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What changed in BREAD FINANCIAL HOLDINGS, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of BREAD FINANCIAL HOLDINGS, INC.'s 2024 and 2025 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 2025 report.

+688 added−682 removedSource: 10-K (2026-02-13) vs 10-K (2025-02-14)

Top changes in BREAD FINANCIAL HOLDINGS, INC.'s 2025 10-K

688 paragraphs added · 682 removed · 508 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

146 edited+49 added−29 removed103 unchanged
Biggest changeCommunity Reinvestment Act The Community Reinvestment Act of 1977 (CRA) is intended to encourage banks to help meet the credit needs of their service areas, including low- and moderate-income neighborhoods, consistent with safe and sound business practices. The relevant Federal Banking Agency, the FDIC in the Banks’ case, examines each bank and assigns it a public CRA rating.
Biggest changeIn August 2025, the CFPB published an advance notice of proposed rulemaking requesting input on certain aspects of the rule it was reconsidering, and in October 2025 the District Court entered a preliminary injunction barring enforcement of the rule while it is being reconsidered by the CFPB. 16 Tabl e of Contents Community Reinvestment Act The Community Reinvestment Act of 1977 (CRA) is intended to encourage banks to help meet the credit needs of their service areas, including low- and moderate-income neighborhoods, consistent with safe and sound business practices.
Additionally, we deliver growth for some of the most recognized brands in travel & entertainment, health & beauty, jewelry and specialty apparel through our private label and co-brand credit cards and pay-over-time products providing choice and value to our shared customers.
Additionally, we deliver growth for some of the most recognized brands in travel and entertainment, health and beauty, jewelry and specialty apparel through our private label and co-brand credit cards and pay-over-time products providing choice and value to our shared customers.
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.
Co-Brand and Private Label 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 co-brand and private label credit card programs.
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.
We manage and service the accounts we originate for our co-brand and private label credit card programs, as well as our DTC credit cards and Bread Pay products.
Consequently, we continuously review capabilities and develop or acquire systems, processes and competencies to meet our unique business requirements, including strategic investments in cloud capabilities, machine learning and AI, emerging technologies and automation, and data and analytics.
Consequently, we continuously review capabilities and develop or acquire systems, processes and competencies to meet our unique business requirements, including strategic investments in cloud capabilities, machine learning and AI, emerging technologies and automation, and data analytics.
Moreover, some of our competitors, including new and emerging competitors in the digital and mobile payments space, are not subject to the same regulatory requirements or legislative scrutiny to which we are subject, which could place us at a competitive disadvantage. In our retail deposits business, we have acquisition and servicing capabilities similar to other direct-banking competitors.
Moreover, some of our competitors, including new and emerging competitors in the digital and mobile payments space, are not subject to the same regulatory requirements or legislative scrutiny to which we are, which could place us at a competitive disadvantage. In our retail deposits business, we have acquisition and servicing capabilities similar to other direct-banking competitors.
A bank, however, may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer. The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer; the required minimum Tier 1 Leverage Ratio for all banks and BHCs is 4%.
The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer; the required minimum Tier 1 Leverage Ratio for all banks and BHCs is 4%. A bank, however, may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.
In addition, the rules establish special requirements for any credit and debit card issuers that are subject to the jurisdiction of the FDIC to assess the validity of notifications of changes of address under certain circumstances. The Banks implemented an ID Theft Prevention Program, approved by their Boards of Directors, in compliance with these requirements.
In addition, the rules establish special requirements for any credit and debit card issuers that are subject to the jurisdiction of the FDIC to assess the validity of notifications of changes of address under certain circumstances. The Banks implemented an ID Theft Prevention Program (Program), approved by their Boards of Directors, in compliance with these requirements.
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.
We also continue to diversify and optimize our loan 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 co-brand and private label credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.
Bread Pay also offers our existing private label and co-brand credit card partners a broader digital product suite and additional white-label product solutions for those customers preferring a non-revolving loan with fixed repayment terms such as our installment loans and “split-pay” offerings.
Bread Pay also offers our existing co-brand and private label credit card partners a broader digital product suite and additional white-label product solutions for those customers preferring a non-revolving loan with fixed repayment terms such as our installment loan and “split-pay” offerings.
We cannot guarantee, however, that our cybersecurity risk management program and processes, or those of our third-party providers, including our policies, controls or procedures, will be fully implemented, adhered to, or effective in protecting both our customers’ and our own information and technology from cyberattacks.
We cannot guarantee, however, that our cybersecurity risk management program and processes, or those of our third-party service providers, including our policies, controls or procedures, will be fully implemented, adhered to, or effective in protecting both our customers’ and our own information and technology from cyberattacks.
CET1 capital primarily includes common stockholders’ equity subject to certain regulatory adjustments and deductions, including for goodwill and intangible assets, certain deferred tax assets, and accumulated other comprehensive income or loss. • Tier 1 Risk-Based Capital Ratio – the ratio of Tier 1 capital to risk-weighted assets.
CET1 capital primarily includes common stockholders’ equity subject to certain regulatory adjustments and deductions, including for goodwill and intangible assets, net, certain deferred tax assets, and accumulated other comprehensive income or loss. • Tier 1 Risk-Based Capital Ratio – the ratio of Tier 1 capital to risk-weighted assets.
Our program agreements also typically provide that the parties will develop the terms of the rewards program linked to the use of our product (such as opportunities to receive double rewards points for purchases made on a product), along with the allocation of costs related to the rewards program.
Our program agreements also typically provide that the parties will develop the terms of the rewards program linked to the use of our product, such as opportunities to receive double rewards points for purchases made on a product, along with the allocation of costs between the parties related to the rewards program.
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.
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 to operate in a safe and sound manner.
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.
With our range of offerings, we provide relevant products across consumer segments, including Gen Z and Millennials who are more likely to be drawn to cash flow management products such as our pay-over-time installment loans and “split-pay” offerings as compared to Gen X and Baby Boomers, while Gen X and Baby Boomers generally gravitate more toward rewards and the convenience of a co-brand or private label credit card.
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.
As of December 31, 2025, 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.
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.
Restrictions on Transactions with Affiliates and Insiders Sections 23A and 23B of the Federal Reserve Act and the FRB’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.
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.
Federal and state laws also require us to respond appropriately to data security breaches. A final rule issued by the FRB, 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.
For a discussion of the risks associated with our use of technology systems, see “Part I—Item 1A. Risk Factors” under the heading “Cybersecurity, Technology and Vendor Risks”. Disaster and Contingency Planning We operate, either internally or through third-party service providers, multiple data processing centers to store and otherwise process our customer transaction data.
For a discussion of the risks associated with our use of technology systems, see “Part I—Item 1A. Risk Factors” under the heading “Cybersecurity, Technology and Vendor Risks.” Disaster and Contingency Planning We operate, either internally or through third-party service providers, multiple data processing centers to store and otherwise process our customer transaction data.
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.
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, as well as other electronic payment methods on all cardholder accounts.
The terms of these promotions vary by partner, but generally the longer the deferred interest, reduced interest or interest-free period, the greater the partner’s merchant discount.
The terms of these promotions vary by partner, but generally the longer the deferred interest, reduced interest or interest-free period, the greater the partner’s merchant discount fee.
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.
The annual indexation of the reserve requirement exemption amount and the low reserve tranche for the years 2021-2026 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.
In 2018, the State of California enacted the California Consumer Privacy Act (CCPA), which was modified in 2020 through a voter referendum adopting the California Privacy Rights Act (CPRA).
The State of California enacted the California Consumer Privacy Act (CCPA) in 2018, which was modified in 2020 through a voter referendum adopting the California Privacy Rights Act.
There are also several exemptions from the definition of covered funds, including, among other things, loan securitization, joint ventures, certain types of foreign funds, entities issuing asset-backed commercial paper, and registered investment companies. We do not engage in proprietary trading or invest in or sponsor covered funds.
There are also several exemptions from the definition of covered funds, including, among other things, loan securitizations, joint ventures, certain types of foreign funds, entities issuing asset-backed commercial paper, and registered investment companies. We do not engage in proprietary trading or invest in or sponsor covered funds.
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).
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, Raymour & Flanigan, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).
Cash advances are not subject to an interest grace period, and some credit card programs do not provide an interest grace period for promotional purchases.
Cash advances are not subject to an interest grace period, and for some credit card programs we do not provide an interest grace period for promotional purchases.
These programs are coordinated by a compliance officer, undergo annual independent audits to assess effectiveness, and require training of employees. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by a financial institution to engage in a merger transaction under the Bank Merger Act.
These programs must be coordinated by a compliance officer, undergo annual independent audits to assess effectiveness, and require training of employees. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by a financial institution to engage in a merger transaction under the Bank Merger Act.
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.
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 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.
As a general matter, the financial terms and conditions governing our co-brand and private label 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 to the extent possible.
Among other things, the GLBA: (i) imposes certain limitations on the ability of financial institutions to share consumers’ nonpublic personal information with nonaffiliated third parties; (ii) requires that financial institutions provide certain disclosures to consumers about their information collection, sharing and security practices and affords consumers the right to “opt out” of the institution’s disclosure of their personal financial information to nonaffiliated third parties (with certain exceptions); and (iii) requires financial institutions to develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities, the sensitivity of consumer information processed by the financial institution as well as plans for responding to data security breaches.
Among other things, the GLBA: (i) imposes certain limitations on the ability of financial institutions to share consumers’ nonpublic personal information with nonaffiliated third parties; (ii) requires that financial institutions provide certain disclosures to consumers about their information collection, sharing and security practices and affords consumers the right to opt out of the institution’s disclosure of their personal financial information to nonaffiliated third parties (with certain exceptions); and (iii) requires financial institutions to develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities, the sensitivity of consumer information processed by the financial institution as well as plans for responding to data security breaches.
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.
The Federal Banking Agencies, being the Office of the Comptroller of the Currency (OCC), the FRB 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.
The reserve requirement exemption and the low reserve tranche are both subject to adjustment on an annual basis, as applicable, by the Federal Reserve Board. Effective March 26, 2020, in response to the COVID-19 pandemic, the reserve requirement ratios on all net transaction accounts were reduced to zero percent, thereby eliminating reserve requirements for all depository institutions.
The reserve requirement exemption and the low reserve tranche are both subject to adjustment on an annual basis, as applicable, by the FRB. Effective March 26, 2020, in response to the COVID-19 pandemic, the reserve requirement ratios on all net transaction accounts were reduced to zero percent, thereby eliminating reserve requirements for all depository institutions.
Each Bank has in place an effective compliance management system to comply with these laws and regulations. In March 2024 the CFPB published a final rule that would significantly reduce the safe harbor amount for late fees that credit card issuers are authorized to charge.
Each Bank has in place an effective compliance management system to comply with these laws and regulations. In March 2024 the CFPB published a final rule that would have significantly reduced the safe harbor amount for late fees that credit card issuers are authorized to charge.
We offer a flexible platform and robust suite of application programming interfaces (APIs) that allow merchants and partners to seamlessly integrate online point-of-sale financing and other digital payment products. Our Bread Pay installment loans are fixed extensions of credit where the customer pays down the outstanding balance in monthly installments, typically over a 3 to 48 month period.
We offer a flexible platform and robust suite of application programming interfaces (APIs) that allow merchants and partners to seamlessly integrate online point-of-sale financing and other digital payment products. Our Bread Pay installment loans are fixed extensions of credit where the customer pays down the outstanding balance in monthly installments, primarily over a 3 to 84 month period.
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.
In addition, we continue to scale and optimize 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 have a cross-functional team of risk, fraud and security professionals that regularly evaluate our fraud-prevention capabilities and emerging industry trends and solutions. Marketing, and Data and Analytics .
