for the year ended December 31, 2023, as well as our related outlook for 2024 and certain of the uncertainties associated with achieving that outlook.
BUSINESS ENVIRONMENT This Business Environment section provides an overview of our results of operations and financial position for the year ended December 31, 2024, as well as our related outlook for 2025 and certain of the uncertainties associated with achieving that outlook.
(4) Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin . (5) Loan yield represents annualized Interest and fees on loans divided by Average credit card and other loans. (6) Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.
(5) Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin . (6) Loan yield represents annualized Interest and fees on loans divided by Average credit card and other loans. (7) Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.
In estimating our Allowance for credit losses, for each identified segment of loans sharing similar risk characteristics, management uses modeling and estimation techniques that leverage historical data and behavioral relationships, together with third-party projections of certain macroeconomic variables, to estimate expected losses based on historical correlation of realized losses to macroeconomic conditions for each of the segments in our portfolio.
In estimating our Allowance for credit losses, for each identified segment of loans sharing similar risk characteristics, management uses modeling and estimation techniques that leverage historical data and behavioral relationships, together with third-party projections of certain macroeconomic variables, to estimate expected credit losses based on historical correlation of realized losses to macroeconomic conditions.
The key assumptions used to determine the fair value are primarily unobservable inputs (i.e., Level 3 inputs) including internally developed forecasts to estimate future cash flows, growth rates and discount rates, as well as market valuation multiples (for the market approach). Estimated cash flows are based on internal forecasts grounded in historical performance and future expectations.
The key assumptions used to determine the fair value are primarily unobservable inputs (i.e., Level 3 inputs as defined under GAAP) including internally developed forecasts to estimate future cash flows, growth rates and discount rates, as well as market valuation multiples (for the market approach). Estimated cash flows are based on internal forecasts grounded in historical performance and future expectations.
Our funding, liquidity and capital policies are designed to ensure that our business has sufficient liquidity and capital resources necessary to support our daily operations, our business growth, and our credit ratings related to our Parent Company’s unsecured senior notes and our public secured financings, and meet our regulatory and policy requirements, including capital and leverage ratio requirements applicable to Comenity Bank (CB) and Comenity Capital Bank (CCB) under Federal Deposit Insurance Corporation (FDIC) regulations, in a cost effective and prudent manner through both expected and unexpected market environments.
Our funding, liquidity and capital policies are designed to ensure that our business has sufficient liquidity and capital resources necessary to support our daily operations, our business growth, and our credit ratings related to our Parent Company’s senior unsecured notes and our public secured financings, and meet our regulatory and policy requirements, including capital and leverage ratio requirements applicable to Comenity Bank (CB) and Comenity Capital Bank (CCB) under FDIC regulations, in a cost effective and prudent manner through both expected and unexpected market environments.
Although Bread Financial is not a bank holding company as defined, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies.
Although Bread Financial is not a bank holding company as defined under the Bank Holding Company Act, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies.
As of December 31, 2023, we had $265 million in unrecognized tax benefits, including interest and penalties, recorded in Other liabilities on the Consolidated Balance Sheet. Goodwill Impairment Goodwill is recognized for business acquisitions when the purchase price is higher than the fair value of acquired net assets.
As of December 31, 2024, we had $229 million in unrecognized tax benefits, including interest and penalties, recorded in Other liabilities on the Consolidated Balance Sheet. Goodwill Impairment Goodwill is recognized for business acquisitions when the purchase price is higher than the fair value of acquired net assets.
We aim to satisfy our financing needs with a diverse set of funding sources, and we seek to maintain diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, which we believe will mitigate the impact of disruptions in any one type of instrument, tenor or investor.
We aim to satisfy our financing needs with a diverse set of funding sources, and we seek to maintain 66 Tabl e of Contents diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, which we believe will mitigate the impact of disruptions in any one type of instrument, tenor or investor.
TCE/TA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . (11) Tangible book value per common share represents TCE divided by shares outstanding and is a non-GAAP financial measure.
(13) Tangible book value per common share represents TCE divided by shares outstanding and is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures .
The table below provides a summary of the structured finance credit ratings for certain of the asset-backed securities of WFNMT as of December 31, 2023: WFNMT DBRS S&P Fitch Class A notes AAA AAA AAA Credit ratings are not a recommendation to buy or hold any securities and they may be revised or revoked at any time at the sole discretion of the rating agency.
The table below provides a summary of the structured finance credit ratings for certain of the asset-backed securities, specifically the Class A notes of WFNMNT as of December 31, 2024: WFNMNT DBRS S&P Fitch Class A notes AAA AAA AAA Credit ratings are not a recommendation to buy or hold any securities and they may be revised or revoked at any time at the sole discretion of the rating agency.
