BREAD FINANCIAL HOLDINGS INC
For the period ended Mar 31, 2025. Filed Apr 29, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 29, 2025
BFH$101.83-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001101215-24-000224
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)Current report: 10-Q
Period ended 2025-03-31; filed 2025-04-29.
0001101215-25-000080
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 220 previous paragraphs and 205 current paragraphs.
97 unchanged; 79 reworded; 27 added; 40 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 18 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
We are a tech-forward financial services company that provides simple, personalized payment, lending, and saving solutions to millions of U.S. consumers. Our payment solutions, including Bread Financial general purpose credit cards and savings products, empower our customers and their passions for a better life. 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.
Current report
We have continued to diversify our product mix with our brand partners through growth of our co-brand credit card programs, which, relative to our private label credit card programs, have higher credit sales per account and an improved credit risk mix that generally results in higher transactor balances, lower delinquencies and late fees, as well as lower losses. We also offer our proprietary credit cards along with the expansion of our Bread Pay products, which are our installment loans and “split-pay” offerings.
Current report
Total non-interest expenses of $477 million decreased 1% from the first quarter of 2024. The year-over-year decrease was primarily driven by debt extinguishment costs incurred in the first quarter of 2024 and decreased Card and processing expenses due to reduced volume-related card and statement costs, partially offset by increases in Information processing and communication expenses, due to elevated software license renewal costs, and increased Marketing expenses, due to incremental investments associated with our brand partner joint marketing campaigns.
Current report
We continued strengthening our balance sheet during the first quarter of 2025 by completing a $400 million Subordinated Notes offering, which contributed to the increase in our Total risk-based capital ratio of 15.5% as of March 31, 2025. We further optimized our capital structure through our $150 million board authorized share repurchase program, which we commenced in March and completed in April, with a combined total of 3.2 million shares repurchased. We also repurchased $7 million in principal value of our Convertible Notes, leaving only $3 million remaining. Additionally, direct-to-consumer (DTC) deposits increased 13% to $7.9 billion as of March 31, 2025, with average DTC deposits now representing 43% of our total funding, up from 36% a year ago.
Current report
During the first quarter of 2025 we continued to closely monitor the litigation related to the Consumer Financial Protection Bureau (CFPB) credit card late fee rule, which, among other things, would have significantly reduced the safe harbor amount for late fees that credit card issuers are authorized to charge. Industry organizations had previously challenged the final rule in court, and since May 2024 the rule had been subject to an injunction issued by the United States District Court for the Northern District of Texas. On April 15, 2025, the United States District Court for the Northern District of Texas entered an order and final judgement, pursuant to which the CFPB’s credit card late fee rule was vacated. As a result of the rule being vacated, the rule will have no force or effect, and the late fee safe harbor amounts will continue to be set as they were prior to the CFPB’s late fee rulemaking.
Current report
While our industry will benefit from the CFPB's late fee rule having been vacated, as well as from a reduced regulatory environment anticipated under the current Presidential Administration and congressional majorities, risks associated with tariffs, trade policies and inflation may adversely impact consumer strength. The risk of disruption to the economy continues to grow as evidenced by the uncertainty reflected in lower consumer and small business confidence and sentiment.
Current report
In light of the foregoing, our 2025 financial outlook has been adjusted from our original outlook provided in our 2024 Form 10-K, to reflect slower Credit sales growth and slightly higher inflation, but still generally healthy labor markets. With greater anticipated economic volatility, we are prepared for a wide range of scenarios. From an interest rate perspective, our outlook assumes interest rate decreases by the Federal Reserve Board, which will slightly decrease Total net interest income. Our 2025 outlook assumed no late fee reduction related to the CFPB late fee rule, which, as noted above has recently been vacated by the United States District Court.
Current report
Based on an updated range of economic scenarios and expected impacts on consumer spending, our strategic credit tightening actions, higher gross credit losses, and visibility into our new business pipeline and existing partners, we now expect 2025 Average credit card and other loans to be flat to slightly lower relative to 2024. For 2025 compared with 2024, Total net interest and non-interest income, excluding any gains on portfolio sales, a Non-GAAP financial measure, is anticipated to be flat to slightly higher after adjusting for our updated outlook on Average credit card and other loans, as a result of our implemented pricing actions, partially offset by factors such as: (i) expected interest rate decreases by the Federal Reserve Board, which impact us due to our slight asset sensitivity and lagged cost of funds impacts, (ii) our continued shift in risk mix, from improving credit quality, and therefore lower delinquencies and consequently lower late fees, and (iii) the shift in our product mix, to co-brand, proprietary, and installment lending products, leading to lower finance charges and late fees.
Current report
As a result of efficiencies gained from our ongoing operational excellence initiatives, along with disciplined expense management and prudent investments, in 2025 we expect to generate nominal positive operating leverage excluding any gains on portfolio sales and the pretax impacts from our repurchased Convertible Notes, a Non-GAAP financial measure.
Current report
Our 2025 financial outlook continues to assume a full year Net principal loss rate ranging from 8.0% to 8.2%. As a result of hurricanes Helene and Milton in September and October 2024, respectively, we froze delinquency progression for cardholders in Federal Emergency Management Agency (FEMA) identified impact zones for one billing cycle, which is estimated to negatively impact second quarter of 2025 net credit losses by approximately $13 million.