We have a cross-functional team of risk, fraud and security professionals that regularly evaluate and enhance our fraud-prevention capabilities and monitor emerging industry trends and solutions. Marketing, and Data and Analytics .
Relative to our co-brand loan portfolio, our private label loan portfolio generally has higher revenue yields. In addition, our private label customers generally have lower credit scores and therefore lower credit lines, and are generally more likely to be delinquent in their payments, have accounts with higher APRs and have more late fees assessed.
Relative to our co-brand loan portfolio, our private label loan portfolio generally has higher revenue yields. In addition, our private label customers generally have lower credit scores and therefore lower credit lines, and are generally more likely to be delinquent in their payments, have accounts with higher annual percentage rates (APRs) and have more late fees assessed.
The Banks are also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the Federal Reserve Board's implementing Regulation O as made applicable to the Banks by the regulations of the FDIC.
The Banks are also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the FRB’s implementing Regulation O as made applicable to the Banks by the regulations 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, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret.
Our co-brand and private label partner base, with nearly 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, Raymour & Flanigan, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret.
Third-Party Risk Management The FDIC, along with the other Federal Banking Agencies, issued final guidance on managing risks associated with third-party relationships. The guidance states that sound third-party risk management takes into account the level of risk, complexity, and size of the bank and the nature of the third-party relationship.
Third-Party Risk Management The FDIC, along with the other Federal Banking Agencies, issued final guidance on managing risks associated with third-party relationships in June 2023. The guidance states that sound third-party risk management takes into account the level of risk, complexity, and size of the bank and the nature of the third-party relationship.
Thereafter, we may increase or decrease individual credit limits from time to time, at our sole discretion, based primarily on our evaluation of the customer’s creditworthiness and ability to pay. For the vast majority of accounts, periodic interest charges are calculated using the daily balance method, which results in daily compounding of periodic interest charges.
Thereafter, we may increase or decrease individual credit limits from time to time, at our sole discretion, based primarily on our evaluation of the customer’s creditworthiness and ability to pay. 4 Tabl e of Contents For the vast majority of accounts, periodic interest charges are calculated using the daily balance method, which results in daily compounding of periodic interest charges.
In that regard, although the Parent Company is not a BHC, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies. Separately, under Utah state law the Parent Company is subject to examination by the UDFI.
In that regard, although the Parent Company is not a BHC, we seek to maintain capital levels and ratios in excess of the minimums required for a BHC. Separately, under Utah state law the Parent Company is subject to examination by the UDFI.
Some of our current and potential competitors may be larger than we are, have larger customer bases, greater brand recognition, longer operating histories, a dominant or more secure position, broader geographic scope, volume, scale, resources, and market share than we do, or offer products and services that we do not offer.
Some of our current and potential competitors may be larger than we are, have 8 Tabl e of Contents larger customer bases, greater brand recognition, longer operating histories, a dominant or more secure position, broader geographic scope, volume, scale, resources, and market share than we do, or offer products and services that we do not offer.
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.
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 we charge on certain credit card accounts receiving monthly paper statements for certain of our brand partner programs.
Our average outstanding DTC credit card account balance for the year ended December 31, 2024 was $2,317. Bread Pay Bread Pay is our payment technology solution for our pay-over-time products, which includes both our installment loan and “split-pay” offerings, as described in more detail below.
Our average outstanding DTC credit card account balance for the year ended December 31, 2025 was $2,295. Bread Pay Bread Pay is our payment technology solution for our pay-over-time products, which includes both our installment loan and “split-pay” offerings, as described in more detail below.
Banks in a multi-bank organization, such as CB and CCB, are subject to supervision and examination by the CFPB with respect to the federal consumer financial protection laws if at least one bank reports total assets over $10 billion for four consecutive quarters.
Banks in a multi-bank organization, such as CB and CCB, are subject to supervision and examination by the CFPB with respect to the federal consumer financial protection laws if at least one bank reports total assets over $10 billion for four consecutive quarters, which CCB has, and thus both Banks are subject to supervision and examination by the CFPB with respect to federal consumer protection laws.
Declaration and payment of cash dividends or repurchases of our common stock depends upon cash dividend payments to Bread Financial Holdings, Inc. by the Banks, which are our primary source of revenue and cash flow. As state-chartered banks, under Delaware or Utah law, as applicable, the Banks are subject to regulatory restrictions on the payment and amounts of dividends.
Declaration and payment of cash dividends on, or repurchases of, our equity securities depends upon cash dividend payments to Bread Financial Holdings, Inc. by the Banks, which are our primary source of revenue and cash flow. As state-chartered banks, under Delaware or Utah law, as applicable, the Banks are subject to regulatory restrictions on the payment and amounts of dividends.
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.
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 14 Tabl e of Contents certain foreign funds.
Our partners benefit from customer insights and analytics, with each of our branded credit card programs tailored to our partner’s brand and their unique customers. Our private label and co-brand program agreements with our brand partners are generally long-term, exclusive contracts, with terms typically ranging from 5 to 10 years.
Our partners benefit from our customer insights and analytics, with each of our branded credit card programs tailored to our partner’s brand and 3 Tabl e of Contents their unique customers. Our co-brand and private label program agreements with our brand partners are generally long-term, exclusive contracts, with terms typically ranging from 5 to 10 years.
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.
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 equity securities may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements.
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.
Through our marketing technology, data and analytics capabilities, including the use of machine learning and AI technology, we focus on data insights that drive actionable strategies and enhance revenue growth and customer retention. We use multi-channel marketing platforms and capabilities, including in-store, web, permission-based email, permission-based mobile messaging and direct mail to engage customers in the channels of their choice.
In addition, our co-brand customers generally have higher credit scores and therefore higher credit lines, with the majority of our co-brand customers having a Vantage score in excess of 660. Our average outstanding co-brand credit card account balance for the year ended December 31, 2024 was $1,840.
In addition, our co-brand customers generally have higher credit scores and therefore higher credit lines, with the majority of our co-brand customers having a Vantage score in excess of 660. Our average outstanding co-brand credit card account balance for the year ended December 31, 2025 was $1,821.
Reserve Requirements Federal Reserve Board regulations require insured depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearing and regular checking accounts, as well as cardholder credit balances.
Reserve Requirements FRB regulations require insured depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearing and regular checking accounts, as well as cardholder credit balances.
Risk 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.
Risk Factors” under the headings “ Regulation in the areas of privacy, data protection, data governance, 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 18 Tabl e of Contents 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.
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.
Through Bread Pay, we offer an omnichannel solution for more than 1,400 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 Bread Pay products into third-party platforms to gain efficient distribution of our lending solutions.
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.
Specifically, we rely on third parties to help us deliver systems and operational infrastructure, these relationships include (but are not limited to): Amazon Web Services and Microsoft for our cloud infrastructure, and Fiserv for our credit card processing services, as previously reported.
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 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).
“Covered transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets, including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or extension of credit, a derivative transaction to the extent that the transaction causes the bank to have a credit exposure to the affiliate, or the issuance of a guarantee, acceptance, or letter of credit.
“Covered transactions” are subject to quantitative and qualitative limits and include: • loans or extensions of credit; • purchases of or investments in securities; • purchases of assets, including assets subject to an agreement to repurchase; • acceptance of securities as collateral for a loan or extension of credit; • a derivative transaction to the extent that the transaction causes the bank to have a credit exposure to the affiliate; or • the issuance of a guarantee, acceptance, or letter of credit.
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.
For the year ended December 31, 2025, customer spending on our co-brand credit cards comprised approximately 52% of our credit sales, which we believe enables us to capture incremental and non-discretionary purchases as consumer spending patterns shift in response to evolving economic conditions.
As of December 31, 2024, the Banks’ regulatory capital ratios were above the well-capitalized standards and met the Capital Conservation Buffer. Dividends Bread Financial Holdings, Inc. is a legal entity separate and distinct from the Banks.
As of December 31, 2025, the Banks’ regulatory capital ratios were above the well-capitalized standards, inclusive of the Capital Conservation Buffer. Dividends Bread Financial Holdings, Inc. is a legal entity separate and distinct from the Banks.
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.
Private label credit card loan balances are typically smaller, with an average outstanding account balance for the year ended December 31, 2025 of $775; although, we do offer “big ticket” purchase financing and financing for medical and dental procedures with certain private label brand partners, which often involve larger amounts.
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.
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 a flexible work experience that allows them to balance office work and remote work time.
Risk Factors – Risk Management – Operational Risk”. 8 Tabl e of Contents Protection of Intellectual Property and Other Proprietary Rights We rely on a combination of patents, copyrights, trademarks, and trade secrets (and corresponding laws relating to such intellectual property), confidentiality procedures, contractual provisions, and other similar measures to protect our technology and proprietary information used in our business.
Risk Factors – Risk Management – Operational Risk.” Protection of Intellectual Property and Other Proprietary Rights We rely on a combination of patents, copyrights, trademarks, and trade secrets (and corresponding laws relating to such intellectual property), confidentiality procedures, contractual provisions, and other similar measures to protect our technology and proprietary information used in our business.
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.
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.
Over the past few years, we have advanced our actions and activities in support of creating a more inclusive work environment, including the maturation of our associate programs and our nine Business Resource Groups, which are open to all associates and that nearly 1,400 unique associates have voluntarily joined.
Over the past few years, we have advanced our actions and activities in support of creating a more inclusive work environment, including the maturation of our associate programs and expansion of our nine Associate Resource Groups, which are open to all associates across our locations and that nearly 1,600 unique associates have voluntarily joined.
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.
If any of our entities became subject to regulation as a 10 Tabl e of Contents 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 or FRB) and our operations would be limited to activities that are closely related to banking.
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.
The FDIC’s claim under the cross guaranty provision is superior to claims of stockholders 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.
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.
Regulation of Bread Financial Holdings, Inc. 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.
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, (i) by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits, or (ii) that could lead to material financial loss to the entity.
Charges made using a co-brand credit card, particularly charges made outside of the co-brand partner, generate interchange income for us. Relative to our private label loan portfolio, our co-brand loan portfolio generally has 4 Tabl e of Contents lower revenue yields.
Charges made using a co-brand credit card, particularly charges made outside of the co-brand partner, generate interchange revenue for us. Relative to our private label loan portfolio, our co-brand loan portfolio generally has lower revenue yields.
Any 14 Tabl e of Contents deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or take other actions.
Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or take other actions.
Services Supporting our Primary Product Offerings Our primary product offerings, as described above, are supported and enhanced by numerous services and capabilities that we provide, including: (i) risk management, account origination and funding services; (ii) credit card and other loan processing and servicing; (iii) fraud prevention; (iv) marketing, and data and analytics; and (v) our digital and mobile capabilities. 6 Tabl e of Contents Risk Management, Account Origination and Funding Services.
Services Supporting our Primary Product Offerings Our primary product offerings, as described above, are supported and enhanced by numerous services and capabilities that we provide, including: (i) risk management, underwriting and funding services; (ii) credit card and other loan processing and servicing; (iii) fraud prevention; (iv) marketing, and data and analytics; and (v) our digital and mobile capabilities.
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.
In addition, in 2025 for the twentieth 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.
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.
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 flexible work experience, which we believe enables us to attract and retain a highly qualified and motivated workforce.
Blocked 15 Tabl e of Contents assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the Office of Foreign Assets Control. Failure to comply with these sanctions could have serious legal and reputational consequences.
Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.
The statute also allows consumers to access, delete, correct, and prevent the sale and sharing of personal information that has been collected by covered businesses in certain circumstances. The CCPA/CPRA does not apply to personal information collected, processed, sold, or disclosed pursuant to the GLBA or the California Financial Information Privacy Act.
