UNITED STATES
2023☒2022oor☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
BREAD FINANCIAL HOLDINGS, INC.
Delaware (State or other jurisdiction of (I.R.S. Employer 3095 Loyalty Circle Columbus, (Address of principal executive offices)31-142921531-1429215(I.R.S. Employer
incorporation or organization)
Identification No.)43219, Ohio43219(Zip Code)(Zip Code)(614)
Securities registered pursuant to Section 12(b) of the Act:
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Common stock, par value $0.01 per share | BFH | New York Stock Exchange |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) |
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this and our other Quarterly Reports on Form 10-Q.
Effective March 23, 2022, Alliance Data Systems Corporation was renamed Bread Financial Holdings, Inc.,
brand partners.
“Banks”.
1
BUSINESS ENVIRONMENT
income.
Second quarter 2022 average Total credit card and other loans of $17.0 billion were up 11% from the prior year period, with the end-of-period balance being up 13%.
loans; with a full year 2023 Net interest margin expected to be in line with the 2022 full year rate of 19.2%.
Provision for credit losses increased
With regard to our expenses, Total non-interest expenses for the second quarter of 2022 were up 12% from the prior year period, due primarily to increased marketing expenses, employee compensation and benefit costs and overall technology modernization expenses. As a result of ongoing investment in technology modernization, digital advancement, marketing, and product innovation, along with strong portfolio growth, we continue to anticipate Total non-interest expenses will increase in 2022. The pace and timing of our investments will be calibrated to align with our full year revenue growthnormalized effective tax rate to remain in the range of 25% to 26%, with quarter-over-quarter variability due to timing of certain discrete items.
2
Overall, our results for the second quarter of 2022 demonstrated the benefits of the strategic actions we have implemented over the last few years, and our business transformation efforts continue to enable sustainable, profitable growth.
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||||||||||
|
| 2022 |
| 2021 |
| $ |
| % |
| 2022 |
| 2021 |
| $ |
| % | | ||||
(Millions, except per share amounts and percentages) | | | | | | | | | | | | | | | | | | | | | |
Total net interest and non-interest income | | $ | 893 | | $ | 764 | | 129 | | 17 | | $ | 1,814 | | $ | 1,566 | | 248 | | 16 | |
Provision for credit losses | | | 404 | | | (14) | | 418 | | * | | | 598 | | | 19 | | 579 | | * | |
Total non-interest expenses | | | 473 | | | 424 | | 49 | | 12 | | | 897 | | | 826 | | 71 | | 9 | |
Income from continuing operations before income taxes | | | 16 | | | 354 | | (338) | | (95) | | | 319 | | | 721 | | (402) | | (56) | |
Provision for income taxes | | | 4 | | | 91 | | (87) | | (96) | | | 95 | | | 190 | | (95) | | (50) | |
Income from continuing operations | | | 12 | | | 263 | | (251) | | (95) | | | 224 | | | 531 | | (307) | | (58) | |
(Loss) income from discontinued operations, net of taxes | | | — | | | 11 | | (11) | | * | | | (1) | | | 29 | | (30) | | * | |
Net income | | | 12 | | | 274 | | (262) | | (95) | | | 223 | | | 560 | | (337) | | (60) | |
| | | | | | | | | | | | | | | | | | | | | |
Net income per diluted share | | $ | 0.25 | | $ | 5.47 | | (5.22) | | (95) | | $ | 4.46 | | $ | 11.21 | | (6.75) | | (60) | |
Income from continuing operations per diluted share | | $ | 0.25 | | $ | 5.25 | | (5.00) | | (95) | | $ | 4.47 | | $ | 10.63 | | (6.16) | | (58) | |
Net interest margin (1) | | | 18.6 | % | | 17.3 | % | | | 1.3 | | | 19.0 | % | | 17.5 | % | | | 1.5 | |
Return on average equity (2) | | | 2.2 | % | | 56.4 | % | | | (54.2) | | | 19.9 | % | | 61.0 | % | | | (41.1) | |
Effective income tax rate - continuing operations | | | 22.7 | % | | 25.7 | % | | | (3.0) | | | 29.9 | % | | 26.3 | % | | | 3.6 | |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
(Millions, except per share amounts and percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Total net interest and non-interest income | $ | 952 | $ | 893 | 59 | 7 | $ | 2,241 | $ | 1,814 | 427 | 24 | |||||||||||||||||||||||||||||||||||
Provision for credit losses | 336 | 404 | (68) | (17) | 442 | 598 | (156) | (26) | |||||||||||||||||||||||||||||||||||||||
Total non-interest expenses | 530 | 473 | 57 | 12 | 1,075 | 897 | 178 | 20 | |||||||||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes | 86 | 16 | 70 | nm | 724 | 319 | 405 | nm | |||||||||||||||||||||||||||||||||||||||
Provision for income taxes | 22 | 4 | 18 | nm | 205 | 95 | 110 | nm | |||||||||||||||||||||||||||||||||||||||
Income from continuing operations | 64 | 12 | 52 | nm | 519 | 224 | 295 | nm | |||||||||||||||||||||||||||||||||||||||
(Loss) income from discontinued operations, net of income taxes (1) | (16) | — | (16) | nm | (16) | (1) | (15) | nm | |||||||||||||||||||||||||||||||||||||||
Net income | 48 | 12 | 36 | nm | 503 | 223 | 280 | nm | |||||||||||||||||||||||||||||||||||||||
Net income per diluted share | $ | 0.95 | $ | 0.25 | 0.70 | nm | $ | 10.02 | $ | 4.46 | 5.56 | nm | |||||||||||||||||||||||||||||||||||
Income from continuing operations per diluted share | $ | 1.27 | $ | 0.25 | 1.02 | nm | $ | 10.34 | $ | 4.47 | 5.87 | nm | |||||||||||||||||||||||||||||||||||
Net interest margin (2) | 18.7 | % | 18.6 | % | 0.1 | 18.8 | % | 19.0 | % | (0.2) | |||||||||||||||||||||||||||||||||||||
Return on average equity (3) | 9.4 | % | 2.2 | % | 7.2 | 39.7 | % | 19.9 | % | 19.8 | |||||||||||||||||||||||||||||||||||||
Effective income tax rate - continuing operations | 26.0 | % | 22.7 | % | 3.3 | 28.3 | % | 29.9 | % | (1.6) |
3
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| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||||||||||
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| 2022 |
| 2021 |
| $ Change |
| % Change |
| 2022 |
| 2021 |
| $ Change |
| % Change | | ||||
(Millions, except percentages) | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | | | | | | |
Interest and fees on loans | | $ | 1,064 | | $ | 913 | | 151 | | 17 | | $ | 2,130 | | $ | 1,854 | | 276 | | 15 | |
Interest on cash and investment securities | | | 9 | | | 2 | | 7 | | 401 | | | 11 | | | 3 | | 8 | | 230 | |
Total interest income | | | 1,073 | | | 915 | | 158 | | 17 | | | 2,141 | | | 1,857 | | 284 | | 15 | |
Interest expense | | | | | | | | | | | | | | | | | | | | | |
Interest on deposits | | | 41 | | | 43 | | (2) | | (4) | | | 76 | | | 90 | | (14) | | (17) | |
Interest on borrowings | | | 54 | | | 57 | | (3) | | (6) | | | 98 | | | 117 | | (19) | | (16) | |
Total interest expense | | | 95 | | | 100 | | (5) | | (5) | | | 174 | | | 207 | | (33) | | (16) | |
Net interest income | | | 978 | | | 815 | | 163 | | 20 | | | 1,967 | | | 1,650 | | 317 | | 19 | |
Non-interest income | | | | | | | | | | | | | | | | | | | | | |
Interchange revenue, net of retailer share arrangements | | | (102) | | | (85) | | (17) | | 19 | | | (198) | | | (153) | | (45) | | 29 | |
Other | | | 17 | | | 34 | | (17) | | (49) | | | 45 | | | 69 | | (24) | | (35) | |
Total non-interest income | | | (85) | | | (51) | | (34) | | 65 | | | (153) | | | (84) | | (69) | | 82 | |
Total net interest and non-interest income | | | 893 | | | 764 | | 129 | | 17 | | | 1,814 | | | 1,566 | | 248 | | 16 | |
Provision for credit losses | | | 404 | | | (14) | | 418 | | * | | | 598 | | | 19 | | 579 | | * | |
Total net interest and non-interest income, after provision for credit losses | | $ | 489 | | $ | 778 | | (289) | | (37) | | $ | 1,216 | | $ | 1,547 | | (331) | | (21) | |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Interest income | |||||||||||||||||||||||||||||||||||||||||||||||
Interest and fees on loans | $ | 1,153 | $ | 1,064 | 89 | 8 | $ | 2,441 | $ | 2,130 | 311 | 15 | |||||||||||||||||||||||||||||||||||
Interest on cash and investment securities | 44 | 9 | 35 | nm | 90 | 11 | 79 | nm | |||||||||||||||||||||||||||||||||||||||
Total interest income | 1,197 | 1,073 | 124 | 12 | 2,531 | 2,141 | 390 | 18 | |||||||||||||||||||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||||||||||||||||||||||||||
Interest on deposits | 127 | 41 | 86 | nm | 244 | 76 | 168 | nm | |||||||||||||||||||||||||||||||||||||||
Interest on borrowings | 78 | 54 | 24 | 44 | 178 | 98 | 80 | 82 | |||||||||||||||||||||||||||||||||||||||
Total interest expense | 205 | 95 | 110 | nm | 422 | 174 | 248 | nm | |||||||||||||||||||||||||||||||||||||||
Net interest income | 992 | 978 | 14 | 1 | 2,109 | 1,967 | 142 | 7 | |||||||||||||||||||||||||||||||||||||||
Non-interest income | |||||||||||||||||||||||||||||||||||||||||||||||
Interchange revenue, net of retailer share arrangements | (74) | (102) | 28 | (28) | (161) | (198) | 37 | (19) | |||||||||||||||||||||||||||||||||||||||
Gain on portfolio sale | — | — | — | — | 230 | — | 230 | nm | |||||||||||||||||||||||||||||||||||||||
Other | 34 | 17 | 17 | 90 | 63 | 45 | 18 | 39 | |||||||||||||||||||||||||||||||||||||||
Total non-interest income | (40) | (85) | 45 | (53) | 132 | (153) | 285 | nm | |||||||||||||||||||||||||||||||||||||||
Total net interest and non-interest income | 952 | 893 | 59 | 7 | 2,241 | 1,814 | 427 | 24 | |||||||||||||||||||||||||||||||||||||||
Provision for credit losses | 336 | 404 | (68) | (17) | 442 | 598 | (156) | (26) | |||||||||||||||||||||||||||||||||||||||
Total net interest and non-interest income, after provision for credit losses | $ | 616 | $ | 489 | 127 | 26 | $ | 1,799 | $ | 1,216 | 583 | 48 |
Three Total interest income increased for the three and sixmonths ended June 30, 2022, compared with the same periods in the prior year:
Interest income: Total interest income increased in the three and six months ended June 30, 2022,2023, primarily resulting from Interest and fees on loans. The increase in each period, relative to the prior year, was due to increases in averagefinance charge yields of approximately 108 basis points and 104 basis points for the three and six month periods, respectively, as well as an increase in Average credit card and other loans driven by new originations, and increasesmoderation in finance charge yields of approximately 114 and 145 basis points for the three and six months periods, respectively, increasing revenue by $48 million and $122 million over the prior year periods of comparison, respectively.
consumer payment rate.
•Interest on deposits increased due to higher average interest rates which increased interest expense by $80 million and $155 million over the respective periods of comparison, as well as higher average balances which increased interest expense by $6 million and $13 million, over those same respective periods. •Interest on borrowings increased due to higher average interest rates which increased funding costs $38 million and $98 million over the respective periods of comparison, partially offset by lower average borrowings which decreased funding costs by $14 million and $18 million, over those same respective periods. |
Non-interest income:
Total non-interest income increased for the three and six months ended June 30, 2023, due to the following:4
Provision for credit losses: Provision for credit lossesincreased in the three and six months ended June 30, 2022, driven by reserve releases of $208 million and $373 million, respectively, from the Allowance for credit losses in the prior year periods associated with an improving macroeconomic outlook at such times and lower volumes of Credit card and other loans relative2023, respectively. We continue to the current year periods, as well as a reserve build of $166 million in the second quarter 2022, driven by a 6% higher end-of period loan balance andmaintain a higher reserve rate, 12.3% as of June 30, 2023, due to continued softening, but stabilizing economic scenario weightings reflectingindicators, including ongoing inflation, the increasing probabilityincreased cost of a recessionconsumer debt and other macroeconomic factors, including the increasing interest rate environment and persistent inflation.possibility of higher unemployment levels.
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| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||||||||||
|
| 2022 |
| 2021 |
| $ Change |
| % Change |
| 2022 |
| 2021 |
| $ Change |
| % Change | | ||||
(Millions, except percentages) | | | | | | | | | | | | | | | | | | | | | |
Non-interest expenses | | | | | | | | | | | | | | | | | | | | | |
Employee compensation and benefits | | $ | 191 | | $ | 162 | | 29 | | 18 | | $ | 370 | | $ | 320 | | 50 | | 16 | |
Card and processing expenses | | | 84 | | | 83 | | 1 | | 1 | | | 166 | | | 161 | | 5 | | 3 | |
Information processing and communication | | | 61 | | | 55 | | 6 | | 11 | | | 117 | | | 106 | | 11 | | 10 | |
Marketing expenses | | | 50 | | | 35 | | 15 | | 41 | | | 80 | | | 77 | | 3 | | 4 | |
Depreciation and amortization | | | 30 | | | 22 | | 8 | | 36 | | | 51 | | | 47 | | 4 | | 8 | |
Other | | | 57 | | | 67 | | (10) | | (15) | | | 113 | | | 115 | | (2) | | — | |
Total non-interest expenses | | $ | 473 | | $ | 424 | | 49 | | 12 | | $ | 897 | | $ | 826 | | 71 | | 9 | |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Non-interest expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Employee compensation and benefits | $ | 217 | $ | 191 | 26 | 14 | $ | 437 | $ | 370 | 67 | 18 | |||||||||||||||||||||||||||||||||||
Card and processing expenses | 116 | 84 | 32 | 37 | 235 | 166 | 69 | 42 | |||||||||||||||||||||||||||||||||||||||
Information processing and communication | 75 | 61 | 14 | 23 | 150 | 117 | 33 | 28 | |||||||||||||||||||||||||||||||||||||||
Marketing expenses | 40 | 50 | (10) | (20) | 79 | 80 | (1) | (2) | |||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 35 | 30 | 5 | 17 | 69 | 51 | 18 | 36 | |||||||||||||||||||||||||||||||||||||||
Other | 47 | 57 | (10) | (17) | 105 | 113 | (8) | (8) | |||||||||||||||||||||||||||||||||||||||
Total non-interest expenses | $ | 530 | $ | 473 | 57 | 12 | $ | 1,075 | $ | 897 | 178 | 20 |
Three and six months ended June 30, 2022, compared with the same periods in the prior year:
Non-interest expenses: Total non-interest expenses increased infor the three and six months ended June 30, 2022,2023, due to the following:
Employee compensation and benefits increased due to increased headcount, which was driven by continued digital and technology modernization-related hiring and customer care and collections staffing, increased retirement benefits and higher incentive compensation.