Current report
We remain focused on responsible growth, disciplined capital allocation, and continued execution on our operational excellence efforts, while maintaining flexibility to adapt to changing fiscal and monetary policies, and the regulatory landscape. We are well-positioned to generate additional capital, deliver strong returns, and create sustainable, long-term value for our shareholders.
Current report
•Other increased due primarily to our implemented pricing actions, including paper statement fees, which we began assessing in the second quarter of 2024.
Current report
Provision for credit losses decreased during the three months ended March 31, 2025, with a $69 million reserve release in the current year period compared with a $73 million reserve release in the prior year period. The reserve releases in both periods were offset by net principal losses of $365 million and $394 million during those same respective periods. Our reserve rate was 12.2% as of March 31, 2025, reflecting appropriately prudent weightings on the economic scenarios in our credit reserve modeling to ensure the adequacy of our Allowance for credit losses given the wide range of potential macroeconomic outcomes.
Current report
•Information processing and communication increased due primarily to elevated software license renewal costs.
Current report
•Marketing expenses increased due primarily due to incremental investments associated with our brand partner joint marketing campaigns.
Current report
•Other decreased due primarily to debt extinguishment costs in the first quarter of 2024.
Current report
(1)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets.
Current report
(1)Does not include our Series 2024-B public asset-backed-notes.
Current report
During the first quarter of 2025, we engaged in a number of financing-related transactions, including the repurchase of another portion of our 4.25% Convertible Senior Notes due 2028, and redeeming the remaining $100 million in aggregate principal amount of our 7.000% Senior Notes due 2026, in each case with cash on hand. In addition, we closed on our offering of $400 million aggregate principal amount of 8.375% Fixed-Rate Reset Subordinated Notes due 2035. Each of these transactions, as well as other matters relating to our liquidity and capital resources during the first quarter, are described in more detail below.
Current report
7.000% Senior Notes due 2026
Current report
In January 2025, with cash on hand we redeemed the remaining $100 million in aggregate principal amount of our Senior Notes due 2026.
Current report
8.375% Subordinated Notes Due 2035
Current report
In March 2025, we issued and sold $400 million aggregate principal amount of 8.375% Fixed-Rate Reset Subordinated Notes due June 2035 (the Subordinated Notes). The Subordinated Notes were issued pursuant to an indenture between the Company and U.S. Bank Trust Company, National Association, as trustee. The Subordinated Notes accrue interest on the outstanding principal amount (i) at a rate per annum equal to 8.375% from, and including, March 10, 2025, to, but excluding, June 15, 2030 (the Reset Date), and (ii) from, and including, the Reset Date to, but excluding, the maturity date at a rate per annum equal to the Five-Year U.S. Treasury Rate as of the date that is two business days prior to the Reset Date, plus 430 basis points. Interest on the Subordinated Notes is payable semiannually in arrears in June and December of each year, beginning in June 2025. The Subordinated Notes will mature in June 2035, unless earlier repurchased or redeemed.
Current report
We used $250 million of the net proceeds from the Subordinated Notes offering to enter into a subordinated promissory note between Parent Company, as lender, and Comenity Capital Bank, as borrower, on terms substantially the same as those of the Subordinated Notes. The subordinated promissory note is eliminated in consolidation.
Current report
Table 9: Interest-bearing Deposits
Current report
(7)Maturity Date with respect to conduit borrowings means the date on which the revolving period for the applicable Conduit Facility expires. The revolving period may be extended or renewed (unless an early amortization event occurs prior to the Maturity Date). Absent the extension or renewal of the revolving period, the Conduit Facility shall enter controlled amortization on the Maturity Date and may no longer be drawn upon.
Current report
•global political and public health events and conditions, including significant shifts in trade policy, such as changes to, or the imposition of, tariffs and/or trade barriers and any economic impacts, volatility, uncertainty and geopolitical instability resulting therefrom, as well as ongoing wars and military conflicts and natural disasters;
Removed paragraphs (40)
Previous report
We are a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions. We create opportunities for our customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, we deliver growth for our partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later (BNPL) products such as installment loans and our “split-pay” offerings. We also offer direct-to-consumer solutions that give customers more access, choice and freedom through our branded Bread Cashback®American Express® Credit Card, Bread Rewards TM American Express® Credit Card and Bread Savings® products.
Previous report
•In August and again in September 2024, we entered into separate, privately negotiated repurchase agreements with a limited number of convertible note holders to repurchase a portion of our outstanding $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028 (the Convertible Notes). From a GAAP perspective, we paid a premium to induce these repurchases which resulted in an impact to non-interest expenses. This aggregate $96 million impact is reflected in Total non-interest expenses, with a corresponding $5 million favorable tax impact, also reflected in Net income and consequentially our Earnings per diluted share. 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. We use Adjusted total non-interest expenses, Adjusted net income, and Adjusted earnings per diluted share to more clearly evaluate the ongoing operations of the Company.
Previous report
•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. We use TCE/TA as a metric to evaluate the Company’s capital adequacy and estimate its ability to absorb losses.
Previous report
Total non-interest expenses of $574 million increased 14% from the third quarter of 2023. The year-over-year increase was primarily driven by the impact from our repurchased Convertible Notes, which increased Total non-interest expenses by $96 million. Excluding the impact from our repurchased Convertible Notes, Adjusted total non-interest expenses, a Non-GAAP financial measure, decreased 5% from the third quarter of 2023, driven by a decrease in Card and processing expenses, including fraud, partially offset by an increase in Employee compensation and benefits expense due to higher short-term and long-term incentive compensation.
