BREAD FINANCIAL HOLDINGS, INC.

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, 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.

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 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 may from time to time repurchase debt, including our outstanding senior unsecured notes, subordinated notes or convertible notes. From a GAAP perspective we may pay a premium to induce these repurchases, or in certain cases repurchase at a discount, which would result in an impact to Total non-interest expenses, with a corresponding impact also reflected in Net income and consequently 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 impacts from our repurchased debt transactions. We use Adjusted total non-interest expenses, Adjusted net income, and Adjusted earnings per diluted share to evaluate the ongoing operations of the Company excluding the volatility that can occur from the impacts of our repurchased debt transactions.

Current wording

•We have previously repurchased and may, from time to time, in the future continue to repurchase debt, including our outstanding senior unsecured notes, subordinated notes or convertible notes. In such transactions, we may pay a premium to induce these repurchases, or in certain cases repurchase at a discount, which, from a GAAP perspective, would result in an impact to Total non-interest expenses, with a corresponding impact also reflected in Net income and consequently our Earnings per diluted share. For our prior debt repurchases, we show adjustments to these three financial statement line items, for total Company as well as for continuing operations, to exclude the impacts from our repurchased debt transactions. We use Adjusted total non-interest expenses, Adjusted net income, and Adjusted earnings per diluted share to evaluate the ongoing operations of the Company excluding the volatility that can occur from the impacts of our repurchased debt transactions.

Previous 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.

Current wording

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

Previous 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.

Current wording

Credit sales of $6.8 billion were up 5% year-over-year driven by new partner growth and increased general-purpose spending. Average and end-of-period credit card and other loans decreased 1% to $17.6 billion and 2% to $17.7 billion respectively, driven by an increasing payment rate and the ongoing effect of elevated gross credit losses as compared with historic trends. Total interest income was down 3% from the third 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 finance charges and late fees, resulting from lower gross credit losses and the ongoing implementation of pricing actions. Our improved delinquency trends across our loan portfolio, as well as the gradual shift in product mix to a declining proportion of private label accounts, which tend to have higher billed late fees, have resulted in lower overall billed late fees. Net interest margin remained flat year-over-year but improved sequentially to 18.8%, from 17.7% in the second quarter of 2025, following seasonal loan yield trends. Our net interest margin continues to be impacted by lower billed late fees from lower delinquencies, as well as an elevated cash position and our gradual shift in product mix toward co-brand cards, offset by the ongoing implementation of pricing actions, such as increases to annual percentage rates. Non-interest income decreased $7 million from the third quarter of 2024, driven by increased costs associated with brand partner retailer share arrangements along with a decrease in merchant discount fees due to lower “big ticket” credit sales, partially offset by our implemented pricing actions, inclusive of paper statement fees which we began assessing in second quarter of 2024.

Previous 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.

Current wording

Provision for credit losses decreased for the quarter ended September 30, 2025, relative to the third quarter of 2024, driven by a $28 million reserve release and net principal losses of $327 million, compared with a $22 million reserve build and net principal losses of $347 million in the prior year period.

Previous 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.

Current wording

Our Allowance for credit losses decreased as of September 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 11.7% as of September 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

Total non-interest expenses of $481 million increased 3% from the second quarter of 2024. The year-over-year increase was primarily driven by an $8 million increase in Other expenses, which includes a $13 million impact from our repurchased debt in the quarter, as discussed further in the paragraph below.

Current wording

Total non-interest expenses of $476 million decreased 17% year-over year. The decrease was primarily driven by a $93 million decrease in Other expenses, which includes a $96 million impact in the prior year from our repurchased debt.