5
Table 4: Summary Financial Highlights – Continuing Operations
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| | | | | | | | | | | | | | | | | |
| | As of or for the Three Months Ended June 30, | | | As of or for the Six Months Ended June 30, | ||||||||||||
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|
| 2022 |
| 2021 | | % Change |
| | 2022 |
| 2021 | | % Change | ||||
(Millions, except per share amounts and percentages) | | | | | | | | | | | | | | | | | |
Credit sales | | $ | 8,140 | | $ | 7,401 | | 10 | | | $ | 15,028 | | $ | 13,445 | | 12 |
PPNR (1) | | | 420 | | | 340 | | 24 | | | | 917 | | | 740 | | 24 |
Average credit card and other loans | | | 17,003 | | | 15,282 | | 11 | | | | 16,827 | | | 15,533 | | 8 |
End-of-period credit card and other loans | | | 17,769 | | | 15,724 | | 13 | | | | 17,769 | | | 15,724 | | 13 |
End-of-period direct-to-consumer deposits | | | 4,191 | | | 2,398 | | 75 | | | | 4,191 | | | 2,398 | | 75 |
| | | | | | | | | | | | | | | | | |
Return on average assets (2) | | | 0.2 | % | | 4.8 | % | (4.6) | | | | 2.1 | % | | 4.9 | % | (2.8) |
Return on average equity (3) | | | 2.2 | % | | 56.4 | % | (54.2) | | | | 19.9 | % | | 61.0 | % | (41.1) |
| | | | | | | | | | | | | | | | | |
Net interest margin (4) | | | 18.6 | % | | 17.3 | % | 1.3 | | | | 19.0 | % | | 17.5 | % | 1.5 |
Loan yield (5) | | | 25.0 | % | | 23.9 | % | 1.1 | | | | 25.3 | % | | 23.9 | % | 1.4 |
| | | | | | | | | | | | | | | | | |
Efficiency ratio (6) | | | 52.9 | % | | 55.5 | % | (2.6) | | | | 49.5 | % | | 52.7 | % | (3.2) |
| | | | | | | | | | | | | | | | | |
Tangible common equity / tangible assets ratio (TCE/TA) (7) | | 7.5 | % | | 6.4 | % | 1.1 | | | | 7.5 | % | | 6.4 | % | 1.1 | |
Tangible book value per common share (8) | | $ | 31.75 | | $ | 27.12 | | 17 | | | $ | 31.75 | | $ | 27.12 | | 17 |
Cash dividend per common share | | $ | 0.21 | | $ | 0.21 | | — | | | $ | 0.42 | | $ | 0.42 | | — |
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Delinquency rate | | | 4.4 | % | | 3.3 | % | 1.1 | | | | 4.4 | % | | 3.3 | % | 1.1 |
Net loss rate (9) | | | 5.6 | % | | 5.1 | % | 0.5 | | | | 5.2 | % | | 5.0 | % | 0.2 |
Reserve rate | | | 11.2 | % | | 10.4 | % | 0.8 | | | | 11.2 | % | | 10.4 | % | 0.8 |
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||||||||||||||||
(Millions, except per share amounts and percentages) | |||||||||||||||||||||||||||||||||||
Credit sales | $ | 7,057 | $ | 8,140 | (13) | $ | 14,430 | $ | 15,028 | (4) | |||||||||||||||||||||||||
PPNR (1) | 422 | 420 | — | 1,166 | 917 | 27 | |||||||||||||||||||||||||||||
Average credit card and other loans | 17,652 | 17,003 | 4 | 18,528 | 16,827 | 10 | |||||||||||||||||||||||||||||
End-of-period credit card and other loans | 17,962 | 17,769 | 1 | 17,962 | 17,769 | 1 | |||||||||||||||||||||||||||||
End-of-period direct-to-consumer (retail) deposits | 5,993 | 4,191 | 43 | 5,993 | 4,191 | 43 | |||||||||||||||||||||||||||||
Return on average assets (2) | 1.2 | % | 0.2 | % | 1.0 | 4.6 | % | 2.1 | % | 2.5 | |||||||||||||||||||||||||
Return on average equity (3) | 9.4 | % | 2.2 | % | 7.2 | 39.7 | % | 19.9 | % | 19.8 | |||||||||||||||||||||||||
Net interest margin (4) | 18.7 | % | 18.6 | % | 0.1 | 18.8 | % | 19.0 | % | (0.2) | |||||||||||||||||||||||||
Loan yield (5) | 26.1 | % | 25.0 | % | 1.1 | 26.4 | % | 25.3 | % | 1.1 | |||||||||||||||||||||||||
Efficiency ratio (6) | 55.7 | % | 52.9 | % | 2.8 | 47.9 | % | 49.5 | % | (1.6) | |||||||||||||||||||||||||
Tangible common equity / tangible assets ratio (TCE/TA) (7) | 9.4 | % | 7.5 | % | 1.9 | 9.4 | % | 7.5 | % | 1.9 | |||||||||||||||||||||||||
Tangible book value per common share (8) | $ | 38.99 | $ | 31.75 | 23 | $ | 38.99 | $ | 31.75 | 23 | |||||||||||||||||||||||||
Cash dividend per common share | $ | 0.21 | $ | 0.21 | — | $ | 0.42 | $ | 0.42 | — | |||||||||||||||||||||||||
Payment rate (9) | 15.0 | % | 15.3 | % | (0.3) | 15.0 | % | 15.3 | % | (0.3) | |||||||||||||||||||||||||
Delinquency rate (10) | 5.5 | % | 4.4 | % | 1.1 | 5.5 | % | 4.4 | % | 1.1 | |||||||||||||||||||||||||
Net loss rate (10) | 8.0 | % | 5.6 | % | 2.4 | 7.5 | % | 5.2 | % | 2.3 | |||||||||||||||||||||||||
Reserve rate | 12.3 | % | 11.2 | % | 1.1 | 12.3 | % | 11.2 | % | 1.1 |
6
Table 5: Net Interest Margin
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2022 | | | Three Months Ended June 30, 2021 | | ||||||||||||||
|
| Average Balance |
| Interest Income / Expense |
| Average Yield / Rate |
| | Average Balance |
| Interest Income / Expense |
| Average Yield / Rate | | ||||||
(Millions, except percentages) | | | | | | | | | | | | | | | | | | | | |
Cash and investment securities | | $ | 3,975 | | $ | 9 | | | 0.84 | % | | $ | 3,498 | | $ | 2 | | | 0.19 | % |
Credit card and other loans | | | 17,003 | | | 1,064 | | | 25.04 | % | | | 15,282 | | | 913 | | | 23.90 | % |
Total interest-earning assets | | | 20,978 | | | 1,073 | | | 20.45 | % | | | 18,780 | | | 915 | | | 19.48 | % |
| | | | | | | | | | | | | | | | | | | | |
Direct-to-consumer (retail) deposits | | | 3,865 | | | 10 | | | 1.07 | % | | | 2,255 | | | 5 | | | 0.98 | % |
Wholesale deposits | | | 6,994 | | | 31 | | | 1.78 | % | | | 7,580 | | | 38 | | | 2.00 | % |
Interest-bearing deposits | | | 10,859 | | | 41 | | | 1.53 | % | | | 9,835 | | | 43 | | | 1.76 | % |
| | | | | | | | | | | | | | | | | | | | |
Secured borrowings | | | 5,331 | | | 28 | | | 2.11 | % | | | 4,478 | | | 31 | | | 2.72 | % |
Unsecured borrowings | | | 1,978 | | | 26 | | | 5.15 | % | | | 2,805 | | | 26 | | | 3.74 | % |
Interest-bearing borrowings | | | 7,309 | | | 54 | | | 2.93 | % | | | 7,283 | | | 57 | | | 3.11 | % |
Total interest-bearing liabilities | | | 18,168 | | | 95 | | | 2.09 | % | | | 17,118 | | | 100 | | | 2.34 | % |
| | | | | | | | | | | | | | | | | | | | |
Net interest income | | | | | $ | 978 | | | | | | | | | $ | 815 | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net interest margin (1) | | | | | | 18.6 | % | | | | | | | | | 17.3 | % | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2022 | | | Six Months Ended June 30, 2021 | | ||||||||||||||
|
| Average Balance |
| Interest Income / Expense |
| Average Yield / Rate |
| | Average Balance |
| Interest Income / Expense |
| Average Yield / Rate |
| ||||||
(Millions, except percentages) | | | | | | | | | | | | | | | | | | | | |
Cash and investment securities | | $ | 3,884 | | $ | 11 | | | 0.56 | % | | $ | 3,302 | | $ | 3 | | | 0.20 | % |
Credit card and other loans | | | 16,827 | | | 2,130 | | | 25.32 | % | | | 15,533 | | | 1,854 | | | 23.87 | % |
Total interest-earning assets | | | 20,711 | | | 2,141 | | | 20.67 | % | | | 18,835 | | | 1,857 | | | 19.72 | % |
| | | | | | | | | | | | | | | | | | | | |
Direct-to-consumer (retail) deposits | | | 3,572 | | | 17 | | | 0.94 | % | | | 2,070 | | | 11 | | | 1.08 | % |
Wholesale deposits | | | 7,258 | | | 59 | | | 1.62 | % | | | 7,811 | | | 79 | | | 2.03 | % |
Interest-bearing deposits | | | 10,830 | | | 76 | | | 1.39 | % | | | 9,881 | | | 90 | | | 1.83 | % |
| | | | | | | | | | | | | | | | | | | | |
Secured borrowings | | | 5,162 | | | 48 | | | 1.86 | % | | | 4,550 | | | 64 | | | 2.82 | % |
Unsecured borrowings | | | 1,991 | | | 50 | | | 5.06 | % | | | 2,817 | | | 53 | | | 3.73 | % |
Interest-bearing borrowings | | | 7,153 | | | 98 | | | 2.75 | % | | | 7,367 | | | 117 | | | 3.17 | % |
Total interest-bearing liabilities | | | 17,983 | | | 174 | | | 1.93 | % | | | 17,248 | | | 207 | | | 2.40 | % |
| | | | | | | | | | | | | | | | | | | | |
Net interest income | | | | | $ | 1,967 | | | | | | | | | $ | 1,650 | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net interest margin (1) | | | | | | 19.0 | % | | | | | | | | | 17.5 | % | | | |
7
Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures
.
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | As of or for the Three Months Ended June 30, | | | As of or for the Six Months Ended June 30, | ||||||||||||
| | | | | | | | | | | | | | | | | |
|
| 2022 |
| 2021 | | % Change |
| | 2022 |
| 2021 | | % Change | ||||
(Millions, except percentages) | | | | | | | | | | | | | | | | | |
Pretax pre-provision earnings (PPNR) | | | | | | | | | | | | | | | | | |
Income from continuing operations before income taxes | | $ | 16 | | $ | 354 | | (95) | | | $ | 319 | | $ | 721 | | (56) |
Provision for credit losses | | | 404 | | | (14) | | * | | | | 598 | | | 19 | | * |
Pretax pre-provision earnings (PPNR) | | $ | 420 | | $ | 340 | | 24 | | | $ | 917 | | $ | 740 | | 24 |
| | | | | | | | | | | | | | | | | |
Tangible common equity (TCE) | | | | | | | | | | | | | | | | | |
Total stockholders' equity | | | 2,275 | | | 2,048 | | 11 | | | | 2,275 | | | 2,048 | | 11 |
Less: Goodwill and intangible assets, net | | | (694) | | | (699) | | (1) | | | | (694) | | | (699) | | (1) |
Tangible common equity (TCE) | | $ | 1,581 | | $ | 1,349 | | 17 | | | $ | 1,581 | | $ | 1,349 | | 17 |
| | | | | | | | | | | | | | | | | |
Tangible assets (TA) | | | | | | | | | | | | | | | | | |
Total assets | | | 21,811 | | | 21,812 | | — | | | | 21,811 | | | 21,812 | | — |
Less: Goodwill and intangible assets, net | | | (694) | | | (699) | | (1) | | | | (694) | | | (699) | | (1) |
Tangible assets (TA) | | $ | 21,117 | | $ | 21,113 | | — | | | $ | 21,117 | | $ | 21,113 | | — |
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||
Average Balance | Interest Income / Expense | Average Yield / Rate | Average Balance | Interest Income / Expense | Average Yield / Rate | ||||||||||||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||||||||||||||
Cash and investment securities | $ | 3,613 | $ | 44 | 4.88 | % | $ | 3,975 | $ | 9 | 0.84 | % | |||||||||||||||||||||||
Credit card and other loans | 17,652 | 1,153 | 26.12 | % | 17,003 | 1,064 | 25.04 | % | |||||||||||||||||||||||||||
Total interest-earning assets | 21,265 | 1,197 | 22.51 | % | 20,978 | 1,073 | 20.45 | % | |||||||||||||||||||||||||||
Direct-to-consumer (retail) deposits | 5,824 | 58 | 4.00 | % | 3,865 | 10 | 1.07 | % | |||||||||||||||||||||||||||
Wholesale deposits | 7,250 | 69 | 3.81 | % | 6,994 | 31 | 1.78 | % | |||||||||||||||||||||||||||
Interest-bearing deposits | 13,074 | 127 | 3.90 | % | 10,859 | 41 | 1.53 | % | |||||||||||||||||||||||||||
Secured borrowings | 2,887 | 49 | 6.65 | % | 5,331 | 29 | 2.11 | % | |||||||||||||||||||||||||||
Unsecured borrowings | 1,801 | 29 | 6.49 | % | 1,978 | 25 | 5.15 | % | |||||||||||||||||||||||||||
Interest-bearing borrowings | 4,688 | 78 | 6.59 | % | 7,309 | 54 | 2.93 | % | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 17,762 | 205 | 4.61 | % | 18,168 | 95 | 2.09 | % | |||||||||||||||||||||||||||
Net interest income | $ | 992 | $ | 978 | |||||||||||||||||||||||||||||||
Net interest margin (1) | 18.7 | % | 18.6 | % |
Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||
Average Balance | Interest Income / Expense | Average Yield / Rate | Average Balance | Interest Income / Expense | Average Yield / Rate | ||||||||||||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||||||||||||||
Cash and investment securities | $ | 3,851 | $ | 90 | 4.68 | % | $ | 3,884 | $ | 11 | 0.56 | % | |||||||||||||||||||||||
Credit card and other loans | 18,528 | 2,441 | 26.35 | % | 16,827 | 2,130 | 25.32 | % | |||||||||||||||||||||||||||
Total interest-earning assets | 22,379 | 2,531 | 22.62 | % | 20,711 | 2,141 | 20.67 | % | |||||||||||||||||||||||||||
Direct-to-consumer (retail) deposits | 5,691 | 106 | 3.74 | % | 3,572 | 17 | 0.94 | % | |||||||||||||||||||||||||||
Wholesale deposits | 7,558 | 138 | 3.64 | % | 7,258 | 59 | 1.62 | % | |||||||||||||||||||||||||||
Interest-bearing deposits | 13,249 | 244 | 3.68 | % | 10,830 | 76 | 1.39 | % | |||||||||||||||||||||||||||
Secured borrowings | 3,727 | 118 | 6.37 | % | 5,162 | 48 | 1.86 | % | |||||||||||||||||||||||||||
Unsecured borrowings | 1,857 | 60 | 6.44 | % | 1,991 | 50 | 5.06 | % | |||||||||||||||||||||||||||
Interest-bearing borrowings | 5,584 | 178 | 6.39 | % | 7,153 | 98 | 2.75 | % | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 18,833 | 422 | 4.49 | % | 17,983 | 174 | 1.93 | % | |||||||||||||||||||||||||||
Net interest income | $ | 2,109 | $ | 1,967 | |||||||||||||||||||||||||||||||
Net interest margin (1) | 18.8 | % | 19.0 | % |
As of or for the three months ended June 30, | As of or for the six months ended June 30, | ||||||||||||||||||||||||||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||||||||||||||
Pretax pre-provision earnings (PPNR) | |||||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes | $ | 86 | $ | 16 | nm | $ | 724 | $ | 319 | nm | |||||||||||||||||||||||||
Provision for credit losses | 336 | 404 | (17) | 442 | 598 | (26) | |||||||||||||||||||||||||||||
Pretax pre-provision earnings (PPNR) | $ | 422 | $ | 420 | — | $ | 1,166 | $ | 917 | 27 | |||||||||||||||||||||||||
Less: Gain on portfolio sale | $ | — | $ | — | — | $ | (230) | $ | — | nm | |||||||||||||||||||||||||
Pretax pre-provision earnings less gain on portfolio sale | $ | 422 | $ | 420 | — | $ | 936 | $ | 917 | 2 | |||||||||||||||||||||||||
Tangible common equity (TCE) | |||||||||||||||||||||||||||||||||||
Total stockholders' equity | 2,736 | 2,275 | 20 | 2,736 | 2,275 | 20 | |||||||||||||||||||||||||||||
Less: Goodwill and intangible assets, net | (780) | (694) | 12 | (780) | (694) | 12 | |||||||||||||||||||||||||||||
Tangible common equity (TCE) | $ | 1,956 | $ | 1,581 | 24 | $ | 1,956 | $ | 1,581 | 24 | |||||||||||||||||||||||||
Tangible assets (TA) | |||||||||||||||||||||||||||||||||||
Total assets | 21,609 | 21,811 | (1) | 21,609 | 21,811 | (1) | |||||||||||||||||||||||||||||
Less: Goodwill and intangible assets, net | (780) | (694) | 12 | (780) | (694) | 12 | |||||||||||||||||||||||||||||
Tangible assets (TA) | $ | 20,829 | $ | 21,117 | (1) | $ | 20,829 | $ | 21,117 | (1) |
Delinquencies:
2022:
| | | | | | | | | | | |
| | June 30, | | % of | | December 31, | | % of |
| ||
|
| 2022 |
| Total |
| 2021 |
| Total |
| ||
(Millions, except percentages) | | | | | | | | | | |
|
Credit card and other loans outstanding ─ principal | | $ | 16,825 |
| 100.0 | % | $ | 16,590 |
| 100.0 | % |
Outstanding balances contractually delinquent | | | | | | | | | | | |
31 to 60 days | | $ | 262 | | 1.6 | % | $ | 219 |
| 1.3 | % |
61 to 90 days | |
| 169 |
| 1.0 | |
| 147 |
| 0.9 | |
91 or more days | |
| 306 |
| 1.8 | |
| 281 |
| 1.7 | |
Total | | $ | 737 |
| 4.4 | % | $ | 647 |
| 3.9 | % |
8
June 30, 2023 | % of Total | December 31, 2022 | % of Total | ||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||
Credit card and other loans outstanding ─ principal | $ | 16,728 | 100.0 | % | $ | 20,107 | 100.0 | % | |||||||||||||||
Outstanding balances contractually delinquent | |||||||||||||||||||||||
31 to 60 days | $ | 284 | 1.7 | % | $ | 366 | 1.8 | % | |||||||||||||||
61 to 90 days | 219 | 1.3 | 231 | 1.2 | |||||||||||||||||||
91 or more days | 423 | 2.5 | 515 | 2.6 | |||||||||||||||||||
Total | $ | 926 | 5.5 | % | $ | 1,112 | 5.5 | % |
As part of our collections strategy, we may offer temporary, short term (six-months or less) loan modificationsforbearance 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 or deferred 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 forbearance modification 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 loan modificationforbearance 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 troubled debt restructuring.Loan Modification. For additional information, see Note 2 “Credit Card and Other Loans – Modified Credit Card Loans,”Loans” to our unaudited Condensed Consolidated Financial Statements.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions, except percentages) | |||||||||||||||||||||||
Average credit card and other loans | $ | 17,652 | $ | 17,003 | $ | 18,528 | $ | 16,827 | |||||||||||||||
Net principal losses | 351 | 238 | 694 | 438 | |||||||||||||||||||
Net principal losses as a percentage of average credit card and other loans (1) | 8.0 | % | 5.6 | % | 7.5 | % | 5.2 | % |
| | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | | ||||
(Millions, except percentages) | | | | | | | | | | | | | |
Average credit card and other loans | | $ | 17,003 | | $ | 15,282 | | $ | 16,827 | | $ | 15,533 | |
Net principal losses | |
| 238 | |
| 194 | |
| 438 | |
| 392 | |
Net principal losses as a percentage of average credit card and other loans | |
| 5.6 | % |
| 5.1 | % |
| 5.2 | % |
| 5.0 | % |
Net principal losses as a percentage of Average credit card and other loans for the three and six months ended June 30, 2023 were impacted by the transition of our credit card processing services.