Previous report
We continued strengthening our balance sheet during the third quarter of 2024, by reducing debt and dilution risk, while growing our Common equity tier 1 capital ratio to 13.3% as of September 30, 2024, a 40 basis points improvement year-over-year. Additionally, DTC deposits increased to $7.5 billion as of September 30, 2024, with average DTC deposits now representing 41% of our total funding, up from 35% a year ago.
Previous report
During the third quarter of 2024 we made further progress with the implementation of our mitigation strategy in response to the final rule on credit card late fees published by the Consumer Financial Protection Bureau (CFPB). Industry organizations have challenged the final rule in court, and the ultimate outcome of such challenge, including the impact on the final rule, is uncertain. The final rule had an original effective date of May 14, 2024; however, on May 10, 2024, the United States District Court for the Northern District of Texas granted an injunction and stay of the final rule, and the injunction granted remains in effect as of the date of this report. We are closely monitoring the ongoing litigation related to the rule, but also continue to execute on our mitigation strategy given the uncertainty surrounding the timing and outcome. Because of that uncertainty, our full year 2024 financial outlook assumes the final rule does not take effect this year. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Business Environment” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 for our 2024 financial outlook inclusive of impacts from the CFPB's final rule on credit card late fees.
Previous report
Our 2024 financial outlook reflects slower Credit sales growth as a result of continued moderation in consumer spending and strategic credit tightening, both of which consequently will impact growth in Credit card and other loans and Net interest and non-interest income, as well as the Net loss rate. In addition, our 2024 outlook assumes ongoing interest rate decreases by the Federal Reserve Board, which will slightly decrease Total net interest income.
Previous report
Based on our current economic outlook, strategic credit tightening actions, higher gross credit losses, and visibility into our new business pipeline, we expect 2024 Average credit card and other loans to be down low-single digits on a percentage point basis relative to 2023. Total net interest and non-interest income, excluding the gains on portfolio sales during the years of comparison, is anticipated to be down in the low- to mid-single digits on a percentage point basis from 2023, with full year Net interest margin expected to be lower than 2023 reflecting higher reversals of interest and fees due to expected higher gross credit losses, declining interest rates, and a continued shift in product mix to co-brand and proprietary products.
Previous report
As a result of efficiencies gained from our ongoing investments in technology modernization and digital advancement, along with disciplined expense management, we expect Total non-interest expenses excluding the impact from our repurchased Convertible Notes, a Non-GAAP financial measure, to be down mid-single digits on a percentage point basis relative to 2023. Total non-interest expenses are projected to be higher sequentially in the fourth quarter of 2024 compared with the third quarter’s Adjusted total non-interest expenses, a Non-GAAP financial measure, due to higher sales volumes and marketing expenses.
Previous report
Our 2024 financial outlook continues to assume a full year Net loss rate in the low 8% range. As a result of the recent hurricanes we have frozen delinquency progression for cardholders in Federal Emergency Management Agency identified impact zones, which will result in a modest shift of approximately $10 million in net credit losses from the fourth quarter of 2024 to the second quarter of 2025, and therefore a slightly lower net loss rate in the fourth quarter and consequently an offsetting higher net loss rate in the second quarter of 2025.
Previous report
We remain disciplined in our commitment to our capital priorities and are confident in our ability to adapt our business to potential regulatory and economic changes while achieving strong financial results.
Previous report
(2)Adjusted for the impact from our repurchased Convertible Notes, and therefore represent Non-GAAP financial measures. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Previous report
(nm) Not meaningful, denoting a variance of 1,000 percent or more.
Previous report
•Gain on portfolio sale reflects the gain we recognized from the sale of a credit card loan portfolio in April 2024, that was adjusted during the three months ended September 30, 2024 to recognize an incremental amount due under the purchase and sale agreement. For 2023, we recognized a gain from the sale of the BJ's Wholesale Club (BJ’s) portfolio in late February 2023.
Previous report
Provision for credit losses increased during the three months ended September 30, 2024, driven by a $22 million reserve build in the current year period compared with a flat reserve build in the prior year period. The increase in Provision for credit losses also includes net principal losses of $347 million and $304 million during those same respective periods. Provision for credit losses increased during the nine months ended September 30, 2024, driven by a $142 million reserve release in the current year period compared with a $251 million reserve release in the prior year period, with the release in the prior year period primarily related to the sale of the BJ's portfolio. The reserve releases in both years were offset by net principal losses of $1,122 million and $998 million during those same respective periods. Overall, we continue to maintain an elevated reserve rate, 12.2% as of September 30, 2024, reflecting a conservative weighting of economic scenarios in our credit reserve modeling, which we intend to maintain until we see sustained improvement in delinquencies and an improved macroeconomic outlook.
Previous report
(1)Adjusts Total non-interest expenses for the $96 million impact from our repurchased Convertible Notes, included in Other, and therefore represents a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Previous report
•Employee compensation and benefits increased in both the three and nine month periods due to higher short-term and long-term incentive compensation, partially offset by ongoing strategic adjustments in customer care staffing, as well as a reduction in demand-based outsourced and contract labor.