The statute also allows California residents to access, delete, correct, and opt out of the sale and sharing of personal information that has been collected by covered businesses in certain circumstances. The CCPA does not apply to personal information processed pursuant to the GLBA or the California Financial Information Privacy Act.
Nearly 9 out of 10 associates view our flexible work arrangements as a competitive advantage relative to other potential employment opportunities. We intend to continue flexible work arrangements, seeking to take advantage of the engagement and productivity benefits associated with increased flexibility, as well as opportunities for connectedness and social interaction.
Over 90% of our associates view our flexible work arrangements as a competitive advantage relative to other potential employment opportunities, and we continue to take advantage of the engagement and productivity benefits associated with increased flexibility, as well as opportunities for connectedness and social interaction.
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.
We are continually seeking to enhance customers’ self-service capabilities in our digital channels, which allow customers to address their needs when and how they want, while also generating efficiencies by reducing the cost to serve our customers.
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.
Consumer Financial Protection Bureau Supervision 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.
Evolution of these standards could result in changes to pricing, practices, procedures and other activities relating to our credit card accounts in ways that could reduce the associated return from those accounts and potentially impact business growth plans.
The CFPB has taken enforcement action against other credit card issuers and financial services companies. Evolution of these standards could result in changes to pricing, practices, procedures and other activities relating to our credit card accounts in ways that could reduce the associated return from those accounts and potentially impact business growth plans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks related to cybersecurity, technology and third-party vendors include: • We rely on third-party vendors, and could be adversely impacted if such vendors fail to fulfill their obligations. • Impacts arising from or relating to the transition of our credit card processing services to strategic outsourcing providers that we completed in 2022 have, and may continue to adversely affect our business. • Failures in data protection, cybersecurity and information security, as well as business interruptions to our data centers and other systems, could critically impair our products, services and ability to conduct business. • Our industry is subject to rapid and significant technological changes, and we may be unable to successfully develop and commercialize new or enhanced products and services. • The development and use of AI presents risks and challenges to our business, including compliance with new AI laws and regulations, risks associated with AI models, and the malicious use of AI technology by bad actors.
Biggest changeRisks related to cybersecurity, technology and third-party vendors include: • We rely on third-party vendors, and could be adversely impacted if such vendors fail to fulfill their obligations. • Failures in data protection, cybersecurity and information security, as well as business interruptions to our data centers and other systems, could critically impair our products, services and ability to conduct business. • Our industry is subject to rapid and significant technological changes, and we may be unable to successfully develop and commercialize new or enhanced products and services.
The Bank Secrecy Act, as amended by the PATRIOT Act, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of partners and customers, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies.
The Bank Secrecy Act, as amended by the USA PATRIOT Act, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of partners and customers, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies.
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.
Although not a bank holding company as defined under the BHC 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.
The Board’s determination to declare dividends on, or repurchase shares of, our common stock will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable laws and regulations, including those governing our Banks’ ability to pay dividends and make distributions or other payments to us, and other factors that the Board of Directors deems relevant.
The Board’s determination to declare dividends on, or repurchase shares of, our stock will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable laws and regulations, including those governing our Banks’ ability to pay dividends and make distributions or other payments to us, and other factors that the Board of Directors deems relevant.
Certain collections from our securitized credit card loans come back to us through our subsidiaries, and we use these collections to fund our purchase of newly originated loans to collateralize our securitized financings. If payment rates on our securitized credit card loans are lower than they have historically been, fewer collections will be remitted to us on an ongoing basis.
Certain collections from our securitized credit card loans come back to us through our subsidiaries, and we use these collections to fund the purchase of newly originated loans to collateralize our securitized financings. If payment rates on our securitized credit card loans are lower than they have historically been, fewer collections will be remitted to us on an ongoing basis.
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.
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. ” 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.
Capital Risk Capital risk refers to the potential threat to an institution's financial stability or safety due to inadequate capital resources to support business operations and safeguard against unexpected losses. These risks can arise from various stressed operating conditions, including macroeconomic, credit, liquidity, market, and regulatory factors.
Capital Risk Capital risk refers to the potential threat to an institution’s financial stability or safety and soundness due to inadequate capital resources to support business operations and safeguard against unexpected losses. These risks can arise from various stressed operating conditions, including macroeconomic, credit, liquidity, market, and regulatory factors.
As referenced above, the current and near-term anticipated Delinquency and Net loss rates remain high, relative to our historical experience, and a prolonged continuation or worsening of these rates could have a material adverse impact on our business and results of operations.
As referenced above, the current and near-term anticipated Delinquency and Net principal loss rates remain high, relative to our historical experience, and a prolonged continuation or worsening of these rates could have a material adverse impact on our business and results of operations.
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the United States and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the United States and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer and data protection, employment and other laws applicable to the use of AI.
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.
Operational risk is inherent in all business activities and can impact us through direct or indirect financial loss, damage to our brand, customer dissatisfaction and legal and regulatory penalties. We have implemented an operational risk framework that is defined in our Operational Risk Management Policy.
Subsequently, on March 10, 2023, LVI and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code and in Canada under the Companies’ Creditors Arrangement Act (Canada) (collectively, the LVI Bankruptcy Proceedings).
On March 10, 2023, LVI and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code and in Canada under the Companies’ Creditors Arrangement Act (collectively, the LVI Bankruptcy Proceedings).
Our ERM program reflects our risk appetite, governance, culture and reporting. We manage enterprise risk using our Board-approved Enterprise Risk Management Framework, which includes Board-level oversight, risk management committees, and a dedicated risk management team led by our Chief Risk Officer (CRO).
Our ERM program reflects our risk appetite, governance, culture and reporting. We manage enterprise risk using our Board-approved Risk Appetite Statements and ERM Framework, which includes Board-level oversight, risk management committees, and a dedicated risk management team led by our Chief Risk Officer (CRO).
Our Compliance organization is responsible for establishing and maintaining our Compliance Risk Management Program. Pursuant to this Program, we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed.
Our Compliance organization is responsible for establishing and maintaining our Compliance Risk Management Program, pursuant to which we seek to manage and mitigate compliance risk by assessing, controlling, monitoring, measuring and reporting the legal and regulatory risks to which we are exposed.
Further, our pricing strategy may not offset the negative impact on profitability caused by increases in delinquencies and losses, thus any material increases in delinquencies and losses beyond our current estimates could have a material adverse impact on us.
Further, our pricing strategy may not offset the negative impact on profitability caused by increases in delinquencies and credit losses, thus any material increases in delinquencies and credit losses beyond our current estimates could have a material adverse impact on us.
Severe weather events and natural disasters could have a material adverse effect on our financial position and results of operations, and the timing and effects of any such event cannot accurately be predicted.
Severe weather events and natural disasters could have a material adverse effect on our financial position and results of operations, and the timing and effects of any such events cannot accurately be predicted.
We may not be able to retain and/or attract and hire a highly qualified and diverse workforce or maintain our corporate culture, and having a large segment of our workforce working from home may exacerbate these risks and cause new risks. Our performance largely depends on the talents and efforts of our employees, particularly our key personnel and senior management.
We may not be able to retain and/or attract and hire a highly qualified workforce or maintain our corporate culture, and having a large segment of our workforce periodically working from home may exacerbate these risks and cause new risks. Our performance largely depends on the talents and efforts of our employees, particularly our key personnel and senior management.
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.
Regulation in the areas of privacy, data protection, data governance, 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.
President Trump and various federal legislators have also recently made public statements regarding potential efforts to place caps on credit card interest rates, and a bill was introduced in the U.S. Senate in February 2025 proposing to cap credit card interest rates at 10% for a period of five years.
In addition, President Trump and various federal legislators have also made public statements regarding potential efforts to place caps on credit card interest rates, and a bill was introduced in the U.S. Senate in February 2025 proposing to cap credit card interest rates at 10% for a period of five years.
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.
There are no such restrictions under the FDIA on a bank that is “well capitalized” and as of December 31, 2025, 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 FDIA prohibits an insured bank from offering interest rates on any deposits that significantly exceed rates in its prevailing market, unless it is “well capitalized”. A bank that is less than “well capitalized” may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.
The FDIA prohibits an insured bank from offering interest rates on any deposits that significantly exceed rates in its prevailing market, unless it is “well capitalized.” A bank that is less than “well capitalized” may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates.
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.
Due to the mix of fixed and floating rate assets and liabilities on our Consolidated Balance Sheet as of December 31, 2025, this hypothetical instantaneous 100 basis point increase or decrease in interest rates would have an insignificant impact on our annual Net interest income.
In addition to this industry standard measure, we also consider the potential impact of alternative interest rate scenarios in our internal interest rate risk management decisions, such as larger rate shocks (higher than +/- 100 basis points), or steepening and flattening yield curve scenarios.
In addition to this industry standard measure, we also consider the potential impact of alternative interest rate scenarios in our internal interest rate risk management decisions, such as larger rate shocks (higher than plus-or-minus 100 basis points), or steepening and flattening yield curve scenarios.
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.
Statements in this and other filings we make with the SEC and other public statements, including in our annual sustainability reporting, 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, these leaders are responsible for deploying sufficient financial resources and qualified personnel to manage the risks inherent in our business activities. • The “second line of defense” consists of an independent risk management team charged with oversight and monitoring of risk within the business.
In addition, these leaders are responsible for deploying sufficient financial resources and qualified personnel to manage the risks inherent in our business activities. • The “second line of defense” consists of an independent ERM team charged with oversight and monitoring of risk within the business.
Our ratings could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding.
Our ratings or outlook could be downgraded at any time and without any notice by any of the rating agencies, which could, among other things, adversely limit our access to the capital markets and adversely affect the cost and other terms upon which we are able to obtain funding.
For example, the CCPA and related laws in other jurisdictions require us to adhere to certain disclosure restrictions and deletion obligations with respect to the Personal Information of their residents, and allow for penalties for violations and, in some cases, a private right of action.
For example, the CCPA and related laws in other jurisdictions require us, among other requirements, to adhere to certain disclosure restrictions and deletion obligations with respect to the Personal Information of their residents, and allow for penalties for violations and, in some cases, a private right of action.
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.
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 the Company.
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.
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, 2025.
For example, in late November 2023, the FDIC issued a consent order to one of our subsidiaries, arising out of the June 2022 transition of our credit card processing services to strategic outsourcing partners, and in August 2024 each of our Banks entered into an agreement with the FDIC to pay civil money penalties (CMPs) of $1 million per Bank, also related to the June 2022 transition.
For example, in late November 2023, the FDIC issued a consent order to one of our subsidiaries, Comenity Servicing LLC, arising out of the June 2022 transition of our credit card processing services to strategic outsourcing partners, and in August 2024 each of our Banks entered into an agreement with the FDIC to pay civil money penalties (CMPs) of $1 million per Bank, also related to the June 2022 transition.
As part of our efforts to manage our credit risk, we use our automated proprietary scoring technology and verification procedures to make risk-based origination decisions when approving new account holders, establishing or adjusting their credit limits and applying our risk-based pricing.
As part of our efforts to manage our credit risk, we use our automated proprietary scoring technology and verification procedures to make risk-based underwriting decisions when approving new account holders, establishing or adjusting their credit limits and applying our risk-based pricing.
In addition, existing relationships may be renewed with less favorable terms to us in response to increased competition for such relationships. The competition for new partners is also significant, and our failure to attract new partners could adversely affect our ability to grow.
In addition, existing relationships may be renewed on less favorable terms to us in response to increased competition for such relationships. The competition for new partners is also significant, and our failure to attract new partners could adversely affect our ability to grow.
Partner and customer adoption is a key competitive factor, and our competitors may develop products, platforms or technologies that become more widely adopted than ours. In addition, we may underestimate the time and expense we must invest in new products and services before they generate significant revenues, if at all.