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.
9
various factors, including macroeconomic conditions and volatility in the financial and capital markets, limiting our access to or increasing
These factors could significantly reduce our financial flexibility and cause us to contract or not grow our business, which could have a material adverse effect on our results of operations and financial condition.
Credit Agreement
As of
The Credit Agreement includesour long-term debt agreements include various restrictive financial and non-financial covenants. If we do not comply with certain of these covenants and an event of default occurs and remains uncured, the maturity of amounts outstanding under the Credit Agreement may be accelerated and become payable, and, with respect to our credit agreement, the associated commitments may be terminated. As of June 30, 2022,2023, we were in compliance with all such covenants.
June 30, 2023 | December 31, 2022 | ||||||||||
(Millions, except percentages) | |||||||||||
Deposits | |||||||||||
Direct-to-consumer (retail) | $ | 5,993 | $ | 5,466 | |||||||
Wholesale | 7,027 | 8,321 | |||||||||
Total deposits | $ | 13,020 | $ | 13,787 | |||||||
Non-maturity deposit products | |||||||||||
Non-maturity deposits | $ | 6,570 | $ | 6,736 | |||||||
Interest rate range | 0.70% - 5.38% | 0.70% - 4.70% | |||||||||
Weighted-average interest rate | 4.43 | % | 3.57 | % | |||||||
Certificates of deposit | |||||||||||
Certificates of deposit | $ | 6,450 | $ | 7,051 | |||||||
Interest rate range | 0.50% - 5.45% | 0.40% - 4.95% | |||||||||
Weighted-average interest rate | 3.83 | % | 3.11 | % |
2022, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, were estimated to be $490 million (4% of Total deposits) and $719 million (5% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.
Table 9: Deposits
| | | | | | |
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
(Millions, except percentages) | | | | | | |
Deposits | | | | | | |
Direct-to-consumer (retail) | | $ | 4,191 | | $ | 3,180 |
Wholesale | | | 6,808 | | | 7,847 |
| | | | | | |
Non-maturity deposit products | | | | | | |
Non-maturity deposits | | $ | 6,360 | | $ | 5,586 |
Interest rate range | | 0.70% – 3.50% | | 0.05% – 3.50% | ||
Weighted-average interest rate | | | 1.66% | | | 0.68% |
| | | | | | |
Certificates of deposit | | | | | | |
Certificates of deposit | | $ | 4,639 | | $ | 5,441 |
Interest rate range | | 0.25% – 3.75% | | 0.20% – 3.75% | ||
Weighted-average interest rate | | | 2.27% | | | 1.91% |
10
April 2022,the applicable Trust did not change, including the Trust assets, providing for the option to pledge those assets in the future. In June 2023, the World Financial Network Credit Card Master Trust III amended its 2009-VFC conduit facility, increasing the capacity from $225 million to $275 million and extending a portion of the maturity to July 2023. In addition, in April 2022, the World Financial Capital Master Note Trust amended its 2009-VFN conduit facility, increasing the capacity from $1.5 billion to $2.5 billionOctober 2023, and extendinganother portion of the maturity to July 2023.
October 2024.
2023 | 2024 | Thereafter | Total | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Conduit facilities (1) | 100 | 2,825 | 2,250 | 5,175 |
The following table shows the maturities of borrowing commitments as of June 30, 2022, for the Trusts by year:
Table 10: Borrowing Commitment Maturities
| | | | | | | | | | | | |
|
| 2022 |
| 2023 |
| Thereafter |
| Total | ||||
(Millions) | | | | | | | | | | | | |
Fixed rate asset-backed term note securities | | $ | 653 | | $ | — | | $ | — | | $ | 653 |
Conduit facilities (1) | |
| — | |
| 5,525 | |
| — | |
| 5,525 |
Total (2) | | $ | 653 | | $ | 5,525 | | $ | — | | $ | 6,178 |
On February 28, 2022,
assumptions.
During the three and six months ended June 30, 2022,2023, we paid $11 million and $22$21 million, respectively, in dividends to holders of our shareholders of common stock. On July 28, 2022,27, 2023, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on September 16, 2022,15, 2023, to stockholders of record at the close of business on August 12, 2022.11, 2023.
11
Contractual Obligations
activities.
Six Months Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
(Millions) | |||||||||||
Total cash provided by (used in) | |||||||||||
Operating activities | $ | 741 | $ | 743 | |||||||
Investing activities | 2,860 | (897) | |||||||||
Financing activities | (4,177) | (72) | |||||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (576) | $ | (226) |
| | | | | | | |
| | Six Months Ended June 30, | | ||||
|
| 2022 |
| 2021 |
| ||
(Millions) | | | | | | | |
Total cash provided by (used in) | | | | | | | |
Operating activities | | $ | 743 | | $ | 733 | |
Investing activities | |
| (897) | |
| 535 | |
Financing activities | |
| (72) | |
| (1,365) | |
Effect of foreign currency exchange rates | |
| — | |
| 1 | |
Net decrease in cash, cash equivalents and restricted cash | | $ | (226) | | $ | (96) | |
Cash Flows from Operating Activities primarily include net income adjusted for (i) non-cash items included in net income, such as provision for credit losses, depreciation and amortization, deferred taxes and other non-cash items, and (ii) changes in the balances of operating assets and liabilities, which can fluctuate in the normal course of business due to the amount and timing of payments. We generated cash flows from operating activities of $743$741 million and $733$743 million for the six months ended June 30, 2023 and 2022, and 2021, respectively. Inrespectively. For the first half of 2022,six months ended June 30, 2023, the net cash provided by operating activities was primarily driven by cash generated from net income for the period after adjusting for the provisionProvision for credit losses and the Gain on portfolio sale. For the six months ended June 30, 2022, the net cash provided by operating
Cash Flows from Investing Activities primarily include changes in creditCredit card and other loans. Cash provided by investing activities was $2,860 million for the six months ended June 30, 2023 and cash used in investing activities was $897 million for the six months ended June 30, 2022, and2022. For the six months ended June 30, 2023, the net cash provided by investing activities was $535 million forprimarily due to the sale of the BJ's portfolio and the paydown of Credit card and other loans. For the six months ended June 30, 2021. In the first half of 2022, the net cash used in investing activities was primarily due to growth in credit sales and the consequential growth in Credit card and other loans, as well as the acquisition of a credit card loan portfolio. In the first half of 2021, the net cash provided by investing activities was due to an increase in payment rates that benefitted from government economic stimulus programs
Cash Flows from Financing Activities primarily include changes in deposits and long-term debt. Cash used in financing activities was $72$4,177 million and $1,365$72 million for the six months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023, the net cash used in financing activities was primarily driven by net repayments of debt issued by consolidated variable interest entities (securitizations) and 2021, respectively. Inunsecured borrowings, as well as and lower deposits. For the first half ofsix months ended June 30, 2022, the net cash used in financing activities was primarily driven by net repayments of unsecured borrowings. In the first half of 2021, the net cash used in financing activities was driven by net repayments of asset-backed term notes (securitizations), partially offset by net increases in deposits.
12
and financial condition. See Item 1A “Risk Factors” in our 2021 Form 10-K and other filings with the SEC for further information on the risks of inflation on our Company.
Comenity Bank
13
Quantitative measures, established by regulations to ensure capital adequacy, require the Banks to maintain minimum amounts and ratios of Tier 1 capital to average assets, and Common equity Tiertier 1, Tier 1 capital and Total capital, all to risk weighted assets. Failure to meet these minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions by the Banks’ regulators that if undertaken, could have a direct material effect on Comenity Bank’sCB’s and/or Comenity Capital Bank’sCCB’s operating activities, as well as our operating activities. Based on these regulations, as of June 30, 20222023 and 2021,2022, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The Banks are considered well capitalized and seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer. The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, are as follows as of June 30, 2022, are as follows:
2023:
| | | | | | | | | |
| | | | | | Minimum Ratio to be | |||
|
| | | Minimum Ratio for | | Well Capitalized under | |||
|
| Actual | | Capital Adequacy | | Prompt Corrective | |||
|
| Ratio | | Purposes | | Action Provisions | |||
Comenity Bank | | | | | | | | | |
Tier 1 Leverage capital ratio (1) | | 19.1 | % | | 4.0 | % | | 5.0 | % |
Common Equity Tier 1 capital ratio (2) | | 22.7 | | | 4.5 | | | 6.5 | |
Tier 1 capital ratio (3) | | 22.7 | | | 6.0 | | | 8.0 | |
Total Risk-based capital ratio (4) | | 24.0 | | | 8.0 | | | 10.0 | |
| | | | | | | | | |
Comenity Capital Bank | | | | | | | | | |
Tier 1 Leverage capital ratio (1) | | 16.4 | % | | 4.0 | % | | 5.0 | % |
Common Equity Tier 1 capital ratio (2) | | 18.0 | | | 4.5 | | | 6.5 | |
Tier 1 capital ratio (3) | | 18.0 | | | 6.0 | | | 8.0 | |
Total Risk-based capital ratio (4) | | 19.4 | | | 8.0 | | | 10.0 | |
| | | | | | | | | |
Combined Banks | | | | | | | | | |
Tier 1 Leverage capital ratio (1) | | 17.7 | % | | 4.0 | % | | 5.0 | % |
Common Equity Tier 1 capital ratio (2) | | 20.1 | | | 4.5 | | | 6.5 | |
Tier 1 capital ratio (3) | | 20.1 | | | 6.0 | | | 8.0 | |
Total Risk-based capital ratio (4) | | 21.5 | | | 8.0 | | | 10.0 | |
Actual Ratio | Minimum Ratio for Capital Adequacy Purposes | Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | |||||||||||||||
Comenity Bank | |||||||||||||||||
Common Equity Tier 1 capital ratio (1) | 18.8 | % | 4.5 | % | 6.5 | % | |||||||||||
Tier 1 capital ratio (2) | 18.8 | 6.0 | 8.0 | ||||||||||||||
Total Risk-based capital ratio (3) | 20.1 | 8.0 | 10.0 | ||||||||||||||
Tier 1 Leverage capital ratio (4) | 16.2 | 4.0 | 5.0 | ||||||||||||||
Comenity Capital Bank | |||||||||||||||||
Common Equity Tier 1 capital ratio (1) | 18.2 | % | 4.5 | % | 6.5 | % | |||||||||||
Tier 1 capital ratio (2) | 18.2 | 6.0 | 8.0 | ||||||||||||||
Total Risk-based capital ratio (3) | 19.6 | 8.0 | 10.0 | ||||||||||||||
Tier 1 Leverage capital ratio (4) | 16.1 | 4.0 | 5.0 | ||||||||||||||
Combined Banks (5) | |||||||||||||||||
Common Equity Tier 1 capital ratio (1) | 18.4 | % | 4.5 | % | 6.5 | % | |||||||||||
Tier 1 capital ratio (2) | 18.4 | 6.0 | 8.0 | ||||||||||||||
Total Risk-based capital ratio (3) | 19.8 | 8.0 | 10.0 | ||||||||||||||
Tier 1 Leverage capital ratio (4) | 16.1 | 4.0 | 5.0 |
The Common Equity Tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets.