Previous report
•Marketing expenses were essentially flat during the three month period and decreased during the nine month period due primarily to decreased spending associated with brand partner and BFH joint marketing campaigns, partially offset by higher spending associated with DTC product offerings.
Previous report
•Depreciation and amortizationwas essentially flat during the three month period and decreased during the nine month period due to lower amortization for developed technology associated with an acquisition completed in late 2020.
Previous report
•Other increased in both the three and nine month periods primarily related to the impact from our repurchased Convertible Notes; excluding that impact Other expenses decreased in both periods of comparison due to decreased legal and other business activity costs.
Previous report
Note: Beginning in 2024, we revised the calculation of average balances to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, average balances represent the average balance at the beginning and end of each month, averaged over the periods indicated.
Previous report
(8)Double leverage ratio represents Parent Company investment in subsidiaries divided by BFH consolidated equity.
Previous report
(12)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. TCE/TA is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Previous report
(1)Beginning in 2024, we revised the calculation of average balances to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, average balances represent the average balance at the beginning and end of each month, averaged over the periods indicated.
Previous report
(nm) Not meaningful, denoting a variance of 1,000 percent or more.
Previous report
(1)Net principal losses as a percentage of Average credit card and other loans for the three and nine months ended September 30, 2023 were impacted by the transition of our credit card processing services in June 2022.
Previous report
On October 18, 2024, we amended our Revolving Credit Facility to extend the maturity date from June 13, 2026 to October 18, 2028, as well as to delete the provisions relating to our prior term loan facility (which was repaid in full and terminated in December 2023) and make certain other amendments.
Previous report
In August 2024 we entered into separate, privately negotiated repurchase agreements with a limited number of Convertible Note holders to repurchase $238 million aggregate principal amount of our outstanding Convertible Notes for a final aggregate cash repurchase price of $374 million, which was funded with cash on hand. The final aggregate cash repurchase price, or settlement value, was subject to adjustment as a portion of the repurchase price for select repurchases was based in part on the daily volume-weighted average price per share of Parent Company’s common stock over an agreed measurement period beginning in August 2024 and ending in September 2024. In connection with these aggregate repurchases, we recognized an $87 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 $60 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.
Previous report
In summary, in total through August and September 2024, we recognized a $96 million inducement expense in Other non-interest expenses representing the settlement value, inclusive of transaction fees, in excess of the conversion value, and a $67 million reduction in APIC representing the excess of the conversion value over the carrying value of the Convertible Notes repurchased and a deferred tax impact.
Previous report
Beginning on October 1, 2024, the Convertible Notes became convertible at the option of the holders during the quarterly period ending December 31, 2024, due to the last reported sales price per share of Parent Company’s common stock having exceeded 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding quarter i.e., the quarter ended September 30, 2024 (the Common Stock Sale Price Condition). The Common Stock Sale Price Condition is remeasured each quarter, so the Convertible Notes may continue or cease to be convertible in future quarters depending on the performance of our stock price. Upon any such conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock (at our election), in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. As of the date of this report, we have not received any conversion requests.
Previous report
9.750% Senior Notes due 2029
Previous report
In January 2024, we issued and sold an additional $300 million aggregate principal amount of 9.750% Senior Notes due 2029 (Senior Notes due 2029) at an issue price of 101.00% of principal plus accrued interest from December 22, 2023. The Senior Notes due 2029 issued in January 2024 were issued as additional notes under the same indenture pursuant to which the initial $600 million of Senior Notes due 2029 were issued on December 22, 2023. The Senior Notes due 2029 that were issued in both December 2023 and January 2024 constitute a single series of notes and have the same terms, other than the issue date and issue price. We used the proceeds of the January 2024 offering of Senior Notes due 2029, together with $100 million of cash on hand, to fund the redemption of $400 million in aggregate principal amount of our outstanding 7.000% Senior Notes due 2026.
Previous report
Table 9: Deposits
Previous report
Overall, we continue to improve our funding mix through actions taken to grow our DTC deposits and reduce our Parent Company unsecured borrowings, while maintaining the flexibility of secured, unsecured, and wholesale funding. Typical seasonality of credit card and other loan balance pay downs in the first quarter of each year, and efforts undertaken in 2024 to reduce our long-term unsecured debt, lowered our funding requirements by approximately $1.5 billion from year-end 2023. As a result, we opportunistically reduced our wholesale and brokered deposits, repurchased a portion of our outstanding Convertible Notes and paid down a portion of our secured conduit line balances, shown further below.
Previous report
In May 2024, WFNMNT issued $570 million of Series 2024-A public term asset-backed notes, which mature in April 2027. The offering consisted of $500 million of Class A notes with a fixed interest rate of 5.47% per year, $44 million of zero coupon Class M notes, and $26 million of zero coupon Class B notes. The Class M and B notes were retained by us and eliminated from the Consolidated Balance Sheet. As well, in August 2024 WFNMNT issued $500 million of Series 2024-B public term asset-backed notes, which mature in July 2027. The offering consisted of $500 million of Class A notes with a fixed interest rate of 4.62% per year.