Partner and customer adoption is a key competitive factor, and our competitors may develop products, platforms or tec hnologies that become more widely adopted than ours. In addition, we may underestimate the time and expense we must invest in new products and services before they generate significant revenues, if at all.
To the extent our leaders behave in a manner that is not consistent with our values, we could experience significant impacts to our brand and reputation, as well as to our corporate culture.
To the extent our leaders behave in a manner that is not consistent with our values and leadership behaviors, we could experience significant impacts to our brand and reputation, as well as to our corporate culture.
Chapter 11 case in the Bankruptcy Court for the Southern District of Texas, the liquidating trustee filed an adversary proceeding against us and our general counsel alleging actual and constructive fraudulent transfers, among other claims, in connection with the spinoff; and (ii) in Delaware Chancery Court, the liquidating trustee filed an action against us, each of the members of our Board of Directors at the time of the spinoff, and certain members of our executive management team alleging breaches of fiduciary duties (and aiding and abetting breaches of fiduciary duties) in connection with the spinoff.
Chapter 11 case in the Bankruptcy Court for the Southern District of Texas, the liquidating trustee filed an adversary proceeding against us and our general counsel alleging actual and constructive fraudulent transfers, among other claims, in connection with the spinoff; and (ii) in Delaware Chancery Court, the liquidating trustee filed an action against us, each of the members of our Board of Directors at the time of the spinoff, and 45 Tabl e of Contents certain members of our executive management team alleging breaches of fiduciary duties (and aiding and abetting breaches of fiduciary duties) in connection with the spinoff.
The process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate partners’ and customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively.
T he process of developing new products and services, enhancing existing products and services and adapting to technological changes and evolving industry standards is complex, costly and uncertain, and any failure by us to anticipate partners’ and customers’ changing needs and emerging technological trends accurately could significantly impede our ability to compete effectively.
Furthermore, though we believe that our process and decision-making with respect to the spinoff transaction were entirely appropriate, we and certain members of our Board of Directors and executive management team have been named as defendants in various litigation matters relating to the spinoff. LoyaltyOne, Co.
Though we believe that our process and decision-making with respect to the spinoff transaction were entirely appropriate, we and certain members of our Board of Directors and executive management team have been named as defendants in various litigation matters relating to the spinoff, as follows. In Canada, LoyaltyOne, Co.
We believe that regulatory enforcement and fines have also increased across the banking and financial services sector. Further, while the new Presidential Administration and the congressional majorities in the U.S.
We believe that regulatory enforcement and fines have also increased across the banking and financial services sector. Further, while the current Presidential Administration and the congressional majorities in the U.S.
We manage capital in alignment with the risk characteristics of our business, the economic environment, and the expectations of regulators and shareholders. This includes considering the impact of capital stress testing in our assessment of capital adequacy.
We manage capital in alignment with the risk characteristics of our business, the economic environment, and the expectations of regulators and stockholders. This includes considering the impact of capital stress testing in our assessment of capital adequacy.
In 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.
See also “ Risks Related to the LoyaltyOne Spinoff. ” In 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 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.
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.
Examples of federal and state legislation that we track include legislation intended to place caps on the interest rates that we and other financial institutions are permitted to charge.
Certain merchants, in an effort to decrease their operating expenses, have with some success sought to lower interchange fees, including through promoting alternative payment platforms with lower processing costs and lobbying for legislative or regulatory changes. Several recent events and actions indicate a continuing focus on interchange by legislators, regulators and merchants.
Certain merchants, in an effort to decrease their operating expenses, have with some success sought to lower interchange fees, including through litigation against the payment networks, promoting alternative payment platforms with lower processing costs and lobbying for legislative or regulatory changes. Several recent events and actions indicate a continuing focus on interchange by legislators, regulators and merchants.
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.
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, external credit bureau risk scores, 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.
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.
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.
Regulators and consumer activists have also sought to expand financial institutions’ responsibility to hold customers harmless for fraudulent transactions on their accounts, which increases our exposure to fraud-related losses. 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.
Regulators and consumer activists have also sought to expand financial institutions’ responsibility to hold customers harmless for fraudulent transactions on their accounts, which increases our exposure to fraud-related losses. 25 Tabl e of Contents 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.
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.
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.
A significant source of our funds is customer deposits, primarily in the form of certificates of deposit and other savings products. We obtain deposits directly from retail and commercial customers or through brokerage firms that offer our deposit products to their customers.
A significant source of our funding is through customer deposits, primarily in the form of certificates of deposit and other savings products. We obtain deposits directly from retail customers or through brokerage firms that offer our deposit products to their customers.
The trading price of our common stock may be affected by a number of factors, including our operating results, changes in our earnings estimates, additions or departures of key personnel, our financial condition, legislative and regulatory changes, general conditions in the industries in which we and our brand partners operate, general economic conditions, and general conditions in the securities markets.
The trading price of our common stock may be affected by a number of factors, including our operating results, changes in our earnings estimates, additions or departures of key personnel, our financial condition, legislative, executive and regulatory changes, monetary and fiscal policy, general conditions in the industries in which we and our brand partners operate, general economic conditions, and general conditions in the securities markets.
During 2023, we believe the financial services industry generally experienced an uptick in both the volume and sophistication of fraud attacks, and we also experienced that trend in our business, with fraud-related operational losses increasing significantly from 2022 levels.
During 2023, we believe the financial services industry generally experienced an uptick in both the volume and sophistication of fraud attacks, and we also experienced that trend in our business, with fraud-related operational losses increasing significantly.
Our Delinquency rates were 5.9% of Credit card and other loans as of December 31, 2024, compared with 6.5% and 5.5% as of December 31, 2023 and 2022, respectively. For 2024, our Net principal loss rate was 8.2%, compared with 7.5% and 5.4% for 2023 and 2022, respectively.
Our Delinquency rates were 5.8% of Credit card and other loans as of December 31, 2025, compared with 5.9% and 6.5% as of December 31, 2024 and 2023, respectively. For 2025, our Net principal loss rate was 7.7%, compared with 8.2% and 7.5% for 2024 and 2023, respectively.
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.
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.
Governance and Accountability Board and Board Committees Our Board of Directors, as a whole and through its committees, maintains responsibilities for the oversight of risk management, including monitoring the “tone at the top,” and our risk culture, and overseeing emerging and strategic risks.
Governance and Accountability Board and Board Committees Our Board of Directors, as a whole and through its committees, maintains responsibilities for the oversight of risk management, including monitoring the “tone at the top” and our risk culture, and overseeing emerging and strategic risks.
Conversely, our profitability could also be adversely affected if the interest we receive on our Credit card and other loans falls more quickly than the interest we pay on deposits and other borrowings. 34 Tabl e of Contents Future sales of our common stock, or the perception that future sales could occur, may adversely affect our common stock price.
Conversely, our profitability could also be adversely affected if the interest we receive on our Credit card and other loans falls more quickly than the interest we pay on deposits and other borrowings. Future sales of our common stock, or the perception that future sales could occur, may adversely affect our common stock price.
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.
As part of our efforts to minimize our risk of credit card or other loan charge-offs, we have developed automated proprietary scoring technology and verification procedures to make risk-based underwriting decisions when approving new account holders, establishing or adjusting account holder credit limits and applying our risk-based pricing.
Social media also can cause harm to our reputation. By its very nature, social media can reach a wide audience in a very short amount of time, which presents unique challenges for corporate communications. Negative or otherwise undesirable publicity generated through unexpected social media coverage can damage our reputation and brand.
By its very nature, social media can reach a wide audience in a very short amount of time, which presents unique challenges for corporate communications. Negative or otherwise undesirable publicity generated through unexpected social media coverage can damage our reputation and brand.
For example, excess spread may be affected if a securitization trust’s borrowing costs increase as a result of the proposed B3E changes to existing capital requirements. Such cost increases may result, for example, because the investors are entitled to indemnification for increased costs resulting from such regulatory changes, such as increased capital requirements.
For example, excess spread may be affected if a securitization trust’s borrowing costs increase as a result of the proposed B3E changes to existing capital requirements. Such cost increases may result, for example, because the investors are entitled to indemnification for increased costs resulting from such regulatory changes, such as increased capital requirements. The future of B3E implementation remains uncertain.
Litigation may be necessary to enforce our intellectual property rights, protect our patents, copyrights, trademarks or trade secrets or determine the validity and scope of the 40 Tabl e of Contents proprietary rights of others. Any infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our intellectual property or other proprietary rights.
Litigation may be necessary to enforce our intellectual property rights, protect our patents, copyrights, trademarks or trade secrets or determine the validity and scope of the proprietary rights of others. Any infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our intellectual property or other proprietary rights.
As the business owner, the first line of defense is responsible for, among other things, identifying, owning, managing and controlling key risks associated with their activities, timely addressing issues and remediation, and implementing processes and procedures to strengthen the risk and control environment.
As the business owner, the first line of 46 Tabl e of Contents defense is responsible for, among other things, identifying, owning, managing and controlling key risks associated with their activities, timely addressing issues and remediation, and implementing processes and procedures to strengthen the risk and control environment.
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.
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. 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 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.
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.
Other risks described in this Annual Report on Form 10-K could also materially adversely affect our share price. There is no guarantee that we will pay future dividends or repurchase shares of our common stock at a level anticipated by stockholders, which could reduce returns to our stockholders.
Other risks described in this Annual Report on Form 10-K could also materially adversely affect our share price. 35 Tabl e of Contents There is no guarantee that we will pay future dividends or repurchase shares of our stock at a level anticipated by stockholders, which could reduce returns to our stockholders.
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.
In connection with the spinoff, we entered into a tax matters agreement, and LoyaltyOne, Co. is 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.
We are also more susceptible to the risks of increased regulations and legal and other regulatory actions that are targeted at consumer credit or the specific consumer credit products that we offer, such as legislation and regulations relating to credit card late fees, finance charges and promotional financing.
We are also more susceptible to the risks of increased regulations and legal and other regulatory actions that are targeted at consumer credit or the specific consumer credit products that we offer, such as legislation and regulations relating to credit card late fees, credit card interest rates and promotional financing.
We are required under the program documents to lengthen this accumulation period to the extent we expect the payment rates to be low enough that the current length of the accumulation period is inadequate to fully fund the restricted account by the applicable security’s maturity date.
We are 32 Tabl e of Contents required under the program documents to lengthen this accumulation period to the extent we expect the payment rates to be low enough that the current length of the accumulation period is inadequate to fully fund the restricted account by the applicable security’s maturity date.
Limitations on our Banks’ ability to accept brokered deposits for any reason (including regulatory limitations on the volume of brokered deposits in total or as a percentage of 32 Tabl e of Contents total assets) in the future could materially adversely impact our liquidity, funding costs and profitability.
Limitations on our Banks’ ability to accept brokered deposits for any reason (including regulatory limitations on the volume of brokered deposits in total or as a percentage of total assets) in the future could materially adversely impact our liquidity, funding costs and profitability.
If we were required to become a BHC, or if we voluntarily take such action that results in the Parent Company becoming a federally-regulated BHC, we and our non-bank subsidiaries would be subject to supervision, regulation and examination by the Federal Reserve Board.
If we were required to become a BHC, or if we voluntarily take such action that results in the Parent Company becoming a federally-regulated BHC, we and our non-bank subsidiaries would be subject to supervision, regulation and examination by the FRB.
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.
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 charge-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, including competition from new and non-traditional competitors, such as financial technology companies, and with respect to new products, services and technologies, such as the emergence or increase in popularity of agentic commerce, digital payment platforms and currencies and other alternative payment and deposit solutions. • 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.
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.
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.
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.
Failure to attract, hire, develop, motivate and retain highly qualified 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 integrity and decency.
