BREAD FINANCIAL HOLDINGS, INC.

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, 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.

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 and our other Quarterly Reports on Form 10-Q.

Previous 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.

Current wording

•Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR excluding any gain on portfolio sale and impacts from repurchased debt then excludes from PPNR the gain on any portfolio sale in the period, as well as the loss or gain on any repurchased debt in the period. We use PPNR and PPNR excluding any gain on portfolio sale and impacts from repurchased debt 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 repurchased debt.

Previous 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.

Current wording

This Business Environment section provides an overview of our results of operations and financial position for the second 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 June 30, 2025, compared with the same period in the prior year.

Previous 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.

Current wording

Credit sales of $6.8 billion were up 4% year-over-year driven by new brand partner growth, higher general-purpose spending and overall transaction volume as consumer financial health in 2025 has remained relatively stable, which is reflected in our improving credit metrics. End-of-period credit card and other loans remained relatively flat at $17.7 billion, while Average credit card and other loans decreased 1% to $17.7 billion. As compared with historic trends, continued macroeconomic challenges have resulted in lower consumer spending and the cumulative effect of elevated gross credit losses over the past 12 months adversely impacted loan growth. Total interest income was down 3% from the second quarter of 2024, primarily as a result of lower billed late fees and lower Average credit card and other loans balances, partially offset by lower reversals of fees resulting from lower gross credit losses and the ongoing implementation of pricing actions. Our lower early-stage delinquency volumes and the gradual shift in product mix to a lower proportion of private label accounts, which tend to have higher billed late fees, have resulted in lower overall billed late fees. Net interest margin for the second quarter of 2025 was 17.7%, relative to 18.0% for the second quarter of 2024 driven primarily by lower billed late fees from lower delinquencies. Sequentially, Net interest margin decreased from 18.1% as our Net interest margin trends continue to be impacted by lower billed late fees, as well as an elevated cash position, our gradual shift in product mix toward co-brand cards; partially offset by the ongoing implementation of pricing actions, such as increases to annual percentage rates. Year-over-year, Non-interest income increased $3 million, driven by our implemented pricing actions, inclusive of paper statement fees which we began assessing in second quarter of 2024, partially offset by costs associated with brand partner retailer share arrangements along with a decrease in merchant discount fees due to lower “big ticket” credit sales. We intend to largely 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 $929 million, down 1% versus the second quarter of 2024.

Previous 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.

Current wording

Provision for credit losses decreased for the quarter ended June 30, 2025, relative to the second quarter of 2024, driven by a $74 million reserve release and net principal losses of $348 million, compared with a $92 million reserve release and net principal losses of $382 million in the prior year period.

Previous 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.

Current wording

Our Allowance for credit losses decreased as of June 30, 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 11.9% as of June 30, 2025, reflecting our improving credit metrics and higher-quality new account acquisitions. We continue to maintain 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 management and a more diversified product mix, with co-brand and proprietary cards representing a larger proportion of our portfolio.

Previous wording

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 wording

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 Consumer Financial Protection Bureau’s (CFPB) 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. 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.

Previous wording

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 wording

Based on our current economic outlook, the cumulative effect of elevated gross credit losses over the past 12 months, and visibility into our new business pipeline and existing partners, we continue to 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 gain on portfolio sale, a Non-GAAP financial measure, is anticipated to be relatively flat as our implemented pricing actions are offset by factors such as: (i) 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 billed late fees, and (iii) the shift in our product mix, to co-brand, proprietary, and installment lending products, leading to lower finance charges and billed late fees.

Previous wording

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 wording

As a result of efficiencies gained from our ongoing operational excellence initiatives, along with disciplined expense management and prudent investments, we continue to expect to generate nominal positive operating leverage in 2025, excluding any gain on portfolio sale and the pretax impacts from our repurchased debt, a Non-GAAP financial measure.

Previous 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.

Current wording

The following discussion provides commentary on the variances in our results of operations for the three and six months ended June 30, 2025, 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.

Previous wording

(2)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin.

Current wording

(3)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin.

Previous wording

Interest income: Total interest income decreased for the three months ended March 31, 2025, due to the following:

Current wording

Interest income: Total interest income decreased for the three and six months ended June 30, 2025, due to the following:

Previous 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.

Current wording

•Interest and fees on loans decreased due primarily to lower billed late fees and lower Average credit card and other loans balances, partially offset by lower reversals of fees resulting from lower gross credit losses and the ongoing implementation of pricing actions; collectively decreasing finance charge and late fee yields by approximately 39 basis points and 49 basis points, over the respective periods of comparison. Our lower early-stage delinquency volumes and the gradual shift in product mix to a lower proportion of private label accounts, which tend to have higher billed late fees, have resulted in lower overall billed late fees.

Previous 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.

Current wording

•Interest on cash and investment securities decreased due to lower average interest rates which decreased interest income by $11 million and $22 million, over the respective periods of comparison, partially offset by higher average balances which increased interest income by $3 million and $7 million, over those same respective periods.

Previous wording

Interest expense: Total interest expense decreased for the three months ended March 31, 2025, due to the following:

Current wording

Interest expense: Total interest expense decreased for the three and six months ended June 30, 2025, due to the following:

Previous 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.

Current wording

•Interest on deposits decreased due to lower average interest rates which decreased interest expense by $14 million and $26 million, over the respective periods of comparison, and during the six month period, lower average wholesale deposit balances which decreased funding costs by $5 million.

Previous 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.

Current wording

•Interest on borrowings decreased due to lower average interest rates which decreased funding costs by $7 million and $17 million, over the respective periods of comparison, partially offset during the six month period by higher average borrowings which increased funding costs by $3 million.

Previous wording

Non-interest income: Total non-interest income increased for the three months ended March 31, 2025, due to the following:

Current wording

Non-interest income: Total non-interest income increased for the three and six months ended June 30, 2025, due to the following:

Previous 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.

Current wording

•Interchange revenue, net of retailer share arrangements, typically a contra-revenue item for us, increased during the three month period due to an increase in costs associated with brand partner retailer share arrangements along with a decrease in merchant discount fees due to lower “big ticket” credit sales, and were essentially flat during the six month period.

Previous wording

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 wording

Provision for credit losses decreased for the three and six months ended June 30, 2025. For the three month period, the decrease was driven by a $74 million reserve release and net principal losses of $348 million, compared with a $92 million reserve release and net principal losses of $382 million in the prior year period. For the six month period, the decrease was driven by a $143 million reserve release and net principal losses of $713 million, compared with a $164 million reserve release and net principal losses of $775 million in the prior year period. Our reserve rate was 11.9% as of June 30, 2025, reflecting our improving credit metrics and higher-quality new account acquisitions. We continue to maintain 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.

Previous wording

Non-interest expenses: Total non-interest expenses decreased for the three months ended March 31, 2025, due to the following:

Current wording

Non-interest expenses: Total non-interest expenses increased for the three and six months ended June 30, 2025. Adjusted total non-interest expenses, which represents a Non-GAAP financial measure and has been adjusted for the impacts from our repurchased debt, remained relatively flat.

Previous wording

•Marketing expenses increased due primarily due to incremental investments associated with our brand partner joint marketing campaigns.

Current wording

•Marketing expenses were essentially flat during the three month period, and increased during the six month period due primarily to incremental investments associated with our brand partner joint marketing campaigns.

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. 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. PPNR excluding any gain on portfolio sale and impacts from repurchased debt excludes from PPNR the gain on any portfolio sale in the period, as well as the impacts from our repurchased debt 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.

Previous 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.

Current 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.

Previous wording

(7)Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.

Current wording

(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 repurchased debt.

Previous 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.

Current wording

(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.

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. 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.

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 Federal Emergency Management Agency (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. 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.

Current wording

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). 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

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.

Current wording

We may from time to time retire or repurchase 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

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 wording

During the first half of 2025, we engaged in a number of financing-related transactions, including the redemption of the remaining $100 million in aggregate principal amount of our 7.000% Senior Notes due 2026, the repurchase of another portion of our 4.25% Convertible Senior Notes due 2028 and the completion of a cash tender offer (the Tender Offer) to repurchase $150 million in aggregate principal amount of our 9.750% Senior Notes due March 2029, in each case with cash on hand. We also 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.