Previous report
As referenced above, our business is subject to extensive federal and state laws and regulations, as well as related regulation and supervision, including by the FDIC, CFPB and other federal and state authorities. Pending and future laws and regulations (state and federal) may adversely impact our business. We actively monitor legislation and rulemaking that could impact our business and operations, including the FDIC’s proposed rulemakings during the quarter. Among other rulemakings, in August 2024 the FDIC issued (i) proposed rule changes that would expand the scope of deposits that constitute “brokered deposits,” which are subject to greater regulatory requirements (the Proposed Brokered Deposits Rule), and (ii) proposed rule changes that would permit the FDIC to determine that parent companies of legacy industrial banks/loan companies (such as CCB) are “covered companies” subjecting them to regulation by the FDIC (the Proposed ILC Parent Company Rule). We have submitted a comment letter to the FDIC in opposition to the Proposed ILC Parent Company Rule, and we intend to participate in the comment letter process in opposition to the Proposed Brokered Deposits Rule.
Previous report
(1)Includes the impact of the CECL phase-in adjustment and the cumulative effect, net of tax, of adopting the proportional amortization method of accounting for our tax credit investment.
Previous report
On August 22, 2024, each Bank entered into an agreement with the FDIC to pay civil money penalties (CMPs) of $1 million per Bank. The CMPs arose out of the June 2022 transition of our credit card processing services to strategic outsourcing partners and were related to disruptions to the Banks’ customer reward programs and automatic payments following the transition. These issues were self-identified and remediated timely, and the Banks provided full cooperation with the regulators throughout their examination. The Banks’ agreements to pay the CMPs did not require admission of wrongdoing, and there are no operational limitations on the Banks or our business associated with the CMPs.
Previous report
•global political, market, public health and social events or conditions, including ongoing wars and military conflicts and natural disasters;
Previous report
•continued financial responsibility with respect to a divested business, including required equity ownership, guarantees, indemnities or other financial obligations;
Reworded paragraphs (79)
Previous wording
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with the unaudited Consolidated Financial Statements and related notes thereto presented in this quarterly report and the audited Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the SEC) on February 20, 2024 (the 2023 Form 10-K). Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this report. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those identified in our other filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our 2023 Form 10-K and this and our other Quarterly Reports on Form 10-Q.
Current wording
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with the unaudited Consolidated Financial Statements and related notes thereto presented in this quarterly report and the audited Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the SEC) on February 14, 2025 (the 2024 Form 10-K). Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this report. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those identified in our other filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our 2024 Form 10-K and this Quarterly Report on Form 10-Q.
Previous wording
Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs). Our partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which we first began, specialty apparel. We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers). The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships. We operate our business through a single reportable segment, with our primary source of revenue being from Interest and fees on loans from our various credit card and other loan products, and to a lesser extent from contractual relationships with our brand partners.
Current wording
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 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. We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers). The breadth and quality of our product and service offerings, coupled with our customer-centric approach, have enabled us to establish and maintain long-standing partner relationships. We operate our business through a single reportable segment, with our primary source of revenue being from Interest and fees on loans from our various credit card and other loan products, and to a lesser extent from contractual relationships with our brand partners.
Previous wording
We prepare our audited Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included herein constitutes Non-GAAP Financial
Current wording
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included herein constitutes Non-GAAP Financial
Previous wording
•Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR excluding gain on portfolio sale and impact from repurchased Convertible Notes then excludes from PPNR the gain on any portfolio sale in the period, as well as the inducement expense from our repurchased Convertible Notes in the period. 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.
Current wording
•Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses. We use PPNR as a metric to evaluate our results of operations before income taxes, excluding the volatility that can occur within Provision for credit losses.
Previous wording
This Business Environment section provides an overview of our results of operations and financial position for the third quarter of 2024, as well as our related outlook for the remainder of 2024 and certain of the uncertainties associated with achieving that outlook. This section should be read in conjunction with the other information included or incorporated by reference in this Form 10-Q, including “Consolidated Results of Operations”, “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” herein, and in our 2023 Form 10-K as well as our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, 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. Unless otherwise specified, the discussion included herein is for the three months ended September 30, 2024, compared with the same period in the prior year.
Current wording
This Business Environment section provides an overview of our results of operations and financial position for the first quarter of 2025, as well as our related outlook for the remainder of 2025 and certain of the uncertainties associated with achieving that outlook. This section should be read in conjunction with the other information included or incorporated by reference in this Form 10-Q, including “Consolidated Results of Operations”, “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” herein, and in our 2024 Form 10-K, 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. Unless otherwise specified, the discussion included herein is for the three months ended March 31, 2025, compared with the same period in the prior year.
Previous wording
Credit sales of $6.5 billion were down 3% year-over-year reflecting self-moderated consumer spending and strategic credit tightening, partially offset by new brand partner growth. Average credit card and other loans of $17.8 billion increased 1%, also driven primarily by new brand partner growth, as well as a stabilizing consumer spending trend. End-of-period credit card and other loans of $17.9 billion were flat year-over-year. Total interest income was down 2% from the third quarter of 2023, primarily as a result of lower Interest and fees on loans due to decreased late fees driven by lower early-stage delinquency volumes, our gradual shift in product mix to a lower proportion of private label accounts which tend to have higher late fees, and higher reversals of interest and fees resulting from higher gross credit losses; all partially offset by Interest on cash and investment securities. Net interest margin for the third quarter of 2024 was 18.8%, relative to 20.6% for the third quarter of 2023, driven by decreased late fees and higher funding costs, particularly with direct-to-consumer (DTC) deposits. Year-over-year, Non-interest income decreased $3 million, primarily driven by a decrease in the current year in merchant discount fees resulting from lower “big ticket” credit sales. Overall, Total net interest and non-interest income for the quarter was $983 million, down 5% versus the third quarter of 2023.