However, if an early amortization event were declared for a Trust, the trustee of the particular Trust would retain the interest in the loans along with the excess spread that would otherwise be paid to our Bank subsidiary until the investors 67 Tabl e of Contents were fully repaid.
However, if an early amortization event were declared for a Trust, the trustee of the particular Trust would retain the interest in the loans along with the excess spread that would otherwise be paid to our Bank subsidiary until the investors were fully repaid.
The measurement of estimated uninsured deposits aligns with regulatory guidelines. Overall, during 2023, we continued to improve our funding mix through actions taken to grow our DTC deposits and reduce our Parent Company unsecured borrowings, while maintaining the flexibility of secured, unsecured, and wholesale funding.
The measurement of estimated uninsured deposits aligns with regulatory guidelines. Overall, we continue to improve our funding mix through actions taken to grow our DTC deposits and reduce our Parent Company unsecured borrowings, while maintaining the flexibility of secured, unsecured, and wholesale funding.
For example, a 100 basis point increase in the Allowance for credit losses as a percentage of the amortized cost of our Credit card and other loans could have resulted in a change of approximately $189 million in the Allowance for credit losses as of December 31, 2023, with a corresponding change in the Provision for credit losses.
For example, a 100 basis point increase in the Allowance for credit losses as a percentage of the amortized cost of our Credit card and other loans could have resulted in a change of approximately $185 million in the Allowance for credit losses as of December 31, 2024, with a corresponding change in the Provision for credit losses.
We used the proceeds of the January 2024 offering of Senior Notes due 2029, together with $100 million of cash on hand, to fund the redemption of $400 million in aggregate principal amount of our outstanding 7.000% Senior Notes due 2026.
We used the proceeds of the January 2024 offering of Senior Notes due 2029, together with 69 Tabl e of Contents $100 million of cash on hand, to fund the redemption of $400 million in aggregate principal amount of our outstanding 7.000% Senior Notes due 2026.
However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for Credit card loans and 120 days past due for BNPL loans.
However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for credit card loans and 120 days past due for installment loans and “split-pay” offerings.
As of December 31, 2023 the actual capital ratios and minimum ratios for each Bank, as well as Bread Financial, are as follows as of December 31, 2023: Table 12: Capital Ratios Actual Ratio Minimum Ratio for Capital Adequacy Purposes Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions Total Company Common equity tier 1 capital ratio (1) 12.2 % 4.5 % 6.5 % Tier 1 capital ratio (2) 12.2 6.0 8.0 Total risk-based capital ratio (3) 13.6 8.0 10.0 Tier 1 leverage capital ratio (4) 11.2 4.0 5.0 Total risk-weighted assets (5) $ 20,140 Comenity Bank Common equity tier 1 capital ratio (1) 19.7 % 4.5 % 6.5 % Tier 1 capital ratio (2) 19.7 6.0 8.0 Total risk-based capital ratio (3) 21.1 8.0 10.0 Tier 1 leverage capital ratio (4) 17.9 4.0 5.0 Comenity Capital Bank Common equity tier 1 capital ratio (1) 16.6 % 4.5 % 6.5 % Tier 1 capital ratio (2) 16.6 6.0 8.0 Total risk-based capital ratio (3) 18.0 8.0 10.0 Tier 1 leverage capital ratio (4) 15.2 4.0 5.0 ______________________________ (1) The Common equity tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets.
As of December 31, 2024 the actual capital ratios and minimum ratios for each Bank, as well as Bread Financial, are as follows: Table 12: Capital Ratios Actual Ratio Minimum Ratio for Capital Adequacy Purposes Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions Total Company Common equity tier 1 capital ratio (1) 12.4 % 4.5 % 6.5 % Tier 1 capital ratio (2) 12.4 6.0 8.0 Total risk-based capital ratio (3) 13.8 8.0 10.0 Tier 1 leverage capital ratio (4) 11.5 4.0 5.0 Total risk-weighted assets (5) $ 19,928 Comenity Bank Common equity tier 1 capital ratio (1) 16.5 % 4.5 % 6.5 % Tier 1 capital ratio (2) 16.5 6.0 8.0 Total risk-based capital ratio (3) 17.9 8.0 10.0 Tier 1 leverage capital ratio (4) 15.3 4.0 5.0 Comenity Capital Bank Common equity tier 1 capital ratio (1) 15.4 % 4.5 % 6.5 % Tier 1 capital ratio (2) 15.4 6.0 8.0 Total risk-based capital ratio (3) 16.7 8.0 10.0 Tier 1 leverage capital ratio (4) 14.3 4.0 5.0 ______________________________ (1) Common equity tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets.