Previous wording

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.

Current wording

For additional information on the issuance and subsequent repurchases of our Convertible Notes, as well as our Capped Call transactions, see “Consolidated Liquidity and Capital Resources” under Part II of our 2024 Form 10-K.

Previous wording

During the first quarter of 2025, a holder of Convertible Notes approached us to repurchase Convertible Notes, and we entered into a privately-negotiated repurchase agreement with the holder, repurchasing $7 million aggregate principal amount of outstanding Convertible Notes. The final purchase price, or settlement value, for the repurchase was $11 million, which was funded with cash on hand. In connection with the repurchase, we recognized a $2 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 $2 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.

Current wording

In the first quarter of 2025, a holder of Convertible Notes approached us to repurchase Convertible Notes, and we entered into a privately-negotiated repurchase agreement with the holder, repurchasing $7 million aggregate principal amount of outstanding Convertible Notes. The final purchase price, or settlement value, for the repurchase was $11 million, which was funded with cash on hand. In connection with the repurchase, we recognized a $2 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 $2 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 wording

Following the settlement of these repurchases, $3 million of Convertible Notes remained outstanding as of March 31, 2025. We may, from time to time, seek to retire or repurchase our remaining outstanding Convertible Notes through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.

Current wording

As of June 30, 2025, $3 million of Convertible Notes remained outstanding. We may, from time to time, seek to retire or repurchase our remaining outstanding Convertible Notes through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.

Previous wording

8.375% Subordinated Notes Due 2035

Current wording

8.375% Subordinated Notes Due 2035 - Issuance

Previous wording

As of March 31, 2025 and December 31, 2024, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $592 million (4% of Total deposits) and $574 million (4% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.

Current wording

As of June 30, 2025 and December 31, 2024, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $612 million (5% of Total deposits) and $574 million (4% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.

Previous wording

(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.

Current wording

(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.

Previous wording

(6)Amounts drawn do not include $0.6 billion and $1.1 billion of debt issued by the Trusts as of March 31, 2025 and December 31, 2024, respectively, which were not sold, but were retained by us as a credit enhancement and therefore have been eliminated from the Total.

Current wording

(6)Amounts drawn do not include $0.5 billion and $1.1 billion of debt issued by the Trusts as of June 30, 2025 and December 31, 2024, respectively, which were not sold, but were retained by us as a credit enhancement and therefore have been eliminated from the Total.

Previous wording

As of March 31, 2025, we had approximately $11.7 billion of securitized credit card loans. Securitizations require credit enhancements in the form of cash, spread deposits, additional loans and subordinated classes. The credit enhancement is principally based on the outstanding balances of the series issued by the Trusts and by the performance of the credit card loans in the Trusts.

Current wording

As of June 30, 2025, we had approximately $11.2 billion of securitized credit card loans. Securitizations require credit enhancements in the form of cash, spread deposits, additional loans and subordinated classes. The credit enhancement is principally based on the outstanding balances of the series issued by the Trusts and by the performance of the credit card loans in the Trusts.

Previous wording

During the three months ended March 31, 2025, under the authorized stock repurchase program, we acquired a total of 2.1 million shares of our common stock for $102 million plus applicable excise tax on stock repurchases. Following their repurchase, these 2.1 million shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock. As of March 31, 2025, we had $48 million remaining for future repurchases under the authorized stock repurchase program. During April 2025, we repurchased an additional 1.1 million shares, completing the $150 million stock repurchase program. These shares are now also treated as authorized but unissued shares of common stock.

Current wording

During the six months ended June 30, 2025, we completed the authorized stock repurchase program, acquiring a total of 3.2 million shares of our common stock for $150 million plus applicable excise tax on stock repurchases. Following their repurchase, these 3.2 million shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock.

Previous wording

During the three months ended March 31, 2025, we paid $12 million in dividends to holders of our common stock. On April 24, 2025, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on June 13, 2025, to stockholders of record at the close of business on May 9, 2025.

Current wording

During the three and six months ended June 30, 2025, we paid $10 million and $22 million in dividends to holders of our common stock. On July 24, 2025, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on September 12, 2025, to stockholders of record at the close of business on August 8, 2025.