Current wording
Credit sales of $6.1 billion were up 1% year-over-year driven by higher general-purpose spending and overall transaction volume as consumer financial health remained relatively steady, reflected in our stable to improving credit metrics, and consumers likely advanced certain purchases ahead of potential price increases. Average credit card and other loans of $18.2 billion, and End-of-period credit card and other loans of $17.8 billion, both decreased 2% primarily due to the macroeconomic environment throughout 2024 driving lower consumer spending, higher gross losses, as well as our ongoing strategic credit tightening. Total interest income was down 5% from the first quarter of 2024, primarily as a result of lower late fees, driven both by lower early-stage delinquency volumes and from our gradual shift in product mix to a lower proportion of private label accounts which tend to have higher late fees, in addition to lower Average credit card and other loans balances, offset by lower reversals of fees resulting from lower gross credit losses. Net interest margin for the first quarter of 2025 was 18.1%, relative to 18.7% for the first quarter of 2024, driven primarily by decreased late fees. Our Net interest margin trends continue to be impacted by a lower average prime rate, our gradual shift in product mix toward co-brand cards and lower billed late fees, partially offset by the ongoing implementation of pricing actions, such as increases to annual percentage rates. Year-over-year, Non-interest income increased $25 million, primarily driven by our implemented pricing actions, inclusive of paper statement fees, as well as a reduction in costs associated with brand partner retailer share arrangements, offset by a decrease in merchant discount fees from lower “big ticket” credit sales. We intend to maintain our various implemented pricing actions and policies to ensure appropriate risk-based returns and a competitive value proposition for our cardholders. Overall, Total net interest and non-interest income for the quarter was $970 million, down 2% versus the first quarter of 2024.
Previous wording
Provision for credit losses increased for the quarter ended September 30, 2024, relative to the third quarter of 2023, driven by a $22 million reserve build in the current year period compared with a flat reserve build in the prior year period. The increase in Provision for credit losses also includes net principal losses of $347 million and $304 million during those same respective periods.
Current wording
Provision for credit losses decreased for the quarter ended March 31, 2025, relative to the first quarter of 2024, with a $69 million reserve release in the current year period compared with a $73 million reserve release in the prior year period. The reserve releases were offset by net principal losses of $365 million and $394 million during those same respective periods.
Previous wording
Our Allowance for credit losses decreased as of September 30, 2024, relative to December 31, 2023, due primarily to lower Credit card and other loans balances, which are down from their seasonal peak at the beginning of 2024, partially offset by the increased reserve rate. Overall, we continue to maintain an elevated reserve rate, 12.2% as of September 30, 2024, reflecting a conservative weighting of economic scenarios in our credit reserve modeling, which we intend to maintain until we see sustained improvement in delinquencies and an improved macroeconomic outlook. 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.
Current wording
Our Allowance for credit losses decreased as of March 31, 2025, relative to December 31, 2024, due primarily to a lower Credit card and other loans balance, as seasonally higher transactor balances from the fourth quarter of 2024 were paid down in the first quarter of 2025. Our reserve rate was 12.2% as of March 31, 2025, reflecting appropriately prudent weightings on the economic scenarios in our credit reserve modeling to ensure the adequacy of our Allowance for credit losses given the wide range of potential macroeconomic outcomes. From an overall credit quality perspective, our percentage of Vantage 660+ cardholders continues to remain 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.
Previous wording
In our 2024 financial outlook, we also expect our full year normalized effective tax rate, excluding the impact from our repurchased Convertible Notes, a Non-GAAP financial measure, to be in the range of 25% to 26%, with quarter-over-quarter variability due to the timing of certain discrete items.
Current wording
In our 2025 financial outlook, we also continue to expect our full year normalized effective tax rate to be in the range of 25% to 26%, with quarter-over-quarter variability due to the timing of certain discrete items.
Previous wording
The following discussion provides commentary on the variances in our results of operations for the three and nine months ended September 30, 2024, compared with the same periods in the prior year, as presented in the accompanying tables. This discussion should be read in conjunction with the discussion under “Business Environment” above.
Current wording
The following discussion provides commentary on the variances in our results of operations for the three months ended March 31, 2025, compared with the same period in the prior year, as presented in the accompanying tables. This discussion should be read in conjunction with the discussion under “Business Environment” above.
Previous wording
(3)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin.
Current wording
(2)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin.
Previous wording
(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. ROTCE is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Current wording
(3)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. ROTCE is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Previous wording
Interest income: Total interest income decreased for the three and nine months ended September 30, 2024, due to the following:
Current wording
Interest income: Total interest income decreased for the three months ended March 31, 2025, due to the following:
Previous wording
•Interest and fees on loans decreased during the three and nine months ended September 30, 2024, due primarily to lower late fees driven by lower early-stage delinquency volumes and from our gradual shift in product mix to a lower proportion of private label accounts, as well as higher reversals of interest and fees resulting from higher gross credit losses; collectively decreasing finance charge and late fee yields by approximately 124 basis points and 13 basis points, respectively.