14
macroeconomic conditions, including market conditions, inflation, rising interest rates, unemployment levels and the increased probability of a recession or prolonged economic slowdown, and the related impact on consumer spending behavior, payments, debt levels, savings rates and other behavior;
15
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions, except per share amounts) | |||||||||||||||||||||||
Interest income | |||||||||||||||||||||||
Interest and fees on loans | $ | 1,153 | $ | 1,064 | $ | 2,441 | $ | 2,130 | |||||||||||||||
Interest on cash and investment securities | 44 | 9 | 90 | 11 | |||||||||||||||||||
Total interest income | 1,197 | 1,073 | 2,531 | 2,141 | |||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Interest on deposits | 127 | 41 | 244 | 76 | |||||||||||||||||||
Interest on borrowings | 78 | 54 | 178 | 98 | |||||||||||||||||||
Total interest expense | 205 | 95 | 422 | 174 | |||||||||||||||||||
Net interest income | 992 | 978 | 2,109 | 1,967 | |||||||||||||||||||
Non-interest income | |||||||||||||||||||||||
Interchange revenue, net of retailer share arrangements | (74) | (102) | (161) | (198) | |||||||||||||||||||
Gain on portfolio sale | — | — | 230 | — | |||||||||||||||||||
Other | 34 | 17 | 63 | 45 | |||||||||||||||||||
Total non-interest income | (40) | (85) | 132 | (153) | |||||||||||||||||||
Total net interest and non-interest income | 952 | 893 | 2,241 | 1,814 | |||||||||||||||||||
Provision for credit losses | 336 | 404 | 442 | 598 | |||||||||||||||||||
Total net interest and non-interest income, after provision for credit losses | 616 | 489 | 1,799 | 1,216 | |||||||||||||||||||
Non-interest expenses | |||||||||||||||||||||||
Employee compensation and benefits | 217 | 191 | 437 | 370 | |||||||||||||||||||
Card and processing expenses | 116 | 84 | 235 | 166 | |||||||||||||||||||
Information processing and communication | 75 | 61 | 150 | 117 | |||||||||||||||||||
Marketing expenses | 40 | 50 | 79 | 80 | |||||||||||||||||||
Depreciation and amortization | 35 | 30 | 69 | 51 | |||||||||||||||||||
Other | 47 | 57 | 105 | 113 | |||||||||||||||||||
Total non-interest expenses | 530 | 473 | 1,075 | 897 | |||||||||||||||||||
Income from continuing operations before income taxes | 86 | 16 | 724 | 319 | |||||||||||||||||||
Provision for income taxes | 22 | 4 | 205 | 95 | |||||||||||||||||||
Income from continuing operations | 64 | 12 | 519 | 224 | |||||||||||||||||||
(Loss) income from discontinued operations, net of income taxes (1) | (16) | — | (16) | (1) | |||||||||||||||||||
Net income | $ | 48 | $ | 12 | $ | 503 | $ | 223 | |||||||||||||||
Basic income per share (Note 14) | |||||||||||||||||||||||
Income from continuing operations | $ | 1.28 | $ | 0.25 | $ | 10.37 | $ | 4.48 | |||||||||||||||
(Loss) income from discontinued operations | $ | (0.33) | $ | — | $ | (0.33) | $ | (0.01) | |||||||||||||||
Net income per share | $ | 0.95 | $ | 0.25 | $ | 10.04 | $ | 4.47 | |||||||||||||||
Diluted income per share (Note 14) | |||||||||||||||||||||||
Income from continuing operations | $ | 1.27 | $ | 0.25 | $ | 10.34 | $ | 4.47 | |||||||||||||||
(Loss) income from discontinued operations | $ | (0.32) | $ | — | $ | (0.32) | $ | (0.01) | |||||||||||||||
Net income per share | $ | 0.95 | $ | 0.25 | $ | 10.02 | $ | 4.46 | |||||||||||||||
Weighted average common shares outstanding (Note 14) | |||||||||||||||||||||||
Basic | 50.1 | 49.8 | 50.1 | 49.8 | |||||||||||||||||||
Diluted | 50.3 | 49.9 | 50.2 | 50.0 |
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
(Millions, except per share amounts) | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | |
Interest and fees on loans | | $ | 1,064 | | $ | 913 | | $ | 2,130 | | $ | 1,854 |
Interest on cash and investment securities | |
| 9 | |
| 2 | |
| 11 | |
| 3 |
Total interest income | |
| 1,073 | |
| 915 | |
| 2,141 | |
| 1,857 |
Interest expense | | | | | | | | | | | | |
Interest on deposits | |
| 41 | |
| 43 | |
| 76 | |
| 90 |
Interest on borrowings | |
| 54 | |
| 57 | |
| 98 | |
| 117 |
Total interest expense | | | 95 | | | 100 | | | 174 | | | 207 |
Net interest income | | | 978 | | | 815 | | | 1,967 | | | 1,650 |
Non-interest income | | | | | | | | | | | | |
Interchange revenue, net of retailer share arrangements | | | (102) | | | (85) | | | (198) | | | (153) |
Other | | | 17 | | | 34 | | | 45 | | | 69 |
Total non-interest income | | | (85) | | | (51) | | | (153) | | | (84) |
Total net interest and non-interest income | | | 893 | | | 764 | | | 1,814 | | | 1,566 |
Provision for credit losses | | | 404 | | | (14) | | | 598 | | | 19 |
Total net interest and non-interest income, after provision for credit losses | | | 489 | | | 778 | | | 1,216 | | | 1,547 |
Non-interest expenses | | | | | | | | | | | | |
Employee compensation and benefits | | | 191 | | | 162 | | | 370 | | | 320 |
Card and processing expenses | | | 84 | | | 83 | | | 166 | | | 161 |
Information processing and communication | | | 61 | | | 55 | | | 117 | | | 106 |
Marketing expenses | | | 50 | | | 35 | | | 80 | | | 77 |
Depreciation and amortization | |
| 30 | |
| 22 | |
| 51 | |
| 47 |
Other | | | 57 | | | 67 | | | 113 | | | 115 |
Total non-interest expenses | | | 473 | | | 424 | | | 897 | | | 826 |
Income from continuing operations before income taxes | | | 16 | | | 354 | | | 319 | | | 721 |
Provision for income taxes | |
| 4 | |
| 91 | |
| 95 | |
| 190 |
Income from continuing operations | | | 12 | | | 263 | | | 224 | | | 531 |
Income (loss) from discontinued operations, net of income taxes | |
| — | |
| 11 | |
| (1) | |
| 29 |
Net income | | $ | 12 | | $ | 274 | | $ | 223 | | $ | 560 |
| | | | | | | | | | | | |
Basic income per share (Note 13) | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.25 | | $ | 5.29 | | $ | 4.48 | | $ | 10.68 |
Income (loss) from discontinued operations | | $ | — | | $ | 0.21 | | $ | (0.01) | | $ | 0.58 |
Net income per share | | $ | 0.25 | | $ | 5.50 | | $ | 4.47 | | $ | 11.26 |
| | | | | | | | | | | | |
Diluted income per share (Note 13) | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.25 | | $ | 5.25 | | $ | 4.47 | | $ | 10.63 |
Income (loss) from discontinued operations | | $ | — | | $ | 0.22 | | $ | (0.01) | | $ | 0.58 |
Net income per share | | $ | 0.25 | | $ | 5.47 | | $ | 4.46 | | $ | 11.21 |
| | | | | | | | | | | | |
Weighted average common shares outstanding (Note 13) | | | | | | | | | | | | |
Basic | |
| 49.8 | |
| 49.7 | |
| 49.8 | |
| 49.7 |
Diluted | |
| 49.9 | |
| 50.0 | |
| 50.0 | |
| 49.9 |
Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019. For additional information refer to Note 1, “Description of Business and Basis of Presentation” to the unaudited Consolidated Financial Statements
16
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Net income | $ | 48 | $ | 12 | $ | 503 | $ | 223 | |||||||||||||||
Other comprehensive (loss) income | |||||||||||||||||||||||
Unrealized (loss) gain on available-for-sale debt securities | (2) | (7) | 1 | (16) | |||||||||||||||||||
Tax benefits | 1 | 2 | — | 4 | |||||||||||||||||||
Unrealized (loss) gain on available-for-sale debt securities, net of tax | (1) | (5) | 1 | (12) | |||||||||||||||||||
Other comprehensive (loss) income, net of tax | (1) | (5) | 1 | (12) | |||||||||||||||||||
Total comprehensive income, net of tax | $ | 47 | $ | 7 | $ | 504 | $ | 211 |
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
(Millions) | | | | | | | | | | | | |
Net income | | $ | 12 | | $ | 274 | | $ | 223 | | $ | 560 |
| | | | | | | | | | | | |
Other comprehensive loss | | | | | | | | | | | | |
Unrealized loss on available-for-sale debt securities | | | (7) | | | (2) | | | (16) | | | (11) |
Tax benefit | | | 2 | | | 1 | | | 4 | | | 1 |
Unrealized loss on available-for-sale debt securities, net of tax | |
| (5) | |
| (1) | |
| (12) | |
| (10) |
| | | | | | | | | | | | |
Unrealized gain on cash flow hedges | | | — | | | — | | | — | | | 1 |
Tax benefit | | | — | | | — | | | — | | | — |
Unrealized gain on cash flow hedges, net of tax | | | — | | | — | | | — | | | 1 |
| | | | | | | | | | | | |
Foreign currency translation adjustments | |
| — | |
| 10 | |
| — | |
| (19) |
| | | | | | | | | | | | |
Other comprehensive (loss) income, net of tax | |
| (5) | |
| 9 | |
| (12) | |
| (28) |
| | | | | | | | | | | | |
Total comprehensive income, net of tax | | $ | 7 | | $ | 283 | | $ | 211 | | $ | 532 |
17
June 30, 2023 | December 31, 2022 | ||||||||||
(Millions, except per share amounts) | |||||||||||
ASSETS | |||||||||||
Cash and cash equivalents | $ | 3,325 | $ | 3,891 | |||||||
Credit card and other loans | |||||||||||
Total credit card and other loans (includes loans available to settle obligations of consolidated variable interest entities June 30, 2023, $10,750; December 31, 2022, $15,383, respectively) | 17,962 | 21,365 | |||||||||
Allowance for credit losses | (2,208) | (2,464) | |||||||||
Credit card and other loans, net | 15,754 | 18,901 | |||||||||
Investment securities | 239 | 221 | |||||||||
Property and equipment, net | 162 | 195 | |||||||||
Goodwill and intangible assets, net | 780 | 799 | |||||||||
Other assets | 1,349 | 1,400 | |||||||||
Total assets | $ | 21,609 | $ | 25,407 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Deposits | 13,048 | 13,826 | |||||||||
Debt issued by consolidated variable interest entities | 3,323 | 6,115 | |||||||||
Long-term and other debt | 1,375 | 1,892 | |||||||||
Other liabilities | 1,127 | 1,309 | |||||||||
Total liabilities | 18,873 | 23,142 | |||||||||
Commitments and contingencies (Note 10) | |||||||||||
Stockholders’ equity | |||||||||||
Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 50.1 million shares as of June 30, 2023 and 49.9 million shares as of December 31, 2022, respectively. | 1 | 1 | |||||||||
Additional paid-in capital | 2,181 | 2,192 | |||||||||
Retained earnings | 574 | 93 | |||||||||
Accumulated other comprehensive loss | (20) | (21) | |||||||||
Total stockholders’ equity | 2,736 | 2,265 | |||||||||
Total liabilities and stockholders’ equity | $ | 21,609 | $ | 25,407 |
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
(Millions, except per share amounts) | | | | | | |
ASSETS | | | | | | |
Cash and cash equivalents | | $ | 3,111 | | $ | 3,046 |
Credit card and other loans | | | | | | |
Total credit card and other loans (includes loans available to settle obligations of consolidated variable interest entities: 2022, $12,369; 2021, $11,215) | |
| 17,769 | |
| 17,399 |
Allowance for credit losses | |
| (1,992) | |
| (1,832) |
Credit card and other loans, net | |
| 15,777 | |
| 15,567 |
Investment securities | | | 224 | | | 239 |
Property and equipment, net | |
| 219 | |
| 215 |
Goodwill and intangible assets, net | |
| 694 | |
| 687 |
Other assets | |
| 1,786 | |
| 1,992 |
Total assets | | $ | 21,811 | | $ | 21,746 |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | |
Deposits | |
| 11,028 | |
| 11,027 |
Debt issued by consolidated variable interest entities | |
| 5,498 | |
| 5,453 |
Long-term and other debt | |
| 1,939 | |
| 1,986 |
Other liabilities | |
| 1,071 | |
| 1,194 |
Total liabilities | |
| 19,536 | |
| 19,660 |
Commitments and contingencies (Note 9) | | | | | | |
Stockholders’ equity | | | | | | |
Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 49.8 million shares as of both June 30, 2022 and December 31, 2021 | |
| 1 | |
| 1 |
Additional paid-in capital | |
| 2,174 | |
| 2,174 |
Retained earnings (accumulated deficit) | |
| 114 | |
| (87) |
Accumulated other comprehensive loss | |
| (14) | |
| (2) |
Total stockholders’ equity | |
| 2,275 | |
| 2,086 |
Total liabilities and stockholders’ equity | | $ | 21,811 | | $ | 21,746 |
18
Three Months Ended June 30, 2023 | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | 50.1 | $ | 1 | $ | 2,197 | $ | 537 | $ | (19) | $ | 2,716 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | 48 | — | 48 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (1) | (1) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 12 | — | — | 12 | ||||||||||||||||||||||||||||||||||||||
Capped call transactions for convertible senior notes due 2028 | — | — | (30) | — | — | (30) | ||||||||||||||||||||||||||||||||||||||
Dividends and dividend equivalent rights declared ($0.21 per common share) | — | — | — | (11) | — | (11) | ||||||||||||||||||||||||||||||||||||||
Issuance of shares to employees, net of shares withheld for employee taxes | — | — | 2 | — | — | 2 | ||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2023 | 50.1 | $ | 1 | $ | 2,181 | $ | 574 | $ | (20) | $ | 2,736 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | |||||
| | | | | | | Additional | | | | | | Other | | Total | |||||
| | Common Stock | | Paid-In | | Treasury | | Retained | | Comprehensive | | Stockholders’ | ||||||||
Three Months Ended June 30, 2022 |
| Shares |
| Amount |
| Capital |
| Stock |
| Earnings |
| Loss |
| Equity | ||||||
(Millions) | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2022 |
| 49.8 | | $ | 1 | | $ | 2,163 | | $ | — | | $ | 113 | | $ | (9) | | $ | 2,268 |
Net income |
| — | | | — | | | — | | | — | | | 12 | | | — | |
| 12 |
Other comprehensive loss |
| — | | | — | | | — | | | — | | | — | | | (5) | | | (5) |
Stock-based compensation |
| — | | | — | | | 9 | | | — | | | — | | | — | | | 9 |
Dividends and dividend equivalent rights declared ($0.21 per common share) | | — | | | — | | | — | | | — | | | (11) | | | — | | | (11) |
Other |
| — | | | — | | | 2 | | | — | | | — | | | — | | | 2 |
Balance as of June 30, 2022 |
| 49.8 | | $ | 1 | | $ | 2,174 | | $ | — | | $ | 114 | | $ | (14) | | $ | 2,275 |
Three Months Ended June 30, 2022 | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | 49.8 | $ | 1 | $ | 2,163 | $ | 113 | $ | (9) | $ | 2,268 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | 12 | — | 12 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (5) | (5) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 9 | — | — | 9 | ||||||||||||||||||||||||||||||||||||||
Dividends and dividend equivalent rights declared ($0.21 per common share) | — | — | — | (11) | — | (11) | ||||||||||||||||||||||||||||||||||||||
Issuance of shares to employees, net of shares withheld for employee taxes | — | — | 2 | — | — | 2 | ||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | 49.8 | $ | 1 | $ | 2,174 | $ | 114 | $ | (14) | $ | 2,275 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | |||||
| | | | | | | Additional | | | | | | Other | | Total | |||||
| | Common Stock | | Paid-In | | Treasury | | Retained | | Comprehensive | | Stockholders’ | ||||||||
Three Months Ended June 30, 2021 |
| Shares |
| Amount |
| Capital |
| Stock |
| Earnings |
| Loss |
| Equity | ||||||
(Millions) | | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 2021 |
| 117.1 | | $ | 1 | | $ | 3,431 | | $ | (6,734) | | $ | 5,108 | | $ | (42) | | $ | 1,764 |
Net income |
| — | |
| — | |
| — | |
| — | |
| 274 | |
| — | |
| 274 |
Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | 9 | | | 9 |
Stock-based compensation | | — | | | — | | | 9 | | | — | | | — | | | — | | | 9 |
Dividends and dividend equivalent rights declared ($0.21 per common share) | | — | | | — | | | — | | | — | | | (11) | | | — | | | (11) |
Other | | — | | | — | | | 3 | | | — | | | — | | | — | | | 3 |
Balance as of June 30, 2021 | | 117.1 | | $ | 1 | | $ | 3,443 | | $ | (6,734) | | $ | 5,371 | | $ | (33) | | $ | 2,048 |
See Notes to unaudited Condensed Consolidated Financial Statements.
19
BREAD FINANCIAL HOLDINGS, INC.
Six Months Ended June 30, 2023 | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | 49.9 | $ | 1 | $ | 2,192 | $ | 93 | $ | (21) | $ | 2,265 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | 503 | — | 503 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 21 | — | — | 21 | ||||||||||||||||||||||||||||||||||||||
Capped call transactions for convertible senior notes due 2028 | — | — | (30) | — | — | (30) | ||||||||||||||||||||||||||||||||||||||
Dividends and dividend equivalent rights declared ($0.42 per common share) | — | — | — | (22) | — | (22) | ||||||||||||||||||||||||||||||||||||||
Issuance of shares to employees, net of shares withheld for employee taxes | 0.2 | — | (2) | — | — | (2) | ||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2023 | 50.1 | $ | 1 | $ | 2,181 | $ | 574 | $ | (20) | $ | 2,736 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | |||||
| | | | | | | Additional | | | | | | Other | | Total | |||||
| | Common Stock | | Paid-In | | Treasury | | Retained | | Comprehensive | | Stockholders’ | ||||||||
Six Months Ended June 30, 2022 |
| Shares |
| Amount |
| Capital |
| Stock |
| Earnings |
| Loss |
| Equity | ||||||
(Millions) | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2021 |
| 49.9 | | $ | 1 | | $ | 2,174 | | $ | — | | $ | (87) | | $ | (2) | | $ | 2,086 |
Net income |
| — | | | — | | | — | | | — | | | 223 | | | — | |
| 223 |
Other comprehensive loss |
| — | | | — | | | — | | | — | | | — | | | (12) | |
| (12) |
Stock-based compensation |
| | | | — | | | 15 | | | — | | | — | | | — | |
| 15 |
Repurchases of common stock | | (0.2) | | | — | | | (12) | | | | | | | | | | | | (12) |
Dividends and dividend equivalent rights declared ($0.42 per common share) | | — | | | — | | | — | | | — | | | (22) | | | — | |
| (22) |
Other |
| 0.1 | | | — | | | (3) | | | — | | | — | | | — | | | (3) |
Balance as of June 30, 2022 |
| 49.8 | | $ | 1 | | $ | 2,174 | | $ | — | | $ | 114 | | $ | (14) | | $ | 2,275 |
Six Months Ended June 30, 2022 | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | 49.9 | $ | 1 | $ | 2,174 | $ | (87) | $ | (2) | $ | 2,086 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | 223 | — | 223 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (12) | (12) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 15 | — | — | 15 | ||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | (0.2) | (12) | (12) | |||||||||||||||||||||||||||||||||||||||||
Dividends and dividend equivalent rights declared ($0.42 per common share) | — | — | — | (22) | — | (22) | ||||||||||||||||||||||||||||||||||||||
Issuance of shares to employees, net of shares withheld for employee taxes | 0.1 | — | (3) | — | — | (3) | ||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | 49.8 | $ | 1 | $ | 2,174 | $ | 114 | $ | (14) | $ | 2,275 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | |||||
| | | | | | | Additional | | | | | | Other | | Total | |||||
| | Common Stock | | Paid-In | | Treasury | | Retained | | Comprehensive | | Stockholders’ | ||||||||
Six Months Ended June 30, 2021 |
| Shares |
| Amount |
| Capital |
| Stock |
| Earnings |
| Loss |
| Equity | ||||||
(Millions) | | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2020 |
| 117.1 | | $ | 1 | | $ | 3,427 | | $ | (6,734) | | $ | 4,832 | | $ | (5) | | $ | 1,521 |
Net income |
| — | | | — | | | — | | | — | | | 560 | | | — | |
| 560 |
Other comprehensive loss | | — | | | — | | | — | | | — | | | — | | | (28) | |
| (28) |
Stock-based compensation | | — | | | — | | | 16 | | | — | | | — | | | — | |
| 16 |
Dividends and dividend equivalent rights declared ($0.42 per common share) | | — | | | — | | | — | | | — | | | (21) | | | — | |
| (21) |
Balance as of June 30, 2021 | | 117.1 | | $ | 1 | | $ | 3,443 | | $ | (6,734) | | $ | 5,371 | | $ | (33) | | $ | 2,048 |
20
| | | | | | |
| | Six Months Ended | ||||
| | June 30, | ||||
|
| 2022 |
| 2021 | ||
(Millions) | | | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | | $ | 223 | | $ | 560 |
Adjustments to reconcile net income to net cash provided by operating activities | | | | | | |
Provision for credit losses | | | 598 | | | 19 |
Depreciation and amortization | |
| 51 | |
| 66 |
Deferred income taxes | |
| (102) | |
| 22 |
Non-cash stock compensation | |
| 16 | |
| 16 |
Amortization of deferred financing costs | |
| 12 | |
| 16 |
Amortization of deferred origination costs | |
| 43 | |
| 34 |
Change in other operating assets and liabilities | | | | | | |
Change in other assets | | | (32) | | | (59) |
Change in other liabilities | | | (106) | | | 54 |
Other | | | 40 | |
| 5 |
Net cash provided by operating activities | |
| 743 | |
| 733 |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Change in credit card and other loans | | | (596) | | | 666 |
Change in redemption settlement assets | |
| — | |
| (41) |
Purchase of credit card loan portfolios | |
| (249) | |
| (32) |
Capital expenditures | |
| (43) | |
| (35) |
Purchases of investment securities | |
| (23) | |
| (60) |
Maturities of investment securities | |
| 18 | |
| 35 |
Other | |
| (4) | |
| 2 |
Net cash (used in) provided by investing activities | |
| (897) | |
| 535 |
| | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Unsecured borrowings under debt agreements | | | 218 | | | 31 |
Repayments/maturities of unsecured borrowings under debt agreements | | | (269) | | | (82) |
Debt issued by consolidated variable interest entities | |
| 1,588 | |
| 2,065 |
Repayments/maturities of debt issued by consolidated variable interest entities | | | (1,543) | | | (3,173) |
Net decrease in deposits | | | (22) | | | (176) |
Payment of deferred financing costs | |
| (7) | |
| (8) |
Dividends paid | |
| (22) | |
| (21) |
Repurchases of common stock | |
| (12) | |
| — |
Other | |
| (3) | |
| (1) |
Net cash used in financing activities | |
| (72) | |
| (1,365) |
| | | | | | |
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash | |
| — | |
| 1 |
| | | | | | |
Change in cash, cash equivalents and restricted cash | |
| (226) | |
| (96) |
Cash, cash equivalents and restricted cash at beginning of period | |
| 3,923 | |
| 3,463 |
Cash, cash equivalents and restricted cash at end of period | | $ | 3,697 | | $ | 3,367 |
| | | | | | |
SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | |
| | | | | | |
Cash and cash equivalents reconciliation | | | | | | |
Cash and cash equivalents | | $ | 3,111 | | $ | 2,788 |
Restricted cash included within Other assets | | | 586 | | | 304 |
Cash, cash equivalents and restricted cash included within Assets of discontinued operations | | | — | | | 275 |
Total cash, cash equivalents and restricted cash | | $ | 3,697 | | $ | 3,367 |
Six Months Ended June 30, | |||||||||||
2023 | 2022 | ||||||||||
(Millions) | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income | $ | 503 | $ | 223 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
Provision for credit losses | 442 | 598 | |||||||||
Depreciation and amortization | 69 | 51 | |||||||||
Deferred income taxes | (30) | (102) | |||||||||
Non-cash stock compensation | 22 | 16 | |||||||||
Amortization of deferred financing costs | 13 | 12 | |||||||||
Amortization of deferred origination costs | 44 | 43 | |||||||||
Gain on portfolio sale | (230) | — | |||||||||
Change in other operating assets and liabilities | |||||||||||
Change in other assets | 88 | (32) | |||||||||
Change in other liabilities | (183) | (106) | |||||||||
Other | 3 | 40 | |||||||||
Net cash provided by operating activities | 741 | 743 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Change in credit card and other loans | 477 | (596) | |||||||||
Proceeds from sale of credit card loan portfolio | 2,499 | — | |||||||||
Purchase of credit card loan portfolio | (81) | (249) | |||||||||
Net purchase of investment securities | (18) | (5) | |||||||||
Other, including capital expenditures | (17) | (47) | |||||||||
Net cash provided by (used in) investing activities | 2,860 | (897) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Unsecured borrowings under debt agreements | 801 | 218 | |||||||||
Repayments/maturities of unsecured borrowings under debt agreements | (1,297) | (269) | |||||||||
Debt issued by consolidated variable interest entities | 1,392 | 1,588 | |||||||||
Repayments/maturities of debt issued by consolidated variable interest entities | (4,182) | (1,543) | |||||||||
Net decrease in deposits | (779) | (22) | |||||||||
Payment of deferred financing costs | (49) | (7) | |||||||||
Payment for capped call transactions | (39) | — | |||||||||
Dividends paid | (21) | (22) | |||||||||
Other | (3) | (15) | |||||||||
Net cash used in financing activities | (4,177) | (72) | |||||||||
Change in cash, cash equivalents and restricted cash | (576) | (226) | |||||||||
Cash, cash equivalents and restricted cash at beginning of period | 3,927 | 3,923 | |||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 3,351 | $ | 3,697 | |||||||
SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||
Cash and cash equivalents reconciliation | |||||||||||
Cash and cash equivalents | $ | 3,325 | $ | 3,111 | |||||||
Restricted cash included within Other assets | 26 | 586 | |||||||||
Total cash, cash equivalents and restricted cash | $ | 3,351 | $ | 3,697 |
21
Effective March 23, 2022, Alliance Data Systems Corporation was renamed Bread Financial Holdings, Inc., and on April 4, 2022, its New York Stock Exchange ticker changed from “ADS” to “BFH”. Neither the name change nor the ticker change affected the Company’s legal entity structure, nor did either change have an impact on the Company’s financial statements.
Bread Financial Holdings, Inc. (BFH or, including its consolidated subsidiaries and variable interest entities (VIEs), the Company) isWe are a tech-forward financial services company providingthat provides simple, personalized payment, lending and saving solutions. The Company createsWe create opportunities for itsour 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, the Company deliverswe deliver growth for itsour partners through a comprehensive product suite, including private label and co-brand credit cards installment lending, and buy now, pay later (split-pay). The Company(BNPL) products such as installment loans and our “split-pay” offerings. We also offersoffer direct-to-consumer solutions that give customers more access, choice and freedom through itsour branded Bread CashbackTMAmerican Express® Credit Card and Bread SavingsTM products.
The accompanying
The unaudited Condensed Consolidated Financial Statement should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the Securities and Exchange Commission on February 25, 2022; if28, 2023. If not significantly different, certain note disclosures included therein have been omitted from these unaudited Condensed Consolidated Financial Statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates and assumptions reflect the best judgement of management, but actual results could differ. The most significant of those estimates and assumptions relate to the Company’s Allowance for credit losses.
22
RECENTLY ISSUEDADOPTED ACCOUNTING STANDARDS
governance in support of the new guidance.
The Company’s
charged-off.
Primarily, the Company classifies its credit
23
The following table presents the Company’s creditCredit card and other loans, as of June 30, 20222023 and December 31, 2021,2022, respectively:
| | | | | | |
|
| June 30, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
(Millions) | | | | | | |
Credit card loans | | $ | 17,536 | | $ | 17,217 |
Installment (other) loans | | | 233 | | | 182 |
Total credit card and other loans (1)(2) | | | 17,769 | | | 17,399 |
Less: Allowance for credit losses | | | (1,992) | | | (1,832) |
Credit card and other loans, net | | $ | 15,777 | | $ | 15,567 |
June 30, 2023 | December 31, 2022 | ||||||||||
(Millions) | |||||||||||
Credit card loans | $ | 17,654 | $ | 21,065 | |||||||
BNPL (other) loans | 308 | 300 | |||||||||
Total credit card and other loans (1)(2) | 17,962 | 21,365 | |||||||||
Less: Allowance for credit losses | (2,208) | (2,464) | |||||||||
Credit card and other loans, net | $ | 15,754 | $ | 18,901 |
Includes $10.7 billion and $15.4 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of June 30, 2023 and December 31, 2022, respectively.
Aging Analysis of Delinquent Amortized Cost Credit Card and Other Loans (1) | |||||||||||||||||||||||||||||||||||
31 to 60 Days Past Due | 61 to 90 Days Past Due | 91 or more Days Past Due | Total | Total Current | Total | ||||||||||||||||||||||||||||||
(Millions) | |||||||||||||||||||||||||||||||||||
As of June 30, 2023 | $ | 348 | $ | 285 | $ | 601 | $ | 1,234 | $ | 16,392 | $ | 17,626 | |||||||||||||||||||||||
As of December 31, 2022 | $ | 444 | $ | 296 | $ | 732 | $ | 1,472 | $ | 19,559 | $ | 21,031 |
BNPL loan delinquencies have been included with credit card loan delinquencies in the table above, as amounts were insignificant as of each period presented. As permitted by GAAP, we exclude unbilled finance charges and fees from our amortized cost basis of Credit card and other loans. As of June 30, 2023 and December 31, 2022, accrued interest and fees that have not yet been billed to cardholders were $313 million and $307 million, respectively, included in Credit card and other loans on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | |
| | Aging Analysis of Delinquent Amortized Cost | | | | | | | ||||||||||
|
| 31 to 60 days |
| 61 to 90 days |
| 91 or more days delinquent |
| Total |
| Current |
| Total | ||||||
(Millions) | | | | | | | | | | | | | | | | | | |
As of June 30, 2022 | $ | 314 | | $ | 217 | | $ | 435 | | $ | 966 | | $ | 16,529 | | $ | 17,495 | |
| | | | | | | | | | | | | | | | | | |
As of December 31, 2021 | $ | 262 | | $ | 186 | | $ | 401 | | $ | 849 | | $ | 16,284 | | $ | 17,133 |
From time to time the Company may re-age cardholders’ accounts, which is intended to assist delinquent cardholders who have experienced financial difficulties but who demonstrate both an ability and willingness to repay the amounts due; this practice affects credit card loan delinquencies and principal losses. Accounts meeting specific defined criteria are re-aged when the cardholder makes one or more consecutive payments aggregating to a certain pre-defined amount of their account balance. Upon re-aging, the outstanding balance of a delinquent account is returned to current status. The Company’s re-aged accounts as a percentage of total credit card and other loans represented 1.6% and 2.1%, for the three months ended June 30, 2023 and December 31, 2022, our Delinquency rates were 5.5% and 2021, respectively, and 1.6% and 2.3% for the six months ended June 30, 2022 and 2021,5.5%, respectively. The Company’s re-aging practices comply with regulatory guidelines.
24
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Net Principal LossesLosses:
The Company’sOur 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. InstallmentBNPL 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, creditCredit card and other loans, including unpaid interest and fees, as applicable, are charged-off in each month subsequent to 60 days after the receipt of the notification of the bankruptcy or death, but in any case notno later than 180 days past due for creditCredit card loans and 120 days past due for installmentBNPL loans. The Company recordsWe record the actual losses for unpaid interest and fees as a reduction to Interest and fees on loans, which were $148$243 million and $114$148 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $284$485 million and $245$284 million for the six months ended June 30, 2023 and 2022, respectively.
Modified Credit Card Loans
Forbearance Programs
As partother loans for the same period. Average credit card and other loans represent the average balance of the Company’s collections strategy,loans at the Company may offer temporary, short term (six-months or less) forbearance programs in order to improvebeginning and end of each month, averaged over the likelihood of collections and meet the needs of the Company’s customers. The Company’s modifications for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced or deferred payment requirements, interest rate reductions and late fee waivers. The Company does not offer programs involving the forgiveness of principal. These temporary loan modifications may assist in cases where the Company believes the customer will recover from the short-term hardship and resume scheduled payments. Under these forbearance modification programs, those accounts receiving relief may not advance to the next delinquency cycle, including to charge-off, in the same time frame that would have occurred had the relief not been granted. The Company evaluates its forbearance modification programs to determine if they represent a more than insignificant delay in payment, in which case they would then be considered a troubled debt restructuring (TDR). Loans in these short term programs that are determined to be TDR’s, will be included as such in the disclosures below.
Credit Card Loans Modified as TDRs
The Company considers impaired loans to be loans for which it is probable that it will be unable to collect all amounts due according to the original contractual terms of the cardholder agreement, including credit card loans modified as TDRs. In instances where cardholders are experiencing financial difficulty, the Company may modify its credit card loans with the intention of minimizing losses and improving collectability, while providing cardholders with financial relief; such credit card loans are classified as TDRs, exclusive of the forbearance programs described above. Modifications, including for temporary hardship and permanent workout programs, include concessions consisting primarily of a reduced minimum payment and an interest rate reduction. The temporary programs’ concessions remain in place for a period no longer than twelve months, while the permanent programs remain in place through the payoff of the credit card loans if the cardholder complies with the terms of the program.
TDR concessions do not include the forgiveness of unpaid principal, but may involve the reversal of certain unpaid interest or fee assessments, and the cardholder’s ability to make future purchases is either limited, or suspended until the cardholder successfully exits from the modification program. In accordance with the terms of the Company’s temporary hardship and permanent workout programs, the Credit Agreement reverts back to its original contractual terms (including the contractual interest rate) when the customer exits the program, which is either when all payments have been made in accordance with the program, or when the customer defaults out of the program.
TDRs are collectively evaluated for impairment on a pooled basis. In measuring the appropriate allowance for credit losses, these modified credit card loans are included in the general pool of credit card loans, with the allowance determined under a contingent loss model. The Company’s impaired credit card loans represented less than 2% of total credit card loans as of both June 30, 2022 and December 31, 2021. As of those same dates, the Company’s recorded investment in impaired credit card loans was $252 million and $281 million, respectively, with an associated allowance
25
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
for credit losses of $66 million and $81 million, respectively. The average recorded investment in impaired credit card loans was $258 million and $415 million forperiods indicated. For the three months ended June 30, 2023 and 2022, our Net principal loss rates were 8.0% and 2021,5.6%, respectively, and $265 million and $449 million for the six months ended June 30, 2023 and 2022, our Net principal loss rates were 7.5% and 2021,5.2%, respectively.
Interest income on these impaired credit card loans is accounted for in the same manner as non-impaired credit card loans, and cash collections are allocated according to the same payment hierarchy methodology applied for credit card loans not in modification programs. The Company recognized $3 million and $7 million for the three months ended June 30, 2022 and 2021, respectively, and $7 million and $16 million for the six months ended June 30, 2022 and 2021, respectively, in interest income associated with credit card loans in modification programs, during the period that such loans were impaired.
The following table provides additional information regarding credit card loans modified as TDRs during the specified periods:
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 | ||||||||||||
| | | | Pre-modification | | Post-modification | | | | Pre-modification | | Post-modification | ||||
| | Number of | | Outstanding | | Outstanding | | Number of | | Outstanding | | Outstanding | ||||
|
| Restructurings |
| Balance |
| Balance |
| Restructurings |
| Balance |
| Balance | ||||
(Millions, except for Number of restructurings) | | | | | | | | | | | | | | | | |
Troubled debt restructurings – credit card loans | | 32,216 |
| $ | 46 |
| $ | 46 | | 70,214 |
| $ | 102 |
| $ | 102 |
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2021 |
| Six Months Ended June 30, 2021 | ||||||||||||
| | | | Pre-modification | | Post-modification |
| | | Pre-modification | | Post-modification | ||||
| | Number of | | Outstanding | | Outstanding | | Number of | | Outstanding | | Outstanding | ||||
|
| Restructurings |
| Balance |
| Balance |
| Restructurings |
| Balance |
| Balance | ||||
(Millions, except for Number of restructurings) | | | | | | | | | | | | | | | | |
Troubled debt restructurings – credit card loans | | 33,061 |
| $ | 52 |
| $ | 52 | | 96,689 |
| $ | 145 |
| $ | 145 |
The following table provides additional information regarding credit card loans modified as TDRs that have subsequently defaulted within 12 months of their modification dates during the specified periods; the probability of default is factored into the allowance for credit losses:
| | | | | | | | | | |
| | | | | ||||||
| | Three Months Ended | | Six Months Ended | ||||||
| | June 30, 2022 | | June 30, 2022 | ||||||
| | Number of | | Outstanding |
| Number of | | Outstanding | ||
|
| Restructurings |
| Balance |
| Restructurings |
| Balance | ||
(Millions, except for Number of restructurings) | | | | | | | | | | |
Troubled debt restructurings that subsequently defaulted |
| 18,037 | | $ | 25 | | 39,960 | | $ | 54 |
| | | | | | | | | | |
| | Three Months Ended |
| Six Months Ended | ||||||
| | June 30, 2021 | | June 30, 2021 | ||||||
| | Number of | | Outstanding |
| Number of | | Outstanding | ||
|
| Restructurings |
| Balance |
| Restructurings |
| Balance | ||
(Millions, except for Number of restructurings) | | | | | | | | | | |
Troubled debt restructurings that subsequently defaulted |
| 31,727 | | $ | 42 | | 82,736 | | $ | 109 |
Overall Credit QualityQuality:
Credit Card Loans
As part of the Company’sour credit risk management activities the Company assessesfor our credit card loans portfolio, we assess overall credit quality by reviewing information related to the performance of a credit cardholder’s account, as well as information from credit bureaus and other sources relating to the cardholder’sour cardholders' broader credit performance. The Company utilizesWe utilize VantageScore (Vantage) credit scores to assist in itsour assessment of credit quality. Vantage credit scores are obtained at origination of the account and are refreshed monthly thereafter to assist in predicting customer behavior. The Company categorizesWe categorize these Vantage credit scores into the following three credit score categories: (i) 661 or higher, which are considered the strongest credits and therefore have the lowest credit risk; (ii) 601 to 660, considered to have moderate credit risk; and (iii) 600 or less, which are considered weaker credits and therefore have the highest credit risk. In certain limited circumstances there are
26
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
customer accounts for which a Vantage score is not available and the Company useswe use alternative sources to assess credit risk and predict behavior. The table below excludes 0.3%0.1% and 0.1%0.6% of the total credit card loans balance as of June 30, 20222023 and December 31, 2021,2022, respectively, representing those customer accounts for which a Vantage credit score is not available. The following table reflects the distribution of the Company’s creditour Credit card loans by Vantage score during the specified periods:
as of June 30, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | June 30, | | | December 31, | | ||||||||||||
| | 2022 | | | 2021 | | ||||||||||||
|
| 661 or |
|
| 601 to |
|
| 600 or |
|
| 661 or |
|
| 601 to |
|
| 600 or |
|
| | Higher | | | 660 | | | Less | | | Higher | | | 660 | | | Less | |
Credit card loans | | 61 | % |
| 27 | % |
| 12 | % |
| 62 | % |
| 26 | % |
| 12 | % |
June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
661 or Higher | 601 to 660 | 600 or Lower | 661 or Higher | 601 to 660 | 600 or Lower | ||||||||||||||||||||||||||||||
Credit card loans | 59 | % | 27 | % | 14 | % | 62 | % | 26 | % | 12 | % |
Installment Loans
Aging Analysis of Delinquent Amortized Cost Loan Modifications - Credit Card Loans | |||||||||||||||||||||||||||||||||||
31 to 60 Days Past Due | 61 to 90 Days Past Due | 91 or more Days Past Due | Total | Total Current | Total | ||||||||||||||||||||||||||||||
(Millions) | |||||||||||||||||||||||||||||||||||
As of June 30, 2023 | 18 | 16 | 24 | 58 | 250 | 308 | |||||||||||||||||||||||||||||
As of December 31, 2022 | 19 | 15 | 19 | 53 | 217 | 270 |
Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||
Number of Modifications | Pre-modification Outstanding Balance | Post-modification Outstanding Balance | Number of Modifications | Pre-modification Outstanding Balance | Post-modification Outstanding Balance | ||||||||||||||||||||||||||||||
(Millions, except for Number of modifications) | |||||||||||||||||||||||||||||||||||
Loan modifications – credit card loans | 49,311 | $ | 82 | $ | 82 | 95,795 | $ | 159 | $ | 158 |
Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | ||||||||||||||||||||||
Number of Modifications | Outstanding Balance | Number of Modifications | Outstanding Balance | ||||||||||||||||||||
(Millions, except for Number of modifications) | |||||||||||||||||||||||
Loan modifications that subsequently defaulted | 18,747 | $ | 29 | 37,410 | $ | 57 |
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||
Number of Restructurings | Pre-modification Outstanding Balance | Post-modification Outstanding Balance | Number of Restructurings | Pre-modification Outstanding Balance | Post-modification Outstanding Balance | ||||||||||||||||||||||||||||||
(Millions, except for Number of restructurings) | |||||||||||||||||||||||||||||||||||
Troubled debt restructurings – credit card loans | 32,216 | $ | 46 | $ | 46 | 70,214 | $ | 102 | $ | 102 |
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | ||||||||||||||||||||||
Number of Restructurings | Outstanding Balance | Number of Restructurings | Outstanding Balance | ||||||||||||||||||||
(Millions, except for Number of restructurings) | |||||||||||||||||||||||
Troubled debt restructurings that subsequently defaulted | 18,037 | $ | 25 | 39,960 | $ | 54 |
The Company is
The Company manages its
Portfolio Acquisitions
In April 2022, the Company acquiredwhich closed in late February 2023, for a credit card portfolio for cash consideration of approximately $249 million, which primarily consisted of credit card loans, and also included intangible assets (primarily purchased credit card relationships) and rewards liabilities, and is subject to customarytotal purchase price adjustments.
27
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The Company uses
Installment
The Company measures its allowance
28
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
portfolio segment; theThe amount of the related Allowance for credit losses on BNPL loans is insignificant and therefore has been included in the table below.
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30, | | June 30, | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
(Millions) | | | | | | | | | | | | | |
Beginning balance | | $ | 1,826 | | $ | 1,843 | | $ | 1,832 | | $ | 2,008 | |
| | | | | | | | | | | | | |
Provision for credit losses (1) | |
| 404 | |
| (14) | |
| 598 | |
| 19 | |
Net principal losses (2) | |
| (238) | |
| (194) | |
| (438) | |
| (392) | |
Ending balance | | $ | 1,992 | | $ | 1,635 | | $ | 1,992 | | $ | 1,635 | |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Beginning balance | $ | 2,223 | $ | 1,826 | $ | 2,464 | $ | 1,832 | |||||||||||||||
Provision for credit losses (1) | 336 | 404 | 442 | 598 | |||||||||||||||||||
Change in the estimate for uncollectible unpaid interest and fees | — | — | 5 | — | |||||||||||||||||||
Net principal losses (2) | (351) | (238) | (703) | (438) | |||||||||||||||||||
Ending balance | $ | 2,208 | $ | 1,992 | $ | 2,208 | $ | 1,992 |
Provision for credit losses includes a build/release for the Allowance, as well as replenishment of Net principal losses.
the possibility of higher unemployment levels.
The Company accounts
29
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The Company isWe are required to maintain minimum interests in itsour Trusts ranging from 4% to 10% of the securitized credit card loans. This requirement is met through a transferor’s interest and is supplemented through excess funding deposits which represent cash amounts deposited with the trustee of the securitizations. Cash collateral, restricted deposits are generally released proportionately as investors are repaid. Under the terms of the Trusts, the occurrence of certain triggering events associated with the performance of the securitized credit card loans in each Trust could result in certain required actions, including payment of Trust expenses, the establishment of reserve funds, or early amortization of the debt securities and/or notes, in a worst-case scenario. During the three and six months ended June 30, 20222023 and 2021,2022, no such triggering events occurred.
| | | | | | |
| | June 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
(Millions) | | | | | | |
Total credit card loans – available to settle obligations of consolidated VIEs | | $ | 12,369 | | $ | 11,215 |
Of which: principal amount of credit card loans 91 days or more past due | | $ | 172 | | $ | 159 |
June 30, 2023 | December 31, 2022 | ||||||||||
(Millions) | |||||||||||
Total credit card loans – available to settle obligations of consolidated VIEs | $ | 10,750 | $ | 15,383 | |||||||
Of which: principal amount of credit card loans 91 days or more past due | $ | 234 | $ | 307 |
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
(Millions) | | | | | | | | | | | | |
Net principal losses of securitized credit card loans | | $ | 125 | | $ | 125 | | $ | 240 | | $ | 256 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Net principal losses of securitized credit card loans | $ | 197 | $ | 125 | $ | 413 | $ | 240 |
The Company’s investment
| | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 | ||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| | |
| Amortized |
| Unrealized |
| Unrealized |
| | | ||||||
|
| Cost |
| Gains |
| Losses |
| Fair Value |
| Cost |
| Gains |
| Losses |
| Fair Value | ||||||||
(Millions) | | | | | | | | | | | | | | | | | | | | | | | | |
Available-for-sale securities | | $ | 171 | | $ | — | | $ | (15) | | $ | 156 | | $ | 173 | | $ | 4 | | $ | (2) | | $ | 175 |
Equity securities | | | 68 | | | — | | | — | | | 68 | | | 64 | | | — | | | — | | | 64 |
Total | | $ | 239 | | $ | — | | $ | (15) | | $ | 224 | | $ | 237 | | $ | 4 | | $ | (2) | | $ | 239 |
30
June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||||||||||||||||||||||||||||||
(Millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 185 | $ | — | $ | (23) | $ | 162 | $ | 175 | $ | — | $ | (23) | $ | 152 | |||||||||||||||||||||||||||||||
Equity securities | 77 | — | — | 77 | 69 | — | — | 69 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 262 | $ | — | $ | (23) | $ | 239 | $ | 244 | $ | — | $ | (23) | $ | 221 |
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table providestables provide information about the Company’s AFS debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position, as of June 30, 20222023 and December 31, 2021, respectively.
2022, respectively:
| | | | | | | | | | | | | | | | | | |
| | June 30, 2022 | ||||||||||||||||
| | Less than 12 months | | 12 Months or Greater | | Total | ||||||||||||
|
| | |
| Unrealized |
| | |
| Unrealized |
| | |
| Unrealized | |||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
(Millions) | | | | | | | | | | | | | | | | | | |
Available-for-sale securities | | $ | 131 | | $ | (10) | | $ | 25 | | $ | (5) | | $ | 156 | | $ | (15) |
Total | | $ | 131 | | $ | (10) | | $ | 25 | | $ | (5) | | $ | 156 | | $ | (15) |
June 30, 2023 | |||||||||||||||||||||||||||||||||||
Less than 12 months | 12 Months or Greater | Total | |||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
(Millions) | |||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 39 | $ | (2) | $ | 123 | $ | (21) | $ | 162 | $ | (23) | |||||||||||||||||||||||
Total | $ | 39 | $ | (2) | $ | 123 | $ | (21) | $ | 162 | $ | (23) |
| | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | ||||||||||||||||
| | Less than 12 months | | 12 Months or Greater | | Total | ||||||||||||
|
| | |
| Unrealized |
| | |
| Unrealized |
| | |
| Unrealized | |||
|
| Fair Value |
| Losses |
| Fair Value |
| Losses |
| Fair Value |
| Losses | ||||||
(Millions) | | | | | | | | | | | | | | | | | | |
Available-for-sale securities | | $ | 57 | | $ | (1) | | $ | 15 | | $ | (1) | | $ | 72 | | $ | (2) |
Total | | $ | 57 | | $ | (1) | | $ | 15 | | $ | (1) | | $ | 72 | | $ | (2) |
December 31, 2022 | |||||||||||||||||||||||||||||||||||
Less than 12 months | 12 Months or Greater | Total | |||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
(Millions) | |||||||||||||||||||||||||||||||||||
Available-for-sale securities | $ | 95 | $ | (9) | $ | 57 | $ | (14) | $ | 152 | $ | (23) | |||||||||||||||||||||||
Total | $ | 95 | $ | (9) | $ | 57 | $ | (14) | $ | 152 | $ | (23) |
2022.