We also regularly review the sensitivity of our interest rate risk metrics to changes in our key modeling assumptions. In 2023 and 2024, we implemented a new and improved asset liability management model that is capable of assessing a broader array of interest rate risk scenarios, including a wider range of interest rate and balance sheet assumptions.
We also regularly review the sensitivity of our interest rate risk metrics to changes in our key modeling assumptions. In recent years, we have implemented a new and improved asset liability management model that is capable of assessing a broader array of interest rate risk scenarios, including a wider range of interest rate and balance sheet assumptions.
A significant source of funding is our securitization of credit card loans, which involves the transfer of credit card loans to a trust, and the issuance by the trust of notes to third-party investors collateralized by the beneficial interest in the transferred credit card loans.
A significant source of funding is our securitization of credit card loans, which involves the transfer of credit card loans to a trust, and the issuance by the trust of notes to third-party investors collateralized by the beneficial interest in the 31 Tabl e of Contents transferred credit card loans.
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.
In addition to being affected by general economic conditions and the success of our collection and recovery efforts, the 23 Tabl e of Contents stability of our Delinquency and Net principal 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 would be required to provide annual reports and such additional information as the Federal Reserve Board may require pursuant to the BHC Act, and applicable regulations. In addition, we would be subject to consolidated regulatory capital requirements.
We would be required to provide annual reports and such additional information as the FRB may require pursuant to the BHC Act, and applicable regulations. In addition, we would be subject to consolidated regulatory capital requirements.
Actual results could differ materially from our estimates as a result of adverse impacts from various factors, including regulatory or legislative changes, or if future macroeconomic conditions or future operating results differ significantly from our current assumptions, and such differences could significantly impact our financial results.
Actual results could differ materially from our estimates as a result of adverse impacts from various factors, including regulatory or legislative changes, unexpected developments in legal contingencies, or if future macroeconomic conditions or future operating results differ significantly from our current assumptions, and such differences could significantly impact our financial results.
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.
Pursuant to provisions of the BHC Act and regulations promulgated by the FRB thereunder, a BHC may only engage in, or own companies that engage in, activities deemed by the FRB to be permissible for BHCs.
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.
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.
Changes in the prevailing interpretations of federal or state laws and related regulations could also invalidate or call into question the legality of certain of our services and business practices.
Changes in the 37 Tabl e of Contents prevailing interpretations of federal or state laws and related regulations could also invalidate or call into question the legality of certain of our services and business practices.
For context, during the Great Recession, our Delinquency and Net loss rates peaked in 2009 at 6.2% and 10.0%, respectively. As of December 31, 2024, our Delinquency rate was 5.9% and our 2024 full-year Net loss rate was 8.2%.
For context, during the Great Recession, our Delinquency and Net principal loss rates peaked in 2009 at 6.2% and 10.0%, respectively. As of December 31, 2025, our Delinquency rate was 5.8% and our 2025 full-year Net principal loss rate was 7.7%.
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.
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.
As a result of these hurricanes, we froze delinquency progression for cardholders in Federal Emergency Management Agency (FEMA) identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net loss rate in the fourth quarter of 2024, and consequently these actions will negatively impact Net principal losses and the Net loss rate in the second quarter of 2025.
As a 29 Tabl e of Contents result of these hurricanes, we froze delinquency progression for cardholders in Federal Emergency Management Agency (FEMA) identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net principal loss rate in the fourth quarter of 2024, and consequently negatively impacted Net principal losses and the Net principal loss rate in the second quarter of 2025.
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 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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRisk 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.
Biggest changeRisk Factors – Risk Management” and “Item 1A. Risk Factors – Cybersecurity, Technology and Vendor Risks.” 51 Tabl e of Contents 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 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.
The program is designed based on the NIST CSF 2.0 ; provided that t his does not imply that we meet any particular technical standards, specifications or requirements, only that we use the NIST CSF 2.0 as a guide to help us identify, assess and manage cybersecurity risks relevant to our business.
Item 1C. Cybersecurity. Cybersecurity Risk Management and Strategy As noted above under “Risk Management”, we maintain an information and cybersecurity risk management program, which is led by our CISO and is designed to protect the confidentiality, integrity and availability of critical information and information systems.
Item 1C. Cybersecurity. Cybersecurity Risk Management and Strategy As noted above under “Risk Management,” we maintain an information and cybersecurity risk management program, which is led by our CISO and is designed to protect the confidentiality, integrity and availability of critical information and information systems.
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.
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.

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 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.
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 (1) September 12, 2032 Draper, Utah 22,900 (1) August 31, 2031 New York, New York 18,500 February 29, 2028 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, 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 2. Properties. As of December 31, 2025, we leased 12 general office properties, comprised of approximately 1.1 million square feet, of which approximately 0.4 million square feet are subleased or on the sublease market.
We believe our current facilities are suitable to our businesses and that we will be able to lease, purchase or newly construct additional facilities as needed.
We believe our current facilities are suitable to our businesses and that we will be able to lease, purchase or newly construct additional facilities as needed. 52 Tabl e of Contents

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 16 “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 20, “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 changeThe Stock Performance Graph assumes that $100 was invested in our common stock and each index, and that all dividends were reinvested. For the purpose of this Stock Performance Graph, historical stock prices have been adjusted to reflect the impact of the spinoff of LVI on November 5, 2021.
Biggest changeFor the purpose of this Stock Performance Graph, historical stock prices have been adjusted to reflect the impact of the spinoff of LVI on November 5, 2021. The stock price performance on the graph below is not necessarily indicative of future performance. *$100 invested on December 31, 2020 in stock or index, including reinvestment of dividends.
Issuer 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.
Issuer 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, 2025: 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 1-31 566,245 $ 58.77 564,889 $ 327 November 1-30 1,375,040 63.23 1,372,651 240 December 1-31 1,482 72.51 — $ 240 Total 1,942,767 $ 61.94 1,937,540 ______________________________ (1) During the periods presented, (i) 5,227 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) 1,937,540 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.
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.
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, 2020 and ended December 31, 2025. 54 Tabl e of Contents The Stock Performance Graph assumes that $100 was invested in our common stock and each index, and that all dividends were reinvested.
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.
On January 29, 2026, our Board of Directors declared a quarterly cash dividend of $0.23 per share on our common stock, payable on March 16, 2026, to stockholders of record at the close of business on February 27, 2026.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on the NYSE and trades under the symbol “BFH”.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Factors considered in determining dividends include, but are not limited to, our profitability, expected capital needs and legal, regulatory and contractual restrictions. See also “Risk Factors— There is no guarantee that we will pay future dividends or repurchase shares of our common stock at a level anticipated by stockholders, which could reduce returns to our stockholders. ”.
See also “Risk Factors— There is no guarantee that we will pay future dividends or repurchase shares of our stock at a level anticipated by stockholders, which could reduce returns to our stockholders. ” Subject to these qualifications, we presently expect to continue to pay dividends on a quarterly basis.
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.
Fiscal year end December 31. Copyright© 2025 Standard & Poor’s, a division of S&P Global. All rights reserved. Bread Financial Holdings, Inc.
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.
S&P 500 Index S&P Financials Index December 31, 2020 $ 100.00 $ 100.00 $ 100.00 December 31, 2021 113.87 128.71 135.04 December 31, 2022 65.53 105.40 120.81 December 31, 2023 58.82 133.10 135.49 December 31, 2024 111.09 166.40 176.89 December 31, 2025 136.69 196.16 203.47 Our future filings with the SEC may “incorporate information by reference,” including this Annual Report on Form 10-K.
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.
Market Information Our common stock is listed on the NYSE and trades under the symbol “BFH.” Holders As of February 6, 2026, the closing price of our common stock was $79.53 per share, there were 43,115,116 shares of our common stock outstanding, and there were 86 holders of record of our common stock.
Added
Dividends Payment of future dividends is subject to declaration by our Board of Directors. Factors considered in determining dividends include, but are not limited to, our profitability, expected capital needs and legal, regulatory and contractual restrictions.
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Under the terms of the Series A Preferred Stock, our ability to declare, pay or set aside any payment for dividend or distribution on our common stock, or repurchase, redeem or otherwise acquire for consideration, directly or indirectly, any shares of our common stock, is subject to restrictions in the event that we do not declare and either pay or set aside a sum sufficient for payment of dividends on the Series A Preferred Stock for the immediately preceding dividend period.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest change(13) Reserve rate represents the Allowance for credit losses divided by End-of-period credit card and other loans. 63 Tabl e of Contents Table 5: Net Interest Margin Year Ended December 31, 2025 Average Balance Interest Income / Expense Average Yield / Rate (Millions, except percentages) Cash and investment securities $ 4,232 $ 173 4.08 % Credit card and other loans 17,850 4,739 26.55 % Total interest-earning assets 22,082 4,912 22.24 % Direct-to-consumer (retail) deposits 8,087 349 4.31 % Wholesale deposits 5,252 205 3.91 % Interest-bearing deposits 13,339 554 4.15 % Secured borrowings 3,306 192 5.79 % Unsecured borrowings 1,115 108 9.72 % Interest-bearing borrowings 4,421 300 6.78 % Total interest-bearing liabilities 17,760 854 4.81 % Net interest income $ 4,058 Net interest margin (1) 18.4 % Year Ended December 31, 2024 Average Balance Interest Income / Expense Average Yield / Rate (Millions, except percentages) Cash and investment securities $ 4,116 $ 204 4.96 % Credit card and other loans 18,084 4,820 26.65 % Total interest-earning assets 22,200 5,024 22.63 % Direct-to-consumer (retail) deposits 7,174 349 4.86 % Wholesale deposits 5,919 259 4.38 % Interest-bearing deposits 13,093 608 4.64 % Secured borrowings 3,576 236 6.58 % Unsecured borrowings 1,247 116 9.33 % Interest-bearing borrowings 4,823 352 7.29 % Total interest-bearing liabilities 17,916 960 5.36 % Net interest income $ 4,064 Net interest margin (1) 18.3 % ______________________________ (1) Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. 64 Tabl e of Contents Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures Years Ended December 31, % Change 2025 2024 2023 2025 to 2024 2024 to 2023 (Millions, except per share amounts and percentages) Adjusted net income available to common stockholders Net income available to common stockholders $ 518 $ 277 $ 718 87 (61) Impacts from debt repurchases 57 111 1 (49) nm Adjusted net income available to common stockholders $ 575 $ 388 $ 719 48 (46) Adjusted net income available to common stockholders per diluted share Net income available to common stockholders per diluted share $ 10.89 $ 5.49 $ 14.34 98 (62) Impacts from debt repurchases $ 1.20 $ 2.20 $ 0.02 (46) nm Adjusted net income available to common stockholders per diluted share $ 12.09 $ 7.69 $ 14.36 57 (46) Adjusted income from continuing operations per diluted share Income from continuing operations per diluted share $ 10.96 $ 5.54 $ 14.74 98 (62) Impacts from debt repurchases $ 1.20 $ 2.20 $ 0.02 (46) nm Adjusted income from continuing operations per diluted share $ 12.16 $ 7.74 $ 14.76 57 (48) Adjusted total non-interest expenses Total non-interest expenses $ 1,988 $ 2,060 $ 2,092 (3) (2) Impacts from debt repurchases 74 117 1 (36) nm Adjusted total non-interest expenses 1,914 1,943 2,091 (1) (7) Pretax pre-provision earnings (PPNR) Income from continuing operations before income taxes 615 381 968 61 (61) Provision for credit losses 1,242 1,397 1,229 (11) 14 Pretax pre-provision earnings (PPNR) 1,857 1,778 2,197 4 (19) Less: Gain on portfolio sale (3) (11) (230) (71) (95) Add: Impacts from debt repurchases 74 117 1 (36) nm PPNR excluding gain on portfolio sale and impacts from debt repurchases 1,928 1,884 1,968 2 (4) Average tangible common equity Average total stockholders’ equity 3,293 3,214 2,722 2 18 Less: Average preferred stock (7) — — nm — Less: Average goodwill and intangible assets, net (733) (753) (780) (3) (4) Average tangible common equity 2,553 2,461 1,942 4 27 Tangible common equity (TCE) Total stockholders’ equity 3,327 3,051 2,918 9 5 Less: Preferred stock (71) — — nm — Less: Goodwill and intangible assets, net (716) (746) (762) (4) (2) Tangible common equity (TCE) $ 2,540 $ 2,305 $ 2,156 10 7 ______________________________ (nm) Not meaningful, denoting a variance of 1,000 percent or more. 65 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.
Additionally, we deliver growth for some of the most recognized brands in travel & entertainment, health & beauty, jewelry and specialty apparel through our private label and co-brand credit cards and pay-over-time products providing choice and value to our shared customers.
Additionally, we deliver growth for some of the most recognized brands in travel and entertainment, health and beauty, jewelry and specialty apparel through our private label and co-brand credit cards and pay-over-time products providing choice and value to our shared customers.
(2) Net principal losses and Net principal losses as a percentage of average credit card and other loans for December 31, 2023 and 2022 were impacted by the transition of our credit card processing services in June 2022. CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES Overview We maintain a strong focus on liquidity and capital.
(2) Net principal losses and Net principal losses as a percentage of average credit card and other loans for December 31, 2023 were impacted by the transition of our credit card processing services in June 2022. CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES Overview We maintain a strong focus on liquidity and capital.
For the year ended December 31, 2024, the net cash used in financing activities was primarily driven by net repayments of unsecured borrowings, including our repurchased Convertible Notes, and a net decrease in wholesale deposits, partially offset by the net borrowings of debt issued by consolidated variable interest entities (securitizations).
For the year ended December 31, 2024, the net cash used in financing activities was primarily driven by net repayments of unsecured borrowings, including our repurchased Convertible Notes, and a net decrease in wholesale deposits, partially offset by the net borrowings of debt issued by consolidated variable interest entities.
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.
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 relates to contractual indemnification and tax-related matters.
For additional information refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
For additional information refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
During times where there may be potential risks from adverse developments in the banking industry and/or increased financial sector volatility, we may invoke our contingency funding plan to enhance daily monitoring of our liquidity and funding positions, determine potential mitigating actions if necessary and provide enhanced reporting to our Boards of Directors, at both the Bread Financial and Bank-levels, and regulators.
During times where there may be potential risks from adverse developments in the banking industry and/or increased financial sector volatility, we may invoke our contingency funding plans to enhance daily monitoring of our liquidity and funding positions, determine potential mitigating actions, if necessary, and provide enhanced reporting to our Boards of Directors, at both the Bread Financial and Bank-levels, and regulators.
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.
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 to offset increased costs of employee compensation and other operating expenses impacted by inflation.
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.
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.
Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period includes both the initial impact of our adoption of CECL as of January 1, 2020, and 25% of subsequent changes in our Allowance for credit losses during each quarter of the two-year period ended December 31, 2021.
Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period included both the initial impact of our adoption of CECL as of January 1, 2020, and 25% of subsequent changes in our Allowance for credit losses during each quarter of the two-year period ended December 31, 2021.
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).
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, Raymour & Flanigan, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).
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.
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, subordinated notes, preferred stock 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.
(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.
(11) 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.
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.
BUSINESS ENVIRONMENT This Business Environment section provides an overview of our results of operations and financial position for the year ended December 31, 2025, as well as our related outlook for 2026 and certain of the uncertainties associated with achieving that outlook.
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.
Our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured, subordinated or convertible debt securities and preferred stock 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.
Funding Sources As referenced above, 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.
Funding Sources As referenced above, our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured, subordinated or convertible debt securities and preferred stock by our Parent Company, financings through our securitization programs, and deposits with the Banks.
Our estimate under the Current Expected Credit Loss (CECL) approach involves significant judgments from a modeling and forecasting perspective, and is significantly influenced by the composition, characteristics and quality of our Credit card and other loans portfolio, as well as the prevailing economic conditions and forecasts utilized.
Our estimate under the CECL approach involves significant judgments from a modeling and forecasting perspective, and is significantly influenced by the composition, characteristics and quality of our Credit card and other loans portfolio, as well as the prevailing economic conditions and forecasts utilized.
See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . Total Non-interest Expenses Non-interest expenses: Total non-interest expenses decreased for the year ended December 31, 2024.
See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . Total Non-interest Expenses Non-interest expenses: Total non-interest expenses decreased for the year ended December 31, 2025.
Critical accounting estimates are defined as those that are both most important to the portrayal of our financial position and operating results, and require management’s most subjective judgments, which for us is our Allowance for credit losses, Provision for income taxes and Goodwill impairment.
Critical accounting estimates are defined as those that are both most important to the portrayal of our financial position and operating results, and require management’s most subjective judgments, which for us is our Allowance for credit losses and Goodwill impairment.
On November 20, 2023, following the consent of the Board of Managers of Comenity Servicing LLC (the Servicer), the FDIC issued a consent order to the Servicer. The Servicer is not one of our Bank subsidiaries, but is our wholly-owned subsidiary that services substantially all of our loans.
In November 2023 following the consent of the Board of Managers of Comenity Servicing LLC (the Servicer), the FDIC issued a consent order to the Servicer. The Servicer is not one of our Bank subsidiaries, but is our wholly-owned subsidiary that services substantially all of our loans.
Our primary uses of liquidity are for underwriting Credit card and other loans, scheduled payments of principal and interest on our debt, operational expenses, capital expenditures, including digital and product innovation and technology enhancements, stock repurchases and dividends.
Our primary uses of liquidity are for underwriting Credit card and other loans, scheduled payments of principal and interest on our debt, operational expenses, capital expenditures, including digital and product innovation and technology enhancements, repurchases of equity and debt securities, and payments of dividends.
“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.
“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, 2024, filed with the SEC on February 14, 2025, which discussion is incorporated herein by reference from such prior report on Form 10-K.
This section should be read in conjunction with the other information appearing in this Annual Report on Form 10-K, including “Consolidated Results of Operations”, “Risk Factors”, and “Cautionary Note Regarding Forward-Looking Statements”, which provide further discussion of variances in our results of operations over the periods of comparison, along with other factors that could impact future results and the Company achieving its outlook.
This section should be read in conjunction with the other information appearing in this Annual Report on Form 10-K, including “Consolidated Results of Operations,” “Risk Factors,” and “Cautionary Note Regarding Forward-Looking Statements,” which provide further discussion of variances in our results of operations over the periods of comparison, along with other factors that could impact future results and the Company achieving its outlook.
Our Allowance for credit losses decreased as of December 31, 2024 relative to December 31, 2023, due primarily to lower Credit card and other loans, as well as a modest decrease in the reserve rate over the period.
Our Allowance for credit losses decreased as of December 31, 2025 relative to December 31, 2024, due primarily to lower Credit card and other loans, as well as a decrease in the reserve rate over the period.
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.
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.
Net loss rates for our Credit card and other loans portfolio also have historically exhibited seasonal patterns and generally tend to be the highest in the first quarter of the year.
Net principal loss rates for our Credit card and other loans portfolio also have historically exhibited seasonal patterns and generally tend to be the highest in the first quarter of the year and lowest in the third quarter.
Such risk retention requirements may limit our liquidity by restricting the amount of asset-backed securities we are able to issue or affecting the timing of future issuances of asset-backed securities. We satisfy such risk retention requirements by maintaining a seller’s interest calculated in accordance with Regulation RR.
Such risk retention requirements may limit our liquidity by restricting the amount of asset-backed securities we are able to issue or affecting the timing of future 73 Tabl e of Contents issuances of asset-backed securities. We satisfy such risk retention requirements by maintaining a seller’s interest calculated in accordance with Regulation RR.
The following table provides our net principal losses for the periods presented: Table 8: Net Principal Losses on Credit Card and Other Loans 2024 2023 2022 (Millions, except percentages) Average credit card and other loans $ 18,084 $ 18,216 $ 17,768 Net principal losses (1)(2) 1,489 1,365 968 Net principal losses as a percentage of average credit card and other loans (1)(2) 8.2 % 7.5 % 5.4 % ______________________________ (1) As a result of hurricanes Helene and Milton we froze delinquency progression for cardholders in FEMA identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net principal losses as a percentage of average credit card and other loans in the fourth quarter of 2024, and consequently these actions will negatively impact Net principal losses and Net principal losses as a percentage of average credit card and other loans in the second quarter of 2025.
The following table provides our net principal losses for the periods presented: Table 8: Net Principal Losses on Credit Card and Other Loans 2025 2024 2023 (Millions, except percentages) Average credit card and other loans $ 17,850 $ 18,084 $ 18,216 Net principal losses (1)(2) 1,377 1,489 1,365 Net principal losses as a percentage of average credit card and other loans (1)(2) 7.7 % 8.2 % 7.5 % ______________________________ (1) As a result of hurricanes Helene and Milton we froze delinquency progression for cardholders in FEMA identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net principal losses as a percentage of average credit card and other loans in the fourth quarter of 2024, and consequently these actions negatively impacted Net principal losses and Net principal losses as a percentage of average credit card and other loans in the second quarter of 2025.
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.
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 $184 million in the Allowance for credit losses as of December 31, 2025, with a corresponding change in the Provision for credit losses.
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.
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 80 Tabl e of Contents not necessary.
These transactions are expected generally to reduce potential dilution to our common stock upon any conversion of Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of the Convertible Notes, with such reduction and/or offset subject to a cap, based on the cap price.
At that time, these transactions were expected generally to reduce potential dilution to our common stock upon any conversion of Convertible Notes and/or offset any cash payments we were required to make in excess of the principal amount of the Convertible Notes, with such reduction and/or offset subject to a cap, based on the cap price.
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 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 any persistent effects therefrom, which may result in higher delinquencies and increased credit losses, as reflected in our elevated Reserve rate.
Credit Ratings In November 2023, we obtained credit ratings for our Parent Company from the major credit rating agencies, Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch), in order to facilitate debt financings and broaden the investor base for our Parent Company debt securities.
Credit Ratings We obtain credit ratings for our Parent Company from the major credit rating agencies, Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch), in order to facilitate debt financings and broaden the investor base for our Parent Company debt securities.
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.
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.” 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, each to risk weighted assets.
The Banks adopted the option provided by the interim final rule issued by joint federal bank regulatory agencies, which largely delayed the effects of the current expected credit loss (CECL) model on their regulatory capital for two years, until January 1, 2022, after which the effects are phased-in over a three-year period through December 31, 2024.
The Banks adopted the option provided by the interim final rule issued by joint federal bank regulatory agencies, which largely delayed the effects of the CECL model on their regulatory capital for two years, until January 1, 2022, after which the effects were phased-in over a three-year period through December 31, 2024.
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.
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 new debt securities or other sources of liquidity.
For example, as a result of hurricanes Helene and Milton in 2024 we froze delinquency progression for cardholders in FEMA identified impact zones for one billing cycle. Our modifications, for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced payment 65 Tabl e of Contents requirements, interest rate reductions and late fee waivers.
For example, as a result of hurricanes Helene and Milton in September and October of 2024, respectively, we froze delinquency progression for cardholders in FEMA identified impact zones for one billing cycle. Our modifications, for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced payment requirements, interest rate reductions and late fee waivers.
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).
Credit Agreement In October 2024, we entered into our amended credit agreement with the 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), which matures in October 2028.
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.
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 13: Cash Flows 2025 2024 2023 (Millions) Total cash provided by (used in): Operating activities $ 2,092 $ 1,859 $ 1,987 Investing activities (1,371) (1,169) 788 Financing activities (807) (592) (3,086) Net (decrease) increase in cash, cash equivalents and restricted cash $ (86) $ 98 $ (311) 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.
Net Principal Losses: Our net principal losses include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and third-party fraud losses (including synthetic fraud). Charged-off interest and fees reduce Interest and fees on loans, while third-party fraud losses are recorded in Card and processing expenses.
Net Principal Losses: Our net principal losses include the principal amount of Credit card and other loans that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and third-party fraud losses (including synthetic fraud). 66 Tabl e of Contents Charged-off interest and fees reduce Interest and fees on loans, while third-party fraud losses are recorded in Card and processing expenses.
For the year ended December 31, 2024, the net cash used in investing activities was primarily due to Net principal losses and the purchase of a credit card loan portfolio, partially offset by the paydown of Credit card and other loans and the sale of a credit card loan portfolio.
For the years 75 Tabl e of Contents ended December 31, 2025 and 2024, the net cash used in investing activities was primarily due to Net principal losses, and for the year ended December 31, 2024, the purchase of a credit card loan portfolio, partially offset by the paydown of Credit card and other loans and the sale of a credit card loan portfolio.
We use Adjusted total non-interest expenses , Adjusted net income , and Adjusted earnings per diluted share to evaluate the ongoing operations of the Company excluding the volatility that can occur from the impact of our repurchased Convertible Notes. • Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses.
We use Adjusted total non-interest expenses , Adjusted net income , and Adjusted earnings per diluted share to evaluate the ongoing operations of the Company excluding the volatility that can occur from the impacts of our debt repurchases. • Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses.
In addition, in this report we may refer to the retailers and other companies with whom we do business as our “partners”, “brand partners”, or “clients”, provided that the use of the term “partner”, “partnering” or any similar term does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of Bread Financial’s relationship with any third parties.
In addition, in this report we may refer to the retailers and other companies with whom we do business as our “partners,” “brand partners,” or “clients,” provided that the use of the term “partner,” “partnering” or any similar term does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of Bread Financial’s relationship with any third parties.
Deposits We utilize a variety of deposit products to finance our operating activities, including funding for our non-securitized credit card and other loans, and to fund the securitization enhancement requirements of the Banks.
Deposits The Banks use a variety of deposit products to finance their operating activities, including funding for non-securitized credit card and other loans, and to fund their securitization enhancement requirements.
In connection with the Repurchases, we recognized a $107 million inducement expense in Other non-interest expenses representing the total settlement value, inclusive of transaction fees, in excess of the total conversion value (calculated in accordance with the indenture governing the Convertible Notes), as well as an $88 million reduction in Additional paid-in capital (APIC) related to the total conversion value paid in excess of the carrying value of the Convertible Notes repurchased and a deferred tax impact.
In connection with the repurchases, we recognized a $3 million inducement expense in Other non-interest expenses representing the total settlement value, inclusive of transaction fees, in excess of the total conversion value (calculated in accordance with the indenture governing the Convertible Notes), as well as a $4 million reduction in Additional paid-in capital (APIC) related to the total conversion 69 Tabl e of Contents value paid in excess of the carrying value of the Convertible Notes repurchased and a deferred tax impact.
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.
If the efforts to control inflation in the U.S. and globally are not successful and inflationary pressures continue to persist, including due to changes to, or the imposition of, tariffs and/or trade barriers, they could further increase repayment pressure on consumers as well as the risk of a recessionary environment or stagflation which may adversely impact our business, results of operations and financial condition.
Prior to 2024, average balances represent the average balance at the beginning and end of each month, averaged over the periods indicated. (1) PPNR represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR is a Non-GAAP financial measure.
Prior to 2024, average balances represent the average balance at the beginning and end of each month, averaged over the periods indicated. * Represents a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures . (1) PPNR represents Income from continuing operations before income taxes and the Provision for credit losses.
The following table provides the delinquency trends on our Credit card and other loans portfolio based on the principal balances outstanding as of December 31: Table 7: Delinquency Trends on Credit Card and Other Loans 2024 % of Total 2023 % of Total (Millions, except percentages) Credit card and other loans outstanding ─ principal $ 17,418 100.0 % $ 17,906 100.0 % Outstanding balances contractually delinquent: 31 to 60 days $ 299 1.7 % $ 346 1.9 % 61 to 90 days $ 223 1.3 % $ 250 1.4 % 91 or more days $ 512 2.9 % $ 567 3.2 % Total $ 1,034 5.9 % $ 1,163 6.5 % ______________________________ As part of our collections strategy, we may offer temporary and short term programs in order to improve the likelihood of collections and meet the needs of our customers.
The following table provides the delinquency trends on our Credit card and other loans portfolio based on the principal balances outstanding as of December 31: Table 7: Delinquency Trends on Credit Card and Other Loans 2025 % of Total 2024 % of Total (Millions, except percentages) Credit card and other loans outstanding ─ principal $ 16,886 100.0 % $ 17,418 100.0 % Outstanding balances contractually delinquent: 31 to 60 days 283 1.7 % 299 1.7 % 61 to 90 days 215 1.3 % 223 1.3 % 91 or more days 473 2.8 % 512 2.9 % Total $ 971 5.8 % $ 1,034 5.9 % As part of our collections strategy, we may offer temporary and short term programs in order to improve the likelihood of collections and meet the needs of our customers.
Throughout this report, unless stated or the context implies otherwise, the terms “Bread Financial”, “BFH”, the “Company”, “we”, “our” or “us” refer to Bread Financial Holdings, Inc. and its subsidiaries on a consolidated basis. References to “Parent Company” refer to Bread Financial Holdings, Inc. on a parent-only standalone basis.
Throughout this report, unless stated or the context implies otherwise, the terms “Bread Financial,” “BFH,” the “Company,” “we,” “our” or “us” refer to Bread Financial Holdings, Inc. and its subsidiaries on a consolidated basis. References to “Parent Company” refer to Bread Financial Holdings, Inc. on a parent-only standalone basis.
Both our public term asset-backed notes and borrowings under the Conduit Facilities are included in Debt issued by consolidated VIEs in the Consolidated Balance Sheets. 70 Tabl e of Contents The table below summarizes our conduit capacities, borrowings and maturities for the periods presented: Table 10: Conduit Borrowing Capacity Rollforward and Maturities (Millions) December 31, 2023 Commitment December 31, 2024 Conduit Facilities Capacity Drawn (6) Change Capacity Drawn (6) Maturity Date (7) Comenity Bank WFNMNT 2009-VFN (1) $ 2,650 $ 2,015 $ — $ 2,650 $ 1,955 October 2025 WFNMT 2009-VFC1 (2) 275 260 (275) — 141 — Comenity Capital Bank WFCMNT 2009-VFN (3) 2,250 1,025 — 2,250 867 February 2025 CCAST 2023-VFN1 (4) 250 250 — 250 250 September 2025 CCAST 2024-VFN1 (5) — — 200 200 — February 2025 Total $ 5,425 $ 3,550 $ (75) $ 5,350 $ 3,213 __________________________________ (1) 2009-VFN Conduit issued under World Financial Network Credit Card Master Note Trust (WFNMNT).
Both our public term asset-backed notes and borrowings under the Conduit Facilities are included in Debt issued by consolidated variable interest entities (VIEs) in the Consolidated Balance Sheets. 72 Tabl e of Contents The table below summarizes our conduit capacities, borrowings and maturities for the periods presented: Table 10: Conduit Borrowing Capacity Rollforward and Maturities (Millions) December 31, 2024 Commitment December 31, 2025 Conduit Facilities Capacity Drawn (6) Change Capacity Drawn Maturity Date (7) Comenity Bank WFNMNT 2009-VFN (1) $ 2,650 $ 1,955 $ (900) $ 1,750 $ 1,363 October 2026 WFNMT 2009-VFC1 (2) — 141 — — — — Comenity Capital Bank WFCMNT 2009-VFN (3) 2,250 867 (250) 2,000 712 February 2027 CCAST 2023-VFN1 (4) 250 250 (250) — — — CCAST 2024-VFN1 (5) 200 — (200) — — — Total $ 5,350 $ 3,213 $ (1,600) $ 3,750 $ 2,075 __________________________________ (1) 2009-VFN Conduit issued under World Financial Network Credit Card Master Note Trust (WFNMNT).
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.
The amounts involved may be material. 67 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 the issuance of additional debt or equity securities or engaging in other capital markets or financing transactions.
We use PPNR and PPNR excluding gain on portfolio sale and impact from repurchased Convertible Notes as metrics to evaluate our results of operations before income taxes, excluding the volatility that can occur within Provision for credit losses and the one-time nature of a gain on the sale of a portfolio and/or the impact from repurchased Convertible Notes. • Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations divided by average Tangible common equity.
We use PPNR and PPNR excluding any gain on portfolio sale and impacts from debt repurchases as metrics to evaluate our results of operations before income taxes, excluding the movements that can occur within Provision for credit losses and the one-time nature of a gain on the sale of a portfolio and/or the impacts from debt repurchases. • Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations less Dividends to preferred stockholders, divided by average Tangible common equity.
Given the maturities of certain of our outstanding debt instruments and the macroeconomic outlook, it is possible that we will be required to repay, extend or refinance some or all of our maturing debt in volatile and/or unfavorable markets.
Given the maturities of certain of our outstanding debt instruments and depending on the prevailing macroeconomic conditions, it is possible that we may be required to repay, extend or refinance some or all of our future debt maturities in volatile and/or unfavorable markets.
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.
The Banks seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer. 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.
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.
Our partner base is well diversified across a broad range of industries and retail verticals, including travel and entertainment, specialty apparel, health and beauty, jewelry, sporting goods, technology and electronics, as well as home and furniture.
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.
Before we repurchased 100% of our outstanding Convertible Notes, the Convertible Notes bore 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 were scheduled to mature on June 15, 2028, unless earlier repurchased, redeemed or converted.
(16) Net loss rate, an annualized rate, represents net principal losses for the period divided by Average credit card and other loans for the same period. Net loss rate for the years ended December 31, 2023 and 2022 were impacted by the transition of our credit card processing services in June 2022.
(12) Net principal loss rate, an annualized rate, represents net principal losses for the period divided by Average credit card and other loans for the same period, using an average daily balance calculation methodology. Net principal loss rate for the year ended December 31, 2023 was impacted by the transition of our credit card processing services in June 2022.
The Servicer is committed to complying with the longer-term requirements of the consent order, including the enhancement of its compliance management processes and related corporate governance, compliance with the applicable system conversion requirements, and enhanced risk management and reporting.
The Servicer is committed to complying with the longer-term requirements of the consent order, including the enhancement of its compliance management processes and related corporate governance, compliance with the applicable system conversion requirements, and enhanced risk management and reporting. The Servicer has submitted all required deliverables under the consent order to the FDIC for its review and consideration.
(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.
(10) Payment rate represents consumer payments during the period, divided by the aggregate of the opening monthly Credit card and other loans balances during the period, including held for sale in applicable periods.
(3) Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin. (4) Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Goodwill and intangible assets, net.
(3) Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin. (4) Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations, less Dividends to preferred stockholders, divided by average Tangible common equity.
(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.
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. Adjusted efficiency ratio excludes any gain on portfolio sale and impacts from debt repurchases.
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.
As of December 31, 2025, we had approximately $10.7 billion of securitized credit card loans. Securitizations require credit enhancements in the form of cash, spread deposits, additional loans and/or 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.
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).
Moody’s S&P Fitch Senior unsecured debt Ba2 BB- BB Subordinated debt Ba2 B B+ Preferred stock B1 — B- Outlook Positive Positive Stable 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).
(6) Amounts drawn do not include $1.1 billion and $1.2 billion of debt issued by the Trusts as of December 31, 2024 and 2023, respectively, which were not sold, but were retained by us as a credit enhancement and therefore have been eliminated from the Total.
(6) Amounts drawn do not include $1.1 billion of debt in the form of subordinated notes issued by WFNMNT and WFCMNT as of December 31, 2024, which were not sold, but were retained by us as credit enhancements and therefore have been eliminated from the Total.
Table 4: Summary Financial Highlights – Continuing Operations As of or for the Years Ended December 31, % Change 2024 2023 2022 2024 to 2023 2023 to 2022 (Millions, except per share amounts and percentages) Credit sales $ 26,962 $ 28,900 $ 32,883 (7) (12) PPNR (1) 1,778 2,197 1,894 (19) 16 PPNR excluding gain on portfolio sale and impact from repurchased Convertible Notes (1) 1,874 1,967 1,894 (5) 4 Average credit card and other loans 18,084 18,216 17,768 (1) 3 End-of-period credit card and other loans 18,896 19,333 21,365 (2) (10) End-of-period direct-to-consumer deposits 7,687 6,454 5,466 19 18 Return on average assets (2) 1.3 % 3.3 % 1.0 % (2.0) 2.3 Return on average equity (3) 8.7 % 27.1 % 9.8 % (18.4) 17.3 Return on average tangible common equity (4) 11.4 % 38.0 % 14.2 % (26.6) 23.8 Net interest margin (5) 18.3 % 19.5 % 19.2 % (1.2) 0.3 Loan yield (6) 26.7 % 27.2 % 26.0 % (0.5) 1.2 Efficiency ratio (7) 53.7 % 48.8 % 50.5 % 4.9 (1.7) Double leverage ratio (8) 104.7 % 123.9 % 183.6 % (19.2) (59.7) Common equity tier 1 capital ratio (9) 12.4 % 12.2 % 8.7 % 0.2 3.5 Total risk-based capital ratio (10) 13.8 % 13.6 % 10.1 % 0.2 3.5 Total risk-weighted assets (11) $ 19,928 $ 20,140 $ 22,065 (1.1) (8.7) Tangible common equity / Tangible assets ratio (TCE/TA) (12) 10.4 % 9.6 % 6.0 % 0.8 3.6 Tangible book value per common share (13) $ 46.97 $ 43.70 $ 29.42 7.5 48.5 Payment rate (14) 15.0 % 14.5 % 16.4 % 0.5 (1.9) Delinquency rate (15) 5.9 % 6.5 % 5.5 % (0.6) 1.0 Net loss rate (16) 8.2 % 7.5 % 5.4 % 0.7 2.1 Reserve rate (17) 11.9 % 12.0 % 11.5 % (0.1) 0.5 ______________________________ Note: Beginning in 2024, we revised the calculation of average balances to more closely align with industry practice by incorporating an average daily balance.
Table 4: Summary Financial Highlights – Continuing Operations As of or for the Years Ended December 31, % Change 2025 2024 2023 2025 to 2024 2024 to 2023 (Millions, except per share amounts and percentages) Credit sales $ 27,777 $ 26,962 $ 28,900 3 (7) PPNR * (1) 1,857 1,778 2,197 4 (19) PPNR excluding gain on portfolio sale and impacts from debt repurchases * (1) 1,928 1,884 1,968 2 (4) Average credit card and other loans 17,850 18,084 18,216 (1) (1) End-of-period credit card and other loans 18,805 18,896 19,333 — (2) End-of-period direct-to-consumer (retail) deposits 8,523 7,687 6,454 11 19 Return on average assets (2) 2.4 % 1.3 % 3.3 % 1.1 (2.0) Return on average equity (3) 15.8 % 8.7 % 27.1 % 7.1 (18.4) Return on average tangible common equity * (4) 20.4 % 11.4 % 38.0 % 9.0 (26.6) Net interest margin (5) 18.4 % 18.3 % 19.5 % 0.1 (1.2) Loan yield (6) 26.6 % 26.7 % 27.2 % (0.1) (0.5) Efficiency ratio (7) 51.7 % 53.7 % 48.8 % (2.0) 4.9 Adjusted efficiency ratio (7) 49.8 % 50.8 % 51.5 % (1.0) (0.7) Common equity tier 1 capital ratio (8) 13.0 % 12.4 % 12.2 % 0.6 0.2 Tangible book value per common share * (9) $ 57.57 $ 46.97 $ 43.70 23 7 Cash dividend per common share $ 0.86 $ 0.84 $ 0.84 2 — Payment rate (10) 14.9 % 14.5 % 14.9 % 0.4 (0.4) Delinquency rate (11) 5.8 % 5.9 % 6.5 % (0.1) (0.6) Net principal loss rate (12) 7.7 % 8.2 % 7.5 % (0.5) 0.7 Reserve rate (13) 11.2 % 11.9 % 12.0 % (0.7) (0.1) ______________________________ Note: Beginning in 2024, we revised the calculation of average balances to more closely align with industry practice by incorporating an average daily balance.
(2) 2009-VFC1 Conduit issued under World Financial Network Credit Card Master Trust III (WFNMT). In October 2024, the revolving period of the 2009-VFC1 Conduit expired and the Conduit Facility entered controlled amortization, meaning the period in which principal collections are accumulated to pay down the outstanding principal amount of the notes issued under the Conduit Facility.
(2) 2009-VFC1 Conduit issued under World Financial Network Credit Card Master Trust III (WFNMT) was retired following controlled amortization, meaning the period in which principal collections are accumulated to pay down the outstanding principal amount of the notes issued under the Conduit Facility, in June 2025 pursuant to the termination, consent and waiver agreement.
(3) Total risk-based capital ratio represents total capital divided by total risk-weighted assets. In the calculation of total capital, we follow the Basel III Standardized Approach and therefore tier 1 capital has been increased by tier 2 capital, which for us is the allowable portion of the Allowance for credit losses.
In the calculation of total capital, we follow the Basel III Standardized Approach and therefore tier 1 capital has been increased by tier 2 capital, which for us is comprised of subordinated notes, as well as the allowable portion of the Allowance for credit 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.
Tangible common equity (TCE) represents Total stockholders’ equity reduced by Preferred stock and Goodwill and intangible assets, net. We use ROTCE as a metric to evaluate the Company’s performance. • Tangible book value per common share represents TCE divided by common shares outstanding.
These securitization programs are a principal vehicle through which we finance the Banks’ credit card loans. For this purpose, we use a combination of public term asset-backed notes and private conduit facilities (the Conduit Facilities) with a consortium of lenders, including domestic money center, regional and international banks.
For this purpose, we use a combination of public term asset-backed notes and private conduit facilities (the Conduit Facilities) with a consortium of lenders, including domestic money center, regional and international banks.
(8) Double leverage ratio represents Parent Company investment in subsidiaries divided by BFH consolidated equity. (9) Common equity tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.
(8) Common equity tier 1 capital ratio represents tier 1 capital reduced by Preferred stock divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders ’ equity has been reduced by Goodwill and intangible assets, net.
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.
We have in the past, and may from time to time in the future, retire or repurchase our outstanding debt, including our senior unsecured notes or subordinated notes, through redemptions, cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.
From a GAAP perspective, we paid a premium to induce these repurchases which resulted in an impact to Total non-interest expenses, with a corresponding favorable tax impact, also reflected in Net income and 55 Tabl e of Contents consequently our Earnings per diluted share.
In such transactions, we may pay a premium to induce these repurchases, or in certain cases repurchase at a discount, which, from a GAAP perspective, would result in an impact to Total non-interest expenses, with a corresponding impact also reflected 56 Tabl e of Contents in Net income and consequently our Earnings per diluted share.
From an overall credit quality perspective, our percentage of Vantage 660+ cardholders remains above pre-pandemic levels due to prudent credit tightening and a more diversified product mix, with co-brand and proprietary cards representing a larger proportion of our portfolio. Total non-interest expenses decreased 2% when compared with 2023.
From an overall credit 57 Tabl e of Contents quality perspective, our percentage of cardholders with Vantage scores greater than 660 remains above pre-pandemic levels due to prudent credit management and a more diversified product mix, with co-brand and proprietary cards representing a larger proportion of our portfolio.
Certain of our long-term debt agreements include various restrictive financial and non-financial covenants. If we do not comply with certain of these covenants and an event of default occurs and remains uncured, the maturity of amounts outstanding may be accelerated and become payable, and, with respect to our credit agreement, the associated commitments may be terminated.
If we do not comply with certain of these covenants and an event of default occurs and remains uncured, the maturity of amounts outstanding may be accelerated and become payable, and, with respect to our credit agreement, the associated commitments may be terminated. As of December 31, 2025, we were in compliance with all such covenants.
In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net. See below for a reconciliation of our Total stockholders’ equity under GAAP to tier 1 and tier 2 capital under the Basel III Standardized Approach.
In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders’ equity has been reduced, primarily by Goodwill and intangible assets, net. For us, tier 1 capital is primarily comprised of CET1 capital and Preferred stock.
As of December 31, 2024, our Revolving Credit Facility was undrawn and all $700 million remained available for future borrowings under the Revolving Credit Facility. 68 Tabl e of Contents 4.25% Convertible Senior Notes Due 2028 In June 2023, we issued and sold $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028 (the Convertible Notes).
As of December 31, 2025, our Revolving Credit Facility was undrawn and all $700 million remained available for future borrowings. 7.000% Senior Notes Due 2026 - Redemption In January 2025, with cash on hand, we redeemed the remaining $100 million in aggregate principal amount of our 7.000% Senior Notes due 2026. 4.25% Convertible Senior Notes Due 2028 - Repurchases In June 2023, we issued and sold $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028 (the Convertible Notes).
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.
Based on these regulations, as of December 31, 2025 and 2024, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the 76 Tabl e of Contents minimums required to qualify as well capitalized.
We have shown adjustments to these three financial statement line items, for total Company as well as for continuing operations, to exclude the impact from our repurchased Convertible Notes.
For our prior debt repurchases, we show adjustments to these three financial statement line items, for total Company as well as for continuing operations, to exclude the impacts from our debt repurchases.
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.
Business — Supervision and Regulation — Planned Merger of CB with and into CCB.” The following table provides the actual capital ratios and minimum ratios for the Company, as well as each Bank, as of December 31: Table 14: Capital Ratios Ratio/Dollar Value Minimum Ratio for Capital Adequacy Purposes * Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (Millions, except percentages) 2025 2024 Total Company Common equity tier 1 capital ratio (1) 13.0 % 12.4 % 4.5 % N/A Tier 1 capital ratio (2) 13.4 12.4 6.0 N/A Total risk-based capital ratio (3) 16.8 13.8 8.0 N/A Tier 1 leverage capital ratio (4) 12.4 11.5 4.0 N/A Total risk-weighted assets (5) $ 19,755 $ 19,928 Comenity Bank Common equity tier 1 capital ratio (1) 15.1 % 16.5 % 4.5 % 6.5 % Tier 1 capital ratio (2) 15.1 16.5 6.0 8.0 Total risk-based capital ratio (3) 16.5 17.9 8.0 10.0 Tier 1 leverage capital ratio (4) 14.1 15.3 4.0 5.0 Comenity Capital Bank Common equity tier 1 capital ratio (1) 13.5 % 15.4 % 4.5 % 6.5 % Tier 1 capital ratio (2) 14.1 15.4 6.0 8.0 Total risk-based capital ratio (3) 17.5 16.7 8.0 10.0 Tier 1 leverage capital ratio (4) 13.2 14.3 4.0 5.0 ______________________________ * The listed capital adequacy ratios exclude the Capital Conservation Buffer.
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
See Note 6, “Goodwill and Intangible Assets, Net ” to our audited Consolidated Financial Statements for additional information. 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.

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