Current wording
•Interest and fees on loans decreased due primarily to lower late fees, driven both by lower early-stage delinquency volumes and from our gradual shift in product mix to a lower proportion of private label accounts, in addition to lower Average credit card and other loans balances, offset by lower reversals of fees resulting from lower gross credit losses; collectively decreasing finance charge and late fee yields by approximately 58 basis points.
Previous wording
•Interest on cash and investment securities increased during the three and nine months ended September 30, 2024, partially offsetting the decrease in Interest and fees on loans, due to higher average balances which increased interest income by $9 million and $16 million, respectively, as well as, during the nine month period, higher average interest rates which increased interest income by $9 million.
Current wording
•Interest on cash and investment securities decreased due to lower average interest rates which decreased interest income by $11 million, partially offset by higher average balances which increased interest income by $4 million.
Previous wording
Interest expense: Total interest expense increased for the three and nine months ended September 30, 2024, due to the following:
Current wording
Interest expense: Total interest expense decreased for the three months ended March 31, 2025, due to the following:
Previous wording
•Interest on deposits increased due to higher average interest rates which increased interest expense by $14 million and $76 million over the respective periods of comparison, partially offset by lower average wholesale deposit balances, which decreased funding costs by $4 million and $2 million over the respective periods of comparisons.
Current wording
•Interest on deposits decreased due to lower average interest rates which decreased interest expense by $11 million and lower average wholesale deposit balances, which decreased funding costs by $6 million.
Previous wording
•Interest on borrowings increased during the three month period due to higher average borrowings which increased funding costs by $7 million, as well as higher average interest rates which increased funding costs by $4 million. Whereas during the nine month period, Interest on borrowings increased due to higher average interest rates which increased funding costs by $38 million, partially offset by lower average borrowings which decreased funding costs by $24 million.
Current wording
•Interest on borrowings decreased due to lower average interest rates which decreased funding costs by $10 million, partially offset by higher average borrowings which increased funding costs by $4 million.
Previous wording
Non-interest income: Total non-interest income decreased for the three and nine months ended September 30, 2024, due to the following:
Current wording
Non-interest income: Total non-interest income increased for the three months ended March 31, 2025, due to the following:
Previous wording
•Interchange revenue, net of retailer share arrangements, typically a contra-revenue item for us, increased for the three and nine month periods driven by a decrease in merchant discount fees, from lower “big ticket” credit sales, and interchange revenue earned, partially offset by a reduction in costs associated with brand partner retailer share arrangements.
Current wording
•Interchange revenue, net of retailer share arrangements, typically a contra-revenue item for us, decreased due to a reduction in costs associated with brand partner retailer share arrangements, offset by a decrease in merchant discount fees from lower “big ticket” credit sales.
Previous wording
Non-interest expenses: Total non-interest expenses increased for the three month ended September 30, 2024 and decreased for the nine months ended September 30, 2024. Adjusted total non-interest expenses, which represents a Non-GAAP financial measure and has been adjusted for the $96 million impact from our repurchased Convertible Notes, decreased in both periods of comparison.
Current wording
Non-interest expenses: Total non-interest expenses decreased for the three months ended March 31, 2025, due to the following:
Previous wording
•Card and processing expenses decreased in both the three and nine month periods due primarily to lower fraud losses, as well as reduced volume-related card and statement costs.
Current wording
•Card and processing expenses decreased due primarily to reduced volume-related card and statement costs.
Previous wording
The Provision for income taxes decreased for the three months ended September 30, 2024 primarily driven by a decrease in Income from continuing operations before income taxes. The effective tax rate was 92.2% and 23.0% for the three month periods ended September 30, 2024 and 2023, respectively. The increase in the effective tax rate resulted from an increase in nondeductible items in the current year period, primarily related to the nondeductible portion of our repurchased Convertible Notes transactions, and a favorable discrete item in the prior year period. The Provision for income taxes decreased for the nine months ended September 30, 2024 primarily driven by a decrease in Income from continuing operations before income taxes in the current year relative to the prior year period, which itself was higher due to the gain on the sale of the BJ's portfolio. The effective tax rate was 33.4% and 27.1% for the nine month periods ended September 30, 2024 and 2023, respectively. The increase in the effective tax rate was also driven primarily by an increase in nondeductible items in the current year period related to the nondeductible portion of our repurchased Convertible Notes transactions.
Current wording
The Provision for income taxes increased for the three months ended March 31, 2025, compared with the three months ended March 31, 2024, primarily driven by an increase in Income from continuing operations before income taxes in the current year period relative to the prior year period. The effective tax rate was 28.1% for each of the three-month periods.
Previous wording
(1)PPNR represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR is a Non-GAAP financial measure. PPNR excluding gain on portfolio sale and impact from repurchased Convertible Notes excludes from PPNR the gain on any portfolio sale in the period, as well as the impact from our repurchased Convertible Notes in the period, and is also a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Current wording
(1)PPNR represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Previous wording
(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. For additional information, see “Legislative, Regulatory Matters and Capital Adequacy” included elsewhere in this report.
Current wording
(8)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. For additional information, see “Legislative, Regulatory Matters and Capital Adequacy” included elsewhere in this report.
Previous wording
(13)Tangible book value per common share represents TCE divided by shares outstanding and is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Current wording
(9)Tangible book value per common share represents TCE divided by shares outstanding and is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Previous wording
(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.
Current wording
(10)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.