As of June 30, 2022 and December 31, 2021, deposits
follows, as of June 30, 2023 and December 31, 2022:
| | | | | | |
| | | | | | |
|
| June 30, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
(Millions) | | | | | | |
Interest-bearing | | $ | 10,999 | | $ | 11,027 |
Non-interest-bearing (including cardholder credit balances) | | | 29 | | | — |
Total deposits | | $ | 11,028 | | $ | 11,027 |
June 30, 2023 | December 31, 2022 | ||||||||||
(Millions) | |||||||||||
Interest-bearing | $ | 13,020 | $ | 13,787 | |||||||
Non-interest-bearing (including cardholder credit balances) | 28 | 39 | |||||||||
Total deposits | $ | 13,048 | $ | 13,826 |
| | | | | | |
|
| June 30, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
(Millions) | | | | | | |
Savings accounts | | | | | | |
Direct-to-consumer (retail) | | $ | 2,684 | | $ | 1,713 |
Wholesale | | | 3,676 | | | 3,873 |
Certificates of deposit | | | | | | |
Direct-to-consumer (retail) | | | 1,507 | | | 1,467 |
Wholesale | | | 3,132 | | | 3,974 |
Cardholder credit balances | | | 29 | | | — |
Total deposits | | $ | 11,028 | | $ | 11,027 |
31
June 30, 2023 | December 31, 2022 | ||||||||||
(Millions) | |||||||||||
Savings accounts | |||||||||||
Direct-to-consumer (retail) | $ | 2,716 | $ | 2,782 | |||||||
Wholesale | 3,854 | 3,954 | |||||||||
Certificates of deposit | |||||||||||
Direct-to-consumer (retail) | 3,277 | 2,684 | |||||||||
Wholesale | 3,173 | 4,367 | |||||||||
Cardholder credit balances | 28 | 39 | |||||||||
Total deposits | $ | 13,048 | $ | 13,826 |
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The scheduled maturities of certificates of deposit were as follows as of June 30, 2022 were as follows:2023:
(Millions) | |||||
2023 (1) | $ | 1,845 | |||
2024 | 2,583 | ||||
2025 | 929 | ||||
2026 | 372 | ||||
2027 | 606 | ||||
Thereafter | 115 | ||||
Total certificates of deposit | $ | 6,450 |
| | | |
| | | |
(Millions) | | | |
2022(1) | | $ | 1,334 |
2023 | |
| 2,009 |
2024 | |
| 854 |
2025 | |
| 233 |
2026 | |
| 111 |
Thereafter | |
| 98 |
Total certificates of deposit | | | 4,639 |
Description | June 30, 2023 | December 31, 2022 | Contractual Maturities | Interest Rates | ||||||||||||||||||||||
(Millions, except percentages) | ||||||||||||||||||||||||||
Long-term and other debt: | ||||||||||||||||||||||||||
2023 revolving line of credit | $ | — | $ | — | June 2026 | (1) | ||||||||||||||||||||
2023 term loans | 300 | — | June 2026 | 7.15% | ||||||||||||||||||||||
2017 revolving line of credit | — | — | — | — | ||||||||||||||||||||||
2017 term loans | — | 556 | — | — | ||||||||||||||||||||||
Convertible senior notes due 2028 | 316 | — | June 2028 | 4.25% | ||||||||||||||||||||||
Senior notes due 2024 | 285 | 850 | December 2024 | 4.750% | ||||||||||||||||||||||
Senior notes due 2026 | 500 | 500 | January 2026 | 7.000% | ||||||||||||||||||||||
Subtotal | 1,401 | 1,906 | ||||||||||||||||||||||||
Less: Unamortized debt issuance costs | 26 | 14 | ||||||||||||||||||||||||
Total long-term and other debt | $ | 1,375 | $ | 1,892 | ||||||||||||||||||||||
Debt issued by consolidated VIEs: | ||||||||||||||||||||||||||
Fixed rate asset-backed term note securities | $ | 350 | $ | — | May 2026 | 5.020% | ||||||||||||||||||||
Conduit asset-backed securities | 2,975 | 6,115 | Various – Oct. 2023 to Feb. 2025 | (2) | ||||||||||||||||||||||
Subtotal | 3,325 | 6,115 | ||||||||||||||||||||||||
Less: Unamortized debt issuance costs | 2 | — | ||||||||||||||||||||||||
Total debt issued by consolidated VIEs | $ | 3,323 | $ | 6,115 | ||||||||||||||||||||||
Total borrowings of long-term and other debt | $ | 4,698 | $ | 8,007 |
aggregate principal amount of 7.000% Senior Notes due January 15, 2026 (the Senior Notes due 2026). The Senior Notes due 2026 accrue interest on the outstanding principal amount at the rate of 7.000% per annum from September 22, 2020, payable semi-annually in arrears, on March 15 and September 15 of each year, beginning on March 15, 2021. The Senior Notes due 2026 will mature on January 15, 2026, subject to earlier repurchase or redemption.
income for the three and six months ended June 30, 2023 and 2022:
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
(Millions) | | | | | | | | | | | | |
Payment protection products | | $ | 38 | | $ | 33 | | $ | 77 | | $ | 68 |
Loss from equity method investment | | | (21) | | | — | | | (33) | | | — |
Other | |
| — | |
| 1 | |
| 1 | |
| 1 |
Total other non-interest income | | $ | 17 | | $ | 34 | | $ | 45 | | $ | 69 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Payment protection products | $ | 33 | $ | 38 | $ | 67 | $ | 77 | |||||||||||||||
Loss from equity method investment | — | (21) | (6) | (33) | |||||||||||||||||||
Other | 1 | — | 2 | 1 | |||||||||||||||||||
Total other non-interest income | $ | 34 | $ | 17 | $ | 63 | $ | 45 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Professional services and regulatory fees | $ | 34 | $ | 38 | $ | 72 | $ | 69 | |||||||||||||||
Occupancy expense | 5 | 6 | 10 | 12 | |||||||||||||||||||
Other (1) | 8 | 13 | 23 | 32 | |||||||||||||||||||
Total other non-interest expenses | $ | 47 | $ | 57 | $ | 105 | $ | 113 |
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 | | 2022 |
| 2021 | ||||
(Millions) | | | | | | | | | | | | |
Professional services and regulatory fees | | $ | 38 | | $ | 35 | | $ | 69 | | $ | 66 |
Occupancy expense | | | 6 | | | 7 | | | 12 | | | 15 |
Other(1) | | | 13 | | | 25 | | | 32 | | | 34 |
Total other non-interest expenses | | $ | 57 | | $ | 67 | | $ | 113 | | $ | 115 |
32
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The Company monitors
| | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 | ||||||||
| | Carrying | | Fair | | Carrying | | Fair | ||||
|
| Amount |
| Value |
| Amount |
| Value | ||||
(Millions) | | | | | | | | | | | | |
Financial assets | | | | | | | | | | | | |
Credit card and other loans, net | | $ | 15,777 | | $ | 18,156 | | $ | 15,567 | | $ | 17,989 |
Investment securities | |
| 224 | |
| 224 | |
| 239 | |
| 239 |
Financial liabilities | | | | | | | | | | | | |
Deposits | |
| 11,028 | |
| 11,005 | |
| 11,027 | |
| 11,135 |
Debt issued by consolidated VIEs | |
| 5,498 | |
| 5,498 | |
| 5,453 | |
| 5,467 |
Long-term and other debt | |
| 1,939 | |
| 1,870 | |
| 1,986 | |
| 2,053 |
June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Financial assets | |||||||||||||||||||||||
Credit card and other loans, net | $ | 15,754 | $ | 18,006 | $ | 18,901 | $ | 21,328 | |||||||||||||||
Investment securities | 239 | 239 | 221 | 221 | |||||||||||||||||||
Financial liabilities | |||||||||||||||||||||||
Deposits | 13,048 | 12,942 | 13,826 | 13,731 | |||||||||||||||||||
Debt issued by consolidated VIEs | 3,323 | 3,321 | 6,115 | 6,115 | |||||||||||||||||||
Long-term and other debt | 1,375 | 1,377 | 1,892 | 1,759 |
Credit card and other loans, net: The Company’sOur Credit card and other loans are recorded at historical cost, less an allowancethe Allowance for credit losses, on the Consolidated Balance Sheets. In estimating the fair values, the Company useswe use a discounted cash flow model (i.e., Level 3 inputs), primarily because a comparable whole loan sales market for similar loans does not exist, and therefore there is a lack of observable pricing inputs. The Company usesWe use various internally derived inputs, including projected income, discount rates and forecasted write-offs; economic value attributable to future loans generated by the cardholder accounts is not included in the fair values.
33
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Deposits: Money market and other non-maturity deposits carrying values approximate their fair values because they are short-term in duration and have no defined maturity. Certificates of deposit are recorded at their historical issuance cost on the Consolidated Balance Sheets, adjusted for unamortized fees, with fair value being estimated based on the currently observable market rates available to the Companyus for similar deposits with similar remaining maturities (i.e., Level 2 inputs). Interest payable is included within Other liabilities on the Consolidated Balance Sheets.
| | | | | | | | | | | | |
| | June 30, 2022 | ||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
(Millions) | | | | | | | | | | | | |
Investment securities | | $ | 224 | | $ | 45 | | $ | 179 | | $ | — |
Total assets measured at fair value | | $ | 224 | | $ | 45 | | $ | 179 | | $ | — |
| | | | | | | | | | | | |
| | December 31, 2021 | ||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
(Millions) | | | | | | | | | | | | |
Investment securities | | $ | 239 | | $ | 48 | | $ | 191 | | $ | — |
Total assets measured at fair value | | $ | 239 | | $ | 48 | | $ | 191 | | $ | — |
Financial Instruments Disclosed but Not Carried at Fair Value
The following tables summarize the Company’s financial assets and financial liabilities that are measured at amortized cost, and not required to be carried at fair value on a recurring basis, as of June 30, 2022 and December 31, 2021 respectively. The fair values of these financial instruments are estimates as of June 30, 2022 and December 31, 2021, and require management’s judgment; therefore, these figures may not be indicative of future fair values, nor can the fair value of the Company be estimated by aggregating all of the amounts presented.
| | | | | | | | | | | | |
| | June 30, 2022 | ||||||||||
|
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||
(Millions) | | | | | | | | | | | | |
Financial assets | | | | | | | | | | | | |
Credit card and other loans, net | | $ | 18,156 | | $ | — | | $ | — | | $ | 18,156 |
Total | | $ | 18,156 | | $ | — | | $ | — | | $ | 18,156 |
| | | | | | | | | | | | |
Financial liabilities | | | | | | | | | | | | |
Deposits | | $ | 11,005 | | $ | — | | $ | 11,005 | | $ | — |
Debt issued by consolidated VIEs | |
| 5,498 | |
| — | |
| 5,498 | |
| — |
Long-term and other debt | |
| 1,870 | |
| — | |
| 1,870 | |
| — |
Total | | $ | 18,373 | | $ | — | | $ | 18,373 | | $ | — |
34
June 30, 2023 | |||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Investment securities | $ | 239 | $ | 44 | $ | 195 | $ | — | |||||||||||||||
Total assets measured at fair value | $ | 239 | $ | 44 | $ | 195 | $ | — |
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
| | | | | | | | | | | | |
| | December 31, 2021 | ||||||||||
|
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 | ||||
(Millions) | | | | | | | | | | | | |
Financial assets | | | | | | | | | | | | |
Credit card and other loans, net | | $ | 17,989 | | $ | — | | $ | — | | $ | 17,989 |
Total | | $ | 17,989 | | $ | — | | $ | — | | $ | 17,989 |
| | | | | | | | | | | | |
Financial liabilities | | | | | | | | | | | | |
Deposits | | $ | 11,135 | | $ | — | | $ | 11,135 | | $ | — |
Debt issued by consolidated VIEs | |
| 5,467 | |
| — | |
| 5,467 | |
| — |
Long-term and other debt | |
| 2,053 | |
| — | |
| 2,053 | |
| — |
Total | | $ | 18,655 | | $ | — | | $ | 18,655 | | $ | — |
December 31, 2022 Total Level 1 Level 2 Level 3 (Millions) Investment securities $ 221 $ 44 $ 177 $ — Total assets measured at fair value $ 221 $ 44 $ 177 $ —
2022.
June 30, 2023 | |||||||||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Financial assets | |||||||||||||||||||||||
Credit card and other loans, net | $ | 18,006 | $ | — | $ | — | $ | 18,006 | |||||||||||||||
Total | $ | 18,006 | $ | — | $ | — | $ | 18,006 | |||||||||||||||
Financial liabilities | |||||||||||||||||||||||
Deposits | $ | 12,942 | $ | — | $ | 12,942 | $ | — | |||||||||||||||
Debt issued by consolidated VIEs | 3,321 | — | 3,321 | — | |||||||||||||||||||
Long-term and other debt | 1,377 | — | 1,377 | — | |||||||||||||||||||
Total | $ | 17,640 | $ | — | $ | 17,640 | $ | — |
December 31, 2022 | |||||||||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
(Millions) | |||||||||||||||||||||||
Financial assets | |||||||||||||||||||||||
Credit card and other loans, net | $ | 21,328 | $ | — | $ | — | $ | 21,328 | |||||||||||||||
Total | $ | 21,328 | $ | — | $ | — | $ | 21,328 | |||||||||||||||
Financial liabilities | |||||||||||||||||||||||
Deposits | $ | 13,731 | $ | — | $ | 13,731 | $ | — | |||||||||||||||
Debt issued by consolidated VIEs | 6,115 | — | 6,115 | — | |||||||||||||||||||
Long-term and other debt | 1,759 | — | 1,759 | — | |||||||||||||||||||
Total | $ | 21,605 | $ | — | $ | 21,605 | $ | — |
Comenity Bank
35
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer. The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of June 30, 2022,2023, are as follows:
| | | | | | | | | |
| | | | | | Minimum Ratio to be | |||
|
| | | Minimum Ratio for | | Well Capitalized under | |||
|
| Actual | | Capital Adequacy | | Prompt Corrective | |||
|
| Ratio | | Purposes | | Action Provisions | |||
Comenity Bank | | | | | | | | | |
Tier 1 Leverage capital ratio (1) | | 19.1 | % | | 4.0 | % | | 5.0 | % |
Common Equity Tier 1 capital ratio (2) | | 22.7 | | | 4.5 | | | 6.5 | |
Tier 1 capital ratio (3) | | 22.7 | | | 6.0 | | | 8.0 | |
Total Risk-based capital ratio (4) | | 24.0 | | | 8.0 | | | 10.0 | |
| | | | | | | | | |
Comenity Capital Bank | | | | | | | | | |
Tier 1 Leverage capital ratio (1) | | 16.4 | % | | 4.0 | % | | 5.0 | % |
Common Equity Tier 1 capital ratio (2) | | 18.0 | | | 4.5 | | | 6.5 | |
Tier 1 capital ratio (3) | | 18.0 | | | 6.0 | | | 8.0 | |
Total Risk-based capital ratio (4) | | 19.4 | | | 8.0 | | | 10.0 | |
| | | | | | | | | |
Combined Banks | | | | | | | | | |
Tier 1 Leverage capital ratio (1) | | 17.7 | % | | 4.0 | % | | 5.0 | % |
Common Equity Tier 1 capital ratio (2) | | 20.1 | | | 4.5 | | | 6.5 | |
Tier 1 capital ratio (3) | | 20.1 | | | 6.0 | | | 8.0 | |
Total Risk-based capital ratio (4) | | 21.5 | | | 8.0 | | | 10.0 | |
Actual Ratio | Minimum Ratio for Capital Adequacy Purposes | Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | |||||||||||||||
Comenity Bank | |||||||||||||||||
Common Equity Tier 1 capital ratio (1) | 18.8 | % | 4.5 | % | 6.5 | % | |||||||||||
Tier 1 capital ratio (2) | 18.8 | 6.0 | 8.0 | ||||||||||||||
Total Risk-based capital ratio (3) | 20.1 | 8.0 | 10.0 | ||||||||||||||
Tier 1 Leverage capital ratio (4) | 16.2 | 4.0 | 5.0 | ||||||||||||||
Comenity Capital Bank | |||||||||||||||||
Common Equity Tier 1 capital ratio (1) | 18.2 | % | 4.5 | % | 6.5 | % | |||||||||||
Tier 1 capital ratio (2) | 18.2 | 6.0 | 8.0 | ||||||||||||||
Total Risk-based capital ratio (3) | 19.6 | 8.0 | 10.0 | ||||||||||||||
Tier 1 Leverage capital ratio (4) | 16.1 | 4.0 | 5.0 | ||||||||||||||
Combined Banks (5) | |||||||||||||||||
Common Equity Tier 1 capital ratio (1) | 18.4 | % | 4.5 | % | 6.5 | % | |||||||||||
Tier 1 capital ratio (2) | 18.4 | 6.0 | 8.0 | ||||||||||||||
Total Risk-based capital ratio (3) | 19.8 | 8.0 | 10.0 | ||||||||||||||
Tier 1 Leverage capital ratio (4) | 16.1 | 4.0 | 5.0 |
The Common Equity Tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets.
diminish through the remainder of 2023.
36
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
penalties, obligations to change itsour business practices, significant restrictions on our existing business or ability to develop new business, cease-and-desist orders, safety-and-soundness directives or other requirements resulting in increased expenses, diminished income and damage to the Company’sour reputation.
| | | | | | | | | | | | | | | |
| | Net | | Net Unrealized | | Net Unrealized | | Foreign | | Accumulated | |||||
| | Unrealized | | Gains (Losses) | | Gains (Losses) | | Currency | | Other | |||||
|
| Gains (Losses) |
| on Cash |
| on Net |
| Translation |
| Comprehensive | |||||
Three Months Ended June 30, 2022 |
| on AFS Securities |
| Flow Hedges |
| Investment Hedge |
| Adjustments |
| Loss | |||||
(Millions) | | | | | | | | | | | | | | | |
Balance as of March 31, 2022 |
| $ | (6) |
| $ | — |
| $ | — |
| $ | (3) |
| $ | (9) |
Changes in other comprehensive loss | | | (5) | | | — | | | — | | | — | | | (5) |
Balance as of June 30, 2022 |
| $ | (11) |
| $ | — |
| $ | — |
| $ | (3) |
| $ | (14) |
Three Months Ended June 30, 2023 | Net Unrealized Gains (Losses) on AFS Securities | Foreign Currency Translation Adjustments | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | $ | (16) | $ | (3) | $ | (19) | ||||||||||||||||||||||||||
Changes in other comprehensive (loss) income | (1) | — | (1) | |||||||||||||||||||||||||||||
Balance as of June 30, 2023 | $ | (17) | $ | (3) | $ | (20) |
| | | | | | | | | | | | | | | |
| | Net | | Net Unrealized | | Net Unrealized | | Foreign | | Accumulated | |||||
| | Unrealized | | Gains (Losses) | | Gains (Losses) | | Currency | | Other | |||||
|
| Gains (Losses) |
| on Cash |
| on Net |
| Translation |
| Comprehensive | |||||
Three Months Ended June 30, 2021 |
| on Securities |
| Flow Hedges |
| Investment Hedge |
| Adjustments (1) |
| Loss | |||||
(Millions) |
| | | | | | | | | | | | | | |
Balance as of March 31, 2021 |
| $ | 15 |
| $ | — |
| $ | (7) |
| $ | (50) |
| $ | (42) |
Changes in other comprehensive (loss) income | | | (1) | | | — | | | — | | | 10 | | | 9 |
Balance as of June 30, 2021 |
| $ | 14 |
| $ | — |
| $ | (7) |
| $ | (40) |
| $ | (33) |
Three Months Ended June 30, 2022 | Net Unrealized Gains (Losses) on AFS Securities | Foreign Currency Translation Adjustments | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | $ | (6) | $ | (3) | $ | (9) | ||||||||||||||||||||||||||
Changes in other comprehensive (loss) income | (5) | — | (5) | |||||||||||||||||||||||||||||
Balance as of June 30, 2022 | $ | (11) | $ | (3) | $ | (14) |
| | | | | | | | | | | | | | | |
| | Net | | Net Unrealized | | Net Unrealized | | Foreign | | Accumulated | |||||
| | Unrealized | | Gains (Losses) | | Gains (Losses) | | Currency | | Other | |||||
| | Gains (Losses) | | on Cash | | on Net | | Translation | | Comprehensive | |||||
Six Months Ended June 30, 2022 |
| on Securities |
| Flow Hedges |
| Investment Hedge |
| Adjustments |
| Loss | |||||
(Millions) |
| | | | | | | | | | | | | | |
Balance as of December 31, 2021 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | (3) |
| $ | (2) |
Changes in other comprehensive loss | | | (12) | | | — | | | — | | | — | | | (12) |
Balance as of June 30, 2022 |
| $ | (11) |
| $ | — |
| $ | — |
| $ | (3) |
| $ | (14) |
Six Months Ended June 30, 2023 | Net Unrealized Gains (Losses) on AFS Securities | Foreign Currency Translation Adjustments | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | (18) | $ | (3) | $ | (21) | ||||||||||||||||||||||||||
Changes in other comprehensive income | 1 | — | 1 | |||||||||||||||||||||||||||||
Balance as of June 30, 2023 | $ | (17) | $ | (3) | $ | (20) |
| | | | | | | | | | | | | | | |
| | Net | | Net Unrealized | | Net Unrealized | | Foreign | | Accumulated | |||||
| | Unrealized | | Gains (Losses) | | Gains (Losses) | | Currency | | Other | |||||
| | Gains (Losses) | | on Cash | | on Net | | Translation | | Comprehensive | |||||
Six Months Ended June 30, 2021 |
| on Securities |
| Flow Hedges |
| Investment Hedge |
| Adjustments (1) |
| Loss | |||||
(Millions) |
| | | | | | | | | | | | | | |
Balance as of December 31, 2020 |
| $ | 23 |
| $ | (1) |
| $ | (7) |
| $ | (20) |
| $ | (5) |
Changes in other comprehensive (loss) income | | | (9) | | | 1 | | | — | | | (20) | | | (28) |
Balance as of June 30, 2021 |
| $ | 14 |
| $ | — |
| $ | (7) |
| $ | (40) |
| $ | (33) |
Six Months Ended June 30, 2022 | Net Unrealized Gains (Losses) on AFS Securities | Foreign Currency Translation Adjustments | Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 | $ | 1 | $ | (3) | $ | (2) | ||||||||||||||||||||||||||
Changes in other comprehensive (loss) income | (12) | — | (12) | |||||||||||||||||||||||||||||
Balance as of June 30, 2022 | $ | (11) | $ | (3) | $ | (14) |
11.12. STOCKHOLDERS’ EQUITY
On February 28, 2022,
37
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
this program for an aggregate of $12 million. Following their repurchase, these 200,000 shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock.
During the six months ended June 30, 2021, the Company did 0t repurchase any shares of its common stock.
Stock Compensation Expense
During the six months ended June 30, 2022, the Company2023, we awarded 616,5051,125,479 service-based restricted stock units (RSUs) with a weighted average grant date fair value per share of $68.79$39.95 as determined on the date of grant. Service-based restricted stock units typically vest ratably over three years provided that the participant is employed by the Companyus on each such vesting date.
During the three and six months ended June 30, 2022, the Company2023, we paid $11 million and $22$21 million, respectively, in dividends to its shareholdersholders of our common stock. On July 28, 2022, the Company’s27, 2023, our Board of Directors declared a quarterly cash dividend of $0.21 per share on itsour common stock, payable on September 16, 2022,15, 2023, to stockholders of record at the close of business on August 12, 2022.
11, 2023.
The Company is
38
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||
(Millions, except per share amounts) | |||||||||||||||||||||||||||||||||||
Numerator | |||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 64 | $ | 12 | $ | 519 | $ | 224 | |||||||||||||||||||||||||||
(Loss) income from discontinued operations, net of income taxes | (16) | — | (16) | (1) | |||||||||||||||||||||||||||||||
Net income | $ | 48 | $ | 12 | $ | 503 | $ | 223 | |||||||||||||||||||||||||||
Denominator | |||||||||||||||||||||||||||||||||||
Basic: Weighted average common stock | 50.1 | 49.8 | 50.1 | 49.8 | |||||||||||||||||||||||||||||||
Weighted average effect of dilutive securities | |||||||||||||||||||||||||||||||||||
Add: net effect of dilutive unvested restricted stock awards (1) | 0.2 | 0.1 | 0.1 | 0.2 | |||||||||||||||||||||||||||||||
Diluted | 50.3 | 49.9 | 50.2 | 50.0 | |||||||||||||||||||||||||||||||
Basic EPS | |||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 1.28 | $ | 0.25 | $ | 10.37 | $ | 4.48 | |||||||||||||||||||||||||||
(Loss) income from discontinued operations | $ | (0.33) | $ | — | $ | (0.33) | $ | (0.01) | |||||||||||||||||||||||||||
Net income per share | $ | 0.95 | $ | 0.25 | $ | 10.04 | $ | 4.47 | |||||||||||||||||||||||||||
Diluted EPS | |||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 1.27 | $ | 0.25 | $ | 10.34 | $ | 4.47 | |||||||||||||||||||||||||||
(Loss) income from discontinued operations | $ | (0.32) | $ | — | $ | (0.32) | $ | (0.01) | |||||||||||||||||||||||||||
Net income per share | $ | 0.95 | $ | 0.25 | $ | 10.02 | $ | 4.46 |
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
(Millions, except per share amounts) | | | | | | | | | | | | |
Numerator | | | | | | | | | | | | |
Income from continuing operations | | $ | 12 | | $ | 263 | | $ | 224 | | $ | 531 |
Income (loss) from discontinued operations, net of income taxes | | | — | | | 11 | | | (1) | | | 29 |
Net income | | $ | 12 | | $ | 274 | | $ | 223 | | $ | 560 |
| | | | | | | | | | | | |
Denominator | | | | | | | | | | | | |
Basic: Weighted average common stock | |
| 49.8 | |
| 49.7 | |
| 49.8 | |
| 49.7 |
Weighted average effect of dilutive securities | | | | | | | | | | | | |
Add: net effect of dilutive unvested restricted stock awards (1) | |
| 0.1 | |
| 0.3 | |
| 0.2 | |
| 0.2 |
Diluted | |
| 49.9 | |
| 50.0 | |
| 50.0 | |
| 49.9 |
| | | | | | | | | | | | |
Basic EPS | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.25 | | $ | 5.29 | | $ | 4.48 | | $ | 10.68 |
Income (loss) from discontinued operations | | $ | — | | $ | 0.21 | | $ | (0.01) | | $ | 0.58 |
Net income per share | | $ | 0.25 | | $ | 5.50 | | $ | 4.47 | | $ | 11.26 |
| | | | | | | | | | | | |
Diluted EPS | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.25 | | $ | 5.25 | | $ | 4.47 | | $ | 10.63 |
Income (loss) from discontinued operations | | $ | — | | $ | 0.22 | | $ | (0.01) | | $ | 0.58 |
Net income per share | | $ | 0.25 | | $ | 5.47 | | $ | 4.46 | | $ | 11.21 |
For |
14. DISCONTINUED OPERATIONS
LoyaltyOne
On November 5, 2021, the separation of Loyalty Ventures Inc. (Loyalty Ventures) from the Company was completed after market close (the Separation). The Separation, which has been classified as discontinued operations, was achieved through the Company’s distribution of 81% of the shares of Loyalty Ventures common stock to holders of the Company’s common stock as of the close of business on the record date of October 27, 2021. The Company’s stockholders of record received one share of Loyalty Ventures common stock for every two and a half shares of the Company’s common stock. Following this distribution, Loyalty Ventures became an independent, publicly-traded company, in which the Company has retained a 19% ownership interest.
The Company accounts for its 19% ownership interest in Loyalty Ventures following the equity method of accounting. As of June 30, 2022, the carrying amount of the Company’s ownership interest in Loyalty Ventures, which investment totaled was $17 million, and is included in Other assets in the Consolidated Balance Sheet.
39
BREAD FINANCIAL HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table summarizes the results of operations of the Company’s former LoyaltyOne segment, direct costs identifiable to the LoyaltyOne segment, and the allocation of interest expense on corporate debt, for the three and six months ended June 30, 2021:
| | | | | | | |
| | | | | | | |
| | | | ||||
|
| Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 | | ||
(Millions) | | | | | | | |
Total interest income | | $ | — | | $ | — | |
Total interest expense (1) | | | 3 | | | 7 | |
Net interest income | | | (3) | | | (7) | |
Total non-interest income | | | 151 | | | 327 | |
Total non-interest expenses | | | 130 | | | 275 | |
Income before provision from income taxes | | | 18 | | | 45 | |
Provision for income taxes | | | 7 | | | 16 | |
Income from discontinued operations, net of income taxes | | $ | 11 | | $ | 29 | |
The following table summarizes the depreciation and amortization, and capital expenditures of the Company’s former LoyaltyOne segment for the three and six months ended June 30, 2021:
effect would have been anti-dilutive.
| | | | | | | |
| | | | ||||
| | | | | | | |
|
| | | | | | |
(Millions) | | Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 | | ||
Depreciation and amortization | | $ | 9 | | $ | 18 | |
Capital expenditures | | $ | 4 | | $ | 9 | |
40
41
There have been no material changes to
For a discussion of the recent trends and uncertainties impacting our business, see also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Environment”.
|
|
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
(Millions) | ||||||||||||||||||||||||||
April 1-30 | 5,177 | $ | 27.95 | — | $ | — | ||||||||||||||||||||
May 1-31 | 6,461 | 26.99 | — | — | ||||||||||||||||||||||
June 1-30 | 6,805 | 30.68 | — | — | ||||||||||||||||||||||
Total | 18,443 | $ | 28.62 | — | $ | — |
| | | | | | | | | | |
| | | | | | | Total Number of | | Approximate Dollar | |
| | | | | | | Shares Purchased as | | Value of Shares that | |
| | | | | | | Part of Publicly | | May Yet Be | |
| | Total Number of | | Average Price Paid | | Announced Plans or | | Purchased Under the | ||
Period |
| Shares Purchased (1) |
| per Share |
| Programs |
| Plans or Programs | ||
| | | | | | | | | (Millions) | |
April 1-30 |
| 2,950 | | $ | 55.74 | | — | | $ | — |
May 1-31 |
| 2,356 | |
| 52.28 |
| — | |
| — |
June 1-30 | | 3,407 | | | 47.34 | | — | | | — |
Total |
| 8,713 | | $ | 51.52 | | — | | $ | — |
Not applicable.
Exhibits:
Incorporated by Reference | ||||||||||||||||||||||||||||||||
Exhibit No. | Filer | Description | Form | Exhibit | Filing Date | |||||||||||||||||||||||||||
3.1 | (a) | 8-K | 3.2 | 6/10/16 | ||||||||||||||||||||||||||||
3.2 | (a) | 8-K | 3.1 | 3/24/22 | ||||||||||||||||||||||||||||
3.3 | (a) | 8-K | 3.1 | 4/29/19 | ||||||||||||||||||||||||||||
3.4 | (a) | 8-K | 3.2 | 3/24/22 | ||||||||||||||||||||||||||||
4 | (a) | 10-Q | 4 | 8/8/03 | ||||||||||||||||||||||||||||
10.1 | (b) (c) (d) | 8-K | 99.1 | 4/5/23 | ||||||||||||||||||||||||||||
10.2 | (b) (c) (d) | 8-K | 4.1 | 5/19/23 | ||||||||||||||||||||||||||||
10.3 | (a) | 8-K | 4.1 | 6/13/23 | ||||||||||||||||||||||||||||
10.4 | (a) | 8-K | 10.2 | 6/13/23 | ||||||||||||||||||||||||||||
10.5 | (b) (c) (d) | 8-K | 99.2 | 7/7/23 | ||||||||||||||||||||||||||||
10.6 | (b) (c) (d) | 8-K | 99.1 | 7/7/23 | ||||||||||||||||||||||||||||
*31.1 | (a) | |||||||||||||||||||||||||||||||
|
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42
HIDDEN_ROW Incorporated by Reference Exhibit No. Filer Description Form Exhibit Filing Date 3.1 (a) Third Amended and Restated Certificate of Incorporation of the Registrant. 8-K 3.2 6/10/16 3.2 (a) 8-K 3.1 3/24/22 3.3 (a) 8-K 3.1 4/29/19 3.4 (a) 8-K 3.2 3/24/22 4 (a) Specimen Certificate for shares of Common Stock of the Registrant. 10-Q 4 8/8/03 10.1 (b) (c) (d) 10-D 99.2 6/15/22 *31.1 (a) *31.2 (a) **32.1 (a) **32.2 (a) *101 (a) The following financial information from Bread Financial Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income (Loss), (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements. *104 (a) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). BREAD FINANCIAL HOLDINGS, INC. DATE: August By: /s/ RALPH J. ANDRETTA Ralph J. Andretta President and Chief Executive Officer DATE: August By: /s/ PERRY S. BEBERMAN Perry S. Beberman Executive Vice President and Chief Financial OfficerTableExhibit No. Filer Description Form Exhibit Filing Date *31.2 (a) Item 6.Exhibits.a)Exhibits:EXHIBIT INDEX* Filed herewith43** Furnished herewith(a)Bread Financial Holdings, Inc. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. (b)**32.1 WFN Credit Company, LLC(a)(c)**32.2 World(a)(d)*101 World(a)The following financial information from Bread Financial Network Credit Card Master Note TrustHoldings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in Inline XBRL: (i) Consolidated Statements of Income (Loss), (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.*104 (a) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). *Filed herewith**Furnished herewith444, 20224, 202245