Previous wording

Our efforts to strengthen and optimize our balance sheet are ongoing. In April, we completed our $150 million board authorized share repurchase program, with 3.2 million shares repurchased year-to-date. Additionally, in June we completed a $150 million tender offer for our 9.750% Senior Notes due 2029, using available cash, allowing us to reduce higher cost debt through this repurchase. Our Common equity tier one capital ratio (CET1) of 13.0% decreased from 13.8% in the second quarter of 2024, negatively impacted primarily by the effects from our repurchased debt and shares, partially offset by net earnings over the period. Sequentially, our CET1 ratio improved to 13.0% from 12.0%. Our Total risk-based capital ratio of 16.5% increased from 15.1% in the second quarter of 2024, as a result of net earnings over the period, and our $400 million Subordinated Notes offering in the first quarter of 2025, which increased our Tier 2 capital. Our Total risk-based capital ratio also increased sequentially from 15.5%. Additionally, direct-to-consumer (DTC) deposits increased 12% to $8.1 billion as of June 30, 2025, with average DTC deposits now representing 45% of our total funding, up from 40% a year ago.

Current wording

Our efforts to strengthen and optimize our balance sheet continued in the third quarter of 2025. In August, we announced a $200 million board-authorized share repurchase program, and in September we repurchased 0.6 million shares for $40 million, bringing our year-to-date board-authorized share repurchases to 3.8 million shares. In August, we also completed a cash tender offer to repurchase $31 million in aggregate principal amount of our 9.750% Senior Notes due 2029 and $0.1 million in aggregate principal amount of our 8.375% Fixed-Rate Reset Subordinated Notes due 2035, using available cash, allowing us to continue to reduce higher cost debt. During the third quarter we also repurchased $3 million in aggregate principal amount of our 4.25% Convertible Senior Notes Due 2028. Our Common equity tier one capital ratio (CET1) of 14.0% increased from 13.3% in the third quarter of 2024, driven by net earnings over the period, partially offset by the effects from our repurchased shares and debt securities. Sequentially, our CET1 ratio improved to 14.0% from 13.0%. Additionally, relative to the third quarter of 2024 direct-to-consumer (DTC) deposits increased 9% to $8.2 billion as of September 30, 2025, with average DTC deposits now representing 47% of our total funding, up from 41% a year ago.

Previous wording

Our 2025 financial outlook has been adjusted to reflect continued consumer resiliency, inflation remaining above the Federal Reserve Board’s target rate, and a healthy labor market. Our outlook also anticipates interest rate decreases by the Federal Reserve Board, which will slightly decrease Total net interest income.

Current wording

Our 2025 financial outlook reflects continued consumer resiliency, inflation remaining above the Federal Reserve Board’s target rate, and a slowing, yet stable labor market. Our outlook also anticipates interest rate decreases by the Federal Reserve Board, which we would expect to result in slight Net interest margin compression. Overall, our year-over-year credit sales growth and gradual improvement in our credit metrics give us confidence in our financial outlook as we begin the final quarter of 2025.

Previous 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.

Current wording

Based on our current economic outlook, an increased payment rate, the cumulative effect of ongoing elevated gross credit losses, 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 a higher proportion of 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, 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.

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 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

We have updated our 2025 financial outlook to assume a full year Net principal loss rate ranging from 7.8% to 7.9% as a result of our better than expect credit performance during the first half of 2025, driven by continued consumer resiliency, our disciplined credit management and continued risk and product mix shifts. Nonetheless, given macroeconomic uncertainty, including potential tariff and employment impacts, we remain vigilant with our credit strategies. As previously disclosed, the hurricane related customer-friendly actions we took in October and November 2024, negatively impacted second quarter losses by approximately $13 million.

Current wording

Our 2025 financial outlook assumes a full year Net principal loss rate ranging from 7.8% to 7.9% , driven by continued consumer resiliency, our disciplined credit management and continued risk and product mix shifts. Nonetheless, given macroeconomic uncertainty, with potential changes in monetary and fiscal policies, including tariff and trade policies and the potential impacts on consumer spending and employment, we remain vigilant with our credit strategies.

Previous 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.

Current wording

In our 2025 financial outlook, we now expect our full year effective tax rate to be in the range of 19% to 20% due to larger discrete items realized in 2025, with quarter-over-quarter variability due to the timing of certain discrete items.

Previous wording

We are proud of the progress we have made in strengthening our Company’s balance sheet while providing increased value to our brand partners. We remain confident in our ability to successfully execute our strategic objectives and our operational excellence efforts, and we are well-positioned to deliver strong returns while creating sustainable, long-term value for our shareholders.

Current wording

We remain confident in our ability to achieve our 2025 financial outlook and will continue to successfully execute our strategic objectives and operational excellence efforts. We believe we are well-positioned to deliver strong returns while creating sustainable, long-term value for our shareholders.

Previous 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.

Current wording

The following discussion provides commentary on the variances in our results of operations for the three and nine months ended September 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

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

Current wording

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

Previous 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.

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 finance charges and late 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 46 basis points, over the respective periods of comparison. Our lower 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 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.

Current wording

•Interest on cash and investment securities decreased due to lower average interest rates which decreased interest income by $9 million and $31 million, over the respective periods of comparison, partially offset during the nine month period by higher average balances, which increased interest income by $5 million.

Previous wording

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

Current wording

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

Previous 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.

Current wording

•Interest on deposits decreased due to lower average interest rates which decreased interest expense by $21 million and $46 million, over the respective periods of comparison, partially offset by higher average wholesale deposit balances which increased funding costs by $7 million and $2 million over those same respective periods.

Previous 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.

Current wording

•Interest on borrowings decreased due to lower average borrowings which decreased funding costs by $14 million and $11 million, over the respective periods of comparison, and due to lower average interest rates which decreased funding costs by $2 million and $19 million over those same respective periods.

Previous wording

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

Current wording

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

Previous 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.

Current wording

•Interchange revenue, net of retailer share arrangements, typically a contra-revenue item for us, increased during the three and nine month periods 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.

Previous wording

•Other increased due primarily to our implemented pricing actions, including paper statement fees, which we began assessing in the second quarter of 2024.

Current wording

•Other increased during the three and nine month periods due primarily to our implemented pricing actions, including paper statement fees, which we began assessing in the second quarter of 2024.

Previous 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.

Current wording

Provision for credit losses decreased for the three and nine months ended September 30, 2025. For the three month period, the decrease was driven by a $28 million reserve release and net principal losses of $327 million, compared with a $22 million reserve build and net principal losses of $347 million in the prior year period. For the nine month period, the decrease was driven by a $171 million reserve release and net principal losses of $1,040 million, compared with a $142 million reserve release and net principal losses of $1,122 million in the prior year period. Our reserve rate was 11.7% as of September 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

(1)Adjusts Total non-interest expenses for the impacts from our repurchased debt, representing $13 million for the three months ended June 30, 2025, and $15 million and $9 million for the six months ended June 30, 2025 and 2024, respectively, and therefore represent Non-GAAP financial measures. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

Current wording

(1)Adjusts Total non-interest expenses for the impacts from our repurchased debt, representing $3 million and $96 million for the three months ended September 30, 2025 and 2024, and $19 million and $105 million for the nine months ended September 30, 2025 and 2024, respectively, and therefore represent Non-GAAP financial measures. See “Non-GAAP Financial Measures” and Table 6:

Previous 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.

Current wording

Non-interest expenses: Total non-interest expenses decreased for the three and nine months ended September 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, also decreased over those same periods.

Previous wording

•Card and processing expenses increased during the three month period due to higher network fees driven by our gradual shift in product mix, and were essentially flat during the six month period.

Current wording

•Card and processing expenses increased during the three and nine month periods due to higher network fees driven by our gradual shift in product mix.

Previous wording

•Information processing and communication increased due primarily to elevated software license renewal costs.

Current wording

•Information processing and communication was essentially flat during the three month period, and increased during the nine month period due to elevated software license renewal costs.

Previous 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.

Current wording

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

Previous wording

The Provision for income taxes decreased for thethree and six months ended June 30, 2025. The effective tax rate was 20.5% and 26.0% for the three-month periods ended June 30, 2025 and 2024, respectively, and 24.5% and 27.1% for the six month periods ended June 30, 2025 and 2024, respectively. Both the decreases in the Provision for income taxes and in the effective tax rates over the periods of comparison were primarily driven by a discrete tax benefit in the current year period related to a California law change.

Current wording

The Provision for income taxes decreased for thethree and nine months ended September 30, 2025. The effective tax rate was 4.3% and 92.2% for the three-month periods ended September 30, 2025 and 2024, respectively, and 17.5% and 33.4% for the nine-month periods ended September 30, 2025 and 2024, respectively. Both the decreases in the Provision for income taxes and in the effective tax rates over the periods of comparison were driven by a discrete tax benefit in the current year period and larger nondeductible items in the prior year period.

Previous wording

Subsequent to the end of the current period, on July 4, 2025, President Trump signed into law “The One Big Beautiful Bill Act” (the Bill). The Bill reinstates several provisions of the 2017 Tax Cuts and Jobs Act for businesses. We do not expect the Bill to have a significant impact on our financial position, results of operations or cash flows, nor do we expect significant changes to operational processes, controls or governance as a result of the Bill.

Current wording

On July 4, 2025, President Trump signed into law “The One Big Beautiful Bill Act” (the Bill). The Bill reinstates several provisions of the 2017 Tax Cuts and Jobs Act for businesses. We do not expect the Bill to have a significant impact on our financial position, results of operations or cash flows, nor do we expect significant changes to operational processes, controls or governance as a result of the Bill.

Previous wording

The Loss from discontinued operations, net of income taxes includes amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019, and primarily relate to contractual indemnification and tax-related matters. For additional information refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Current wording

The Loss from discontinued operations, net of income taxes includes amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019, and primarily relates to contractual indemnification and tax-related matters. For additional information refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Previous 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.

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, using an average daily balance calculation methodology.

Previous wording

(1)As a result of hurricanes Helene and Milton we froze delinquency progression for cardholders in FEMA identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net principal losses as a percentage of average credit card and other loans in the fourth quarter of 2024, and consequently these actions negatively impacted Net principal losses and Net principal losses as a percentage of average credit card and other loans in the second quarter of 2025.

Current wording

(1)As a result of hurricanes Helene and Milton we froze delinquency progression for cardholders in FEMA identified impact zones for one billing cycle, which resulted in modestly lower Net principal losses and Net principal losses as a percentage of average credit card and other loans in the fourth quarter of 2024, and consequently these actions negatively impacted Net principal losses and Net principal losses as a percentage of average credit card and other loans in the second quarter of 2025, which has been included in the nine months ended September 30, 2025.

Previous 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.

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, including through issuances of preferred stock by our Parent Company. 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

Our primary uses of liquidity are for underwriting Credit card and other loans, scheduled payments of principal and interest on our debt, operational expenses, capital expenditures, including digital and product innovation and technology enhancements, stock repurchases and dividends.

Current wording

Our primary uses of liquidity are for underwriting Credit card and other loans, scheduled payments of principal and interest on our debt, operational expenses, capital expenditures, including digital and product innovation and technology enhancements, repurchases of equity and debt securities and payment of dividends.

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. 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.

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 the issuance of additional debt, equity or convertible securities, or engaging in other capital markets or financing transactions. Also as part of our financing strategy and capital structure optimization, in March 2025 we issued Subordinated Notes, and in the future we may seek to further optimize our capital structure through issuances of preferred stock. 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

During the fourth quarter of 2024 both Moody’s and Fitch upgraded their credit ratings outlook from “Stable” to “Positive”. The table below provides a summary of the credit ratings for the senior unsecured and subordinated long-term debt of Bread Financial Holdings, Inc. as of June 30, 2025:

Current wording

In October 2025 all three credit rating agencies refreshed their credit ratings and their related outlooks. Both Moody’s and Fitch upgraded their credit ratings. Moody’s also retained their “Positive” outlook, Fitch changed their outlook from “Positive” to “Stable” in conjunction with their credit ratings upgrade, and S&P changed their outlook from “Stable” to “Positive”. The table below provides a summary of the credit ratings for the senior unsecured and subordinated long-term debt of Bread Financial Holdings, Inc. as of the dates presented:

Previous wording

As referenced above, our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured, subordinated or convertible debt securities by our Parent Company, financings through our securitization programs, and deposits with the Banks.

Current wording

As referenced above, our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured, subordinated or convertible debt securities by our Parent Company, potential issuances of preferred stock by our Parent Company, financings through our securitization programs, and deposits with the Banks.