With respect to seasonality, our revenues, earnings and cash flows are affected by increased consumer spending patterns leading up to and including the holiday shopping period in the fourth quarter and, to a lesser extent, during the first quarter as Credit card and other loans are paid down.
With respect to seasonality, our revenues, earnings and cash flows are affected by increased consumer spending patterns leading up to and including the holiday shopping season in the fourth quarter of each year and, to a lesser extent, during the first quarter of each year as Credit card and other loans are paid down.
The Banks also issue certificates of deposit with scheduled maturity dates ranging between January 2024 and December 2028, in denominations of at least $1,000, on which interest is paid either monthly or at maturity.
The Banks also issue certificates of deposit with scheduled maturity dates ranging between January 2025 and December 2029, in denominations of at least $1,000, on which interest is paid either monthly or at maturity.
A tax position is recognized only when it is more likely than not to be sustained, based purely on its technical 71 Tabl e of Contents merits after examination by the relevant taxing authority, and the amount recognized is the benefit we believe is more likely than not to be realized upon ultimate settlement.
A tax position is recognized only when it is more likely than not to be sustained, based purely on its technical merits after examination by the relevant taxing authority, and the amount recognized is the benefit we believe is more likely than not to be realized upon ultimate settlement.
The Senior Notes due 2029 that were issued in both December 2023 and January 2024 constitute a single series of notes and 65 Tabl e of Contents have the same terms, other than the issue date and issue price.
The Senior Notes due 2029 that were issued in both December 2023 and January 2024 constitute a single series of notes and have the same terms, other than the issue date and issue price.
INFLATION AND SEASONALITY Although we cannot precisely determine the impact of inflation on our operations, we have generally sought to rely on operating efficiencies from scale, technology modernization and digital advancement, and expansion in lower cost jurisdictions (in select circumstances) to offset increased costs of employee compensation and other operating expenses impacted by inflation.
INFLATION AND SEASONALITY Although we cannot precisely determine the impact of inflation on our operations, we have generally sought to rely on operating efficiencies from scale, technology modernization and digital advancement along with other operational excellence initiatives, as well as expansion in lower cost jurisdictions (in select circumstances) to offset increased costs of employee compensation and other operating expenses impacted by inflation.
As of December 31, 2023, we were in compliance with all such covenants.
As of December 31, 2024, we were in compliance with all such covenants.
Cash Flows The table below summarizes our cash flow activity for the periods indicated, followed by a discussion of the variance drivers impacting our Operating, Investing and Financing activities: Table 11: Cash Flows 2023 2022 2021 (Millions) Total cash provided by (used in): Operating activities $ 1,987 $ 1,848 $ 1,543 Investing activities 788 (5,111) (1,691) Financing activities (3,086) 3,267 608 Net (decrease) increase in cash, cash equivalents and restricted cash $ (311) $ 4 $ 460 68 Tabl e of Contents Cash Flows from Operating Activities primarily include net income adjusted for (i) non-cash items included in net income, such as provision for credit losses, depreciation and amortization, deferred taxes and other non-cash items, and (ii) changes in the balances of operating assets and liabilities, which can fluctuate in the normal course of business due to the amount and timing of payments.
Cash Flows The table below summarizes our cash flow activity for the periods indicated, followed by a discussion of the variance drivers impacting our Operating, Investing and Financing activities: Table 11: Cash Flows 2024 2023 2022 (Millions) Total cash provided by (used in): Operating activities $ 1,859 $ 1,987 $ 1,848 Investing activities (1,169) 788 (5,111) Financing activities (592) (3,086) 3,267 Net increase (decrease) in cash, cash equivalents and restricted cash $ 98 $ (311) $ 4 Cash Flows from Operating Activities primarily include net income adjusted for (i) non-cash items included in net income, such as provision for credit losses, depreciation and amortization, deferred taxes and other non-cash items, and (ii) changes in the balances of operating assets and liabilities, which can fluctuate in the normal course of business due to the amount and timing of payments.
Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).
Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).
We believe our 63 Tabl e of Contents mix of funding, including the proportion of our DTC (retail) and wholesale deposits, to total funding, reduces the impact that a credit rating downgrade could have on our funding costs and capacity.
We believe our mix of funding, including the proportion of our DTC and wholesale deposits, to total funding, reduces the impact that a credit rating downgrade could have on our funding costs and capacity.
The Convertible Notes bear interest at an annual rate of 4.25%, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023. The Convertible Notes mature on June 15, 64 Tabl e of Contents 2028, unless earlier repurchased, redeemed or converted.
The Convertible Notes bear interest at an annual rate of 4.25%, payable semi-annually in arrears on June 15 and December 15 of each year. The Convertible Notes mature on June 15, 2028, unless earlier repurchased, redeemed or converted.
“Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023, which discussion is incorporated herein by reference.
“Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024, which discussion is incorporated herein by reference from such prior report on Form 10-K.
We also recognize that a customer’s ability and willingness to repay us has been negatively impacted by factors such as inflation and the effects of higher interest rates, which results in higher delinquencies that could lead to increased credit losses, as reflected in our increased Reserve rate.
We also recognize that a customer’s ability and willingness to repay us has been negatively impacted by factors such as recent inflation and higher interest rates, and the persistent effects therefrom, which results in higher delinquencies and increased credit losses, as reflected in our elevated Reserve rate.
We maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system, and we also have a small investment securities portfolio, classified as available-for-sale, which we hold in relation to the Community Reinvestment Act. We do not have any investment securities classified as held-to-maturity. Our DTC deposit balances grew sequentially each quarter during 2023.
We maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system, and we also have a small investment securities portfolio, classified as available-for-sale, which we hold in relation to the Community Reinvestment Act. We do not have any investment securities classified as held-to-maturity.
We generated cash flows from operating activities of $1,987 million and $1,848 million for the years ended December 31, 2023 and 2022, respectively.
We generated cash flows from operating activities of $1,859 million and $1,987 million for the years ended December 31, 2024 and 2023, respectively.
For the year ended December 31, 2023, the net cash used in financing activities was primarily driven by net repayments of both debt issued by consolidated variable interest entities (securitizations) and unsecured borrowings, as well as a net decrease in deposits.
For the year ended December 31, 2023, the net cash used in financing activities was primarily driven by net repayments of both securitizations and unsecured borrowings, as well as a net decrease in deposits.
In evaluating our deferred tax assets on a quarterly basis as new facts and circumstances emerge, we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies. Uncertainties can lead to changes in the ultimate realization of our deferred tax assets.
In evaluating our deferred tax assets on a quarterly basis, as new facts and circumstances emerge we analyze and estimate the impact of future taxable income, reversing temporary differences and available tax planning strategies.
The amounts involved may be material. 62 Tabl e of Contents We will also need additional financing in the future to repay or refinance our existing debt at or prior to maturity, and to fund our growth, which may include issuance of additional debt, equity or convertible securities or engaging in other capital markets or financing transactions.
We will also need additional financing in the future to repay or refinance our existing debt at or prior to maturity, and to fund our growth, which may include issuance of additional debt, equity or convertible securities or engaging in other capital markets or financing transactions.
On January 25, 2024, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on March 15, 2024, to stockholders of record at the close of business on February 9, 2024.
On January 30, 2025, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on March 21, 2025, to stockholders of record at the close of business on February 14, 2025.
The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships.
The breadth and quality of our product and service offerings, coupled with our customer-centric approach, have enabled us to establish and maintain long-standing partner relationships.
PPNR is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . (2) Return on average assets represents annualized Income from continuing operations divided by average Total assets. (3) Return on average equity represents annualized Income from continuing operations divided by average Total stockholders’ equity.
See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . 61 Tabl e of Contents (2) Return on average assets represents annualized Income from continuing operations divided by average Total assets. (3) Return on average equity represents annualized Income from continuing operations divided by average Total stockholders’ equity.
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS See “Recently Adopted and Recently Issued Accounting Standards” under Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the audited Consolidated Financial Statements.
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS See “Recently Adopted and Recently Issued Accounting Standards” in Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies” to the audited Consolidated Financial Statements. 78 Tabl e of Contents
For the year ended December 31, 2023, the net cash provided by investing activities was primarily due to the sale of the BJ’s portfolio, partially offset by the growth of Credit card and other loans, as well as the acquisition of a credit card loan portfolio.
For the year ended December 31, 2023, the net cash provided by investing activities was primarily due to the sale of the BJ’s portfolio, partially offset by the growth of Credit card and other loans, as well as the acquisition of a credit card loan portfolio. Cash Flows from Financing Activities primarily include changes in deposits and long-term debt.
The offering consisted of $350 million of Class A notes with a fixed interest rate of 5.02% per year, $31 million of Class M notes with a fixed interest rate of 5.27% per year, and $18 million of zero coupon Class B notes. The Class M and B notes were retained by us and eliminated from the Consolidated Balance Sheet.
The offering consisted of $500 million of Class A notes with a fixed interest rate of 5.47% per year, $44 million of zero coupon Class M notes, and $26 million of zero coupon Class B notes. The Class M and B notes were retained by us and eliminated from the Consolidated Balance Sheet.
The following table summarizes our retail and wholesale deposit products as of December 31, 2023 and December 31, 2022, by type and associated attributes: Table 9: Deposits December 31, 2023 December 31, 2022 (Millions, except percentages) Deposits Direct-to-consumer (retail) $ 6,454 $ 5,466 Wholesale 7,140 8,321 Total deposits $ 13,594 $ 13,787 Non-maturity deposit products Non-maturity deposits $ 6,597 $ 6,736 Interest rate range 0.70% - 5.64% 0.70% - 4.70% Weighted-average interest rate 4.78 % 3.57 % Certificates of deposit Certificates of deposit $ 6,997 $ 7,051 Interest rate range 0.50% - 5.7% 0.40% - 4.95% Weighted-average interest rate 4.50 % 3.11 % As of December 31, 2023 and December 31, 2022, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $509 million (4% of Total deposits) and $719 million (5% of Total deposits), respectively.
The following table summarizes our retail and wholesale deposit products by type and associated attributes as of December 31: Table 9: Deposits 2024 2023 (Millions, except percentages) Deposits Direct-to-consumer (retail) $ 7,687 $ 6,454 Wholesale 5,368 7,140 Total deposits $ 13,055 $ 13,594 Non-maturity deposit products Non-maturity deposits $ 6,827 $ 6,597 Interest rate range 0.70% - 4.75% 0.70% - 5.64% Weighted-average interest rate 4.16 % 4.78 % Certificates of deposit Certificates of deposit $ 6,228 $ 6,997 Interest rate range 0.80% - 5.7% 0.50% - 5.70% Weighted-average interest rate 4.64 % 4.50 % As of December 31, 2024 and 2023, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $574 million (4% of Total deposits) and $509 million (4% of Total deposits), respectively.
These rates also reflect, more broadly, the general macroeconomic conditions, including the effects of persistent inflation and high interest rates. Our Delinquency and Net principal loss rates are also impacted by the magnitude of our Credit card and other loans portfolio, which serves as the denominator in the calculation of these rates.
These rates also reflect, more broadly, the general macroeconomic conditions, including the compounding effect of persistent inflation relative to wage growth, and higher interest rates. Our Delinquency and Net principal loss rates are also impacted by the size of our Credit card and other loans portfolio, which serves as the denominator in the calculation of these rates.
As a result, we opportunistically reduced our wholesale and brokered deposits and paid down a large portion of our secured conduit line balances, discussed further below. 66 Tabl e of Contents Conduit Facilities and Securitization Programs We sell the majority of the credit card loans originated by the Banks to certain of our master trusts (the Trusts).
As a result, we opportunistically reduced our wholesale and brokered deposits, repurchased a portion of our outstanding Convertible Notes and paid down a portion of our secured conduit line balances, shown further below. Securitization Programs Including Conduit Facilities We sell the majority of the credit card loans originated by the Banks to certain of our master trusts (the Trusts).
Credit Agreement In June 2023, we entered into a new credit agreement (the 2023 Credit Agreement) with Parent Company, as borrower, certain of our domestic subsidiaries, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent and lender, and various other financial institutions, as lenders, which provides for a $700 million senior unsecured revolving credit facility (the Revolving Credit Facility) and a $575 million senior unsecured delayed draw term loan facility (the Term Loan Facility), all on terms and subject to the conditions set forth in the 2023 Credit Agreement.
Credit Agreement In June 2023, we entered into our credit agreement with Parent Company, as borrower, certain of our domestic subsidiaries, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent and lender, and various other financial institutions, as lenders, which provides for a $700 million senior unsecured revolving credit facility (the Revolving Credit Facility).
In accordance with the interim final rule, we began to ratably phase-in these effects on January 1, 2022. 70 Tabl e of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our results of operations and overall financial condition is based upon our audited Consolidated Financial Statements, which have been prepared in accordance with the accounting policies described in Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies,” to our audited Consolidated Financial Statements included as part of this Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our results of operations and overall financial condition is based upon our audited Consolidated Financial Statements, which have been prepared in accordance with the accounting policies described in Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies,” to our audited Consolidated Financial Statements included as part of this Annual Report on Form 10-K.
Moody’s S&P Fitch Senior unsecured debt Ba3 BB- BB- Outlook Stable Stable Stable We also seek to maintain appropriate and stable credit ratings for our credit card securitizations issued through World Financial Network Credit Master Card Trust (WFNMT) from the rating agencies (DBRS, S&P and Fitch).
We also seek to maintain appropriate and stable credit ratings for our credit card securitizations issued through World Financial Network Credit Card Master Note Trust (WFNMNT) from the rating agencies (DBRS, S&P and Fitch).
Tangible common equity over Tangible assets (TCE/TA) represents Total stockholders’ equity reduced by Goodwill and intangible assets, net, (TCE) divided by Tangible assets (TA), which is Total assets reduced by Goodwill and intangible assets, net. We use TCE/TA as a metric to evaluate the Company’s capital adequacy and estimate its ability to cover potential losses.
Tangible common equity (TCE) represents Total stockholders' equity reduced by Goodwill and intangible assets, net. We use ROTCE as a metric to evaluate the Company's performance. • Tangible common equity over Tangible assets (TCE/TA) represents TCE divided by Tangible assets (TA), which is Total assets reduced by Goodwill and intangible assets, net.
For additional information about legislative and regulatory matters impacting us, see “Business–Supervision and Regulation” under Part I of this Annual Report on Form 10-K. 69 Tabl e of Contents Quantitative measures, established by regulations to ensure capital adequacy, require the Banks to maintain minimum amounts and ratios of Tier 1 capital to average assets, and Common equity tier 1, Tier 1 capital and Total capital, all to risk weighted assets.
For additional information about legislative and regulatory matters impacting us, see “Business–Supervision and Regulation” under Part I of this Annual Report on Form 10-K, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Business Environment” and “Risk Factors — Legal, Regulatory and Compliance Risks”. 73 Tabl e of Contents Quantitative measures, established by regulations to ensure capital adequacy, require the Banks to maintain minimum amounts and ratios of Tier 1 capital to average assets, and Common equity tier 1, Tier 1 capital and Total capital, all to risk weighted assets.
As of December 31, 2023, we had approximately $12.8 billion of securitized credit card loans. Securitizations require credit enhancements in the form of cash, spread deposits, additional loans and subordinated classes. The credit enhancement is principally based on the outstanding balances of the series issued by the Trusts and by the performance of the credit card loans in the Trusts.
Securitizations require credit enhancements in the form of cash, spread deposits, additional loans and subordinated classes. The credit enhancement is principally based on the outstanding balances of the series issued by the Trusts and by the performance of the credit card loans in the Trusts.
Such repurchases or exchanges would depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and may be funded through the issuance of debt or convertible debt securities.
Such repurchases or exchanges would depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and may be funded through cash on hand, borrowings under our revolving credit facility, the issuance of debt or convertible debt securities or other sources of liquidity. The amounts involved may be material.
Subsequent to December 31, 2023, in January 2024 we issued and sold an additional $300 million aggregate principal amount of Senior Notes due 2029. The Senior Notes due 2029 issued in January 2024 were issued as additional notes under the same indenture pursuant to which the initial $600 million of Senior Notes due 2029 were issued in December 2023.
The Senior Notes due 2029 issued in January 2024 were issued as additional notes under the same indenture pursuant to which the initial $600 million of Senior Notes due 2029 were issued in December 2023.
If the efforts to control inflation in the U.S. and globally are not successful and inflationary pressures continue to persist, they could magnify the slowdown in the domestic and global economies and increase the risk of a recession, which may adversely impact our business, results of operations and financial condition.
If the efforts to control inflation in the U.S. and globally are not successful and inflationary pressures continue to persist, they could further increase repayment pressure on consumers as well as the risk of a recessionary environment, which may adversely impact our business, results of operations and financial condition.
A liability for unrecognized tax benefits, representing the difference between a tax position taken or expected to be taken in a tax return and the benefit recognized in the audited Consolidated Financial Statements, inherently requires estimates and judgments.
Uncertainties can lead to changes in the ultimate realization of our deferred tax assets. 77 Tabl e of Contents A liability for unrecognized tax benefits, representing the difference between a tax position taken or expected to be taken in a tax return and the benefit recognized in the audited Consolidated Financial Statements, inherently requires estimates and judgments.
Our management approach is designed, among other things, to maintain appropriate and stable Parent Company unsecured debt ratings from the credit rating agencies which help support our access to cost-effective unsecured funding as a component of our overall liquidity and capital resources.
Our management approach is designed, among other things, to maintain appropriate and stable Parent Company senior unsecured debt ratings from the credit rating agencies which help support our access to cost-effective unsecured funding as a component of our overall liquidity and capital resources. 67 Tabl e of Contents The table below provides a summary of the credit ratings for the senior unsecured long-term debt of Bread Financial Holdings, Inc. as of December 31, 2024: Bread Financial Holdings, Inc.
Table 1: Summary of Our Financial Performance Years Ended December 31, $ Change % Change 2023 2022 2021 2023 to 2022 2022 to 2021 2023 to 2022 2022 to 2021 (Millions, except per share amounts and percentages) Total net interest and non-interest income $ 4,289 $ 3,826 $ 3,272 $ 463 $ 554 12 17 Provision for credit losses 1,229 1,594 544 (365) 1,050 (23) nm Total non-interest expenses 2,092 1,932 1,684 160 248 8 15 Income from continuing operations before income taxes 968 300 1,044 668 (744) nm (71) Provision for income taxes 231 76 247 155 (171) nm (69) Income from continuing operations 737 224 797 513 (573) nm (72) (Loss) income from discontinued operations, net of income taxes (1) (19) (1) 4 (18) (5) nm nm Net income 718 223 801 495 (578) nm (72) Net income per diluted share $ 14.34 $ 4.46 $ 16.02 $ 9.88 $ (11.56) nm (72) Income from continuing operations per diluted share $ 14.74 $ 4.47 $ 15.95 $ 10.27 $ (11.48) nm (72) Net interest margin (2) 19.5 % 19.2 % 18.2 % 0.3 1.0 Return on average equity (3) 27.1 % 9.8 % 40.7 % 17.3 (30.9) Effective income tax rate - continuing operations 23.8 % 25.4 % 23.7 % (1.6) 1.7 ______________________________ (1) Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019.
Table 1: Summary of Our Financial Performance Years Ended December 31, $ Change % Change 2024 2023 2022 2024 to 2023 2023 to 2022 2024 to 2023 2023 to 2022 (Millions, except per share amounts and percentages) Total net interest and non-interest income $ 3,838 $ 4,289 $ 3,826 $ (451) $ 463 (11) 12 Provision for credit losses 1,397 1,229 1,594 168 (365) 14 (23) Total non-interest expenses 2,060 2,092 1,932 (32) 160 (2) 8 Income from continuing operations before income taxes 381 968 300 (587) 668 (61) 223 Provision for income taxes 102 231 76 (129) 155 (56) 203 Income from continuing operations 279 737 224 (458) 513 (62) 230 Loss from discontinued operations, net of income taxes (1) (2) (19) (1) 17 (18) (87) nm Net income 277 718 223 (441) 495 (61) 222 Adjusted net income (2) $ 381 $ 718 $ 223 $ (337) $ 495 (47) 222 Net income per diluted share $ 5.49 $ 14.34 $ 4.46 $ (8.85) $ 9.88 (62) 222 Adjusted net income per diluted share (2) $ 7.55 $ 14.34 $ 4.46 $ (6.79) $ 9.88 (47) 222 Income from continuing operations per diluted share $ 5.54 $ 14.74 $ 4.47 $ (9.20) $ 10.27 (62) 230 Adjusted income from continuing operations per diluted share (2) $ 7.60 $ 14.74 $ 4.47 $ (7.14) $ 10.27 (48) 230 Net interest margin (3) 18.3 % 19.5 % 19.2 % (1.2) 0.3 Return on average tangible common equity (4) 11.4 % 38.0 % 14.2 % (26.6) 23.8 Effective income tax rate – continuing operations 26.7 % 23.8 % 25.4 % 2.9 (1.6) ______________________________ (1) Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019.
We offer DTC retail deposit products, as well as deposits sourced through contractual arrangements with various financial counterparties (often referred to as wholesale deposits, and includes brokered deposits). Across both our retail and wholesale deposits, the Banks offer various non-maturity deposit products that are generally redeemable on demand by the customer, and as such have no scheduled maturity date.
Across both our retail and wholesale deposits, the Banks offer various non-maturity deposit products that are generally redeemable on demand by the customer, and as such have no scheduled maturity date.
Cash used in financing activities was $3,086 million for the year ended December 31, 2023 and cash provided by financing activities was $3,267 million for the year ended December 31, 2022.
Cash used in financing activities was $592 million and $3,086 million for the years ended December 31, 2024 and 2023, respectively.
Typical seasonality of credit card and other loan balance pay downs in the first quarter of 2023, combined with the sale of the BJ’s portfolio in late February 2023, and efforts undertaken throughout the year to reduce our long-term unsecured debt, reduced our funding requirements by over $2.9 billion from year-end 2022.
Efforts undertaken in 2024 to reduce our long-term unsecured debt, along with typical seasonality of credit card and other loan balance pay downs in the first quarter of each year, lowered our funding requirements by approximately $0.3 billion from year-end 2023.
Income Taxes The Provision for income taxes increased for the year ended December 31, 2023, primarily related to a $668 million increase in Income from continuing operations before income taxes in 2023. The effective tax rate was 23.8% and 25.4% for the years ended December 31, 2023 and 2022, respectively.
Income Taxes The Provision for income taxes decreased for the year ended December 31, 2024, primarily driven by a $587 million decrease in Income from continuing operations before income taxes in 2024. The effective tax rate was 26.7% and 23.8% for the years ended December 31, 2024 and 2023, respectively.
(13) Delinquency rate represents outstanding balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, divided by the outstanding principal amount of Credit cards and other loans as of the same period-end.Net loss rate, an annualized rate, represents net principal losses for the period divided by the Average credit card and other loans for the same period, with that Average being the average balance of the loans at the beginning and end of each month, averaged over the period.
(15) Delinquency rate represents outstanding balances that are contractually delinquent (i.e., principal balances greater than 30 days past due) as of the end of the period, divided by the outstanding principal amount of Credit card and other loans as of the same period-end.
This discussion should be read in conjunction with the discussion under “Business Environment”, above. For a discussion of the financial condition and results of operations for 2022 compared with 2021, please refer to Part II, Item 7.
For a discussion of the financial condition and results of operations for 2023 compared with 2022, please refer to Part II, Item 7.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see “Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures” that follows.
We believe the use of these Non-GAAP financial measures provide additional clarity in understanding our results of operations and trends. For a reconciliation of these Non-GAAP financial measures to the most directly comparable GAAP measures, please see “Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures” that follows.
(nm) Not meaningful, denoting a variance of 100 percent or more. 55 Tabl e of Contents Table 2: Summary of Total Net Interest and Non-interest Income, After Provision for Credit Losses Years Ended December 31, $ Change % Change 2023 2022 2021 2023 to 2022 2022 to 2021 2023 to 2022 2022 to 2021 (Millions, except percentages) Interest income Interest and fees on loans $ 4,961 $ 4,615 $ 3,861 $ 346 $ 754 8 20 Interest on cash and investment securities 184 69 7 115 62 nm nm Total interest income 5,145 4,684 3,868 461 816 10 21 Interest expense Interest on deposits 541 243 167 298 76 nm 46 Interest on borrowings 338 260 216 78 44 30 20 Total interest expense 879 503 383 376 120 75 31 Net interest income 4,266 4,181 3,485 85 696 2 20 Non-interest income Interchange revenue, net of retailer share arrangements (335) (469) (369) 134 (100) (28) 27 Gain on portfolio sale 230 0 10 230 (10) nm nm Other 128 114 146 14 (32) — — Total non-interest income 23 (355) (213) 378 (142) nm 66 Total net interest and non-interest income 4,289 3,826 3,272 463 554 12 17 Provision for credit losses 1,229 1,594 544 (365) 1,050 (23) nm Total net interest and non-interest income, after provision for credit losses $ 3,060 $ 2,232 $ 2,728 $ 828 $ (496) 37 (18) ______________________________ (nm) Not meaningful, denoting a variance of 100 percent or more.
(nm) Not meaningful, denoting a variance of 1,000 percent or more. 58 Tabl e of Contents Table 2: Summary of Total Net Interest and Non-interest Income, After Provision for Credit Losses Years Ended December 31, $ Change % Change 2024 2023 2022 2024 to 2023 2023 to 2022 2024 to 2023 2023 to 2022 (Millions, except percentages) Interest income Interest and fees on loans $ 4,820 $ 4,961 $ 4,615 $ (141) $ 346 (3) 8 Interest on cash and investment securities 204 184 69 20 115 11 165 Total interest income 5,024 5,145 4,684 (121) 461 (2) 10 Interest expense Interest on deposits 608 541 243 67 298 12 122 Interest on borrowings 352 338 260 14 78 4 30 Total interest expense 960 879 503 81 376 9 75 Net interest income 4,064 4,266 4,181 (202) 85 (5) 2 Non-interest income Interchange revenue, net of retailer share arrangements (381) (335) (469) (46) 134 14 (28) Gain on portfolio sale 11 230 — (219) 230 (95) nm Other 144 128 114 16 14 12 13 Total non-interest income (226) 23 (355) (249) 378 nm (107) Total net interest and non-interest income 3,838 4,289 3,826 (451) 463 (11) 12 Provision for credit losses 1,397 1,229 1,594 168 (365) 14 (23) Total net interest and non-interest income, after provision for credit losses $ 2,441 $ 3,060 $ 2,232 $ (619) $ 828 (20) 37 ______________________________ (nm) Not meaningful, denoting a variance of 1,000 percent or more.
Provision for credit losses decreased relative to 2022 driven by a reserve release in the current year of $136 million, included in which was $235 million related primarily to the sale of the BJ’s portfolio; as compared with a $626 million reserve build in the prior year.
Provision for credit losses increased for the year ended December 31, 2024, driven by a $92 million reserve release in the current year compared with a $136 million reserve release in the prior year, with the release in the prior year primarily related to the sale of the BJ’s portfolio.
See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . 58 Tabl e of Contents (12) Payment rate represents consumer payments during the last month of the period, divided by the beginning-of-month Credit card and other loans, including held for sale in applicable periods.
(14) Payment rate represents consumer payments during the last month of the period, divided by the beginning-of-month Credit card and other loans, including held for sale in applicable periods.

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