Previous wording
(15)Delinquency rate represents outstanding balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, divided by the outstanding principal amount of Credit card and other loans as of the same period-end.
Current wording
(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.
Previous wording
(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 three and nine months ended September 30, 2023 was impacted by the transition of our credit card processing services in June 2022.
Current wording
(12)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.
Previous wording
(17)Reserve rate represents the Allowance for credit losses divided by End-of-period credit card and other loans.
Current wording
(13)Reserve rate represents the Allowance for credit losses divided by End-of-period credit card and other loans.
Previous wording
The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit card and other loans as of the same period-end.
Current wording
The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., principal balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit card and other loans as of the same period-end.
Previous wording
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. 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. We do not offer programs involving the forgiveness of principal. These temporary loan modifications may assist in cases where we believe the customer will recover from the short-term hardship and resume scheduled payments. Under these consumer relief programs, those accounts receiving relief may not advance to the next delinquency cycle, including charge-off, in the same time frame that would have occurred had the relief not been granted. We evaluate our consumer relief programs to determine if they represent a more than insignificant delay in payment granted to borrowers experiencing financial difficulty, in which case they would then be considered a Loan Modification. For additional information, see Note 2 “Credit Card and Other Loans – Modified Credit Card Loans” to our unaudited Consolidated Financial Statements.
Current wording
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. 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. We do not offer programs involving the forgiveness of principal. These temporary loan modifications may assist in cases where we believe the customer will recover from the short-term hardship and resume scheduled payments. Under these consumer relief programs, those accounts receiving relief may not advance to the next delinquency cycle, including charge-off, in the same time frame that would have occurred had the relief not been granted. We evaluate our consumer relief programs to determine if they represent a more than insignificant delay in payment granted to borrowers experiencing financial difficulty, in which case they would then be considered a Loan Modification. For additional information, see Note 2 “Credit Card and Other Loans – Modified Credit Card Loans” to our unaudited Consolidated Financial Statements.
Previous wording
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. Credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. BNPL loans such as our installment loans and our “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due. However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for credit card loans and 120 days past due for BNPL loans.
Current wording
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. Our credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. Our pay-over-time products, which include installment loans and “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due. However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for credit card loans and 120 days past due for installment loans and “split-pay” offerings.
Previous wording
The net principal loss rate is calculated by dividing net principal losses for the period by the Average credit card and other loans for the same period. Beginning in January 2024, we revised the calculation of Average credit card and other loans to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, Average credit card and other loans represent the average balance of the loans at the beginning and end of each month, averaged over the periods indicated. The following table provides our net principal losses for the periods presented:
Current wording
The Net principal loss rate is calculated by dividing net principal losses for the period by the Average credit card and other loans for the same period, using an average daily balance calculation methodology. The following table provides our net principal losses for the periods presented:
Previous wording
We maintain a strong focus on liquidity and capital. 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 Federal Deposit Insurance Corporation (FDIC) regulations, in a cost effective and prudent manner through both expected and unexpected market environments. We also monitor our Double Leverage Ratio, which reflects our Parent Company’s investment in its subsidiaries relative to its consolidated equity, and is often used by regulators and other stakeholders as a measure of the use of debt by a parent entity to fund its subsidiaries.
Current wording
We maintain a strong focus on liquidity and capital. 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 and our public secured financings, and meet our regulatory and policy requirements, including capital and leverage ratio requirements applicable to Comenity Bank (CB) and Comenity Capital Bank (CCB) under Federal Deposit Insurance Corporation (FDIC) regulations, in a cost effective and prudent manner through both expected and unexpected market environments.
Previous wording
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. 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.
Current wording
Our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured, subordinated 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. 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.
Previous wording
We may from time to time retire or purchase our outstanding debt or convertible debt securities through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise. 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.
Current wording
We may from time to time retire or purchase our outstanding debt, including our senior unsecured notes, subordinated notes or convertible notes, through redemptions, cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise. 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.
Previous wording
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. 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.
Current wording
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. Also as part of our financing strategy, we will continue to seek to optimize our capital structure. 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.
Previous wording
We have a robust liquidity risk management framework in place which includes ongoing monitoring of our liquidity and funding positions against our risk appetite metrics and key risk indicators. 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.
Current wording
We have a robust liquidity risk management framework in place which includes ongoing monitoring of our liquidity and funding positions against our risk appetite metrics and key risk indicators. 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.
Previous wording
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.
Current wording
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.
Showing the first 40 of 79 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
In June 2023, we issued and sold $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028 (the Convertible Notes). 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.
Current report — wording carried from elsewhere
For additional information on the issuance of our Convertible Notes and our Capped Call transactions, see “Consolidated Liquidity and Capital Resources” under Part II of our 2024 Form 10-K.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
(10)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. For additional information, see “Legislative, Regulatory Matters and Capital Adequacy” included elsewhere in this report.
Previous report — wording carried elsewhere
(11)Total risk-weighted assets are generally measured by allocating assets, and specified off-balance sheet exposures, to various risk categories as defined by the Basel III Standardized Approach. For additional information, see “Legislative, Regulatory Matters and Capital Adequacy” included elsewhere in this report.
Previous report — wording carried elsewhere
(2)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets.
Previous report — wording carried elsewhere
The table below summarizes our conduit capacities, borrowings and maturities for the periods presented: