Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2021 | Feb. 18, 2022 | Jun. 30, 2021 | |
Document and Entity Information | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2021 | ||
Entity File Number | 001-15749 | ||
Entity Registrant Name | ALLIANCE DATA SYSTEMS CORP | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 31-1429215 | ||
Entity Address, Address Line One | 3095 Loyalty Circle | ||
Entity Address, City or Town | Columbus | ||
Entity Address, State or Province | OH | ||
Entity Address, Postal Zip Code | 43219 | ||
City Area Code | 614 | ||
Local Phone Number | 729-4000 | ||
Title of 12(b) Security | Common stock, par value $0.01 per share | ||
Trading Symbol | ADS | ||
Security Exchange Name | NYSE | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 49,948,146 | ||
Auditor Name | Deloitte & Touche LLP | ||
Auditor Firm ID | 34 | ||
Auditor Location | Dallas, Texas | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2021 | ||
Document Fiscal Period Focus | FY | ||
Entity Central Index Key | 0001101215 | ||
Amendment Flag | false | ||
Entity Public Float | $ 4.1 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Interest income | |||
Interest and fees on loans | $ 3,861 | $ 3,931 | $ 4,729 |
Interest on cash and investment securities | 7 | 21 | 98 |
Total interest income | 3,868 | 3,952 | 4,827 |
Interest expense | |||
Interest on deposits | 167 | 238 | 307 |
Interest on borrowings | 216 | 261 | 331 |
Total interest expense | 383 | 499 | 638 |
Net interest income | 3,485 | 3,453 | 4,189 |
Non-interest income | |||
Interchange revenue, net of retailer share arrangements | (369) | (332) | (358) |
Other | 156 | 177 | 219 |
Total non-interest income | (213) | (155) | (139) |
Total net interest and non-interest income | 3,272 | 3,298 | 4,050 |
Provision for credit losses | 544 | 1,266 | 1,188 |
Total net interest and non-interest income, after provision for credit losses | 2,728 | 2,032 | 2,862 |
Non-interest expenses | |||
Employee compensation and benefits | 671 | 609 | 721 |
Card and processing expenses | 323 | 396 | 479 |
Information processing and communication | 216 | 191 | 187 |
Marketing expenses | 160 | 143 | 205 |
Depreciation and amortization | 92 | 106 | 96 |
Other | 222 | 286 | 512 |
Total non-interest expenses | 1,684 | 1,731 | 2,200 |
Income from continuing operations before income taxes | 1,044 | 301 | 662 |
Provision for income taxes | 247 | 93 | 156 |
Income from continuing operations | 797 | 208 | 506 |
Income (loss) from discontinued operations, net of income taxes | 4 | 6 | (228) |
Net income | $ 801 | $ 214 | $ 278 |
Basic income per share (Note 20): | |||
Income from continuing operations (in dollars per share) | $ 16.02 | $ 4.36 | $ 9.94 |
Income (loss) from discontinued operations (in dollars per share) | 0.07 | 0.11 | (4.56) |
Net income per share (in dollars per share) | 16.09 | 4.47 | 5.38 |
Diluted income per share (Note 20): | |||
Income from continuing operations (in dollars per share) | 15.95 | 4.35 | 9.94 |
Income (loss) from discontinued operations | 0.07 | 0.11 | (4.48) |
Net income per share (in dollars per share) | $ 16.02 | $ 4.46 | $ 5.46 |
Weighted average shares (Note 20): | |||
Basic (in shares) | 49.7 | 47.8 | 50 |
Diluted (in shares) | 50 | 47.9 | 50.9 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income | $ 801 | $ 214 | $ 278 |
Other comprehensive income (loss): | |||
Unrealized (loss) gain on available-for-sale securities | (24) | 22 | 15 |
Tax benefit (expense) | 2 | (1) | (2) |
Unrealized (loss) gain on available-for-sale securities, net of tax | (22) | 21 | 13 |
Unrealized gain (loss) on cash flow hedges | 1 | (1) | |
Unrealized gain (loss) on cash flow hedges, net of tax | 1 | (1) | |
Unrealized gain on net investment hedge | 20 | 7 | |
Tax expense | (13) | (2) | |
Unrealized gain on net investment hedge, net of tax | 7 | 5 | |
Foreign currency translation adjustments (inclusive of deconsolidation of $54 million, $4 million and $27 million for the years ended December 31, 2021, 2020 and 2019, respectively, related to the disposition of businesses) | 17 | 75 | 20 |
Other comprehensive income, net of tax | 3 | 95 | 38 |
Total comprehensive income, net of tax | $ 804 | $ 309 | $ 316 |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Deconsolidation related to sale of businesses | $ 54 | $ 4 | $ 27 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
ASSETS | ||
Cash and cash equivalents | $ 3,046 | $ 2,796 |
Credit card and other loans: | ||
Total credit card and other loans | 17,399 | 16,784 |
Allowance for credit losses | (1,832) | (2,008) |
Credit card and other loans, net | 15,567 | 14,776 |
Available-for-sale securities | 239 | 225 |
Property and equipment, net | 215 | 213 |
Goodwill and intangible assets, net | 687 | 711 |
Other assets | 1,992 | 1,363 |
Assets of discontinued operations | 2,463 | |
Total assets | 21,746 | 22,547 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Deposits | 11,027 | 9,793 |
Debt issued by consolidated variable interest entities | 5,453 | 5,710 |
Long-term and other debt | 1,986 | 2,806 |
Other liabilities | 1,194 | 1,359 |
Liabilities of discontinued operations | 1,357 | |
Total liabilities | 19,660 | 21,025 |
Commitments and contingencies (Note 15) | ||
Stockholders' equity: | ||
Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 49.9 million and 117.1 million shares at December 31, 2021 and December 31, 2020, respectively | 1 | 1 |
Additional paid-in capital | 2,174 | 3,427 |
Treasury stock, at cost, no shares and 67.4 million shares at December 31, 2021 and December 31, 2020, respectively | (6,733) | |
(Accumulated deficit) retained earnings | (87) | 4,832 |
Accumulated other comprehensive loss | (2) | (5) |
Total stockholders' equity | 2,086 | 1,522 |
Total liabilities and stockholders' equity | $ 21,746 | $ 22,547 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Credit Card and Loan Receivables Restricted for Securitization Investors | $ 11,215 | $ 11,208 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 200 | 200 |
Common stock, issued shares | 49.9 | 117.1 |
Treasury stock, shares | 0 | 67.4 |
Consolidated Variable Interest Entities | ||
Credit Card and Loan Receivables Restricted for Securitization Investors | $ 11,215 | $ 11,208 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Millions, $ in Millions | Common Stock | Preferred Stock | Additional Paid-In Capital | Treasury Stock | Retained EarningsPeriod of Adoption Adjustment | Retained Earnings | Accumulated Other Comprehensive Loss | Period of Adoption Adjustment | Total |
Balance at Dec. 31, 2018 | $ 1 | $ 3,172 | $ (5,715) | $ 5,012 | $ (138) | $ 2,332 | |||
Balance (in shares) at Dec. 31, 2018 | 113 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income | 278 | 278 | |||||||
Other comprehensive income (loss) | 38 | 38 | |||||||
Stock-based compensation | 55 | 55 | |||||||
Issuance of preferred stock | 42 | (42) | |||||||
Issuance of preferred stock (in shares) | 0.2 | ||||||||
Conversion of preferred stock to common stock (in shares) | 1.5 | (0.2) | |||||||
Repurchases of common stock | (976) | (976) | |||||||
Dividends and dividend equivalent rights declared | (127) | (127) | |||||||
Issuance of shares to employees, net of shares withheld for employee taxes | (11) | (11) | |||||||
Issuance of shares to employees, net of shares withheld for employee taxes (in shares) | 0.5 | ||||||||
Balance (ASU 2016-13) at Dec. 31, 2019 | $ (485) | $ (485) | |||||||
Balance at Dec. 31, 2019 | $ 1 | 3,258 | (6,733) | 5,163 | (100) | 1,589 | |||
Balance (in shares) at Dec. 31, 2019 | 115 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income | 214 | 214 | |||||||
Other comprehensive income (loss) | 95 | 95 | |||||||
Stock-based compensation | 21 | 21 | |||||||
Dividends and dividend equivalent rights declared | (60) | (60) | |||||||
Common stock issued as consideration for acquired business | 149 | 149 | |||||||
Common stock issued as consideration for acquired business (in shares) | 1.9 | ||||||||
Issuance of shares to employees, net of shares withheld for employee taxes | (1) | (1) | |||||||
Issuance of shares to employees, net of shares withheld for employee taxes (in shares) | 0.2 | ||||||||
Balance at Dec. 31, 2020 | $ 1 | 3,427 | (6,733) | 4,832 | (5) | 1,522 | |||
Balance (in shares) at Dec. 31, 2020 | 117.1 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income | 801 | 801 | |||||||
Other comprehensive income (loss) | 3 | 3 | |||||||
Stock-based compensation | 29 | 29 | |||||||
Dividends and dividend equivalent rights declared | (42) | (42) | |||||||
Retirement of treasury stock | (1,280) | $ 6,733 | (5,453) | ||||||
Retirement of treasury stock (in shares) | (67.4) | ||||||||
Spinoff of Loyalty Ventures Inc. | (225) | (225) | |||||||
Issuance of shares to employees, net of shares withheld for employee taxes | (2) | (2) | |||||||
Issuance of shares to employees, net of shares withheld for employee taxes (in shares) | 0.2 | ||||||||
Balance at Dec. 31, 2021 | $ 1 | $ 2,174 | $ (87) | $ (2) | $ 2,086 | ||||
Balance (in shares) at Dec. 31, 2021 | 49.9 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2019 | |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 1.26 | $ 0.84 | $ 2.52 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ 801 | $ 214 | $ 278 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Provision for credit losses | 544 | 1,266 | 1,188 |
Depreciation and amortization | 123 | 184 | 249 |
Deferred income taxes | (15) | (223) | (186) |
Non-cash stock compensation | 29 | 21 | 55 |
Amortization of deferred financing costs | 31 | 36 | 43 |
Gain on sale of business | (14) | (512) | |
Loss on extinguishment of debt | 72 | ||
Asset impairment charges | 0 | 64 | 52 |
Amortization of deferred origination costs and other charges | 71 | 52 | 241 |
Change in other operating assets and liabilities, net of acquisitions and dispositions | |||
Change in other assets | (30) | 210 | (43) |
Change in other liabilities | (11) | 73 | (219) |
Net cash provided by operating activities | 1,543 | 1,883 | 1,218 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Change in credit card and other loans | (1,805) | 1,784 | (2,587) |
Change in redemption settlement assets | (113) | (41) | (9) |
Proceeds from sale of business | 27 | 4,410 | |
Payments for acquired businesses, net of cash and restricted cash | (75) | (267) | (7) |
Proceeds from sale of credit card loan portfolio | 512 | 289 | 2,062 |
Purchase of credit card loan portfolios | (110) | (925) | |
Capital expenditures | (84) | (54) | (142) |
Purchases of available-for-sale securities | (93) | (40) | (20) |
Maturities of available-for-sale securities | 73 | 77 | 60 |
Other | 4 | (1) | 19 |
Net cash (used in) provided by investing activities | (1,691) | 1,774 | 2,861 |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Unsecured borrowings under debt agreements | 38 | 1,276 | 3,111 |
Repayments/maturities of unsecured borrowings under debt agreements | (864) | (1,320) | (5,982) |
Debt issued by consolidated variable interest entities | 4,278 | 2,419 | 4,852 |
Repayments/maturities of debt issued by consolidated variable interest entities | (4,538) | (4,096) | (5,219) |
Net increase (decrease) in deposits | 1,228 | (2,370) | 356 |
Debt proceeds from spinoff of Loyalty Ventures Inc. | 652 | ||
Transfers to Loyalty Ventures Inc. related to spinoff | (127) | ||
Payment of debt extinguishment costs | (46) | ||
Payment of deferred financing costs | (13) | (19) | (45) |
Proceeds from issuance of common stock | 4 | 3 | 12 |
Dividends paid | (42) | (61) | (127) |
Purchase of treasury shares | (976) | ||
Other | (8) | 1 | (28) |
Net cash provided by (used in) financing activities | 608 | (4,167) | (4,092) |
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash | 15 | 3 | |
Change in cash, cash equivalents and restricted cash | 460 | (495) | (10) |
Cash, cash equivalents and restricted cash at beginning of year | 3,463 | 3,958 | 3,968 |
Cash, cash equivalents and restricted cash at end of year | 3,923 | 3,463 | 3,958 |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Cash paid during the year for interest | 357 | 488 | 672 |
Cash paid during the year for income taxes, net | $ 325 | $ 268 | $ 1,071 |
DESCRIPTION OF BUSINESS AND SUM
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2021 | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF THE BUSINESS Alliance Data Systems Corporation (ADSC or, including its consolidated subsidiaries and variable interest entities, the Company) is a leading provider of tech-forward payment and lending solutions, serving customers and consumer-based industries in North America. Through omnichannel touch points and a comprehensive product suite that includes credit products and Bread ® ® BASIS OF PRESENTATION The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation. In particular, as a result of the spinoff of its LoyaltyOne segment as discontinued operations, the Company has adjusted the presentation of its Consolidated Financial Statements from its historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.” While neither the Company nor any of its subsidiaries are considered a “bank” within the meaning of the Bank Holding Company Act, the changes from the historical presentation, to the bank holding company presentation, the most significant of which reflect a reclassification of Interest expense within Net interest income, are intended to reflect the Company’s operations going forward and better align the Company with its peers for comparability purposes. As noted above, the Company’s Consolidated Financial Statements have been presented with its LoyaltyOne segment as discontinued operations. See Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation,” for more information. SIGNIFICANT ACCOUNTING POLICIES The Company presents its accounting policies within the Notes to the Consolidated Financial Statements to which they relate; the table below lists such accounting policies and the related Notes. The remaining significant accounting policies applied by the Company are included below. Significant Accounting Policy Note Number Note Title Credit Card and Other Loans Note 3 Credit Card and Other Loans Allowance for Credit Losses Note 4 Allowance for Credit Losses Transfers of Financial Assets Note 5 Securitizations Available-for-Sale Securities Note 6 Available-for-Sale Securities Property and Equipment Note 7 Property and Equipment, Net Goodwill Note 8 Goodwill and Intangible Assets, Net Intangible Assets, Net Note 8 Goodwill and Intangible Assets, Net Leases Note 10 Leases Stock Compensation Expense Note 18 Stockholders' Equity Income Taxes Note 19 Income Taxes Earnings Per Share Note 20 Earnings Per Share Principles of Consolidation The accompanying consolidated financial statements include the accounts of ADSC and all subsidiaries in which the Company has a controlling financial interest. For voting interest entities, a controlling financial interest is determined when the Company is able to exercise control over the operating and financial decisions of the investee. For variable interest entities (VIEs), which are themselves determined based on the amount and characteristics of the equity in the entity, the Company has a controlling financial interest when it is determined to be the primary beneficiary. The primary beneficiary is the party having both the power to exercise control over the activities that most significantly impact the VIE’s financial performance, as well as the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE. The Company is the primary beneficiary of its securitization trusts and therefore consolidates these trusts within its Consolidated Financial Statements. In cases where the Company does not have a controlling financial interest, but is able to exert significant influence over the operating and financial decisions of the entity, the Company accounts for such investments under the equity method. All intercompany transactions have been eliminated. Currency Translation The Company’s monetary assets and liabilities denominated in foreign currencies, for example those of subsidiaries outside the U.S., are translated into U.S. dollars based on the rates of exchange in effect at the end of the reporting period, while non-monetary assets and liabilities are translated based on the rates of exchange in effect as of the date of the transaction giving rise to the asset or liability. Income and expense items are translated at the average exchange rates prevailing during the period. The resulting effects, along with any related hedge or tax impacts, are recorded in Accumulated other comprehensive loss, a component of stockholders’ equity. Translation adjustments, along with the related hedge and tax impacts, are recognized in the Consolidated Statements of Income upon the sale or substantial liquidation of an investment in a foreign subsidiary. Gains and losses resulting from transactions in currencies other than the entity’s functional currency are recognized in Other non-interest expenses in the Consolidated Statements of Income, and were insignificant for each of the periods presented. Historically, the Company’s impacts from foreign currency exchange rate fluctuations were most prevalent within businesses that have been spun off, such as LoyaltyOne, or sold, such as Epsilon, both of which are reflected as discontinued operations herein. Amounts Based on Estimates and Judgments The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments about future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported amounts of income and expenses during the reporting periods. The most significant of those estimates and judgments relate to the Company’s Allowance for credit losses; actual results could differ. Revenue Recognition The Company’s primary source of revenue is from Interest and fees on loans from its various credit card and other loan products, and to a lesser extent from contractual relationships with its brand partners. The following describes the Company’s recognition policies across its various sources of revenue. Interest and fees on loans Interest on cash and investment securities: Interchange revenue, net of retailer share arrangements: Other non-interest income: Represents ancillary revenues earned from cardholders, consisting primarily of monthly fees from the purchase of certain payment protection products which are recognized based on the average cardholder account balance over time and can be cancelled at any point by the cardholder, as well as gains or losses on the sales of loan portfolios and income or losses from equity method investments. Contract Costs: The Company performs an impairment assessment when events or changes in circumstances indicate that the carrying amount of contract costs may not be recoverable. For the year ended December 31, 2020, due to the global COVID-19 pandemic and resulting retail store closures and significant declines in credit sales, the Company recognized an impairment charge of $38 million in Non-interest expenses in its Consolidated Statement of Income. No impairment charges were recognized in either of the years ended December 31, 2021 or 2019. Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks, interest-bearing cash balances such as those invested in money market funds, as well as other highly liquid short-term investments with an original maturity of three months or less, and restricted cash. As of December 31, 2021 and 2020, cash and due from banks was $251 million and $262 million, respectively, interest-bearing cash balances were $2.7 billion and $2.5 billion, respectively, and short-term investments were $80 million and $29 million, respectively. Restricted cash primarily represents cash restricted for principal and interest repayments of debt issued by consolidated VIE securitization trusts, and is recorded in Other assets on the Consolidated Balance Sheets. Restricted cash totaled $877 million and $323 million at December 31, 2021 and 2020, respectively. Derivative Financial Instruments From time to time, the Company uses derivative financial instruments to manage its exposure to various financial risks; the Company does not trade or speculate in derivative financial instruments. Subject to the criteria set forth in GAAP, the Company will either designate its derivative financial instruments in hedging relationships, or as economic hedges should the criteria in GAAP not be met. For those derivatives designated in hedging relationships, changes in their fair values, excluding any ineffective portions, are recorded in Accumulated other comprehensive income, net of income taxes, until the hedged transactions affect net income; the ineffective portions of the derivative financial instruments are recognized through net income. For those derivatives not designated in hedging relationships, or economic hedges, changes in their fair values are recognized in the Consolidated Statements of Income as they occur. The Company’s derivative financial instruments were immaterial to the Consolidated Financial Statements for the periods presented. With the spinoff of its LoyaltyOne segment in November 2021, the Company does not hold any derivative financial instruments as of December 31, 2021. CONCENTRATIONS We depend on a limited number of large partner relationships for a significant portion of our revenue. The business generated through our 10 largest partners represented approximately 59% and 65%, respectively, of our Total net interest and non-interest income during the years ended December 31, 2021 and 2020. Business generated through our relationship with Victoria’s Secret & Co. and its retail affiliates represented approximately 13% and 14% of our Total net interest and non-interest income during these same respective periods. We previously announced the non-renewal of our contract with BJ’s Wholesale Club (BJ’s). For the year ended December 31, 2021, BJ’s branded co-brand accounts generated approximately 8% of our Total net interest and non-interest income. As of December 31, 2021, BJ’s branded co-brand accounts were responsible for approximately 11% of our Total credit card and other loans. RECENTLY ISSUED ACCOUNTING STANDARDS In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and is effective upon issuance for all entities, and the adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements. RECENTLY ADOPTED ACCOUNTING STANDARDS In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminated certain exceptions within Accounting Standards Codification (ASC) 740, “Income Taxes,” and clarified certain aspects of ASC 740 to promote consistency among reporting entities. Most amendments within the standard were required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company’s adoption of this standard on January 1, 2021 did not have a material impact on its financial position, results of operations or cash flows, and there were no significant changes to accounting policies, business processes or internal controls as a result of adopting the standard. Effective January 1, 2020, the Company adopted the new credit reserving methodology referred to as Current Expected Credit Loss (CECL), following a modified retrospective transition which resulted in an increase to the Allowance for credit losses of $644 million, an increase to net deferred tax assets of $159 million, with the offset to the opening balance of Retained earnings, net of income taxes, of $485 million. Under the CECL methodology, the Company utilizes a financial instrument impairment model to establish an allowance based on expected losses over the estimated life of the exposure, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. This approach differs from the Company’s historic model prior to January 1, 2020, which was based on an incurred loss approach. Although there were no significant changes to the Company’s accounting systems or internal controls as a result of adopting the standard, the Company modified certain of its existing controls and added new controls around its loss forecasting models. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2021 | |
ACQUISITIONS | |
ACQUISITIONS | 2. ACQUISITIONS Bread On September 28, 2020, the Company acquired 3.5 million preferred Series D Shares of Lon Inc., a Delaware corporation (Bread), for approximately $25 million, which represented an approximate 6% ownership interest in Bread. On December 3, 2020, the Company acquired the remaining interest in Bread, and accordingly its approximate 6% interest was remeasured at fair value; no gain or loss was recognized on the remeasurement. Consideration for the 100% ownership of Bread consisted of cash of $275 million, equity of $149 million with the issuance of 1.9 million shares of the Company’s common stock, and deferred cash consideration of approximately $75 million paid in December 2021. Consideration, net of cash and restricted cash acquired, was $491 million. The following table summarizes the allocation of the consideration and the respective fair values of the assets acquired and liabilities assumed in the transaction, net of cash and restricted cash acquired, as of December 3, 2020 (in millions): Installment loans $ 112 Developed technology 91 Right of use assets - operating 4 Deferred tax asset, net 7 Intangible assets 11 Goodwill 370 Total assets acquired 595 Accounts payable 2 Accrued expenses 3 Operating lease liabilities 3 Debt issued by consolidated variable interest entities 96 Total liabilities assumed 104 Net assets acquired, net of cash and restricted cash $ 491 The goodwill resulting from the acquisition was not deductible for tax purposes. Bread utilized certain statutory trusts to securitize its installment loans. As part of the acquisition, the Company acquired $112 million of installment loans restricted for securitization investors. In addition, the Company assumed two warehouse facilities totaling $96 million utilized to fund securitized loans, which were amended in December 2020 and repaid in full in August 2021. See Note 11, “Borrowings of Long-term and Other Debt,” for more information. |
CREDIT CARD AND OTHER LOANS
CREDIT CARD AND OTHER LOANS | 12 Months Ended |
Dec. 31, 2021 | |
CREDIT CARD AND OTHER LOANS | |
CREDIT CARD AND OTHER LOANS | 3. CREDIT CARD AND OTHER LOANS The Company’s payment and lending solutions result in the generation of credit card and other loans, which are recorded at the time a cardholder enters into a point-of-sale transaction with a merchant. Credit card loans represent revolving amounts due and have a range of terms that include credit limits, interest rates and fees, which can be revised over time based on new information about the cardholder, in accordance with applicable regulations and the governing terms and conditions. Cardholders choosing to revolve their amounts due, instead of paying in full, are subject to finance charges and are required to make monthly payments based on pre-established amounts. Other loans, which are primarily installment loans offered to our customers, have a range of fixed terms such as interest rates, fees and repayment periods, and borrowers are required to make pre-established monthly payments over the term of the loan in accordance with the applicable terms and conditions. Credit card and other loans are presented on the Consolidated Balance Sheets net of the Allowance for credit losses, and include principal and any related accrued interest and fees. The Company continues to accrue interest and fee income on all accounts, except in limited circumstances, until the related balance and all related interest and fees are paid or charged-off; an Allowance for credit losses is established for uncollectable interest and fees. For the most part, the Company classifies its credit card and other loans as held for investment. The Company sells a majority of its credit card loans originated by Comenity Bank and by Comenity Capital Bank, which together are referred to herein as the “Banks,” to securitization master trusts, which are themselves consolidated VIEs, and therefore these loans are restricted for securitization investors. All new originations of credit card and other loans are determined to be held for investment at origination because the Company has the intent and ability to hold them for the foreseeable future. In determining what constitutes the foreseeable future, the Company considers the average life and homogenous nature of its credit card and other loans. In assessing whether its credit card and other loans continue to be held for investment, the Company also considers capital levels and scheduled maturities of funding instruments used. The assertion regarding the intent and ability to hold credit card and other loans for the foreseeable future can be made with a high degree of certainty given the maturity distribution of the Company’s direct-to-consumer deposits and other funding instruments; the demonstrated ability to replace maturing time-based deposits and other borrowings with new deposits or borrowings; and historic payment activity on its credit card and other loans. Due to the homogenous nature of the Company’s credit card loans, amounts are classified as held for investment on a brand partner portfolio basis. From time to time certain credit card loans are classified as held for sale, as determined on a brand partner basis. The Company carries these assets at the lower of aggregate cost or fair value, and continues to recognize finance charges on an accrual basis. Cash flows associated with credit card and other loans originated or purchased for investment are classified as Cash flows from investing activities, regardless of any subsequent change in intent. The Company’s credit card and other loans were as follows, as of December 31: 2021 2020 (in millions) Credit card loans $ 17,217 $ 16,666 Installment loans 182 118 Total credit card and other loans (1)(2) 17,399 16,784 Less: Allowance for credit losses (1,832) (2,008) Credit card and other loans, net $ 15,567 $ 14,776 (1) Includes $11.2 billion of credit card and other loans available to settle obligations of consolidated VIEs as of both December 31, 2021 and 2020, respectively. (2) Includes $224 million and $219 million, of accrued interest and fees that have not yet been billed to cardholders as of December 31, 2021 and 2020, respectively. Credit Card and Other Loans Aging An account is contractually delinquent if the Company does not receive the minimum payment due by the specified due date. The Company’s policy is to continue to accrue interest and fee income on all accounts, except in limited circumstances, until the balance and all related interest and fees are paid or charged-off, which is typically at 180 days past due for credit card loans and 120 days past due for installment loans. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent. This collection scoring algorithm then recommends a strategy for collecting on the past due account, including a contact schedule and collections priority. If, after exhausting all in-house collection efforts, the Company is unable to make a collection it may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances. The following table presents the delinquency trends on the Company’s credit card and other loans portfolio based on the principal balances outstanding as of December 31, and excludes amounts that have not yet been billed to cardholders: Aging Analysis of Delinquent Amortized Cost Credit Card and Other Loans (1) 31 to 60 days delinquent 61 to 90 days delinquent 91 or more days delinquent Total delinquent Current Total (in millions) As of December 31, 2021 $ 262 $ 186 $ 401 $ 849 $ 16,284 $ 17,133 As of December 31, 2020 $ 273 $ 203 $ 440 $ 916 $ 15,578 $ 16,494 (1) Installment loan delinquencies have been included with credit card loan delinquencies in the table above, as amounts were insignificant at each period presented. 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 charge-offs. 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. For the years ended December 31, 2021, 2020 and 2019, the Company’s re-aged accounts represented 1.7%, 2.8% and 2.4%, respectively, of total credit card and other loans. The Company’s re-aging practices comply with regulatory guidelines. Net Principal Charge-offs The Company’s net charge-offs include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and fraud losses. Charged-off interest and fees reduce Interest and fees on loans, while 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. Installment loans, including unpaid interest, are generally charged-off when a loan becomes 120 days past due. However, in the case of a customer bankruptcy or death, credit card and other loans, including unpaid interest and fees as applicable, are charged-off in each month subsequent to 60 days after the receipt of notification of the bankruptcy or death, but in any case not later than 180 days past due. The Company records the actual charge-offs for unpaid interest and fees as a reduction to Interest and fees on loans, which were $456 million, $717 million and $809 million for the years ended December 31, 2021, 2020 and 2019, respectively. Modified Credit Card Loans Forbearance Programs In response to the global COVID-19 pandemic, the Company offered forbearance programs, which provided for short-term modifications in the form of payment deferrals and late fee waivers to borrowers who were current as of their most recent billing cycle, prior to the announcement of the forbearance programs. As of December 31, 2021 and 2020, the amount of credit card loans in these forbearance programs was approximately $86 million and $157 million, respectively. Additionally, the Company instituted two short-term forbearance programs with durations of three 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 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. Additionally, the Company instituted two temporary hardship programs with durations of three 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 3% of total credit card loans as of December 31, 2021 and 2020, respectively. As of those same dates, the Company’s recorded investment in impaired credit card loans was $281 million and $490 million, respectively, with an associated allowance for credit losses of $81 million and $166 million, respectively. The average recorded investment in impaired credit card loans was $383 million and $412 million for the years ended December 31, 2021 and 2020, respectively. Interest income on these impaired credit card loans is accounted for in the same manner as other 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 $26 million, $30 million and $23 million for the years ended December 31, 2021, 2020 and 2019, 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 for the years ended December 31: 2021 2020 Pre- Post- Pre- Post- modification modification modification modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings 171,993 $ 254 $ 254 391,049 $ 554 $ 553 The following table provides additional information regarding credit card loans modified as TDRs that have subsequently defaulted within 12 months of their modification dates for the years ended December 31; the probability of default is factored into the allowance for credit losses: 2021 2020 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted 114,531 $ 154 118,600 $ 162 Credit Quality Credit Card Loans As part of the Company’s credit risk management activities, the Company assesses overall credit quality by reviewing information related to the performance of a credit cardholder’s account, as well as information from credit bureaus relating to the cardholder’s broader credit performance. The Company utilizes VantageScore (Vantage) credit scores to assist in its 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 categorizes 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 customer accounts for which a Vantage score is not available and the Company uses alternative sources to assess credit risk and predict behavior. The table below excludes 0.1% of our total credit card loans balance at each of December 31, 2021 and 2020, representing those customer accounts for which a Vantage credit score is not available. The following table reflects the distribution of the Company’s credit card loans by Vantage score as of December 31: Vantage 2021 2020 661 or 601 to 600 or 661 or 601 to 600 or Higher 660 Less Higher 660 Less Credit card loans 62 % 26 % 12 % 60 % 28 % 12 % Note: The Company’s credit card loans are revolving as they do not have stated maturities, and therefore are exempted from certain vintage disclosures otherwise required under GAAP. Installment Loans The amortized cost basis of the Company’s installment loans totaled $182 million and $118 million as of December 31, 2021 and 2020, respectively. As of December 31, 2021, approximately 84% of these loans were originated by customers with Fair Isaac Corporation (FICO) scores of 660 or above, and approximately 16% of these loans were originated by customers with FICO scores below 660. Similarly, as of December 31, 2020, approximately 86% and 14% of these loans were originated by customers with FICO scores of 660 or above, and below 660, respectively. Unfunded Loan Commitments The Company is active in originating private label and co-brand credit cards in the United States. The Company manages potential credit risk in its unfunded lending commitments by reviewing each potential customer’s credit application and evaluating the applicant’s financial history and ability and perceived willingness to repay. Credit card loans are made primarily on an unsecured basis. Cardholders reside throughout the United States and are not significantly concentrated in any one area. The Company manages its potential risk in credit commitments by limiting the total amount of credit, both by individual customer and in total, by monitoring the size and maturity of its portfolios and applying consistent underwriting standards. The Company has the unilateral ability to cancel or reduce unused credit card lines at any time. Unused credit card lines available to cardholders totaled approximately $112 billion and $108 billion at December 31, 2021 and 2020, respectively. While these amounts represented the total available unused credit card lines, the Company has not experienced and does not anticipate that all cardholders will access their entire available line at any given point in time. Portfolio Sales As of December 31, 2021 and 2020, there were no credit card loans held for sale. During the years ended December 31, 2021 and 2020, the Company sold credit card loan portfolios for cash consideration of approximately $512 million and $289 million, respectively, and recognized associated gains of approximately $10 million and $20 million, respectively, which were recorded in Other non-interest income in the Consolidated Statements of Income. Also during the year ended December 31, 2020, the Company recorded $8 million in portfolio valuation adjustments, which are reflected in Non-interest expenses, and as of September 2020, one of the Company’s credit card loan portfolios totaling approximately $82 million was transferred from held for sale to held for investment, and was included in Total credit card and other loans as of December 31, 2020. No such valuation adjustments or transfers occurred in 2021. Portfolio Acquisitions During the year ended December 31, 2021, the Company acquired three credit card loan portfolios for aggregate cash consideration of approximately $110 million, which consisted of approximately $106 million of credit card loans and $4 million of purchased credit card relationships intangible assets. No portfolio acquisitions were made during the year ended December 31, 2020. |
ALLOWANCE FOR CREDIT LOSSES
ALLOWANCE FOR CREDIT LOSSES | 12 Months Ended |
Dec. 31, 2021 | |
Allowance for Credit Loss [Abstract] | |
Allowance for Credit Losses [Text Block] | 4. ALLOWANCE FOR CREDIT LOSSES Effective January 1, 2020, the Company adopted the CECL model on a modified retrospective approach and applied a CECL model to determine its allowance for credit losses. Reserves for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods. The allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of its credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions. The estimate under the CECL model is significantly influenced by the composition, characteristics and quality of the Company’s portfolio of credit card and other loans, as well as the prevailing economic conditions and forecasts utilized. The estimate of the allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees. Charge-offs of principal amounts, net of recoveries are deducted from the allowance. Charge-offs for unpaid interest and fees as well as any adjustments to the allowance associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans. The allowance is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness. In estimating its allowance for credit losses, for each identified group, management utilizes various models and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors. These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships with credit performance. The Company’s quantitative estimate of expected credit losses under CECL is impacted by certain forecasted economic factors. The Company considers the forecast used to be reasonable and supportable over the estimated life of the credit card and other loans, with no reversion period. In addition to the quantitative estimate of expected credit losses, the Company also incorporates qualitative adjustments for certain factors such as Company-specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the allowance for credit losses reflects the Company’s best estimate of current expected credit losses. As permitted by GAAP, the Company excludes unbilled finance charges from its amortized cost basis of credit card and other loans. As of December 31, 2021 and 2020, unbilled finance charges were $224 million and $219 million, respectively, and included in Credit card and other loans on the Consolidated Balance Sheets. Credit Card Loans The Company uses a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics. As part of its CECL implementation, the Company evaluated multiple risk characteristics of its credit card loans portfolio, and determined delinquency status and credit quality to be the most significant characteristics for estimating expected credit losses. To estimate its allowance for credit losses, the Company segregates its credit card loans into four groups with similar risk characteristics, on the basis of delinquency status and credit quality risk score. These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances warrant. In determining the estimated life of the Company’s credit card loans, payments were applied to the measurement date balance with no payments allocated to future purchase activity. The Company uses a combination of First In First Out (FIFO) and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) methodology to model balance paydown. The Company’s groups of pooled financial assets with similar risk characteristics and their estimated life is as follows: Estimated Life (in months) Group A (Current, risk score - high) 14 Group B (Current, risk score - low) 19 Group C (Delinquent, risk score - high) 17 Group D (Delinquent, risk score - low) 26 Installment Loans The allowance for credit losses for installment loans utilizes a migration model over the remaining life of the loans. The model segmented accounts based on three attributes: delinquency, risk score and remaining term. As of December 31, 2021 and 2020, the allowance for credit losses related to installment loans was $14 million and $6 million, respectively. Allowance for Credit Losses Rollforward The following table presents the Company’s allowance for credit losses for its credit card and other loans. With the acquisition of Bread in December 2020, the Company acquired certain installment loans which represented a separate portfolio segment; the amount of the related allowance for credit losses was insignificant and therefore has been included in the table below. The amounts presented are for the years ended December 31: 2021 2020 2019 (in millions) Beginning balance $ 2,008 $ 1,815 (3) $ 1,038 Provision for credit losses (1) 544 1,266 1,188 Change in estimate for uncollectible unpaid interest and fees — 10 — Net principal charge-offs (2) (720) (1,083) (1,055) Ending balance $ 1,832 $ 2,008 $ 1,171 (1) Provision for credit losses includes a build/release for the allowance, as well as replenishment of Net principal charge-offs. (2) Principal charge-offs are presented net of recoveries of $163 million, $205 million and $234 million for the years ended December 31, 2021, 2020 and 2019, respectively. (3) Includes an increase of $644 million as of January 1, 2020, related to the adoption of the CECL methodology. During the year ended December 31, 2021, the decrease in the allowance for credit losses was due to improved credit performance, lower net charge-offs and improving macroeconomic variables. In addition, improvements in customer payment behavior, which include the effects of government stimulus actions, have contributed to a reduction in credit card and other loans, as well as delinquencies, which also contributed to the reduction in the allowance for credit losses. During the year ended December 31, 2020, the increase in the allowance for credit losses was due to a $644 million cumulative-effect adjustment for the adoption of the CECL methodology as well as deterioration of the macroeconomic outlook due to the global COVID-19 pandemic. |
SECURITIZATIONS
SECURITIZATIONS | 12 Months Ended |
Dec. 31, 2021 | |
SECURITIZATIONS | |
SECURITIZATIONS | 5. SECURITIZATIONS The Company accounts for transfers of financial assets as either sales or financings. Transfers of financial assets that are accounted for as sales are removed from the Consolidated Balance Sheets with any realized gain or loss reflected in the Consolidated Statements of Income during the period in which the sale occurs. Transfers of financial assets that are not accounted for as a sale are treated as a financing. The Company regularly securitizes the majority of its credit card loans through the transfer of those loans to one of its master trusts (the Trusts). The Company performs the decision making for the Trusts, as well as servicing the cardholder accounts that generate the credit card loans held by the Trusts. In its capacity as a servicer, the Company administers the loans, collects payments and charges-off uncollectible balances. Servicing fees are earned by a subsidiary of ADSC, which are eliminated in consolidation. The Trusts are VIEs because they have insufficient equity at risk to finance their activities – being the issuance of debt securities and notes, collateralized by the underlying credit card loans. Because the Company performs the decision making and servicing for the Trusts, it has the power to direct the activities that most significantly impact the Trusts’ economic performance (the collection of the underlying credit card loans). In addition, the Company holds all of the variable interests in the Trusts, with the exception of the liabilities held by third-parties. These variable interests provide the Company with the right to receive benefits and the obligation to absorb losses, which could be significant to the Trusts. As a result of these considerations, the Company is deemed to be the primary beneficiary of the Trusts and therefore consolidates the Trusts. The Trusts issue debt securities and notes, which are non-recourse to the Company. The collections on the securitized credit card loans held by the Trusts are available only for payment of those debt securities and notes, or other obligations arising in the securitization transactions. For its securitized credit card loans, during the initial phase of a securitization reinvestment period, the Company generally retains principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets. During the amortization or accumulation period of a securitization, the investors’ share of principal collections (in certain cases, up to a maximum specified amount each month) is either distributed to the investors or held in an account until it accumulates to the total amount due, at which time it is paid to the investors in a lump sum. The Company is required to maintain minimum interests in its 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 years ended December 31, 2021, 2020 and 2019, no such triggering events occurred. The following tables provide the total securitized credit card loans and related delinquencies as of December 31, and net principal charge-offs of securitized credit card loans for the years ended December 31: 2021 2020 (in millions) Total credit card loans – available to settle obligations of consolidated VIEs $ 11,215 $ 11,208 Of which: principal amount of credit card loans 91 days or more past due $ 159 $ 201 2021 2020 2019 (in millions) Net charge-offs of securitized principal $ 453 $ 756 $ 908 |
AVAILABLE-FOR-SALE SECURITIES
AVAILABLE-FOR-SALE SECURITIES | 12 Months Ended |
Dec. 31, 2021 | |
AVAILABLE-FOR-SALE SECURITIES | |
AVAILABLE-FOR-SALE SECURITIES | 6. AVAILABLE-FOR-SALE SECURITIES The Company’s available-for-sale (AFS) securities consist of available-for-sale debt securities, equity securities, U.S. Treasury bonds and mutual funds. These investments are carried at fair value on the Consolidated Balance Sheets within Other assets. For any AFS debt securities in an unrealized loss position, the CECL methodology requires estimation of the lifetime expected credit losses which then would be recognized in the Consolidated Statements of Income by establishing, or adjusting an existing allowance for those credit losses. The Company did not have any such credit losses for the periods presented. Any unrealized gains, or any portion of a security’s non-credit-related unrealized losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. The Company typically invests in highly-rated securities with low probabilities of default. Gains and losses on investments in equity securities are recorded in Other non-interest expenses in the Consolidated Statements of Income. Realized gains and losses are recognized upon disposition of the securities, using the specific identification method. The table below reflects unrealized gains and losses as of December 31: 2021 2020 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) Available-for-sale securities $ 237 $ 4 $ (2) $ 239 $ 219 $ 6 $ — $ 225 Total $ 237 $ 4 $ (2) $ 239 $ 219 $ 6 $ — $ 225 The following table provides information about the Company’s AFS debt securities with gross unrealized losses, as of December 31, 2021, and the length of time such individual securities have been in a continuous unrealized loss position. The gross unrealized losses were insignificant on AFS debt securities as of December 31, 2020. Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Available-for-sale securities $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) Total $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) At December 31, 2021, the amortized cost and estimated fair value of the Company’s AFS securities by contractual maturity, are as follows: Amortized Estimated Cost Fair Value (in millions) Due in one year or less (1) $ 65 $ 65 Due after one year through five years — — Due after five years through ten years — — Due after ten years 172 174 Total $ 237 $ 239 (1) Includes mutual funds, which do not have a stated maturity. There were no realized gains or losses from the sale of any AFS securities for the years ended December 31, 2021, 2020 and 2019. |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2021 | |
PROPERTY AND EQUIPMENT, NET | |
PROPERTY AND EQUIPMENT, NET | 7. PROPERTY AND EQUIPMENT, NET Furniture, equipment, buildings and leasehold improvements are carried at cost less accumulated depreciation, and depreciation is measured on a straight-line basis. Costs incurred during construction are capitalized; depreciation begins once the asset is placed in service. As of December 31, 2021, the Company’s furniture and equipment has remaining estimated useful lives ranging from less than one year to 10 years. Leasehold improvements are depreciated over the lesser of the remaining terms of the respective leases, or the economic lives of the improvements, and range from less than one year to 17 years, at December 31, 2021. Costs associated with the acquisition or development of internal-use software are also capitalized and recorded in Property and equipment, net. Once the internal-use software is ready for its intended use, the cost is amortized on a straight-line basis over the software’s estimated useful life. As of December 31, 2021, the Company’s internal-use software has remaining estimated useful lives ranging from less than one year to four years . The Company reviews long-lived assets and asset groups for impairment whenever events or circumstances indicate their carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recoverable and exceeds the asset or asset group’s fair value. With the Bread acquisition on December 3, 2020, the Company acquired $91 million of developed technology recorded in Property and equipment, net, which is being amortized over a 5 year life; the Company also impaired $4 million in capitalized software with the acquisition, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020. Also during the fourth quarter of 2020, the Company determined it would reduce its real estate footprint and cease use of certain properties with the intent to sublease, triggering an impairment analysis of certain property and equipment. As a result of the analysis, the Company recorded asset impairment charges of $3 million and accelerated depreciation expense of $25 million, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020. Property and equipment consist of the following as of December 31: 2021 2020 (in millions) Internal-use computer software and development $ 263 $ 248 Furniture and equipment 107 122 Land and leasehold improvements 76 90 Construction in progress 25 24 Total 471 484 Accumulated depreciation and amortization (256) (271) Property and equipment, net $ 215 $ 213 Depreciation expense totaled $26 million, $57 million and $30 million for the years ended December 31, 2021, 2020 and 2019, respectively, and includes purchased software. Amortization expense on capitalized internal-use software costs totaled $37 million, $15 million and $18 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021 and 2020, the net amount of unamortized capitalized internal-use software costs included in Property and equipment, net on the Consolidated Balance Sheets was $113 million and $118 million, respectively. |
GOODWILL AND INTANGIBLE ASSETS,
GOODWILL AND INTANGIBLE ASSETS, NET | 12 Months Ended |
Dec. 31, 2021 | |
GOODWILL AND INTANGIBLE ASSETS, NET | |
GOODWILL AND INTANGIBLE ASSETS, NET | 8. GOODWILL AND INTANGIBLE ASSETS, NET Goodwill Goodwill is reviewed at least annually for impairment, or more frequently if circumstances indicate that an impairment is probable, using qualitative or quantitative analysis. No goodwill impairment has been recognized during any of the years ended December 31, 2021, 2020, or 2019. The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020, respectively, were as follows (in millions): Balance at December 31, 2019 $ 264 Goodwill acquired during the period (1) 370 Balance at December 31, 2020 $ 634 Goodwill acquired during the period — Balance at December 31, 2021 $ 634 (1) Fully related to the acquisition of Bread in December 2020. There were no accumulated goodwill impairment losses as of both December 31, 2021 and 2020. Intangible Assets, net The Company’s identifiable intangible assets consist of both amortizable and non-amortizable intangible assets. Definite-lived intangible assets are subject to amortization and are amortized on a straight-line basis over their estimated useful lives; indefinite-lived intangible assets are not amortized. The Company reviews long-lived assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable; recognizing an impairment if the carrying amount is not recoverable and exceeds the fair value of the asset or asset group. No impairment of intangible assets has been recognized during any of the years ended December 31, 2021, 2020, or 2019. Intangible assets consist of the following as of December 31: 2021 Gross Accumulated Assets Amortization Net Useful Life (in millions) Definite-Lived Assets Customer contracts and lists $ 9 $ (3) $ 6 3 years Premium on purchased credit card loan portfolios 133 (89) 44 1-13 years Non-compete agreements 2 — 2 5 years $ 144 $ (92) $ 52 Indefinite-Lived Assets Tradename 1 — 1 Indefinite life Total intangible assets $ 145 $ (92) $ 53 2020 Gross Accumulated Assets Amortization Net Useful Life (in millions) Definite-Lived Assets Customer contracts and lists $ 9 $ — $ 9 3 years Premium on purchased credit card loan portfolios 138 (73) 65 1 Non-compete agreements 2 — 2 5 years $ 149 $ (73) $ 76 Indefinite-Lived Assets Tradename 1 — 1 Indefinite life Total intangible assets $ 150 $ (73) $ 77 With the Bread acquisition on December 3, 2020, the Company acquired $11 million of intangible assets, consisting of customer relationships of $9 million and a non-compete agreement of $2 million that are being amortized over weighted average lives of 3.0 years and 5.0 years, respectively. Amortization expense related to intangible assets was approximately $29 million, $34 million and $48 million for the years ended December 31, 2021, 2020 and 2019, respectively. The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows for the years ending December 31 (in millions): 2022 $ 20 2023 15 2024 11 2025 2 2026 1 Thereafter 3 $ 52 |
OTHER ASSETS
OTHER ASSETS | 12 Months Ended |
Dec. 31, 2021 | |
Other Assets | |
Other Assets | 9. OTHER ASSETS The following is a summary of Other assets as of December 31: 2021 2020 (in millions) Restricted cash (1) $ 877 $ 323 Deferred contract costs 364 311 Deferred tax asset, net 302 289 Accounts receivable, net (2) 151 114 Right of use assets - operating 97 119 Investment in LVI 50 — Other (3) 151 207 Total other assets $ 1,992 $ 1,363 (1) Represents principal accumulation for the repayment of debt issued by consolidated variable interest entities that matures in 2022 or that matured in 2021, at December 31, 2021 and 2020, respectively. (2) Primarily related to amounts receivable from brand partners, which are recorded at the invoiced amount and do not bear interest. (3) Primarily comprised of prepaid expenses and non-income-based tax receivables. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2021 | |
LEASES | |
LEASES | 10. LEASES The Company has various operating leases for facilities and equipment which are recorded as lease-related assets (right-of-use assets) and liabilities for those leases with terms greater than 12 months. The Company does not have any finance leases. The Company determines if an arrangement is a lease or contains a lease at inception, and does not separate lease and non-lease components. Right-of-use assets are recognized as of the lease commencement date at amounts equal to the respective lease liabilities, adjusted for any prepaid lease payments, initial direct costs and lease incentives. The Company’s lease liabilities are recognized at the present value of the contractual fixed lease payments discounted using the Company’s incremental borrowing rate, as the rate implicit in the lease is typically not readily determinable, as of the lease commencement date or upon modification of the lease. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. As of December 31, 2021, the Company’s leases have remaining lease terms ranging from less than one year, up to 17 years, some of which may include renewal options. Leases with an initial term of 12 months or less are not recognized on the Consolidated Balance Sheets; lease expense for these leases is recognized on a straight-line basis over the lease term. As with other long-lived assets, right-of-use assets are reviewed for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable. In the fourth quarter of 2020, the Company performed an impairment assessment for its right-of-use assets associated with its locations where it ceased use with the intent to sublease. As a result, the Company recorded an asset impairment charge of $18 million, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020. The components of lease expense were as follows for the years ended December 31: 2021 2020 2019 (in millions) Operating lease cost $ 23 $ 25 $ 24 Short-term lease cost — 1 1 Variable lease cost 2 2 3 Sublease income (5) (1) — Total $ 20 $ 27 $ 28 The table below reflects other lease-related information as of December 31: 2021 2020 Weighted-average remaining lease term (in years): Operating leases 9.8 10.3 Weighted-average discount rate: Operating leases 5.8% 5.8% Supplemental lease-related cash flow information was as follows for the years ended December 31: 2021 2021 2020 (in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 25 $ 28 $ 27 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 5 $ 1 $ 23 Maturities of the Company’s lease liabilities by year were as follows as of December 31, 2021 (in millions): 2022 $ 20 2023 21 2024 21 2025 20 2026 19 Thereafter 86 Total undiscounted lease liabilities 187 Less: Amount representing interest (47) Total present value of minimum lease payments $ 140 |
BORROWINGS OF LONG-TERM AND OTH
BORROWINGS OF LONG-TERM AND OTHER DEBT | 12 Months Ended |
Dec. 31, 2021 | |
BORROWINGS OF LONG-TERM AND OTHER DEBT | |
BORROWINGS OF LONG-TERM AND OTHER DEBT | 11. BORROWINGS OF LONG-TERM AND OTHER DEBT Long-term and other debt consisted of the following as of December 31: Description 2021 2020 Contractual Maturities Interest Rates (Dollars in millions) Long-term and other debt: Revolving line of credit $ — $ — July 2024 (1) Term loans 658 1,484 July 2024 (2) Senior notes due 2024 850 850 December 2024 4.750% Senior notes due 2026 500 500 January 2026 7.000% Subtotal 2,008 2,834 Less: Unamortized debt issuance costs 22 28 Total long-term and other debt $ 1,986 $ 2,806 Deposits: Certificates of deposit $ 5,447 $ 6,015 Various – Jan 2022 to Dec 2026 0.20% to 3.75% Money market and other non-maturity deposits 5,586 3,790 Non-maturity (3) Subtotal 11,033 9,805 Less: Unamortized debt issuance costs 6 12 Total deposits $ 11,027 $ 9,793 Debt issued by consolidated VIEs: Fixed rate asset-backed term note securities $ 1,572 $ 3,424 Various – Feb 2022 to Sep 2022 2.21% to 3.61% Conduit asset-backed securities 3,883 2,205 Various – Aug 2022 to Oct 2023 (4) Secured loan facility — 86 Subtotal 5,455 5,715 Less: Unamortized debt issuance costs 2 5 Total debt issued by consolidated VIEs $ 5,453 $ 5,710 Total borrowings of long-term and other debt $ 18,466 $ 18,309 (1) The interest rate is based upon LIBOR plus an applicable margin. (2) The interest rate is based upon LIBOR plus an applicable margin. The weighted average interest rate for the term loans was 1.85% and 1.90% at December 31, 2021 and 2020, respectively. (3) The interest rates are based on the Federal Funds rate plus an applicable margin. At December 31, 2021, the interest rates ranged from 0.05% to 3.50% . At December 31, 2020, the interest rates ranged from 0.38% to 3.50% . (4) The interest rate is based upon LIBOR or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin. At December 31, 2021, the interest rates ranged from 0.89% to 0.96% . At December 31, 2020, the interest rates ranged from 1.39% to 1.89% . Certain of the Company’s long-term debt agreements contain various restrictive financial and non-financial covenants. If the Company does not satisfy these covenants, the maturity of amounts outstanding may be accelerated and become payable. The Company was in compliance with all such covenants at December 31, 2021. Long-term and Other Debt Credit Agreement The Company, as borrower, and certain of its wholly owned subsidiaries, as guarantors, are party to a credit agreement with various agents and lenders dated June 14, 2017, as amended (the credit agreement). At December 31, 2021, the credit agreement had $658 million aggregate principal amount of term loans outstanding (the term loans) and provided for a $750 million revolving credit facility (the revolving line of credit) which was undrawn as of December 31, 2021. The credit agreement contains the usual and customary negative and affirmative covenants, including, but not limited to, restrictions on the Company’s ability and in certain instances, its subsidiaries’ ability to consolidate or merge; substantially change the nature of its business; sell, lease, or otherwise transfer any substantial part of its assets; create or incur indebtedness; create liens; and make acquisitions. The negative covenants are subject to certain exceptions as specified in the credit agreement. The credit agreement also requires the Company to comply with certain financial covenants and includes customary events of default. In July 2021, the Company amended its credit agreement to, among other things, (i) provide consent by the lenders to the spinoff or sale of our LoyaltyOne segment, (ii) extend the maturity date of the revolving loans and approximately 86% of the term loans from December 31, 2022 to July 1, 2024, (iii) revise the method of determining interest rates and commitment fees to be charged in connection with the loans, (iv) modify the financial and operational covenants and certain other provisions in the credit agreement to reflect our business and operations after giving effect to the LoyaltyOne spinoff, including a financial covenant that Comenity Bank and Comenity Capital Bank each maintain a common equity tier 1 capital ratio of at least 11% at all times there are term loans outstanding (or at least 10% if no term loans are outstanding), (v) require a prepayment of certain of the loans in an amount equal to the net proceeds from the LoyaltyOne spinoff or sale, including any net proceeds from debt that is distributed to us minus, in the case of the first transaction associated with the divestiture of the LoyaltyOne spinoff or sale, $25 million and (vi) add Lon Inc. and Lon Operations LLC acquired in our acquisition of Bread as additional guarantors. Following our receipt of $750 million in connection with the spinoff of our former LoyaltyOne segment in November 2021, we used $725 million of such amount to repay term loans under our credit agreement, as required by the July 2021 amendment, and used the remaining $25 million to make our scheduled fourth quarter amortization payment with respect to such loans. As of December 31, 2021, the Company had $658 million aggregate principal amount of term loans outstanding with $750 million total availability under the revolving line of credit. Senior Notes Due 2024 and 2026 The senior notes set forth below are each governed by their respective indenture that includes usual and customary negative covenants and events of default. These senior notes are unsecured and are guaranteed on a senior unsecured basis by certain of the Company’s existing and future domestic restricted subsidiaries that incurs or in any other manner becomes liable for any debt under the Company’s domestic credit facilities, including the credit agreement. Due 2024: Due 2026: Deposits The Company uses a variety of deposit products to finance its operating activities, including funding for its non-securitized credit card and other loans, and fund securitization enhancement requirements for the Banks. The Company offers both direct-to-consumer retail deposit products as well as deposits sourced through contractual arrangements with various financial counterparties. Direct-to-consumer retail deposits comprised approximately $3.2 billion and $1.7 billion of total deposits outstanding at December 31, 2021 and 2020, respectively. Other third-party sourced deposits (often referred to as wholesale deposits) comprised approximately $7.8 billion and $8.1 billion of total deposits outstanding at December 31, 2021 and 2020, respectively. The Banks issue certificates of deposit in denominations of at least $1,000, across various maturities ranging between January 2022 and December 2026. As of December 31, 2021, the effective annual interest rates on the certificates of deposit ranged from 0.20% to 3.75%, with a weighted average interest rate of 1.91%; as of December 31, 2020, the effective annual interest rates ranged from 0.15% to 3.75%, with a weighted average interest rate of 2.58%. Interest is paid monthly and at maturity, depending on the certificate of deposit. The Banks also offer various non-maturity deposits; these deposits are redeemable on demand by the customer and, as such, have no scheduled maturity dates. As of December 31, 2021, the effective annual interest rates on such deposits ranged from 0.05% to 3.50%, with a weighted average interest rate of 0.68%; as of December 31, 2020, the effective annual interest rates ranged from 0.38% to 3.50%, with a weighted average interest rate of 1.00%. Interest is paid either monthly or at maturity. Debt Issued by Consolidated VIEs An asset-backed security is a security whose value and income payments are derived from and collateralized by a specified pool of underlying assets – in the case of the Company, its credit card loans. The sale of the pool of underlying assets to general investors is accomplished through a securitization process. The Company regularly sells its credit card loans to its Trusts, which are consolidated by the Company. The liabilities of these consolidated VIEs include asset-backed securities for which creditors, or beneficial interest holders, do not have recourse to the general credit of the Company. Asset-Backed Term Notes For the year ended December 31, 2021, no asset-backed term notes were issued, and $2.1 billion of asset-backed term notes matured and were repaid, of which $281 million were previously retained by us and therefore eliminated from the Consolidated Balance Sheets. As of December 31, 2021, the Company collected $846 million of principal payments made by its credit cardholders during the accumulation period for the repayment of the $563 million Series 2019-A notes, which matured and were repaid in February 2022, the $399 million Series 2019-B notes, which mature in June 2022, and the $684 million Series 2019-C notes, which mature in September 2022. The cash is restricted to the securitization investors and is reflected in Other assets in the Consolidated Balance Sheet as of December 31, 2021. Conduit Facilities The Company maintained committed syndicated bank conduit facilities to support the funding of its credit card loans for its Trusts. Borrowings outstanding under each facility bear interest at a margin above LIBOR or the asset-backed commercial paper costs of each individual conduit provider. During the year ended December 31, 2021, the Company obtained increased lender commitments under its conduit facilities of $1.3 billion and extended the respective maturities to August 2022 and October 2023. Total capacity under the conduit facilities was $4.5 billion, of which $3.9 billion had been drawn and was included in Debt issued by consolidated variable interest entities on the Consolidated Balance Sheets. Secured Loan Facility At December 31, 2020, the Company had a secured loan facility related to the acquisition of Bread, with an outstanding balance of $86 million that was set to mature in November 2022, with prepayment permitted. In August 2021, the Company repaid this outstanding secured loan facility in full. Maturities The future principal payments for the Company’s long-term and other debt are as follows, as of December 31, 2021: Long-Term Debt Issued by and Consolidated Year Other Debt Deposits VIEs Total (in millions) 2022 $ 231 $ 9,096 $ 3,034 $ 12,361 2023 177 1,217 2,421 3,815 2024 1,100 627 — 1,727 2025 — 57 — 57 2026 500 36 — 536 Thereafter — — — — Total maturities 2,008 11,033 5,455 18,496 Unamortized debt issuance costs (22) (6) (2) (30) $ 1,986 $ 11,027 $ 5,453 $ 18,466 |
OTHER LIABILITIES
OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2021 | |
OTHER LIABILITIES | |
OTHER LIABILITIES.. | 12. OTHER LIABILITIES The following is a summary of Other liabilities as of December 31: 2021 2020 (in millions) Accounts payable and other brand partner liabilities $ 291 $ 354 Accrued liabilities (1) 314 384 Operating lease liabilities 140 172 Long-term tax reserves 313 347 Other (2) 136 102 Total other liabilities $ 1,194 $ 1,359 (1) Primarily related to accrued payroll and benefits, marketing, taxes and professional services expenses. (2) Primarily comprised of long-term unearned revenue and cardholder liabilities. |
OTHER NON-INTEREST INCOME AND O
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES | 12 Months Ended |
Dec. 31, 2021 | |
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES | |
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSE | 13. OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES The following table provides the components of Other non-interest income for the years ended December 31: 2021 2020 2019 (in millions) Payment protection products $ 141 $ 156 $ 174 Gain on portfolio and other sales 10 20 41 Other 5 1 4 Total other non-interest income $ 156 $ 177 $ 219 The following table provides the components of Other non-interest expenses for the years ended December 31: 2021 2020 2019 (in millions) Professional services and regulatory fees $ 136 114 $ 120 Asset impairment charges — 64 11 Portfolio valuation adjustments (to reflect the lower of cost or market) — — 190 Loss on extinguishment of debt — — 72 Other (1) 86 108 119 Total other non-interest expenses $ 222 $ 286 $ 512 (1) Primarily related to occupancy expense and non-income based taxes. |
FAIR VALUES OF FINANCIAL INSTRU
FAIR VALUES OF FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2021 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | 14. FAIR VALUES OF FINANCIAL INSTRUMENTS Fair value is defined under GAAP as the price that would be required to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; with such transaction based on the principal market, or in the absence of a principal market the most advantageous market for the specific instrument. GAAP provides for a three-level fair value hierarchy that classifies the inputs to valuation techniques used to measure fair value, defined as follows: Level 1: Level 2: Level 3: We monitor the market conditions and evaluate the fair value hierarchy levels quarterly. For the years ended December 31, 2021 and 2020, there were no transfers into or out of Level 3, and no transfers between Levels 1 and 2. The following table summarizes the carrying values and fair values of the Company’s financial assets and financial liabilities as of December 31: 2021 2020 Carrying Fair Carrying Fair Amount Value Amount Value (in millions) Financial assets Credit card and other loans, net $ 15,567 $ 17,989 $ 14,776 $ 17,301 Available-for-sale securities 239 239 225 225 Financial liabilities Deposits 11,027 11,135 9,793 10,016 Debt issued by consolidated variable interest entities 5,453 5,467 5,710 2,783 Long-term and other debt 1,986 2,053 2,806 2,875 Valuation Techniques Used in the Fair Value Measurement of Financial Assets and Financial Liabilities Credit card and other loans, net: The Company’s Credit card and other loans are recorded at historical cost, less an allowance for credit losses, on the Consolidated Balance Sheets. In estimating the fair values, the Company uses 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 uses 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. Available-for-sale securities: Deposits: Debt issued by consolidated VIEs: Long-term and other debt: The following tables summarize the Company’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by the fair value hierarchy described in the preceding paragraphs, as of December 31: 2021 Total Level 1 Level 2 Level 3 (in millions) Available-for-sale securities $ 239 $ 48 $ 191 $ — Total assets measured at fair value $ 239 $ 48 $ 191 $ — 2020 Total Level 1 Level 2 Level 3 (in millions) Available-for-sale securities $ 225 $ 34 $ 191 $ — Total assets measured at fair value $ 225 $ 34 $ 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 December 31, 2021 and 2020. The fair values of these financial instruments are estimates as of December 31, 2021 and 2020, 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. 2021 Fair Value Level 1 Level 2 Level 3 (in 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 $ — 2020 Fair Value Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and other loans, net $ 17,301 $ — $ — $ 17,301 Total $ 17,301 $ — $ — $ 17,301 Financial liabilities: Deposits $ 10,016 $ — $ 10,016 $ — Debt issued by consolidated VIEs 5,783 — 5,783 — Long-term and other debt 2,875 — 2,875 — Total $ 18,674 $ — $ 18,674 $ — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property and equipment, right-of-use assets, deferred contract assets, goodwill, and intangible assets. These assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances, such as upon impairment. The Company did not have any impairments for the year ended December 31, 2021. For the year ended December 31, 2020, the Company recorded asset impairment charges of $64 million related to certain deferred contract costs, fixed assets and right-of-use assets. The fair values were determined by using discounted cash flow models over the estimated life of each asset; the principal assumptions used were forecasted future cash flows and the discount rate, which are considered Level 3 inputs. See Note 7, “Property and Equipment, Net,” and Note 10, “Leases,” for more information regarding asset impairments. For the year ended December 31, 2019, as part of restructuring and other charges, the Company recorded asset impairments of $52 million. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 15. COMMITMENTS AND CONTINGENCIES Regulatory Matters Comenity Bank is regulated, supervised and examined by the State of Delaware and the Federal Deposit Insurance Corporation (FDIC). The Company’s industrial bank, Comenity Capital Bank, is regulated, supervised and examined by the State of Utah and the FDIC. While neither of our Banks is currently subject to regular examinations by the CFPB due to each Bank’s total assets not having exceeded $10 billion for four consecutive quarters, we have in the past been, and may in the future become, subject to supervision and examination by the CFPB with respect to federal consumer protection laws. Quantitative measures established by regulations to ensure capital adequacy require Comenity Bank and Comenity Capital Bank to maintain minimum amounts and ratios of Tier 1 capital to average assets, Common equity tier 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’s and/or Comenity Capital Bank’s operating activities, as well as those of the Company. Based on these regulations, as of December 31, 2021 and 2020, 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 actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of December 31, 2021, 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 capital to average assets (1) 20.0 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets (2) 21.4 4.5 6.5 Tier 1 capital to risk-weighted assets (3) 21.4 6.0 8.0 Total capital to risk-weighted assets (4) 22.7 8.0 10.0 Comenity Capital Bank Tier 1 capital to average assets (1) 17.3 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets (2) 18.6 4.5 6.5 Tier 1 capital to risk-weighted assets (3) 18.6 6.0 8.0 Total capital to risk-weighted assets (4) 19.9 8.0 10.0 Combined Banks Tier 1 capital to average assets (1) 18.6 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets (2) 20.0 4.5 6.5 Tier 1 capital to risk-weighted assets (3) 20.0 6.0 8.0 Total capital to risk-weighted assets (4) 21.3 8.0 10.0 (1) Tier 1 capital to average assets ratio represents tier 1 capital divided by total assets for leverage ratio. (2) Common Equity Tier 1 capital to risk-weighted assets ratio represents common equity tier 1 capital divided by total risk-weighted assets. (3) Tier 1 capital to risk-weighted assets ratio represents tier 1 capital divided by total risk-weighted assets. (4) Total capital to risk-weighted assets ratio represents total capital divided by total risk-weighted assets. On September 10, 2019, Comenity Capital Bank submitted a bank merger application to the FDIC seeking the FDIC’s approval to merge Comenity Bank with and into Comenity Capital Bank as the surviving bank entity. On the same date, Comenity Capital Bank and Comenity Bank each submitted counterpart bank merger applications to the Utah Department of Financial Institutions and the Delaware Office of the State Bank Commissioner, respectively, in connection with the proposed merger. On April 20, 2021, Comenity Capital Bank withdrew its bank merger application with the FDIC. On May 3, 2021, each of Comenity Capital Bank and Comenity Bank similarly withdrew their counterpart bank merger applications in Utah and Delaware, respectively. Indemnification On July 1, 2019, the Company completed the sale of its Epsilon segment to Publicis Groupe S.A. (Publicis). Under the terms of the agreement governing that transaction, the Company agreed to indemnify Publicis and its affiliates from and against any losses arising out of or related to a United States Department of Justice (DOJ) investigation. The DOJ investigation related to third-party marketers who sent, or allegedly sent, deceptive mailings and the provision of data and services to those marketers by Epsilon’s data practice. Epsilon actively cooperated with the DOJ in connection with the investigation. On January 19, 2021, Epsilon entered into a deferred prosecution agreement (DPA) with the DOJ to resolve the matters that were the subject of the investigation. Pursuant to the DPA, Epsilon agreed, among other things, to pay penalties and consumer compensation in the aggregate amount of $150 million, to be paid in two equal installments, the first in January 2021 and the second in January 2022. A $150 million loss contingency was recorded as of December 31, 2020. The Company paid $75 million to Publicis pursuant to its contractual indemnification obligation in January 2021. As of December 31, 2021, the Company had $75 million included in Accrued expenses in its Consolidated Balance Sheets. In January 2022, the Company paid the second remaining $75 million installment to Publicis pursuant to its contractual indemnification obligation. Legal Proceedings From time to time the Company is involved in various claims and lawsuits arising in the ordinary course of business that it believes will not have a material effect on its consolidated financial condition or liquidity, including claims and lawsuits alleging breaches of the Company’s contractual obligations. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2021 | |
EMPLOYEE BENEFIT PLANS | |
EMPLOYEE BENEFIT PLANS | 16. EMPLOYEE BENEFIT PLANS Employee Stock Purchase Plan In March 2015, the Company’s Board of Directors adopted the 2015 Employee Stock Purchase Plan (the 2015 ESPP), which was subsequently approved by the Company’s stockholders on June 3, 2015. The 2015 ESPP became effective July 1, 2015 with no definitive expiration date. The Company’s Board of Directors may at any time and for any reason terminate or amend the 2015 ESPP. No employee may purchase more than $25,000 worth of stock under the 2015 ESPP in any calendar year, and no employee may purchase stock under the 2015 ESPP if such purchase would cause the employee to own more than 5% of the voting rights or value of the Company’s common stock. The 2015 ESPP provides for six-month offering periods, commencing on the first trading day of the first and third calendar quarter of each year and ending on the last trading day of each subsequent calendar quarter. The purchase price of the common stock upon exercise is 85% of the fair market value of shares on the applicable purchase date as determined by averaging the high and low trading prices of the last trading day of each six-month period as defined above. An employee elects to participate and have contributions deducted through payroll deductions. The 2015 ESPP provides for the issuance of any remaining shares available for issuance under the 2005 ESPP, which were 441,327 shares at June 30, 2015. The 2015 ESPP reserved an additional 1,000,000 shares of the Company’s common stock for issuance under the 2015 Plan, bringing the maximum number of shares reserved for issuance under the 2015 ESPP to 1,441,327 shares, subject to adjustment as provided in the 2015 ESPP. During the year ended December 31, 2021, the Company issued 57,713 shares of common stock under the 2015 ESPP at a weighted-average issue price of $70.44. Since its adoption on July 1, 2015, 571,825 shares of common stock have been issued, with 869,502 shares available for issuance under the 2015 ESPP. 401(k) Retirement Savings Plan The Alliance Data Systems 401(k) and Retirement Savings Plan (the RSP) is a defined contribution plan that is qualified under Section 401(k) of the Internal Revenue Code of 1986. The Company amended the RSP effective December 3, 2020. The RSP is an IRS-approved safe harbor plan design that eliminates the need for most discrimination testing. Eligible employees can participate in the RSP immediately upon joining the Company and after 180 days of employment begin receiving company matching contributions; “seasonal” or “on-call” employees must complete a year The RSP permits eligible employees to make Roth elective deferrals, which are included in the employee’s taxable income at the time of contribution, but not when distributed. Regular, or Non-Roth, elective deferrals made by employees, together with contributions by the Company to the RSP, and income earned on these contributions, are not taxable until withdrawn from the RSP. The Company matches an employee’s contribution dollar-for-dollar up to five percent of the employee’s eligible compensation; all Company matching contributions immediately vest. For the years ended December 31, 2021, 2020 and 2019, Company matching contributions were $15 million, $16 million and $35 million, respectively. Participants in the RSP can direct their contributions and the Company’s matching contribution to numerous investment options, including the Company’s common stock. On July 20, 2001, the Company registered 1,500,000 shares of its common stock for issuance in accordance with the RSP pursuant to a Registration Statement on Form S-8, File No. 333-65556. As of December 31, 2021, 290,897 of such shares remain available for issuance. Executive Deferred Compensation Plan The Company also maintains an Executive Deferred Compensation Plan (EDCP). The EDCP permits a defined group of management and highly compensated employees to defer on a pre-tax basis a portion of their base salary and incentive compensation (as defined in the EDCP) payable for services rendered. Deferrals under the EDCP are unfunded and subject to the claims of the Company’s creditors. Each participant in the EDCP is 100% vested in their account, and account balances accrue interest at a rate established and adjusted periodically by the Compensation and Human Capital committee of the Company’s Board of Directors. As of December 31, 2021 and 2020, the Company’s outstanding liability related to the EDCP, which was included in Other liabilities on the Consolidated Balance Sheets, was $18 million and $19 million, respectively. |
CHANGES IN ACCUMULATED OTHER CO
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS | 12 Months Ended |
Dec. 31, 2021 | |
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | 17. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows: Foreign Currency Accumulated Net Unrealized Net Unrealized Net Unrealized Translation Other Gains (Losses) on (Losses) Gains on Gains (Losses) on Adjustment Comprehensive AFS Securities Cash Flow Hedges Net Investment Hedge (Losses) Gains (1) Loss (in millions) Balance as of January 1, 2019 $ (11) $ — $ (12) $ (115) $ (138) Changes in other comprehensive income (loss) 13 — 5 (7) 11 Recognition resulting from the sale of Epsilon's foreign subsidiaries — — — 27 27 Balance at December 31, 2019 $ 2 $ — $ (7) $ (95) $ (100) Changes in other comprehensive income (loss) 21 (1) — 71 91 Recognition resulting from the sale of Precima's foreign subsidiaries — — — 4 4 Balance at December 31, 2020 $ 23 $ (1) $ (7) $ (20) $ (5) Changes in other comprehensive income (loss) (21) 2 — (37) (56) Recognition resulting from the spinoff of LoyaltyOne's foreign subsidiaries (1) (1) 7 54 59 Balance at December 31, 2021 $ 1 $ — $ — $ (3) $ (2) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates from the Company’s LoyaltyOne segment, which was spun off in November 2021. With the spinoff of the Company’s LoyaltyOne segment on November 5, 2021, the $7 million net unrealized loss on its net investment hedge related to its net investment in BrandLoyalty was reclassified into net income. Upon the sale of Precima on January 10, 2020, $4 million of accumulated foreign currency translation adjustments attributable to Precima’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the gain on the sale of Precima. Upon the sale of Epsilon on July 1, 2019, $27 million of accumulated foreign currency translation adjustments attributable to Epsilon’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the loss on the sale of the Epsilon segment. Other reclassifications from accumulated other comprehensive loss into net income for each of the periods presented were not material. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2021 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 18. STOCKHOLDERS’ EQUITY Stock Repurchase Programs During the years ended December 31, 2021 and 2020, the Company did not repurchase any shares of its common stock. During the year ended December 31, 2019, the Company repurchased approximately 6.3 million shares of its common stock for an aggregate amount of $976 million. The stock repurchase program expired on June 30, 2020, and $348 million of this program expired unused. Stock Compensation Plans The Company has adopted equity compensation plans to advance the interests of the Company by rewarding certain employees for their contributions to the financial success of the Company and thereby motivating them to continue to make such contributions in the future. The 2015 Omnibus Incentive Plan became effective July 1, 2015 and reserved 5,100,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants who performed services for the Company or its affiliates, with only employees eligible to receive incentive stock options. The 2015 Omnibus Incentive Plan expired on June 30, 2020. In March 2020, the Company’s Board of Directors adopted the 2020 Omnibus Incentive Plan (the 2020 Plan), which was subsequently approved by the Company’s stockholders on June 9, 2020. The 2020 Plan became effective July 1, 2020 and expires on June 30, 2030. The 2020 Plan reserves 2,400,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for the Company or its affiliates, with only employees being eligible to receive incentive stock options. The maximum amount that may be awarded to any independent member of the Company’s Board of Directors in any one calendar year may not exceed $1 million. On June 9, 2020, the Company registered 2,400,000 shares of its common stock for issuance in accordance with the 2020 Plan pursuant to a Registration Statement on Form S-8, File No. 333-239040. Terms of all awards under the 2020 Plan are determined by the Board of Directors or the Compensation & Human Capital Committee of the Board of Directors or its designee at the time of award. Stock Compensation Expense Stock-based compensation expense is measured at the grant date of the award, based on the fair value of the award and is recognized ratably over the requisite service period. Stock-based compensation expense recognized in Employee benefits and compensation expense in the Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019 was $25 million, $15 million and $18 million, respectively, with corresponding income tax benefits of $4 million, $3 million and $3 million, respectively. Stock-based compensation expense related to discontinued operations for the years ended December 31, 2021, 2020 and 2019 was $4 million, $6 million and $37 million, respectively. As the amount of stock-based compensation expense recognized is based on awards ultimately expected to vest, the amount recognized in the Company’s Consolidated Statements of Income has been reduced for estimated forfeitures. The Company estimates forfeitures at each grant date based on historical experience, with forfeiture estimates to be revised, if necessary, in subsequent periods should actual forfeitures differ from those estimates; forfeitures were estimated at 5% for each of the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, there was approximately $35 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, stock-based equity awards granted to employees, which is expected to be recognized over a weighted average remaining period of approximately 1.8 years. Restricted Stock Unit Awards The following table summarizes RSUs activity under the Company’s equity compensation plans: Weighted Market- Performance- Service- Average Based (1) Based (1) Based Total Fair Value Balance at January 1, 2019 56,229 423,242 317,441 796,912 $ 218.81 Shares granted 37,878 420,239 246,118 704,235 161.05 Shares vested — (262,773) (178,730) (441,503) 218.45 Shares forfeited (69,819) (350,436) (126,257) (546,512) 188.40 Balance at December 31, 2019 24,288 230,272 258,572 513,132 $ 172.06 Shares granted 20,770 219,186 241,610 481,566 89.11 Shares vested — (42,097) (127,921) (170,018) 175.09 Shares forfeited (22,831) (186,135) (38,447) (247,413) 166.93 Balance at December 31, 2020 22,227 221,226 333,814 577,267 $ 103.89 Shares granted (2) 2,641 111,542 774,062 888,245 88.18 Shares vested — (24,677) (167,723) (192,400) 118.78 Shares forfeited (5,801) (216,675) (291,201) (513,677) 93.16 Balance at December 31, 2021 19,067 91,416 648,952 759,435 $ 89.14 Outstanding and Expected to Vest 633,480 $ 90.09 (1) Shares granted reflect a 100% target attainment of the respective market-based or performance -based metric. Shares forfeited include those restricted stock units forfeited as a result of the Company not meeting the respective market-based or performance-based metric conditions. (2) Shares granted reflect a November 2021 make-whole equity adjustment to unvested shares due to the reduction in the Company’s share value resulting from the spinoff of Loyalty Ventures Inc. This adjustment increased shares granted by 2,641 shares, 12,659 shares and 96,556 shares for market-based, performance-based and service-based awards, respectively. These shares were excluded from the weighted average fair value calculation. For performance-based and service-based awards, the fair value of the RSUs was estimated using the Company’s closing share price on the date of grant. Service-based RSUs typically vest ratably over a three year period. Performance-based RSUs typically vest ratably over a three year period if specified performance measures tied to the Company’s financial performance are met. For the performance-based RSUs awarded in 2021, the pre-defined vesting criteria typically permit a range from 0% to 170% to be earned. Accruals of compensation cost for an award with a performance condition are based on the probable outcome of that performance condition. The total fair value of RSUs vested was $23 million, $30 million and $96 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, the aggregate intrinsic value of RSUs outstanding and expected to vest was $42 million. Dividends For the year ended December 31, 2021, the Company declared cash dividends of $0.84 per share for a total of $42 million, and paid cash dividends and dividend equivalents totaling $42 million. For the year ended December 31, 2020, the Company declared cash dividends of $1.26 per share for a total of $60 million, and paid cash dividends and dividend equivalents totaling $61 million. For the year ended December 31, 2019, the Company declared cash dividends of $2.52 per share for a total of $127 million, and paid cash dividends and dividend equivalents totaling $127 million. On January 27, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share on its common stock, payable on March 18, 2022 to stockholders of record at the close of business on February 11, 2022. Treasury Stock On July 30, 2021, the Company retired its 67.4 million shares of treasury stock outstanding, which increased Treasury stock by $6,733 million, reduced Retained earnings by $5,453 million, reduced Additional paid-in capital by $1,280 million and reduced Common stock by an immaterial amount, with no impact to total stockholders’ equity, on the Consolidated Balance Sheets. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2021 | |
INCOME TAXES | |
INCOME TAXES | 19. INCOME TAXES The Company files income tax returns in federal, state, local and foreign jurisdictions, as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions and provisions for uncertain tax positions. The components of the Company’s Provision for income taxes for the years ended December 31 included in the Consolidated Statements of Income were are as follows: 2021 2020 2019 (in millions) Current Federal $ 218 $ 228 $ 123 State 49 36 35 Total current income tax expense 267 264 158 Deferred Federal (13) (143) (9) State (7) (28) 7 Total deferred income tax benefit (20) (171) (2) Total Provision for income taxes $ 247 $ 93 $ 156 A reconciliation of the Company’s expected income tax expense computed by applying the federal statutory rate to income from continuing operations before income taxes to the recorded Provision for income taxes for the years ended December 31 is as follows: 2021 2020 2019 (in millions) Expected expense at statutory rate $ 219 $ 63 $ 139 Increase (decrease) in income taxes resulting from: State and local income taxes, net of federal benefit 33 6 33 Impact of 2017 Tax Reform (8) (2) (30) Non-deductible expenses 4 6 7 IRC Section 199, net of tax reserves — 12 — Other (1) 8 7 Total $ 247 $ 93 $ 156 Differences between the Consolidated Financial Statements and tax bases of assets and liabilities give rise to deferred tax assets and liabilities, which measure the future tax effects of items recognized in the Consolidated Financial Statements. Changes in deferred income tax assets and liabilities associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Deferred tax assets require certain estimates and judgments in order to determine whether it is more likely than not that all or a portion of the benefit of a deferred tax asset will not be realized. In evaluating the Company’s deferred tax assets on a quarterly basis as new facts and circumstances emerge, the Company analyzes and estimates the impact of future taxable income, reversing temporary differences and available tax planning strategies. Uncertainties can lead to changes in the ultimate realization of deferred tax assets. A liability for unrecognized tax benefits, representing the difference between a tax position taken or expected to be taken in a tax return and the benefit recognized in the Consolidated Financial Statements, inherently requires estimates and judgments. A tax position is recognized only when it is more likely than not to be sustained, based purely on its technical merits after examination by the taxing authority, and the amount recognized is the benefit the Company believes is more likely than not to be realized upon ultimate settlement. The Company evaluates its tax positions as new facts and circumstances become available, making adjustments to unrecognized tax benefits as appropriate. Uncertainties can mean the tax benefits ultimately realized differ from amounts previously recognized, with any differences recorded in Provision for income taxes, along with amounts for estimated interest and penalties related to uncertain tax positions. The following table reflects the significant components of Deferred tax assets and liabilities as of December 31: 2021 2020 (in millions) Deferred tax assets Deferred revenue $ 17 $ 14 Allowance for credit losses 447 482 Net operating loss carryforwards and other carryforwards 42 43 Operating lease liabilities 33 42 Accrued expenses and other 65 75 Total deferred tax assets 604 656 Valuation allowance (8) (8) Deferred tax assets, net of valuation allowance 596 648 Deferred tax liabilities Deferred income $ 221 $ 291 Depreciation 28 14 Right of use assets 22 28 Intangible assets 23 26 Total deferred tax liabilities 294 359 Net deferred tax assets $ 302 $ 289 Amounts recognized on the Consolidated Balance Sheets: Other assets $ 302 $ 289 At December 31, 2021, included in the Company’s U.S. tax returns are approximately $132 million of U.S. federal net operating loss carryovers (“NOLs”) and approximately $34 million of foreign tax credits. With the exception of NOLs generated after December 31, 2017, these attributes expire at various times through the year 2037. As well, as of December 31, 2021, the Company has state income tax NOLs of approximately $231 million and state credits of approximately $3 million, both available to offset future state taxable income, and state capital losses of approximately $7 million to offset capital gains. The state NOLs, credits and capital losses will expire at various times through the year 2040. The Company uses the portfolio approach relating to the release of stranded tax effects recorded in accumulated other comprehensive loss. Under the portfolio approach, the net unrealized gains or losses recorded in accumulated other comprehensive loss would be eliminated only on the date the entire portfolio of available-for-sale securities is sold or otherwise disposed of. H.R. 1, originally known as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Reform”) was enacted on December 22, 2017 and permanently reduced the corporate tax rate to 21% from 35%, effective January 1, 2018. For the year ended December 31, 2021, the Company recorded an income tax benefit of approximately $8 million related to the 2017 Tax Reform rate differential that was released from Other comprehensive income due to the divestiture of the LoyaltyOne segment. For the year ended December 31, 2020, the Company recorded an income tax benefit of approximately $2 million related to the rate benefit for a capital loss that will be carried back to a year preceding the 2017 Tax Reform rate reduction. The Company is currently under audit with the Internal Revenue Service for years 2012-2018. For years 2012-2014, the audit is limited in scope to research and development tax credits and IRC Section 199 deductions claimed on amended returns. As a result of the preliminary audit findings, the Company increased its reserve for IRC Section 199 deductions by $12 million during the year ended December 31, 2020. For the year ended December 31, 2019, the Company recorded an income tax benefit of approximately $30 million related to a decrease in unrecognized tax benefits as a result of a tax accounting method change required by the 2017 Tax Reform. The following table presents changes in unrecognized tax benefits (in millions): Balance at January 1, 2019 $ 223 Increases related to prior years’ tax positions 2 Decreases related to prior years’ tax positions (66) Increases related to current year tax positions 58 Settlements during the period (1) Lapses of applicable statutes of limitation (1) Balance at December 31, 2019 $ 215 Increases related to prior years’ tax positions 59 Decreases related to prior years’ tax positions (23) Increases related to current year tax positions 11 Settlements during the period (5) Lapses of applicable statutes of limitation (2) Balance at December 31, 2020 $ 255 Increases related to prior years’ tax positions 1 Decreases related to prior years’ tax positions (13) Increases related to current year tax positions 12 Settlements during the period (8) Balance at December 31, 2021 $ 247 The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in Provision for income taxes. The Company has potential cumulative interest and penalties with respect to unrecognized tax benefits of approximately $76 million, $69 million and $60 million at December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, the Company recorded approximately $8 million, $9 million and $2 million, respectively, in Provision for income taxes for potential interest and penalties for unrecognized tax benefits. At December 31, 2021, 2020 and 2019, the Company had unrecognized tax benefits of approximately $241 million, $243 million and $198 million, respectively, that, if recognized, would impact the effective tax rate. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits over the next twelve months. The Company files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, as applicable. With some exceptions, the tax returns filed by the Company are no longer subject to U.S. federal income tax and state and local examinations for the years before 2015 or foreign income tax examinations for years before 2017. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2021 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 20. EARNINGS PER SHARE Basic earnings (losses) per share (EPS) is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of stock options, unvested restricted stock awards, or other dilutive securities. Diluted EPS is based on the weighted average number of common and potentially dilutive common shares (dilutive stock options, unvested restricted stock awards and other dilutive securities outstanding during the year) pursuant to the Treasury Stock method. For periods with participating securities, in this case 2019, the Company computes EPS using the two-class method, which is an allocation of earnings between the holders of common stock and a company’s participating security holders that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the years ended December 31: 2021 2020 2019 (in millions, except per share amounts) Basic EPS: Numerator: Income from continuing operations $ 797 $ 208 $ 506 Less: Dividends declared on preferred stock — — 3 Less: Allocation of undistributed earnings — — 6 Income from continuing operations 797 208 497 Income (loss) from discontinued operations, net of income taxes 4 6 (228) Net income $ 801 $ 214 $ 269 Denominator: Weighted average shares 49.7 47.8 50.0 Basic EPS: Continuing operations $ 16.02 $ 4.36 $ 9.94 Discontinued operations $ 0.07 $ 0.11 $ (4.56) Total $ 16.09 $ 4.47 $ 5.38 Diluted EPS (1) : Numerator: Income from continuing operations $ 797 $ 208 $ 506 Income (loss) from discontinued operations, net of income taxes 4 6 (228) Net income $ 801 $ 214 $ 278 Denominator: Weighted average shares from Basic EPS above 49.7 47.8 50.0 Weighted average effect of dilutive securities (2) Shares from assumed conversion of preferred stock — — 0.8 Net effect of dilutive unvested restricted stock awards (1) 0.3 0.1 0.1 Denominator for diluted calculation 50.0 47.9 50.9 Diluted EPS: Continuing operations $ 15.95 $ 4.35 $ 9.94 Discontinued operations $ 0.07 $ 0.11 $ (4.48) Total $ 16.02 $ 4.46 $ 5.46 (1) Computed using the if-converted method, as the result was more dilutive. (2) For the years ended December 31, 2021, 2020 and 2019, an insignificant amount of restricted stock awards were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. On April 25, 2019, the Company entered into an exchange agreement with ValueAct Holdings, L.P. pursuant to which ValueAct exchanged an aggregate of 1,500,000 shares of the Company’s common stock for an aggregate of 150,000 shares of Series A Non-Voting Convertible Preferred Stock (preferred stock). In October 2019, ValueAct converted all 150,000 shares of preferred stock back to common stock. |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2021 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
SUPPLEMENTAL CASH FLOW INFORMATION | 21. SUPPLEMENTAL CASH FLOW INFORMATION The Consolidated Statements of Cash Flows are presented with the combined cash flows from continuing and discontinued operations. The following table provides a reconciliation of cash and cash equivalents to the total of the amounts reported in the Consolidated Statements of Cash Flows as of December 31: 2021 2020 (in millions) Cash and cash equivalents $ 3,046 $ 2,796 Restricted cash included within Other assets 877 323 Cash, cash equivalents and restricted cash included within Assets of discontinued operations — 344 Total cash, cash equivalents and restricted cash $ 3,923 $ 3,463 Non-cash investing and financing activities for the year ended December 31, 2021 included the Company’s equity method investment in Loyalty Ventures Inc. upon spinoff, which totaled $48 million on November 5, 2021, and the Company’s retirement of its outstanding treasury stock in July 2021. For more information, see Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation,” and Note 18, “Stockholders’ Equity.” Non-cash investing and financing activities for the year ended December 31, 2020 included $75 million of deferred consideration and the issuance of approximately 1.9 million shares of the Company’s common stock as non-cash consideration in the acquisition of Bread on December 3, 2020. For more information, see Note 2, “Acquisitions.” |
DISCONTINUED OPERATIONS AND BAN
DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION | 12 Months Ended |
Dec. 31, 2021 | |
DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION | |
DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION | 22. DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION 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 of Loyalty Ventures, which comprised the LoyaltyOne segment and 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 ADS common stock as of the close of business on the record date of October 27, 2021. ADS stockholders of record received one share of Loyalty Ventures common stock for every two The Company accounts for its 19% ownership interest in Loyalty Ventures following the equity method of accounting. As of December 31, 2021, the carrying amount of the Company’s ownership interest in Loyalty Ventures, which investment totaled was $50 million, and is included in Other assets in the Consolidated Balance Sheet, while earnings (losses), which were immaterial for the period, are recorded in Other non-interest income in the Consolidated Statements of Income. 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 years ended December 31: 2021 2020 2019 (in millions) Total interest income $ 1 $ 1 $ 2 Total interest expense (1) 11 17 31 Net interest income (10) (16) (29) Total non-interest income 574 765 1,033 Total non-interest expenses 519 656 927 Income before provision from income taxes 45 93 77 Provision for income taxes 36 6 10 Income from discontinued operations, net of income taxes $ 9 $ 87 $ 67 (1) As described above, the Company’s credit agreement, as amended, required a $725 million prepayment of term loans in conjunction with the LoyaltyOne spinoff. As a result, the interest expense reflected above is the allocation to discontinued operations of interest on the basis of this $725 million mandatory prepayment. The following table summarizes the assets and liabilities of the Company’s former LoyaltyOne segment as of December 31: 2020 (in millions) Assets: Cash and cash equivalents $ 286 Accounts receivable, net 270 Inventories 164 Redemption settlement assets, restricted 693 Property and equipment, net 98 Goodwill 736 Other assets 216 Total assets of discontinued operations $ 2,463 Liabilities: Accounts payable $ 68 Accrued expenses 61 Deferred revenue 1,004 Other liabilities 224 Total liabilities of discontinued operations $ 1,357 The following table summarizes the depreciation and amortization, and capital expenditures of the Company’s former LoyaltyOne segment for the years ended December 31: 2021 2020 2019 (in millions) Depreciation and amortization $ 31 $ 78 $ 80 Capital expenditures $ 15 $ 24 $ 41 Epsilon Effective April 12, 2019, the Company entered into a definitive agreement to sell its Epsilon segment to Publicis Groupe S.A. for $4 billion in cash, subject to certain specified adjustments. Beginning in the first quarter of 2019, Epsilon met the criteria for classification as discontinued operations. The sale of Epsilon was completed on July 1, 2019, and the pre-tax gain is shown in the table below (in millions). Consideration received (1) $ 4,452 Net carrying value of assets and liabilities (including other comprehensive income) 3,940 Pre-tax gain on deconsolidation $ 512 (1) Consideration as defined included cash associated with the sold Epsilon entities, which was $42.2 million. The Company recorded transaction costs of approximately $79 million for the year ended December 31, 2019 and recorded an after-tax loss on sale of $252 million, which is included in Loss from discontinued operations, net of taxes. Following the sale of Epsilon, the Company has continued its existing contractual relationships with Epsilon for digital marketing services. The following table summarizes the results of operations of the Company’s former Epsilon segment, direct costs identifiable to the Epsilon segment, and the allocation of interest expense on corporate debt, for the years ended December 31: 2021 2020 2019 (in millions) Total interest income $ — $ — $ — Total interest expense (1) — — 64 Net interest income — — (64) Total non-interest income — — 963 Total non-interest expenses 7 110 519 (Loss) income before (benefit) provision for income taxes (7) (110) 380 (Benefit) provision for income taxes (2) (29) 675 (Loss) income from discontinued operations, net of income taxes $ (5) $ (81) $ (295) (1) The Company’s credit agreement, as amended, required a $500 million payment of the revolving credit facility and the redemption of all of the Company’s outstanding senior notes. As a result, the interest expense reflected above is the allocation to discontinued operations of interest on the basis of this $500 million mandatory repayment and redemption of its $2 billion in senior notes outstanding. For the year ended December 31, 2021, loss from discontinued operations reflects a tax liability associated with indemnification issues with the purchaser. For the year ended December 31, 2020, loss from discontinued operations reflects a loss contingency associated with indemnification issues with the purchaser. For the year ended December 31, 2019, loss from discontinued operations reflects the results of operations of the Company’s former Epsilon segment, direct costs identifiable to the Epsilon segment including a loss contingency associated with indemnification issues with the purchaser and the allocation of interest expense on corporate debt. See Note 15, “Commitments and Contingencies,” for additional information with respect to the loss contingency. The following table summarizes the depreciation and amortization, and capital expenditures of the Company’s former Epsilon segment for the years ended December 31: 2021 2020 2019 (in millions) Depreciation and amortization $ — $ — $ 73 Capital expenditures $ — $ — $ 56 BANK HOLDING COMPANY FINANCIAL PRESENTATION As a result of the Separation and consequential classification of LoyaltyOne as discontinued operations, the Company has adjusted the presentation of its Consolidated Financial Statements from the Company’s historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.” While neither the Company nor any of its subsidiaries are considered a “bank” within the meaning of the Bank Holding Company Act, the changes from the historical presentation, to the bank holding company presentation, the most significant of which reflect a reclassification of Interest expense within Net interest income, are intended to reflect the Company’s operations going forward and better align the Company with its peers for comparability purposes. The Separation and associated reporting changes applied herein also results in the Company reflecting one reportable operating segment. The following tables reflect a reconciliation from the Company’s historical approach to the presentation of its Consolidated Statements of Income to the Company’s bank holding company presentation for the years ended December 31, 2020 and 2019. The “Adjustments for Discontinued Operations” column reflects the removal of the operations of Loyalty Ventures and is derived from the LoyaltyOne reportable operating segment, presented in the corresponding Annual Report on Form 10-K, adjusted to reflect directly attributable costs and allocations previously held in the Corporate segment, such as transaction costs, hedging costs, and interest on term loans required to be repaid as a result of the Separation. The “Adjustments for Bank Holding Company Presentation” column reflects the changes, due to the removal of the operations of Loyalty Ventures, in the presentation of the Company’s historic Consolidated Statements of Income from commercial and industrial company presentation to the bank holding company presentation. For the Year Ended December 31, 2020 Historical as Reported Adjustments for Discontinued Operations As Adjusted for Discontinued Operations Adjustments for Bank Holding Company Presentation Per Consolidated Statements of Income (in millions) Revenues Services $ 117 $ (292) $ (175) $ 175 $ — Redemption, net 473 (473) — — — Finance charges, net 3,931 — 3,931 (3,931) — Interest and fees on loans — — — 3,931 3,931 (1) Interest on cash and investment securities — — — 21 21 (1) Total interest income* 4,521 (765) 3,756 196 3,952 Interest expense Interest on deposits — — — 238 238 (1) Interest on borrowings — — — 261 261 (1) Total interest expense — — — 499 499 Net interest income* 4,521 (765) 3,756 (303) 3,453 Non-interest income Interchange revenue, net of retailer share arrangements — — — (332) (332) (2) Other — — — 177 177 (2) Total non-interest income — — — (155) (155) Total net interest and non-interest income* 4,521 (765) 3,756 (458) 3,298 Provision for credit losses 1,266 — 1,266 — 1,266 Total net interest and non-interest income, after provision for credit losses* 3,255 (765) 2,490 (458) 2,032 Operating expenses Cost of operations (exclusive of depreciation and amortization disclosed separately below) 2,077 (577) 1,500 (1,500) — General and administrative 106 (1) 105 (105) — Depreciation and other amortization 99 (29) 70 (70) — Amortization of purchased intangibles 85 (49) 36 (36) — Non-interest expenses Employee compensation and benefits — — — 609 609 (3) Card and processing expenses — — — 396 396 (3) Information processing and communication — — — 191 191 (3) Marketing expense — — — 143 143 (3) Depreciation and amortization — — — 106 106 (3) Other — — — 286 286 (3) Total non-interest expenses* 2,367 (656) 1,711 20 1,731 Operating income 888 (109) 779 (478) 301 Interest expense Securitization funding costs 166 — 166 (166) — Interest expense on deposits 220 — 220 (220) — Interest expense on long-term and other debt, net 108 (16) 92 (92) — Total interest expense, net 494 (16) 478 (478) — Income from continuing operations before income taxes 394 (93) 301 — 301 Provision for income taxes 99 (6) 93 — 93 Income from continuing operations 295 (87) 208 — 208 (Loss) income from discontinued operations, net of income taxes (81) 87 6 — 6 Net income $ 214 $ — $ 214 $ — $ 214 * Caption total not historically provided. For the Year Ended December 31, 2019 Historical as Reported Adjustments for Discontinued Operations As Adjusted for Discontinued Operations Adjustments for Bank Holding Company Presentation Per Consolidated Statements of Income (in millions) Revenues Services $ 216 $ (396) $ (180) $ 180 $ — Redemption, net 637 (637) — — — Finance charges, net 4,729 — 4,729 (4,729) — Interest and fees on loans — — — 4,729 4,729 (1) Interest on cash and investment securities — — — 98 98 (1) Total interest income* 5,582 (1,033) 4,549 278 4,827 Interest expense Interest on deposits — — — 307 307 (1) Interest on borrowings — — — 331 331 (1) Total interest expense — — — 638 638 Net interest income* 5,582 (1,033) 4,549 (360) 4,189 Non-interest income Interchange revenue, net of retailer share arrangements — — — (358) (358) (2) Other — — — 219 219 (2) Total non-interest income — — — (139) (139) Total net interest and non-interest income* 5,582 (1,033) 4,549 (499) 4,050 Provision for credit losses 1,188 — 1,188 — 1,188 Total net interest and non-interest income, after provision for credit losses* 4,394 (1,033) 3,361 (499) 2,862 Operating expenses Cost of operations (exclusive of depreciation and amortization disclosed separately below) 2,688 (847) 1,841 (1,841) — General and administrative 150 — 150 (150) — Depreciation and other amortization 80 (32) 48 (48) — Amortization of purchased intangibles 96 (48) 48 (48) — Loss on extinguishment of debt 72 — 72 (72) — Non-interest expenses Employee compensation and benefits — — — 721 721 (3) Card and processing expenses — — — 479 479 (3) Information processing and communication — — — 187 187 (3) Marketing expense — — — 205 205 (3) Depreciation and amortization — — — 96 96 (3) Other — — — 512 512 (3) Total non-interest expenses* 3,086 (927) 2,159 41 2,200 Operating income 1,308 (106) 1,202 (540) 662 Interest expense Securitization funding costs 213 — 213 (213) — Interest expense on deposits 226 — 226 (226) — Interest expense on long-term and other debt, net 130 (29) 101 (101) — Total interest expense, net 569 (29) 540 (540) — Income from continuing operations before income taxes 739 (77) 662 — 662 Provision for income taxes 166 (10) 156 — 156 Income from continuing operations 573 (67) 506 — 506 (Loss) income from discontinued operations, net of income taxes (295) 67 (228) — (228) Net income $ 278 $ — $ 278 $ — $ 278 * Caption total not historically provided. (1) The following tables provide a net interest income reconciliation of interest income previously reported in Finance charges, net revenue, and represents interest income and interest expense previously reported in Total interest expense, net. For the Year Ended December 31, 2020 Finance charges, net Securitization funding costs Interest expense on deposits Interest expense on long-term and other debt, net Total (in millions) Interest income Interest and fees on loans $ 3,931 $ — $ — $ — $ 3,931 Interest on cash and investment securities — 1 18 2 21 Interest expense Interest on deposits — — (238) — (238) Interest on borrowings — (167) — (94) (261) Net interest income $ 3,931 $ (166) $ (220) $ (92) $ 3,453 For the Year Ended December 31, 2019 Finance charges, net Securitization funding costs Interest expense on deposits Interest expense on long-term and other debt, net Total (in millions) Interest income Interest and fees on loans $ 4,729 $ — $ — $ — $ 4,729 Interest on cash and investment securities — 7 81 10 98 Interest expense Interest on deposits — — (307) — (307) Interest on borrowings — (220) — (111) (331) Net interest income $ 4,729 $ (213) $ (226) $ (101) $ 4,189 (2) The following tables provide a non-interest income reconciliation of servicing fees previously reported in Services revenue, and the gain/loss on portfolio and other sales previously reported in Cost of operations expense. For the Year Ended December 31, 2020 Services revenue Cost of operations expense Total (in millions) Non-interest income Interchange revenue, net of retailer share arrangements $ (332) $ — $ (332) Other Payment protection products 157 — 157 Gain on portfolio and other sales — 20 20 Subtotal 157 20 177 Total non-interest income $ (175) $ 20 $ (155) For the Year Ended December 31, 2019 Services revenue Cost of operations expense Total (in millions) Non-interest income Interchange revenue, net of retailer share arrangements $ (358) $ — $ (358) Other Payment protection products 178 — 178 Gain on portfolio and other sales — 41 41 Subtotal 178 41 219 Total non-interest income $ (180) $ 41 $ (139) (3) The following tables provide a reconciliation of further detailed expense line items previously reported in Cost of operations expense, General and administrative expense, Depreciation and other amortization, Amortization of purchased intangibles, and Loss on extinguishment of debt. For the Year Ended December 31, 2020 Cost of operations expense General and administrative expense Depreciation and other amortization Amortization of purchased intangibles Total (in millions) Non-interest expenses Employee compensation and benefits $ 562 $ 47 $ — $ — $ 609 Card and processing expenses 396 — — — 396 Information processing and communication 177 14 — — 191 Marketing expense 143 — — — 143 Depreciation and amortization — — 70 36 106 Other 242 44 — — 286 Total non-interest expenses $ 1,520 $ 105 $ 70 $ 36 $ 1,731 Gain on portfolio and other sales (non-interest income) (20) — — — (20) Total $ 1,500 $ 105 $ 70 $ 36 $ 1,711 For the Year Ended December 31, 2019 Cost of operations expense General and administrative expense Depreciation and other amortization Amortization of purchased intangibles Loss on extinguishment of debt Total (in millions) Non-interest expenses Employee compensation and benefits $ 654 $ 67 $ — $ — $ — $ 721 Card and processing expenses 479 — — — — 479 Information processing and communication 168 19 — — — 187 Marketing expense 204 1 — — — 205 Depreciation and amortization — — 48 48 — 96 Other 377 63 — — 72 512 Total non-interest expenses $ 1,882 $ 150 $ 48 $ 48 $ 72 $ 2,200 Gain on portfolio and other sales (non-interest income) (41) — — — — (41) Total $ 1,841 $ 150 $ 48 $ 48 $ 72 $ 2,159 The adjustments to the presentation of the Consolidated Statements of Comprehensive Income, Consolidated Balance Sheets, Consolidated Statements of Stockholders' Equity and Consolidated Statements of Cash Flows, from the Company's historical approach under SEC Regulation S-X Article 5, to Article 9, were insignificant. |
PARENT-ONLY FINANCIAL STATEMENT
PARENT-ONLY FINANCIAL STATEMENTS | 12 Months Ended |
Dec. 31, 2021 | |
PARENT-ONLY FINANCIAL STATEMENTS | |
PARENT-ONLY FINANCIAL STATEMENTS | 23. PARENT COMPANY FINANCIAL STATEMENTS The following ADSC financial statements are provided in accordance with the rules of the Securities and Exchange Commission, which require such disclosure when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets. Certain of the Company’s subsidiaries may be restricted in distributing cash or other assets to ADSC, which could be utilized to service its indebtedness. The stand-alone parent-only financial statements are presented below. Parent Company – Condensed Balance Sheets December 31, 2021 2020 (in millions) Assets: Cash and cash equivalents $ — $ — Investment in subsidiaries 4,446 5,127 Investment in Loyalty Ventures 50 — Other assets 123 42 Total assets $ 4,619 $ 5,169 Liabilities: Long-term and other debt $ 1,985 $ 2,805 Intercompany liabilities, net 482 742 Other liabilities 66 100 Total liabilities 2,533 3,647 Stockholders’ equity 2,086 1,522 Total liabilities and stockholders’ equity $ 4,619 $ 5,169 Parent Company – Condensed Statements of Income Years Ended December 31, 2021 2020 2019 (in millions) Total interest income $ 12 $ 13 $ 19 Total interest expense 103 110 130 Net interest expense (91) (97) (111) Dividends from subsidiaries 535 256 923 Total net interest and non-interest income 444 159 812 Total non-interest expenses 1 1 71 Income before income taxes and equity in undistributed net income (loss) of subsidiaries 443 158 741 Benefit for income taxes 36 21 42 Income before equity in undistributed net income (loss) of subsidiaries 479 179 783 Equity in undistributed net income (loss) of subsidiaries 322 35 (505) Net income $ 801 $ 214 $ 278 Parent Company – Condensed Statements of Comprehensive Income Years Ended December 31, 2021 2020 2019 (in millions) Net income $ 801 $ 214 $ 278 Other comprehensive income, net of tax 7 — 5 Total comprehensive income, net of tax $ 808 $ 214 $ 283 Parent Company – Condensed Statements of Cash Flows Years Ended December 31, 2021 2020 2019 (in millions) Net cash used in operating activities $ (398) $ (138) $ (1,029) Investing activities: Investment in subsidiaries — (3) (135) Proceeds from sale of business — — 4,118 Dividends received 533 256 923 Purchases of available-for-sale securities (10) — — Net cash provided by investing activities 523 253 4,906 Financing activities: Debt proceeds from spinoff of Loyalty Ventures Inc. 750 — — Borrowings under debt agreements 38 1,276 3,083 Repayments of borrowings (864) (1,320) (5,778) Payment of debt extinguishment costs — — (46) Payment of deferred financing costs (4) (9) (21) Purchase of treasury shares — — (976) Dividends paid (42) (61) (127) Proceeds from issuance of common stock 4 3 12 Other (7) (4) (24) Net cash used in financing activities (125) (115) (3,877) Change in cash, cash equivalents and restricted cash — — — Cash, cash equivalents and restricted cash at beginning of year — — — Cash, cash equivalents and restricted cash at end of year $ — $ — $ — Non-cash investing and financing activities for the year ended December 31, 2021 included the Company’s equity method investment in Loyalty Ventures Inc. upon spinoff, which totaled $48 million on November 5, 2021. Non-cash investing and financing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2020, included the issuance of approximately 1.9 million shares of the Company’s common stock as non-cash consideration in the acquisition of Bread on December 3, 2020. For more information, see Note 2, “Acquisitions.” Non-cash investing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2019, included a $3 billion non-cash dividend in the form of an intercompany return of capital from ADS Alliance Data Systems, Inc. to ADSC. |
DESCRIPTION OF BUSINESS AND S_2
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2021 | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | BASIS OF PRESENTATION The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation. In particular, as a result of the spinoff of its LoyaltyOne segment as discontinued operations, the Company has adjusted the presentation of its Consolidated Financial Statements from its historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.” While neither the Company nor any of its subsidiaries are considered a “bank” within the meaning of the Bank Holding Company Act, the changes from the historical presentation, to the bank holding company presentation, the most significant of which reflect a reclassification of Interest expense within Net interest income, are intended to reflect the Company’s operations going forward and better align the Company with its peers for comparability purposes. As noted above, the Company’s Consolidated Financial Statements have been presented with its LoyaltyOne segment as discontinued operations. See Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation,” for more information. |
Credit Card and Other Loans | The Company’s payment and lending solutions result in the generation of credit card and other loans, which are recorded at the time a cardholder enters into a point-of-sale transaction with a merchant. Credit card loans represent revolving amounts due and have a range of terms that include credit limits, interest rates and fees, which can be revised over time based on new information about the cardholder, in accordance with applicable regulations and the governing terms and conditions. Cardholders choosing to revolve their amounts due, instead of paying in full, are subject to finance charges and are required to make monthly payments based on pre-established amounts. Other loans, which are primarily installment loans offered to our customers, have a range of fixed terms such as interest rates, fees and repayment periods, and borrowers are required to make pre-established monthly payments over the term of the loan in accordance with the applicable terms and conditions. Credit card and other loans are presented on the Consolidated Balance Sheets net of the Allowance for credit losses, and include principal and any related accrued interest and fees. The Company continues to accrue interest and fee income on all accounts, except in limited circumstances, until the related balance and all related interest and fees are paid or charged-off; an Allowance for credit losses is established for uncollectable interest and fees. For the most part, the Company classifies its credit card and other loans as held for investment. The Company sells a majority of its credit card loans originated by Comenity Bank and by Comenity Capital Bank, which together are referred to herein as the “Banks,” to securitization master trusts, which are themselves consolidated VIEs, and therefore these loans are restricted for securitization investors. All new originations of credit card and other loans are determined to be held for investment at origination because the Company has the intent and ability to hold them for the foreseeable future. In determining what constitutes the foreseeable future, the Company considers the average life and homogenous nature of its credit card and other loans. In assessing whether its credit card and other loans continue to be held for investment, the Company also considers capital levels and scheduled maturities of funding instruments used. The assertion regarding the intent and ability to hold credit card and other loans for the foreseeable future can be made with a high degree of certainty given the maturity distribution of the Company’s direct-to-consumer deposits and other funding instruments; the demonstrated ability to replace maturing time-based deposits and other borrowings with new deposits or borrowings; and historic payment activity on its credit card and other loans. Due to the homogenous nature of the Company’s credit card loans, amounts are classified as held for investment on a brand partner portfolio basis. From time to time certain credit card loans are classified as held for sale, as determined on a brand partner basis. The Company carries these assets at the lower of aggregate cost or fair value, and continues to recognize finance charges on an accrual basis. Cash flows associated with credit card and other loans originated or purchased for investment are classified as Cash flows from investing activities, regardless of any subsequent change in intent. |
Allowance for Credit Losses | Effective January 1, 2020, the Company adopted the CECL model on a modified retrospective approach and applied a CECL model to determine its allowance for credit losses. Reserves for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods. The allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of its credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions. The estimate under the CECL model is significantly influenced by the composition, characteristics and quality of the Company’s portfolio of credit card and other loans, as well as the prevailing economic conditions and forecasts utilized. The estimate of the allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees. Charge-offs of principal amounts, net of recoveries are deducted from the allowance. Charge-offs for unpaid interest and fees as well as any adjustments to the allowance associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans. The allowance is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness. In estimating its allowance for credit losses, for each identified group, management utilizes various models and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors. These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships with credit performance. The Company’s quantitative estimate of expected credit losses under CECL is impacted by certain forecasted economic factors. The Company considers the forecast used to be reasonable and supportable over the estimated life of the credit card and other loans, with no reversion period. In addition to the quantitative estimate of expected credit losses, the Company also incorporates qualitative adjustments for certain factors such as Company-specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the allowance for credit losses reflects the Company’s best estimate of current expected credit losses. As permitted by GAAP, the Company excludes unbilled finance charges from its amortized cost basis of credit card and other loans. As of December 31, 2021 and 2020, unbilled finance charges were $224 million and $219 million, respectively, and included in Credit card and other loans on the Consolidated Balance Sheets. Credit Card Loans The Company uses a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics. As part of its CECL implementation, the Company evaluated multiple risk characteristics of its credit card loans portfolio, and determined delinquency status and credit quality to be the most significant characteristics for estimating expected credit losses. To estimate its allowance for credit losses, the Company segregates its credit card loans into four groups with similar risk characteristics, on the basis of delinquency status and credit quality risk score. These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances warrant. In determining the estimated life of the Company’s credit card loans, payments were applied to the measurement date balance with no payments allocated to future purchase activity. The Company uses a combination of First In First Out (FIFO) and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) methodology to model balance paydown. |
Transfers of Financial Assets | The Company accounts for transfers of financial assets as either sales or financings. Transfers of financial assets that are accounted for as sales are removed from the Consolidated Balance Sheets with any realized gain or loss reflected in the Consolidated Statements of Income during the period in which the sale occurs. Transfers of financial assets that are not accounted for as a sale are treated as a financing. The Company regularly securitizes the majority of its credit card loans through the transfer of those loans to one of its master trusts (the Trusts). The Company performs the decision making for the Trusts, as well as servicing the cardholder accounts that generate the credit card loans held by the Trusts. In its capacity as a servicer, the Company administers the loans, collects payments and charges-off uncollectible balances. Servicing fees are earned by a subsidiary of ADSC, which are eliminated in consolidation. The Trusts are VIEs because they have insufficient equity at risk to finance their activities – being the issuance of debt securities and notes, collateralized by the underlying credit card loans. Because the Company performs the decision making and servicing for the Trusts, it has the power to direct the activities that most significantly impact the Trusts’ economic performance (the collection of the underlying credit card loans). In addition, the Company holds all of the variable interests in the Trusts, with the exception of the liabilities held by third-parties. These variable interests provide the Company with the right to receive benefits and the obligation to absorb losses, which could be significant to the Trusts. As a result of these considerations, the Company is deemed to be the primary beneficiary of the Trusts and therefore consolidates the Trusts. The Trusts issue debt securities and notes, which are non-recourse to the Company. The collections on the securitized credit card loans held by the Trusts are available only for payment of those debt securities and notes, or other obligations arising in the securitization transactions. For its securitized credit card loans, during the initial phase of a securitization reinvestment period, the Company generally retains principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets. During the amortization or accumulation period of a securitization, the investors’ share of principal collections (in certain cases, up to a maximum specified amount each month) is either distributed to the investors or held in an account until it accumulates to the total amount due, at which time it is paid to the investors in a lump sum. |
Available-for-Sale Securities | The Company’s available-for-sale (AFS) securities consist of available-for-sale debt securities, equity securities, U.S. Treasury bonds and mutual funds. These investments are carried at fair value on the Consolidated Balance Sheets within Other assets. For any AFS debt securities in an unrealized loss position, the CECL methodology requires estimation of the lifetime expected credit losses which then would be recognized in the Consolidated Statements of Income by establishing, or adjusting an existing allowance for those credit losses. The Company did not have any such credit losses for the periods presented. Any unrealized gains, or any portion of a security’s non-credit-related unrealized losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. The Company typically invests in highly-rated securities with low probabilities of default. Gains and losses on investments in equity securities are recorded in Other non-interest expenses in the Consolidated Statements of Income. Realized gains and losses are recognized upon disposition of the securities, using the specific identification method. |
Property and Equipment | Furniture, equipment, buildings and leasehold improvements are carried at cost less accumulated depreciation, and depreciation is measured on a straight-line basis. Costs incurred during construction are capitalized; depreciation begins once the asset is placed in service. As of December 31, 2021, the Company’s furniture and equipment has remaining estimated useful lives ranging from less than one year to 10 years. Leasehold improvements are depreciated over the lesser of the remaining terms of the respective leases, or the economic lives of the improvements, and range from less than one year to 17 years, at December 31, 2021. Costs associated with the acquisition or development of internal-use software are also capitalized and recorded in Property and equipment, net. Once the internal-use software is ready for its intended use, the cost is amortized on a straight-line basis over the software’s estimated useful life. As of December 31, 2021, the Company’s internal-use software has remaining estimated useful lives ranging from less than one year to four years . The Company reviews long-lived assets and asset groups for impairment whenever events or circumstances indicate their carrying amounts may not be recoverable. An impairment is recognized if the carrying amount is not recoverable and exceeds the asset or asset group’s fair value. With the Bread acquisition on December 3, 2020, the Company acquired $91 million of developed technology recorded in Property and equipment, net, which is being amortized over a 5 year life; the Company also impaired $4 million in capitalized software with the acquisition, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020. Also during the fourth quarter of 2020, the Company determined it would reduce its real estate footprint and cease use of certain properties with the intent to sublease, triggering an impairment analysis of certain property and equipment. As a result of the analysis, the Company recorded asset impairment charges of $3 million and accelerated depreciation expense of $25 million, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020. |
Goodwill | Goodwill is reviewed at least annually for impairment, or more frequently if circumstances indicate that an impairment is probable, using qualitative or quantitative analysis. No goodwill impairment has been recognized during any of the years ended December 31, 2021, 2020, or 2019. |
Intangible Assets, Net | The Company’s identifiable intangible assets consist of both amortizable and non-amortizable intangible assets. Definite-lived intangible assets are subject to amortization and are amortized on a straight-line basis over their estimated useful lives; indefinite-lived intangible assets are not amortized. The Company reviews long-lived assets and asset groups, including intangible assets, for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable; recognizing an impairment if the carrying amount is not recoverable and exceeds the fair value of the asset or asset group. No impairment of intangible assets has been recognized during any of the years ended December 31, 2021, 2020, or 2019. |
Leases | The Company has various operating leases for facilities and equipment which are recorded as lease-related assets (right-of-use assets) and liabilities for those leases with terms greater than 12 months. The Company does not have any finance leases. The Company determines if an arrangement is a lease or contains a lease at inception, and does not separate lease and non-lease components. Right-of-use assets are recognized as of the lease commencement date at amounts equal to the respective lease liabilities, adjusted for any prepaid lease payments, initial direct costs and lease incentives. The Company’s lease liabilities are recognized at the present value of the contractual fixed lease payments discounted using the Company’s incremental borrowing rate, as the rate implicit in the lease is typically not readily determinable, as of the lease commencement date or upon modification of the lease. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. As of December 31, 2021, the Company’s leases have remaining lease terms ranging from less than one year, up to 17 years, some of which may include renewal options. Leases with an initial term of 12 months or less are not recognized on the Consolidated Balance Sheets; lease expense for these leases is recognized on a straight-line basis over the lease term. As with other long-lived assets, right-of-use assets are reviewed for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable. In the fourth quarter of 2020, the Company performed an impairment assessment for its right-of-use assets associated with its locations where it ceased use with the intent to sublease. As a result, the Company recorded an asset impairment charge of $18 million, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020. |
Stock Compensation Expense | Stock-based compensation expense is measured at the grant date of the award, based on the fair value of the award and is recognized ratably over the requisite service period. Stock-based compensation expense recognized in Employee benefits and compensation expense in the Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019 was $25 million, $15 million and $18 million, respectively, with corresponding income tax benefits of $4 million, $3 million and $3 million, respectively. Stock-based compensation expense related to discontinued operations for the years ended December 31, 2021, 2020 and 2019 was $4 million, $6 million and $37 million, respectively. As the amount of stock-based compensation expense recognized is based on awards ultimately expected to vest, the amount recognized in the Company’s Consolidated Statements of Income has been reduced for estimated forfeitures. The Company estimates forfeitures at each grant date based on historical experience, with forfeiture estimates to be revised, if necessary, in subsequent periods should actual forfeitures differ from those estimates; forfeitures were estimated at 5% for each of the years ended December 31, 2021, 2020 and 2019. |
Income Taxes | The Company files income tax returns in federal, state, local and foreign jurisdictions, as applicable. Provisions for current income tax liabilities are calculated and accrued on income and expense amounts expected to be included in the income tax returns for the current year. Income taxes reported in earnings also include deferred income tax provisions and provisions for uncertain tax positions.Differences between the Consolidated Financial Statements and tax bases of assets and liabilities give rise to deferred tax assets and liabilities, which measure the future tax effects of items recognized in the Consolidated Financial Statements. Changes in deferred income tax assets and liabilities associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense. The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Deferred tax assets require certain estimates and judgments in order to determine whether it is more likely than not that all or a portion of the benefit of a deferred tax asset will not be realized. In evaluating the Company’s deferred tax assets on a quarterly basis as new facts and circumstances emerge, the Company analyzes and estimates the impact of future taxable income, reversing temporary differences and available tax planning strategies. Uncertainties can lead to changes in the ultimate realization of deferred tax assets. A liability for unrecognized tax benefits, representing the difference between a tax position taken or expected to be taken in a tax return and the benefit recognized in the Consolidated Financial Statements, inherently requires estimates and judgments. A tax position is recognized only when it is more likely than not to be sustained, based purely on its technical merits after examination by the taxing authority, and the amount recognized is the benefit the Company believes is more likely than not to be realized upon ultimate settlement. The Company evaluates its tax positions as new facts and circumstances become available, making adjustments to unrecognized tax benefits as appropriate. Uncertainties can mean the tax benefits ultimately realized differ from amounts previously recognized, with any differences recorded in Provision for income taxes, along with amounts for estimated interest and penalties related to uncertain tax positions. |
Earnings Per Share | Basic earnings (losses) per share (EPS) is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of stock options, unvested restricted stock awards, or other dilutive securities. Diluted EPS is based on the weighted average number of common and potentially dilutive common shares (dilutive stock options, unvested restricted stock awards and other dilutive securities outstanding during the year) pursuant to the Treasury Stock method. For periods with participating securities, in this case 2019, the Company computes EPS using the two-class method, which is an allocation of earnings between the holders of common stock and a company’s participating security holders that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the years ended December 31: |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of ADSC and all subsidiaries in which the Company has a controlling financial interest. For voting interest entities, a controlling financial interest is determined when the Company is able to exercise control over the operating and financial decisions of the investee. For variable interest entities (VIEs), which are themselves determined based on the amount and characteristics of the equity in the entity, the Company has a controlling financial interest when it is determined to be the primary beneficiary. The primary beneficiary is the party having both the power to exercise control over the activities that most significantly impact the VIE’s financial performance, as well as the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE. The Company is the primary beneficiary of its securitization trusts and therefore consolidates these trusts within its Consolidated Financial Statements. In cases where the Company does not have a controlling financial interest, but is able to exert significant influence over the operating and financial decisions of the entity, the Company accounts for such investments under the equity method. All intercompany transactions have been eliminated. |
Currency Translation | Currency Translation The Company’s monetary assets and liabilities denominated in foreign currencies, for example those of subsidiaries outside the U.S., are translated into U.S. dollars based on the rates of exchange in effect at the end of the reporting period, while non-monetary assets and liabilities are translated based on the rates of exchange in effect as of the date of the transaction giving rise to the asset or liability. Income and expense items are translated at the average exchange rates prevailing during the period. The resulting effects, along with any related hedge or tax impacts, are recorded in Accumulated other comprehensive loss, a component of stockholders’ equity. Translation adjustments, along with the related hedge and tax impacts, are recognized in the Consolidated Statements of Income upon the sale or substantial liquidation of an investment in a foreign subsidiary. Gains and losses resulting from transactions in currencies other than the entity’s functional currency are recognized in Other non-interest expenses in the Consolidated Statements of Income, and were insignificant for each of the periods presented. Historically, the Company’s impacts from foreign currency exchange rate fluctuations were most prevalent within businesses that have been spun off, such as LoyaltyOne, or sold, such as Epsilon, both of which are reflected as discontinued operations herein. |
Amounts Based on Estimates and Judgments | Amounts Based on Estimates and Judgments The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments about future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported amounts of income and expenses during the reporting periods. The most significant of those estimates and judgments relate to the Company’s Allowance for credit losses; actual results could differ. |
Revenue Recognition | Revenue Recognition The Company’s primary source of revenue is from Interest and fees on loans from its various credit card and other loan products, and to a lesser extent from contractual relationships with its brand partners. The following describes the Company’s recognition policies across its various sources of revenue. Interest and fees on loans Interest on cash and investment securities: Interchange revenue, net of retailer share arrangements: Other non-interest income: Represents ancillary revenues earned from cardholders, consisting primarily of monthly fees from the purchase of certain payment protection products which are recognized based on the average cardholder account balance over time and can be cancelled at any point by the cardholder, as well as gains or losses on the sales of loan portfolios and income or losses from equity method investments. Contract Costs: The Company performs an impairment assessment when events or changes in circumstances indicate that the carrying amount of contract costs may not be recoverable. For the year ended December 31, 2020, due to the global COVID-19 pandemic and resulting retail store closures and significant declines in credit sales, the Company recognized an impairment charge of $38 million in Non-interest expenses in its Consolidated Statement of Income. No impairment charges were recognized in either of the years ended December 31, 2021 or 2019. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks, interest-bearing cash balances such as those invested in money market funds, as well as other highly liquid short-term investments with an original maturity of three months or less, and restricted cash. As of December 31, 2021 and 2020, cash and due from banks was $251 million and $262 million, respectively, interest-bearing cash balances were $2.7 billion and $2.5 billion, respectively, and short-term investments were $80 million and $29 million, respectively. Restricted cash primarily represents cash restricted for principal and interest repayments of debt issued by consolidated VIE securitization trusts, and is recorded in Other assets on the Consolidated Balance Sheets. Restricted cash totaled $877 million and $323 million at December 31, 2021 and 2020, respectively. |
Derivative Financial Instruments | Derivative Financial Instruments From time to time, the Company uses derivative financial instruments to manage its exposure to various financial risks; the Company does not trade or speculate in derivative financial instruments. Subject to the criteria set forth in GAAP, the Company will either designate its derivative financial instruments in hedging relationships, or as economic hedges should the criteria in GAAP not be met. For those derivatives designated in hedging relationships, changes in their fair values, excluding any ineffective portions, are recorded in Accumulated other comprehensive income, net of income taxes, until the hedged transactions affect net income; the ineffective portions of the derivative financial instruments are recognized through net income. For those derivatives not designated in hedging relationships, or economic hedges, changes in their fair values are recognized in the Consolidated Statements of Income as they occur. The Company’s derivative financial instruments were immaterial to the Consolidated Financial Statements for the periods presented. With the spinoff of its LoyaltyOne segment in November 2021, the Company does not hold any derivative financial instruments as of December 31, 2021. |
Concentrations | CONCENTRATIONS We depend on a limited number of large partner relationships for a significant portion of our revenue. The business generated through our 10 largest partners represented approximately 59% and 65%, respectively, of our Total net interest and non-interest income during the years ended December 31, 2021 and 2020. Business generated through our relationship with Victoria’s Secret & Co. and its retail affiliates represented approximately 13% and 14% of our Total net interest and non-interest income during these same respective periods. We previously announced the non-renewal of our contract with BJ’s Wholesale Club (BJ’s). For the year ended December 31, 2021, BJ’s branded co-brand accounts generated approximately 8% of our Total net interest and non-interest income. As of December 31, 2021, BJ’s branded co-brand accounts were responsible for approximately 11% of our Total credit card and other loans. |
Recently Issued and Adopted Accounting Standards | RECENTLY ISSUED ACCOUNTING STANDARDS In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and is effective upon issuance for all entities, and the adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements. RECENTLY ADOPTED ACCOUNTING STANDARDS In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminated certain exceptions within Accounting Standards Codification (ASC) 740, “Income Taxes,” and clarified certain aspects of ASC 740 to promote consistency among reporting entities. Most amendments within the standard were required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company’s adoption of this standard on January 1, 2021 did not have a material impact on its financial position, results of operations or cash flows, and there were no significant changes to accounting policies, business processes or internal controls as a result of adopting the standard. Effective January 1, 2020, the Company adopted the new credit reserving methodology referred to as Current Expected Credit Loss (CECL), following a modified retrospective transition which resulted in an increase to the Allowance for credit losses of $644 million, an increase to net deferred tax assets of $159 million, with the offset to the opening balance of Retained earnings, net of income taxes, of $485 million. Under the CECL methodology, the Company utilizes a financial instrument impairment model to establish an allowance based on expected losses over the estimated life of the exposure, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information. This approach differs from the Company’s historic model prior to January 1, 2020, which was based on an incurred loss approach. Although there were no significant changes to the Company’s accounting systems or internal controls as a result of adopting the standard, the Company modified certain of its existing controls and added new controls around its loss forecasting models. |
DESCRIPTION OF BUSINESS AND S_3
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of other significant accounting policies | Significant Accounting Policy Note Number Note Title Credit Card and Other Loans Note 3 Credit Card and Other Loans Allowance for Credit Losses Note 4 Allowance for Credit Losses Transfers of Financial Assets Note 5 Securitizations Available-for-Sale Securities Note 6 Available-for-Sale Securities Property and Equipment Note 7 Property and Equipment, Net Goodwill Note 8 Goodwill and Intangible Assets, Net Intangible Assets, Net Note 8 Goodwill and Intangible Assets, Net Leases Note 10 Leases Stock Compensation Expense Note 18 Stockholders' Equity Income Taxes Note 19 Income Taxes Earnings Per Share Note 20 Earnings Per Share |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
ACQUISITIONS | |
Summary of the fair values of the assets acquired and liabilities assumed | The following table summarizes the allocation of the consideration and the respective fair values of the assets acquired and liabilities assumed in the transaction, net of cash and restricted cash acquired, as of December 3, 2020 (in millions): Installment loans $ 112 Developed technology 91 Right of use assets - operating 4 Deferred tax asset, net 7 Intangible assets 11 Goodwill 370 Total assets acquired 595 Accounts payable 2 Accrued expenses 3 Operating lease liabilities 3 Debt issued by consolidated variable interest entities 96 Total liabilities assumed 104 Net assets acquired, net of cash and restricted cash $ 491 |
CREDIT CARD AND OTHER LOANS (Ta
CREDIT CARD AND OTHER LOANS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
CREDIT CARD AND OTHER LOANS | |
Schedule of components of credit card and other loans | 2021 2020 (in millions) Credit card loans $ 17,217 $ 16,666 Installment loans 182 118 Total credit card and other loans (1)(2) 17,399 16,784 Less: Allowance for credit losses (1,832) (2,008) Credit card and other loans, net $ 15,567 $ 14,776 (1) Includes $11.2 billion of credit card and other loans available to settle obligations of consolidated VIEs as of both December 31, 2021 and 2020, respectively. (2) Includes $224 million and $219 million, of accrued interest and fees that have not yet been billed to cardholders as of December 31, 2021 and 2020, respectively. |
Schedule of aging analysis of total credit card and other loans portfolio at amortized cost | Aging Analysis of Delinquent Amortized Cost Credit Card and Other Loans (1) 31 to 60 days delinquent 61 to 90 days delinquent 91 or more days delinquent Total delinquent Current Total (in millions) As of December 31, 2021 $ 262 $ 186 $ 401 $ 849 $ 16,284 $ 17,133 As of December 31, 2020 $ 273 $ 203 $ 440 $ 916 $ 15,578 $ 16,494 (1) Installment loan delinquencies have been included with credit card loan delinquencies in the table above, as amounts were insignificant at each period presented. |
Schedule of information on credit card loans that are considered troubled debt restructurings | 2021 2020 Pre- Post- Pre- Post- modification modification modification modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings 171,993 $ 254 $ 254 391,049 $ 554 $ 553 The following table provides additional information regarding credit card loans modified as TDRs that have subsequently defaulted within 12 months of their modification dates for the years ended December 31; the probability of default is factored into the allowance for credit losses: 2021 2020 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted 114,531 $ 154 118,600 $ 162 |
Schedule of composition of obligor credit quality | Vantage 2021 2020 661 or 601 to 600 or 661 or 601 to 600 or Higher 660 Less Higher 660 Less Credit card loans 62 % 26 % 12 % 60 % 28 % 12 % |
ALLOWANCE FOR CREDIT LOSSES (Ta
ALLOWANCE FOR CREDIT LOSSES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Allowance for Credit Loss [Abstract] | |
Schedule of Company's group similar risk characteristics based on delinquency status and risk score, and estimated life | Estimated Life (in months) Group A (Current, risk score - high) 14 Group B (Current, risk score - low) 19 Group C (Delinquent, risk score - high) 17 Group D (Delinquent, risk score - low) 26 |
Schedule of Company's allowance for loan loss | 2021 2020 2019 (in millions) Beginning balance $ 2,008 $ 1,815 (3) $ 1,038 Provision for credit losses (1) 544 1,266 1,188 Change in estimate for uncollectible unpaid interest and fees — 10 — Net principal charge-offs (2) (720) (1,083) (1,055) Ending balance $ 1,832 $ 2,008 $ 1,171 (1) Provision for credit losses includes a build/release for the allowance, as well as replenishment of Net principal charge-offs. (2) Principal charge-offs are presented net of recoveries of $163 million, $205 million and $234 million for the years ended December 31, 2021, 2020 and 2019, respectively. (3) Includes an increase of $644 million as of January 1, 2020, related to the adoption of the CECL methodology. |
SECURITIZATIONS (Tables)
SECURITIZATIONS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
SECURITIZATIONS | |
Schedule of securitized credit card receivables, delinquencies and net charge-offs | 2021 2020 (in millions) Total credit card loans – available to settle obligations of consolidated VIEs $ 11,215 $ 11,208 Of which: principal amount of credit card loans 91 days or more past due $ 159 $ 201 2021 2020 2019 (in millions) Net charge-offs of securitized principal $ 453 $ 756 $ 908 |
AVAILABLE-FOR-SALE SECURITIES (
AVAILABLE-FOR-SALE SECURITIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
AVAILABLE-FOR-SALE SECURITIES | |
Schedule of principal components of other investments, which are carried at fair value | 2021 2020 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) Available-for-sale securities $ 237 $ 4 $ (2) $ 239 $ 219 $ 6 $ — $ 225 Total $ 237 $ 4 $ (2) $ 239 $ 219 $ 6 $ — $ 225 |
Schedule of unrealized losses and fair value for investments that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position | Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Available-for-sale securities $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) Total $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) |
Schedule of securities by contractual maturity date | Amortized Estimated Cost Fair Value (in millions) Due in one year or less (1) $ 65 $ 65 Due after one year through five years — — Due after five years through ten years — — Due after ten years 172 174 Total $ 237 $ 239 (1) Includes mutual funds, which do not have a stated maturity. |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
PROPERTY AND EQUIPMENT, NET | |
Schedule of property and equipment, net | 2021 2020 (in millions) Internal-use computer software and development $ 263 $ 248 Furniture and equipment 107 122 Land and leasehold improvements 76 90 Construction in progress 25 24 Total 471 484 Accumulated depreciation and amortization (256) (271) Property and equipment, net $ 215 $ 213 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS, NET (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
GOODWILL AND INTANGIBLE ASSETS, NET | |
Schedule of changes in carrying amount of goodwill | The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020, respectively, were as follows (in millions): Balance at December 31, 2019 $ 264 Goodwill acquired during the period (1) 370 Balance at December 31, 2020 $ 634 Goodwill acquired during the period — Balance at December 31, 2021 $ 634 (1) Fully related to the acquisition of Bread in December 2020. |
Schedule of intangible assets | 2021 Gross Accumulated Assets Amortization Net Useful Life (in millions) Definite-Lived Assets Customer contracts and lists $ 9 $ (3) $ 6 3 years Premium on purchased credit card loan portfolios 133 (89) 44 1-13 years Non-compete agreements 2 — 2 5 years $ 144 $ (92) $ 52 Indefinite-Lived Assets Tradename 1 — 1 Indefinite life Total intangible assets $ 145 $ (92) $ 53 2020 Gross Accumulated Assets Amortization Net Useful Life (in millions) Definite-Lived Assets Customer contracts and lists $ 9 $ — $ 9 3 years Premium on purchased credit card loan portfolios 138 (73) 65 1 Non-compete agreements 2 — 2 5 years $ 149 $ (73) $ 76 Indefinite-Lived Assets Tradename 1 — 1 Indefinite life Total intangible assets $ 150 $ (73) $ 77 |
Schedule of estimated amortization expense related to intangible assets | 2022 $ 20 2023 15 2024 11 2025 2 2026 1 Thereafter 3 $ 52 |
OTHER ASSETS (Tables)
OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Other Assets | |
Schedule of other assets | 2021 2020 (in millions) Restricted cash (1) $ 877 $ 323 Deferred contract costs 364 311 Deferred tax asset, net 302 289 Accounts receivable, net (2) 151 114 Right of use assets - operating 97 119 Investment in LVI 50 — Other (3) 151 207 Total other assets $ 1,992 $ 1,363 (1) Represents principal accumulation for the repayment of debt issued by consolidated variable interest entities that matures in 2022 or that matured in 2021, at December 31, 2021 and 2020, respectively. (2) Primarily related to amounts receivable from brand partners, which are recorded at the invoiced amount and do not bear interest. (3) Primarily comprised of prepaid expenses and non-income-based tax receivables. |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
LEASES | |
Schedule of lease cost | 2021 2020 2019 (in millions) Operating lease cost $ 23 $ 25 $ 24 Short-term lease cost — 1 1 Variable lease cost 2 2 3 Sublease income (5) (1) — Total $ 20 $ 27 $ 28 The table below reflects other lease-related information as of December 31: 2021 2020 Weighted-average remaining lease term (in years): Operating leases 9.8 10.3 Weighted-average discount rate: Operating leases 5.8% 5.8% Supplemental lease-related cash flow information was as follows for the years ended December 31: 2021 2021 2020 (in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 25 $ 28 $ 27 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 5 $ 1 $ 23 |
Schedule of maturities of lease liabilities | Maturities of the Company’s lease liabilities by year were as follows as of December 31, 2021 (in millions): 2022 $ 20 2023 21 2024 21 2025 20 2026 19 Thereafter 86 Total undiscounted lease liabilities 187 Less: Amount representing interest (47) Total present value of minimum lease payments $ 140 |
BORROWINGS OF LONG-TERM AND O_2
BORROWINGS OF LONG-TERM AND OTHER DEBT (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
BORROWINGS OF LONG-TERM AND OTHER DEBT | |
Schedule of debt | Description 2021 2020 Contractual Maturities Interest Rates (Dollars in millions) Long-term and other debt: Revolving line of credit $ — $ — July 2024 (1) Term loans 658 1,484 July 2024 (2) Senior notes due 2024 850 850 December 2024 4.750% Senior notes due 2026 500 500 January 2026 7.000% Subtotal 2,008 2,834 Less: Unamortized debt issuance costs 22 28 Total long-term and other debt $ 1,986 $ 2,806 Deposits: Certificates of deposit $ 5,447 $ 6,015 Various – Jan 2022 to Dec 2026 0.20% to 3.75% Money market and other non-maturity deposits 5,586 3,790 Non-maturity (3) Subtotal 11,033 9,805 Less: Unamortized debt issuance costs 6 12 Total deposits $ 11,027 $ 9,793 Debt issued by consolidated VIEs: Fixed rate asset-backed term note securities $ 1,572 $ 3,424 Various – Feb 2022 to Sep 2022 2.21% to 3.61% Conduit asset-backed securities 3,883 2,205 Various – Aug 2022 to Oct 2023 (4) Secured loan facility — 86 Subtotal 5,455 5,715 Less: Unamortized debt issuance costs 2 5 Total debt issued by consolidated VIEs $ 5,453 $ 5,710 Total borrowings of long-term and other debt $ 18,466 $ 18,309 (1) The interest rate is based upon LIBOR plus an applicable margin. (2) The interest rate is based upon LIBOR plus an applicable margin. The weighted average interest rate for the term loans was 1.85% and 1.90% at December 31, 2021 and 2020, respectively. (3) The interest rates are based on the Federal Funds rate plus an applicable margin. At December 31, 2021, the interest rates ranged from 0.05% to 3.50% . At December 31, 2020, the interest rates ranged from 0.38% to 3.50% . (4) The interest rate is based upon LIBOR or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin. At December 31, 2021, the interest rates ranged from 0.89% to 0.96% . At December 31, 2020, the interest rates ranged from 1.39% to 1.89% . |
Schedule of maturity of debt | The future principal payments for the Company’s long-term and other debt are as follows, as of December 31, 2021: Long-Term Debt Issued by and Consolidated Year Other Debt Deposits VIEs Total (in millions) 2022 $ 231 $ 9,096 $ 3,034 $ 12,361 2023 177 1,217 2,421 3,815 2024 1,100 627 — 1,727 2025 — 57 — 57 2026 500 36 — 536 Thereafter — — — — Total maturities 2,008 11,033 5,455 18,496 Unamortized debt issuance costs (22) (6) (2) (30) $ 1,986 $ 11,027 $ 5,453 $ 18,466 |
OTHER LIABILITIES (Tables)
OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
OTHER LIABILITIES | |
Schedule of other liabilities | 2021 2020 (in millions) Accounts payable and other brand partner liabilities $ 291 $ 354 Accrued liabilities (1) 314 384 Operating lease liabilities 140 172 Long-term tax reserves 313 347 Other (2) 136 102 Total other liabilities $ 1,194 $ 1,359 (1) Primarily related to accrued payroll and benefits, marketing, taxes and professional services expenses. (2) Primarily comprised of long-term unearned revenue and cardholder liabilities. |
OTHER NON-INTEREST INCOME AND_2
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES | |
Components of Other non-interest income | The following table provides the components of Other non-interest income for the years ended December 31: 2021 2020 2019 (in millions) Payment protection products $ 141 $ 156 $ 174 Gain on portfolio and other sales 10 20 41 Other 5 1 4 Total other non-interest income $ 156 $ 177 $ 219 |
Components of Other non-interest expenses | The following table provides the components of Other non-interest expenses for the years ended December 31: 2021 2020 2019 (in millions) Professional services and regulatory fees $ 136 114 $ 120 Asset impairment charges — 64 11 Portfolio valuation adjustments (to reflect the lower of cost or market) — — 190 Loss on extinguishment of debt — — 72 Other (1) 86 108 119 Total other non-interest expenses $ 222 $ 286 $ 512 |
FAIR VALUES OF FINANCIAL INST_2
FAIR VALUES OF FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | |
Schedule of estimated fair value of Company's financial instruments | 2021 2020 Carrying Fair Carrying Fair Amount Value Amount Value (in millions) Financial assets Credit card and other loans, net $ 15,567 $ 17,989 $ 14,776 $ 17,301 Available-for-sale securities 239 239 225 225 Financial liabilities Deposits 11,027 11,135 9,793 10,016 Debt issued by consolidated variable interest entities 5,453 5,467 5,710 2,783 Long-term and other debt 1,986 2,053 2,806 2,875 |
Schedule of assets and liabilities carried at fair value measured on recurring basis | 2021 Total Level 1 Level 2 Level 3 (in millions) Available-for-sale securities $ 239 $ 48 $ 191 $ — Total assets measured at fair value $ 239 $ 48 $ 191 $ — 2020 Total Level 1 Level 2 Level 3 (in millions) Available-for-sale securities $ 225 $ 34 $ 191 $ — Total assets measured at fair value $ 225 $ 34 $ 191 $ — |
Schedule of assets and liabilities disclosed but not carried at fair value | 2021 Fair Value Level 1 Level 2 Level 3 (in 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 $ — 2020 Fair Value Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and other loans, net $ 17,301 $ — $ — $ 17,301 Total $ 17,301 $ — $ — $ 17,301 Financial liabilities: Deposits $ 10,016 $ — $ 10,016 $ — Debt issued by consolidated VIEs 5,783 — 5,783 — Long-term and other debt 2,875 — 2,875 — Total $ 18,674 $ — $ 18,674 $ — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES. | |
Schedule of actual capital ratios and minimum ratios | Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 capital to average assets (1) 20.0 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets (2) 21.4 4.5 6.5 Tier 1 capital to risk-weighted assets (3) 21.4 6.0 8.0 Total capital to risk-weighted assets (4) 22.7 8.0 10.0 Comenity Capital Bank Tier 1 capital to average assets (1) 17.3 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets (2) 18.6 4.5 6.5 Tier 1 capital to risk-weighted assets (3) 18.6 6.0 8.0 Total capital to risk-weighted assets (4) 19.9 8.0 10.0 Combined Banks Tier 1 capital to average assets (1) 18.6 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets (2) 20.0 4.5 6.5 Tier 1 capital to risk-weighted assets (3) 20.0 6.0 8.0 Total capital to risk-weighted assets (4) 21.3 8.0 10.0 |
CHANGES IN ACCUMULATED OTHER _2
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS | |
Schedule of changes in each component of accumulated comprehensive income (loss), net of tax effects | Foreign Currency Accumulated Net Unrealized Net Unrealized Net Unrealized Translation Other Gains (Losses) on (Losses) Gains on Gains (Losses) on Adjustment Comprehensive AFS Securities Cash Flow Hedges Net Investment Hedge (Losses) Gains (1) Loss (in millions) Balance as of January 1, 2019 $ (11) $ — $ (12) $ (115) $ (138) Changes in other comprehensive income (loss) 13 — 5 (7) 11 Recognition resulting from the sale of Epsilon's foreign subsidiaries — — — 27 27 Balance at December 31, 2019 $ 2 $ — $ (7) $ (95) $ (100) Changes in other comprehensive income (loss) 21 (1) — 71 91 Recognition resulting from the sale of Precima's foreign subsidiaries — — — 4 4 Balance at December 31, 2020 $ 23 $ (1) $ (7) $ (20) $ (5) Changes in other comprehensive income (loss) (21) 2 — (37) (56) Recognition resulting from the spinoff of LoyaltyOne's foreign subsidiaries (1) (1) 7 54 59 Balance at December 31, 2021 $ 1 $ — $ — $ (3) $ (2) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates from the Company’s LoyaltyOne segment, which was spun off in November 2021. With the spinoff of the Company’s LoyaltyOne segment on November 5, 2021, the $7 million net unrealized loss on its net investment hedge related to its net investment in BrandLoyalty was reclassified into net income. Upon the sale of Precima on January 10, 2020, $4 million of accumulated foreign currency translation adjustments attributable to Precima’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the gain on the sale of Precima. Upon the sale of Epsilon on July 1, 2019, $27 million of accumulated foreign currency translation adjustments attributable to Epsilon’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the loss on the sale of the Epsilon segment. Other reclassifications from accumulated other comprehensive loss into net income for each of the periods presented were not material. |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
STOCKHOLDERS' EQUITY | |
Schedule of performance-based and service-based restricted stock unit awards | Weighted Market- Performance- Service- Average Based (1) Based (1) Based Total Fair Value Balance at January 1, 2019 56,229 423,242 317,441 796,912 $ 218.81 Shares granted 37,878 420,239 246,118 704,235 161.05 Shares vested — (262,773) (178,730) (441,503) 218.45 Shares forfeited (69,819) (350,436) (126,257) (546,512) 188.40 Balance at December 31, 2019 24,288 230,272 258,572 513,132 $ 172.06 Shares granted 20,770 219,186 241,610 481,566 89.11 Shares vested — (42,097) (127,921) (170,018) 175.09 Shares forfeited (22,831) (186,135) (38,447) (247,413) 166.93 Balance at December 31, 2020 22,227 221,226 333,814 577,267 $ 103.89 Shares granted (2) 2,641 111,542 774,062 888,245 88.18 Shares vested — (24,677) (167,723) (192,400) 118.78 Shares forfeited (5,801) (216,675) (291,201) (513,677) 93.16 Balance at December 31, 2021 19,067 91,416 648,952 759,435 $ 89.14 Outstanding and Expected to Vest 633,480 $ 90.09 (1) Shares granted reflect a 100% target attainment of the respective market-based or performance -based metric. Shares forfeited include those restricted stock units forfeited as a result of the Company not meeting the respective market-based or performance-based metric conditions. (2) Shares granted reflect a November 2021 make-whole equity adjustment to unvested shares due to the reduction in the Company’s share value resulting from the spinoff of Loyalty Ventures Inc. This adjustment increased shares granted by 2,641 shares, 12,659 shares and 96,556 shares for market-based, performance-based and service-based awards, respectively. These shares were excluded from the weighted average fair value calculation. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
INCOME TAXES | |
Schedule of components of income before income taxes and components of income tax expense | 2021 2020 2019 (in millions) Current Federal $ 218 $ 228 $ 123 State 49 36 35 Total current income tax expense 267 264 158 Deferred Federal (13) (143) (9) State (7) (28) 7 Total deferred income tax benefit (20) (171) (2) Total Provision for income taxes $ 247 $ 93 $ 156 |
Summary of reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate | 2021 2020 2019 (in millions) Expected expense at statutory rate $ 219 $ 63 $ 139 Increase (decrease) in income taxes resulting from: State and local income taxes, net of federal benefit 33 6 33 Impact of 2017 Tax Reform (8) (2) (30) Non-deductible expenses 4 6 7 IRC Section 199, net of tax reserves — 12 — Other (1) 8 7 Total $ 247 $ 93 $ 156 |
Summary of deferred tax assets and liabilities | 2021 2020 (in millions) Deferred tax assets Deferred revenue $ 17 $ 14 Allowance for credit losses 447 482 Net operating loss carryforwards and other carryforwards 42 43 Operating lease liabilities 33 42 Accrued expenses and other 65 75 Total deferred tax assets 604 656 Valuation allowance (8) (8) Deferred tax assets, net of valuation allowance 596 648 Deferred tax liabilities Deferred income $ 221 $ 291 Depreciation 28 14 Right of use assets 22 28 Intangible assets 23 26 Total deferred tax liabilities 294 359 Net deferred tax assets $ 302 $ 289 Amounts recognized on the Consolidated Balance Sheets: Other assets $ 302 $ 289 |
Summary of reconciliation of unrecognized tax benefits | The following table presents changes in unrecognized tax benefits (in millions): Balance at January 1, 2019 $ 223 Increases related to prior years’ tax positions 2 Decreases related to prior years’ tax positions (66) Increases related to current year tax positions 58 Settlements during the period (1) Lapses of applicable statutes of limitation (1) Balance at December 31, 2019 $ 215 Increases related to prior years’ tax positions 59 Decreases related to prior years’ tax positions (23) Increases related to current year tax positions 11 Settlements during the period (5) Lapses of applicable statutes of limitation (2) Balance at December 31, 2020 $ 255 Increases related to prior years’ tax positions 1 Decreases related to prior years’ tax positions (13) Increases related to current year tax positions 12 Settlements during the period (8) Balance at December 31, 2021 $ 247 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted net income per share | 2021 2020 2019 (in millions, except per share amounts) Basic EPS: Numerator: Income from continuing operations $ 797 $ 208 $ 506 Less: Dividends declared on preferred stock — — 3 Less: Allocation of undistributed earnings — — 6 Income from continuing operations 797 208 497 Income (loss) from discontinued operations, net of income taxes 4 6 (228) Net income $ 801 $ 214 $ 269 Denominator: Weighted average shares 49.7 47.8 50.0 Basic EPS: Continuing operations $ 16.02 $ 4.36 $ 9.94 Discontinued operations $ 0.07 $ 0.11 $ (4.56) Total $ 16.09 $ 4.47 $ 5.38 Diluted EPS (1) : Numerator: Income from continuing operations $ 797 $ 208 $ 506 Income (loss) from discontinued operations, net of income taxes 4 6 (228) Net income $ 801 $ 214 $ 278 Denominator: Weighted average shares from Basic EPS above 49.7 47.8 50.0 Weighted average effect of dilutive securities (2) Shares from assumed conversion of preferred stock — — 0.8 Net effect of dilutive unvested restricted stock awards (1) 0.3 0.1 0.1 Denominator for diluted calculation 50.0 47.9 50.9 Diluted EPS: Continuing operations $ 15.95 $ 4.35 $ 9.94 Discontinued operations $ 0.07 $ 0.11 $ (4.48) Total $ 16.02 $ 4.46 $ 5.46 (1) Computed using the if-converted method, as the result was more dilutive. (2) For the years ended December 31, 2021, 2020 and 2019, an insignificant amount of restricted stock awards were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
Schedule of reconciliation of cash and cash equivalents | 2021 2020 (in millions) Cash and cash equivalents $ 3,046 $ 2,796 Restricted cash included within Other assets 877 323 Cash, cash equivalents and restricted cash included within Assets of discontinued operations — 344 Total cash, cash equivalents and restricted cash $ 3,923 $ 3,463 |
DISCONTINUED OPERATIONS AND B_2
DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
Schedule of Bank Holding Company Financial Information | For the Year Ended December 31, 2020 Historical as Reported Adjustments for Discontinued Operations As Adjusted for Discontinued Operations Adjustments for Bank Holding Company Presentation Per Consolidated Statements of Income (in millions) Revenues Services $ 117 $ (292) $ (175) $ 175 $ — Redemption, net 473 (473) — — — Finance charges, net 3,931 — 3,931 (3,931) — Interest and fees on loans — — — 3,931 3,931 (1) Interest on cash and investment securities — — — 21 21 (1) Total interest income* 4,521 (765) 3,756 196 3,952 Interest expense Interest on deposits — — — 238 238 (1) Interest on borrowings — — — 261 261 (1) Total interest expense — — — 499 499 Net interest income* 4,521 (765) 3,756 (303) 3,453 Non-interest income Interchange revenue, net of retailer share arrangements — — — (332) (332) (2) Other — — — 177 177 (2) Total non-interest income — — — (155) (155) Total net interest and non-interest income* 4,521 (765) 3,756 (458) 3,298 Provision for credit losses 1,266 — 1,266 — 1,266 Total net interest and non-interest income, after provision for credit losses* 3,255 (765) 2,490 (458) 2,032 Operating expenses Cost of operations (exclusive of depreciation and amortization disclosed separately below) 2,077 (577) 1,500 (1,500) — General and administrative 106 (1) 105 (105) — Depreciation and other amortization 99 (29) 70 (70) — Amortization of purchased intangibles 85 (49) 36 (36) — Non-interest expenses Employee compensation and benefits — — — 609 609 (3) Card and processing expenses — — — 396 396 (3) Information processing and communication — — — 191 191 (3) Marketing expense — — — 143 143 (3) Depreciation and amortization — — — 106 106 (3) Other — — — 286 286 (3) Total non-interest expenses* 2,367 (656) 1,711 20 1,731 Operating income 888 (109) 779 (478) 301 Interest expense Securitization funding costs 166 — 166 (166) — Interest expense on deposits 220 — 220 (220) — Interest expense on long-term and other debt, net 108 (16) 92 (92) — Total interest expense, net 494 (16) 478 (478) — Income from continuing operations before income taxes 394 (93) 301 — 301 Provision for income taxes 99 (6) 93 — 93 Income from continuing operations 295 (87) 208 — 208 (Loss) income from discontinued operations, net of income taxes (81) 87 6 — 6 Net income $ 214 $ — $ 214 $ — $ 214 * Caption total not historically provided. For the Year Ended December 31, 2019 Historical as Reported Adjustments for Discontinued Operations As Adjusted for Discontinued Operations Adjustments for Bank Holding Company Presentation Per Consolidated Statements of Income (in millions) Revenues Services $ 216 $ (396) $ (180) $ 180 $ — Redemption, net 637 (637) — — — Finance charges, net 4,729 — 4,729 (4,729) — Interest and fees on loans — — — 4,729 4,729 (1) Interest on cash and investment securities — — — 98 98 (1) Total interest income* 5,582 (1,033) 4,549 278 4,827 Interest expense Interest on deposits — — — 307 307 (1) Interest on borrowings — — — 331 331 (1) Total interest expense — — — 638 638 Net interest income* 5,582 (1,033) 4,549 (360) 4,189 Non-interest income Interchange revenue, net of retailer share arrangements — — — (358) (358) (2) Other — — — 219 219 (2) Total non-interest income — — — (139) (139) Total net interest and non-interest income* 5,582 (1,033) 4,549 (499) 4,050 Provision for credit losses 1,188 — 1,188 — 1,188 Total net interest and non-interest income, after provision for credit losses* 4,394 (1,033) 3,361 (499) 2,862 Operating expenses Cost of operations (exclusive of depreciation and amortization disclosed separately below) 2,688 (847) 1,841 (1,841) — General and administrative 150 — 150 (150) — Depreciation and other amortization 80 (32) 48 (48) — Amortization of purchased intangibles 96 (48) 48 (48) — Loss on extinguishment of debt 72 — 72 (72) — Non-interest expenses Employee compensation and benefits — — — 721 721 (3) Card and processing expenses — — — 479 479 (3) Information processing and communication — — — 187 187 (3) Marketing expense — — — 205 205 (3) Depreciation and amortization — — — 96 96 (3) Other — — — 512 512 (3) Total non-interest expenses* 3,086 (927) 2,159 41 2,200 Operating income 1,308 (106) 1,202 (540) 662 Interest expense Securitization funding costs 213 — 213 (213) — Interest expense on deposits 226 — 226 (226) — Interest expense on long-term and other debt, net 130 (29) 101 (101) — Total interest expense, net 569 (29) 540 (540) — Income from continuing operations before income taxes 739 (77) 662 — 662 Provision for income taxes 166 (10) 156 — 156 Income from continuing operations 573 (67) 506 — 506 (Loss) income from discontinued operations, net of income taxes (295) 67 (228) — (228) Net income $ 278 $ — $ 278 $ — $ 278 * Caption total not historically provided. (1) The following tables provide a net interest income reconciliation of interest income previously reported in Finance charges, net revenue, and represents interest income and interest expense previously reported in Total interest expense, net. For the Year Ended December 31, 2020 Finance charges, net Securitization funding costs Interest expense on deposits Interest expense on long-term and other debt, net Total (in millions) Interest income Interest and fees on loans $ 3,931 $ — $ — $ — $ 3,931 Interest on cash and investment securities — 1 18 2 21 Interest expense Interest on deposits — — (238) — (238) Interest on borrowings — (167) — (94) (261) Net interest income $ 3,931 $ (166) $ (220) $ (92) $ 3,453 For the Year Ended December 31, 2019 Finance charges, net Securitization funding costs Interest expense on deposits Interest expense on long-term and other debt, net Total (in millions) Interest income Interest and fees on loans $ 4,729 $ — $ — $ — $ 4,729 Interest on cash and investment securities — 7 81 10 98 Interest expense Interest on deposits — — (307) — (307) Interest on borrowings — (220) — (111) (331) Net interest income $ 4,729 $ (213) $ (226) $ (101) $ 4,189 (2) The following tables provide a non-interest income reconciliation of servicing fees previously reported in Services revenue, and the gain/loss on portfolio and other sales previously reported in Cost of operations expense. For the Year Ended December 31, 2020 Services revenue Cost of operations expense Total (in millions) Non-interest income Interchange revenue, net of retailer share arrangements $ (332) $ — $ (332) Other Payment protection products 157 — 157 Gain on portfolio and other sales — 20 20 Subtotal 157 20 177 Total non-interest income $ (175) $ 20 $ (155) For the Year Ended December 31, 2019 Services revenue Cost of operations expense Total (in millions) Non-interest income Interchange revenue, net of retailer share arrangements $ (358) $ — $ (358) Other Payment protection products 178 — 178 Gain on portfolio and other sales — 41 41 Subtotal 178 41 219 Total non-interest income $ (180) $ 41 $ (139) (3) The following tables provide a reconciliation of further detailed expense line items previously reported in Cost of operations expense, General and administrative expense, Depreciation and other amortization, Amortization of purchased intangibles, and Loss on extinguishment of debt. For the Year Ended December 31, 2020 Cost of operations expense General and administrative expense Depreciation and other amortization Amortization of purchased intangibles Total (in millions) Non-interest expenses Employee compensation and benefits $ 562 $ 47 $ — $ — $ 609 Card and processing expenses 396 — — — 396 Information processing and communication 177 14 — — 191 Marketing expense 143 — — — 143 Depreciation and amortization — — 70 36 106 Other 242 44 — — 286 Total non-interest expenses $ 1,520 $ 105 $ 70 $ 36 $ 1,731 Gain on portfolio and other sales (non-interest income) (20) — — — (20) Total $ 1,500 $ 105 $ 70 $ 36 $ 1,711 For the Year Ended December 31, 2019 Cost of operations expense General and administrative expense Depreciation and other amortization Amortization of purchased intangibles Loss on extinguishment of debt Total (in millions) Non-interest expenses Employee compensation and benefits $ 654 $ 67 $ — $ — $ — $ 721 Card and processing expenses 479 — — — — 479 Information processing and communication 168 19 — — — 187 Marketing expense 204 1 — — — 205 Depreciation and amortization — — 48 48 — 96 Other 377 63 — — 72 512 Total non-interest expenses $ 1,882 $ 150 $ 48 $ 48 $ 72 $ 2,200 Gain on portfolio and other sales (non-interest income) (41) — — — — (41) Total $ 1,841 $ 150 $ 48 $ 48 $ 72 $ 2,159 |
LoyaltyOne | |
Schedule of financial statement information for discontinued operations | 2021 2020 2019 (in millions) Total interest income $ 1 $ 1 $ 2 Total interest expense (1) 11 17 31 Net interest income (10) (16) (29) Total non-interest income 574 765 1,033 Total non-interest expenses 519 656 927 Income before provision from income taxes 45 93 77 Provision for income taxes 36 6 10 Income from discontinued operations, net of income taxes $ 9 $ 87 $ 67 (1) As described above, the Company’s credit agreement, as amended, required a $725 million prepayment of term loans in conjunction with the LoyaltyOne spinoff. As a result, the interest expense reflected above is the allocation to discontinued operations of interest on the basis of this $725 million mandatory prepayment. 2020 (in millions) Assets: Cash and cash equivalents $ 286 Accounts receivable, net 270 Inventories 164 Redemption settlement assets, restricted 693 Property and equipment, net 98 Goodwill 736 Other assets 216 Total assets of discontinued operations $ 2,463 Liabilities: Accounts payable $ 68 Accrued expenses 61 Deferred revenue 1,004 Other liabilities 224 Total liabilities of discontinued operations $ 1,357 2021 2020 2019 (in millions) Depreciation and amortization $ 31 $ 78 $ 80 Capital expenditures $ 15 $ 24 $ 41 |
Epsilon | |
Schedule of financial statement information for discontinued operations | Consideration received (1) $ 4,452 Net carrying value of assets and liabilities (including other comprehensive income) 3,940 Pre-tax gain on deconsolidation $ 512 (1) Consideration as defined included cash associated with the sold Epsilon entities, which was $42.2 million. 2021 2020 2019 (in millions) Total interest income $ — $ — $ — Total interest expense (1) — — 64 Net interest income — — (64) Total non-interest income — — 963 Total non-interest expenses 7 110 519 (Loss) income before (benefit) provision for income taxes (7) (110) 380 (Benefit) provision for income taxes (2) (29) 675 (Loss) income from discontinued operations, net of income taxes $ (5) $ (81) $ (295) (1) The Company’s credit agreement, as amended, required a $500 million payment of the revolving credit facility and the redemption of all of the Company’s outstanding senior notes. As a result, the interest expense reflected above is the allocation to discontinued operations of interest on the basis of this $500 million mandatory repayment and redemption of its $2 billion in senior notes outstanding. 2021 2020 2019 (in millions) Depreciation and amortization $ — $ — $ 73 Capital expenditures $ — $ — $ 56 |
PARENT-ONLY FINANCIAL STATEME_2
PARENT-ONLY FINANCIAL STATEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
PARENT-ONLY FINANCIAL STATEMENTS | |
Schedule of balance sheets | Parent Company – Condensed Balance Sheets December 31, 2021 2020 (in millions) Assets: Cash and cash equivalents $ — $ — Investment in subsidiaries 4,446 5,127 Investment in Loyalty Ventures 50 — Other assets 123 42 Total assets $ 4,619 $ 5,169 Liabilities: Long-term and other debt $ 1,985 $ 2,805 Intercompany liabilities, net 482 742 Other liabilities 66 100 Total liabilities 2,533 3,647 Stockholders’ equity 2,086 1,522 Total liabilities and stockholders’ equity $ 4,619 $ 5,169 |
Schedule of statements of income | Parent Company – Condensed Statements of Income Years Ended December 31, 2021 2020 2019 (in millions) Total interest income $ 12 $ 13 $ 19 Total interest expense 103 110 130 Net interest expense (91) (97) (111) Dividends from subsidiaries 535 256 923 Total net interest and non-interest income 444 159 812 Total non-interest expenses 1 1 71 Income before income taxes and equity in undistributed net income (loss) of subsidiaries 443 158 741 Benefit for income taxes 36 21 42 Income before equity in undistributed net income (loss) of subsidiaries 479 179 783 Equity in undistributed net income (loss) of subsidiaries 322 35 (505) Net income $ 801 $ 214 $ 278 |
Schedule of statements of comprehensive income | Parent Company – Condensed Statements of Comprehensive Income Years Ended December 31, 2021 2020 2019 (in millions) Net income $ 801 $ 214 $ 278 Other comprehensive income, net of tax 7 — 5 Total comprehensive income, net of tax $ 808 $ 214 $ 283 |
Schedule of statements of cash flows | Parent Company – Condensed Statements of Cash Flows Years Ended December 31, 2021 2020 2019 (in millions) Net cash used in operating activities $ (398) $ (138) $ (1,029) Investing activities: Investment in subsidiaries — (3) (135) Proceeds from sale of business — — 4,118 Dividends received 533 256 923 Purchases of available-for-sale securities (10) — — Net cash provided by investing activities 523 253 4,906 Financing activities: Debt proceeds from spinoff of Loyalty Ventures Inc. 750 — — Borrowings under debt agreements 38 1,276 3,083 Repayments of borrowings (864) (1,320) (5,778) Payment of debt extinguishment costs — — (46) Payment of deferred financing costs (4) (9) (21) Purchase of treasury shares — — (976) Dividends paid (42) (61) (127) Proceeds from issuance of common stock 4 3 12 Other (7) (4) (24) Net cash used in financing activities (125) (115) (3,877) Change in cash, cash equivalents and restricted cash — — — Cash, cash equivalents and restricted cash at beginning of year — — — Cash, cash equivalents and restricted cash at end of year $ — $ — $ — |
DESCRIPTION OF BUSINESS AND S_4
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2021USD ($)segmentclient | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Jan. 01, 2020USD ($) | Dec. 31, 2018USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Number of Reportable Segments | segment | 1 | ||||
Retained Earnings (Accumulated Deficit) | $ (87) | $ 4,832 | |||
Allowance for credit losses | $ (1,832) | (2,008) | $ (1,171) | $ (1,038) | |
Period for which interest and fee income accrue until balance, interest and other fees are paid or charged off on installment loan receivables | 120 days | ||||
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | ||||
Amortization term of direct loan amortization costs | 1 year | ||||
Unamortized deferred costs related to loan origination | $ 48 | 38 | |||
Unamortized contract costs | 364 | 311 | |||
Cash and Due from Banks | 251 | 262 | |||
Short-term Investments | 80 | 29 | |||
Interest-bearing Deposits in Banks and Other Financial Institutions | 2,700 | 2,500 | |||
Restricted cash | $ 877 | $ 323 | |||
Number of major customer | client | 10 | ||||
Customer Concentration Risk | Total net interest and non-interest income | Largest clients | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Concentration Risk, Percentage | 59.00% | 65.00% | |||
Customer Concentration Risk | Total net interest and non-interest income | Victoria's Secret & Co. and its retail affiliates | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Concentration Risk, Percentage | 13.00% | 14.00% | |||
Customer Concentration Risk | Total net interest and non-interest income | BJs Wholesale Club (BJs) | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Concentration Risk, Percentage | 8.00% | ||||
Customer Concentration Risk | Total credit card and other loans | BJs Wholesale Club (BJs) | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Concentration Risk, Percentage | 11.00% | ||||
Interchange revenue, net of retailer share arrangements | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Amortization of contract costs | $ 64 | $ 65 | 72 | ||
Non-interest expenses | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Amortization of contract costs | 11 | 12 | 12 | ||
Impairment of contract costs | $ 0 | 38 | $ 0 | ||
ASU 2016-13 | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Allowance for credit losses | $ (644) | ||||
ASU 2016-13 | Period of Adoption Adjustment | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Deferred Income Tax Assets, Net | $ 159 | ||||
Retained Earnings (Accumulated Deficit) | 485 | ||||
Allowance for credit losses | $ 644 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) shares in Millions, $ in Millions | Dec. 03, 2020USD ($)item | Sep. 28, 2020USD ($)shares | Dec. 31, 2021USD ($)shares | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($)shares | Dec. 31, 2019USD ($) |
Acquisition | ||||||
Total consideration, net of cash and restricted cash acquired | $ 75 | $ 267 | $ 7 | |||
Developed technology | ||||||
Fair values of assets acquired and liabilities assumed in acquisition | ||||||
Developed technology | $ 91 | |||||
Bread | ||||||
Acquisition | ||||||
Number of shares initially acquired | shares | 3.5 | |||||
Percentage of interest acquired | 6.00% | 6.00% | ||||
Total acquisition percentage | 100.00% | |||||
Equity consideration shares of common stock | shares | 1.9 | 1.9 | ||||
Cash consideration | $ 25 | $ 275 | ||||
Equity consideration | 149 | |||||
Deferred consideration | 75 | $ 75 | ||||
Total consideration paid | $ 491 | |||||
Gain (loss) recognized on remeasurement | $ 0 | |||||
Fair values of assets acquired and liabilities assumed in acquisition | ||||||
Installment loan receivables | 112 | |||||
Developed technology | 91 | |||||
Right of use assets - operating | 4 | |||||
Deferred tax asset, net | 7 | |||||
Intangible assets | 11 | |||||
Goodwill | 370 | |||||
Total assets acquired | 595 | |||||
Accounts payable | 2 | |||||
Accrued expenses | 3 | |||||
Operating lease liabilities | 3 | |||||
Non-recourse borrowings of consolidated securitization entities | 96 | |||||
Debt issued by consolidated variable interest entities | 96 | |||||
Total liabilities assumed | 104 | |||||
Net assets acquired, net of cash and restricted cash | $ 491 | |||||
Number of warehouse facilities acquired | item | 2 |
CREDIT CARD AND OTHER LOANS - A
CREDIT CARD AND OTHER LOANS - Allowance for Loan Loss and Delinquencies (Details) $ in Millions | 12 Months Ended | |||
Dec. 31, 2021USD ($)item | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Receivables | $ 16,284 | $ 15,578 | ||
Total credit card and other loans | 17,399 | 16,784 | ||
Less: Credit card and other loans - restricted for securitization investors | 11,215 | 11,208 | ||
Unbilled finance charges | 224 | 219 | ||
Allowance for credit losses | (1,832) | (2,008) | $ (1,171) | $ (1,038) |
Loans and Leases Receivable, Net Amount | 15,567 | 14,776 | ||
Unbilled to cardholders | $ 224 | 219 | ||
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | |||
Period for which interest and fee income accrue until balance, interest and other fees are paid or charged off on installment loan receivables | 120 days | |||
Period an account becomes past due before a proprietary collection scoring algorithm automatically scores the risk of an account becoming further delinquent | 30 days | |||
Amortized cost of receivables balances contractually delinquent: | ||||
Financing Receivable, before Allowance for Credit Loss, Total | $ 16,284 | $ 15,578 | ||
Principal receivables balances contractually delinquent: | ||||
Re-aged accounts as percentage of total credit card and loan receivables | 1.70% | 2.80% | 2.40% | |
Modified Credit Card Receivables | ||||
Impaired credit card and loan receivables | $ 281 | $ 490 | ||
Allowance for loan loss on impaired credit card receivables | $ 81 | 166 | ||
Maximum percentage of credit card receivables to total portfolio | 3.00% | |||
Average recorded investment in impaired credit card receivables | $ 383 | 412 | ||
Interest income on modified credit card receivables | 26 | 30 | $ 23 | |
ASU 2016-13 | ||||
Allowance for credit losses | (644) | |||
Consolidated Variable Interest Entities | ||||
Total credit card and other loans | 11,200 | 11,200 | ||
Less: Credit card and other loans - restricted for securitization investors | 11,215 | 11,208 | ||
Credit Card and Loan Receivables | ||||
Receivables | 17,217 | 16,666 | ||
Amortized cost of receivables balances contractually delinquent: | ||||
Financing Receivable, before Allowance for Credit Loss, Total | $ 17,217 | 16,666 | ||
Modified Credit Card Receivables | ||||
Number of short term forbearance programs | item | 2 | |||
Short-term forbearance programs | $ 12 | 67 | ||
Deferred forbearance programs | $ 86 | 157 | ||
Duration of short term program one | 3 months | |||
Duration of short term program two | 6 months | |||
Outstanding Balance | $ 9 | 40 | ||
Maximum period of time temporary programs' concessions remain in place | 12 months | |||
Installment Loan Receivables | ||||
Receivables | $ 182 | 118 | ||
Allowance for credit losses | $ (14) | (6) | ||
Period for which interest and fee income accrue until balance, interest and other fees are paid or charged off on installment loan receivables | 120 days | |||
Amortized cost of receivables balances contractually delinquent: | ||||
Financing Receivable, before Allowance for Credit Loss, Total | $ 182 | $ 118 |
CREDIT CARD AND OTHER LOANS -_2
CREDIT CARD AND OTHER LOANS - Amortized Cost Basis Credit Card and Loan Receivables (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Financing Receivable, Past Due [Line Items] | ||
Receivables | $ 16,284 | $ 15,578 |
Total | 17,133 | 16,494 |
31 to 60 days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | 262 | 273 |
61 to 90 days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | 186 | 203 |
91 or more days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | 401 | 440 |
Total delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | $ 849 | $ 916 |
CREDIT CARD AND OTHER LOANS - T
CREDIT CARD AND OTHER LOANS - Troubled Debt Restructurings (Details) - Consumer Portfolio $ in Millions | 12 Months Ended | |
Dec. 31, 2021USD ($)item | Dec. 31, 2020USD ($)item | |
Troubled debt restructurings - credit card and loan receivables | ||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||
Number of Restructurings | item | 171,993 | 391,049 |
Pre-modification Outstanding Balance | $ 254 | $ 554 |
Post-modification Outstanding Balance | $ 254 | $ 553 |
Troubled debt restructurings that subsequently defaulted - credit card and loan receivables | ||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||
Number of Restructurings | item | 114,531 | 118,600 |
Outstanding Balance | $ 154 | $ 162 |
CREDIT CARD AND OTHER LOANS - C
CREDIT CARD AND OTHER LOANS - Credit Quality on Amortized Cost Basis (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Credit Quality | ||
Receivables | $ 16,284 | $ 15,578 |
Percentage of Financing Receivable, Credit Card Receivables, Outstanding | 0.10% | |
Unused credit card lines available to cardholders | $ 112,000 | 108,000 |
Installment Loan Receivables | ||
Credit Quality | ||
Receivables | $ 182 | $ 118 |
Installment Loan Receivables | FICO Score, From 660 and Above | ||
Credit Quality | ||
Percentage of total amortized cost basis of revolving loan receivables outstanding | 84 | 86 |
Percentage of Amortized Cost Basis Loan Receivables Outstanding | 84 | 86 |
Installment Loan Receivables | FICO Score, From 660 and Below | ||
Credit Quality | ||
Percentage of total amortized cost basis of revolving loan receivables outstanding | 14 | |
Percentage of Amortized Cost Basis Loan Receivables Outstanding | 14 | |
Installment Loan Receivables | FICO Score Below 660 | ||
Credit Quality | ||
Percentage of total amortized cost basis of revolving loan receivables outstanding | 16 | |
Percentage of Amortized Cost Basis Loan Receivables Outstanding | 16 | |
Credit Card Receivable | No Score | Credit Score, from 661 or Higher | ||
Credit Quality | ||
Percentage of amortized cost basis of credit card receivables outstanding | 62.00% | 60.00% |
Credit Card Receivable | No Score | Credit Score, From 601 to 660 | ||
Credit Quality | ||
Percentage of amortized cost basis of credit card receivables outstanding | 26.00% | 28.00% |
Credit Card Receivable | No Score | Credit Score, From 600 or Less | ||
Credit Quality | ||
Percentage of amortized cost basis of credit card receivables outstanding | 12.00% | 12.00% |
CREDIT CARD AND OTHER LOANS - S
CREDIT CARD AND OTHER LOANS - Securitized Credit Card Receivables (Details) $ in Millions | Sep. 30, 2020USD ($)Asset | Dec. 31, 2021USD ($)item | Dec. 31, 2020USD ($)item | Dec. 31, 2019USD ($) |
Portfolio Held For Sale | ||||
Carrying value of the credit card portfolios held for sale | $ 0 | |||
Number of credit card portfolios transferred from held for sale to receivables | Asset | 1 | |||
Carring value of the loan and credit card portfolios transferred out of held for sale to receivables | $ 82 | |||
Valuation adjustment on credit card and loan portfolios held for sale | 0 | $ 8 | $ (190) | |
Proceeds from sale of credit card loan portfolio | 512 | 289 | 2,062 | |
Gain (loss) on sales of credit card portfolio | $ 10 | $ 20 | ||
Portfolio Acquisitions | ||||
Number of credit card portfolios acquired | item | 3 | 0 | ||
Purchase price of credit card portfolio | $ 110 | 925 | ||
Purchase price of credit card receivables portfolio | 106 | |||
Purchase price of credit card receivables portfolio, intangible assets | 4 | |||
Securitized Credit Card and Loan Receivables | ||||
Total credit card loans - available to settle obligations of consolidated VIEs | 11,215 | $ 11,208 | ||
Of which: principal amount of credit card loans 91 days or more past due | 159 | 201 | ||
Net charge-offs of securitized principal | $ 453 | $ 756 | $ 908 | |
Minimum | ||||
Securitized Credit Card and Loan Receivables | ||||
Minimum interests requirement (as a percent) | 4.00% | |||
Maximum | ||||
Securitized Credit Card and Loan Receivables | ||||
Minimum interests requirement (as a percent) | 10.00% |
ALLOWANCE FOR CREDIT LOSSES (De
ALLOWANCE FOR CREDIT LOSSES (Details) $ in Millions | Jan. 01, 2020USD ($) | Dec. 31, 2021USD ($)item | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) |
Allowance for Loan Loss | ||||
Number of credit card and loan receivable groups | item | 4 | |||
Payments allocated to future purchase activity | $ 0 | |||
Balance at beginning of period | $ 1,171 | 2,008 | $ 1,171 | $ 1,038 |
Provision for credit losses | 544 | 1,266 | 1,188 | |
Change in estimate for uncollectible unpaid interest and fees | 10 | |||
Recoveries | 163 | 205 | 234 | |
Principal charge-offs | (720) | (1,083) | (1,055) | |
Balance at end of period | $ 1,832 | 2,008 | 1,171 | |
Number of days a loan is contractually past due before resulting in charge-off | 180 days | |||
Number of days after notification of creditor's bankruptcy or death when an account is charged-off | 60 days | |||
Actual charge-offs for unpaid interest and fees | $ 456 | 717 | 809 | |
Unbilled Finance Charges | $ 224 | 219 | ||
Current Expected Credit Loss Methodology [Member] | ||||
Allowance for Loan Loss | ||||
Balance at beginning of period | 1,815 | $ 1,815 | ||
Balance at end of period | $ 1,815 | |||
Increase in allowance for credit losses | $ 644 | |||
Maximum | ||||
Allowance for Loan Loss | ||||
Number of days after notification of creditor's bankruptcy or death when an account is charged-off | 180 days | |||
Group A (Current, risk score - high) | ||||
Allowance for Loan Loss | ||||
Estimated Life (in months) | 14 months | |||
Group B (Current, risk score - low) | ||||
Allowance for Loan Loss | ||||
Estimated Life (in months) | 19 months | |||
Group C (Delinquent, risk score - high) | ||||
Allowance for Loan Loss | ||||
Estimated Life (in months) | 17 months | |||
Group D (Delinquent, risk score - low) | ||||
Allowance for Loan Loss | ||||
Estimated Life (in months) | 26 months |
SECURITIZATIONS (Details)
SECURITIZATIONS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Total credit card loans - available to settle obligations of consolidated VIEs | $ 11,215 | $ 11,208 | |
Of which: principal amount of credit card loans 91 days or more past due | 159 | 201 | |
Net charge-offs of securitized principal | $ 453 | $ 756 | $ 908 |
Minimum | |||
Minimum interests requirement (as a percent) | 4.00% | ||
Maximum | |||
Minimum interests requirement (as a percent) | 10.00% |
AVAILABLE-FOR-SALE SECURITIES_2
AVAILABLE-FOR-SALE SECURITIES (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Debt Securities, Available-for-Sale, Fair Value to Amortized Cost, after Allowance for Credit Loss [Abstract] | |||
Amortized Cost | $ 237 | $ 219 | |
Unrealized Gains | 4 | 6 | |
Unrealized Losses | (2) | ||
Fair Value | 239 | 225 | |
Fair Value | |||
Less than 12 months | 57 | ||
12 Months or Greater | 15 | ||
Total | 72 | ||
Unrealized Losses | |||
Less than 12 months | (1) | ||
12 Months or Greater | (1) | ||
Total | (2) | ||
Amortized Cost | |||
Due in one year or less | 65 | ||
Due after ten years | 172 | ||
Total | 237 | ||
Estimated Fair Value | |||
Due in one year or less | 65 | ||
Due after ten years | 174 | ||
Total | 239 | ||
Gains or losses from the sale of AFS securities | $ 0 | $ 0 | $ 0 |
PROPERTY AND EQUIPMENT, NET (De
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Millions | Dec. 03, 2020 | Dec. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Property and equipment | |||||
Total | $ 484 | $ 471 | $ 484 | ||
Accumulated depreciation and amortization | (271) | (256) | (271) | ||
Property and equipment, net | 213 | 215 | 213 | ||
Depreciation | |||||
Depreciation | 26 | 57 | $ 30 | ||
Amortization on capitalized software | 37 | 15 | 18 | ||
Unamortized capitalized software costs | 118 | 113 | 118 | ||
Capitalized software, impairment | 4 | ||||
Impairment charges | 64 | $ 11 | |||
Internal-use computer software and development | |||||
Property and equipment | |||||
Total | 248 | $ 263 | 248 | ||
Internal-use computer software and development | Minimum | |||||
Depreciation | |||||
Estimated useful life | 1 year | ||||
Internal-use computer software and development | Maximum | |||||
Depreciation | |||||
Estimated useful life | 4 years | ||||
Furniture and equipment | |||||
Property and equipment | |||||
Total | 122 | $ 107 | 122 | ||
Furniture and equipment | Minimum | |||||
Depreciation | |||||
Estimated useful life | 1 year | ||||
Furniture and equipment | Maximum | |||||
Depreciation | |||||
Estimated useful life | 10 years | ||||
Land and leasehold improvements | |||||
Property and equipment | |||||
Total | 90 | $ 76 | 90 | ||
Construction in progress | |||||
Property and equipment | |||||
Total | 24 | $ 25 | $ 24 | ||
Leasehold improvements | Minimum | |||||
Depreciation | |||||
Estimated useful life | 1 year | ||||
Leasehold improvements | Maximum | |||||
Depreciation | |||||
Estimated useful life | 17 years | ||||
Bread | |||||
Depreciation | |||||
Developed technology | $ 91 | ||||
Developed technology | |||||
Depreciation | |||||
Developed technology | $ 91 | ||||
Useful life | 5 years | ||||
Private Label Services and Credit | |||||
Depreciation | |||||
Impairment charges | 3 | ||||
Accelerated depreciation | $ 25 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS, NET - Goodwill Information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill | |||
Goodwill impairment | $ 0 | $ 0 | $ 0 |
Operating segment | Private Label Services and Credit | |||
Goodwill | |||
Beginning Balance | 634 | 264 | |
Goodwill acquired during the year | 370 | ||
Ending Balance | $ 634 | $ 634 | $ 264 |
GOODWILL AND INTANGIBLE ASSET_4
GOODWILL AND INTANGIBLE ASSETS, NET - Finite Lived Assets and Indefinite Lived Assets (Details) - USD ($) $ in Millions | Dec. 03, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Schedule of Finite and Indefinite-lived Intangible Assets | ||||
Finite lived assets, gross | $ 144 | $ 149 | ||
Accumulated Amortization | (92) | (73) | ||
Finite lived assets, net | 52 | 76 | ||
Total Intangible Assets | ||||
Gross Assets | 145 | 150 | ||
Accumulated Amortization | (92) | (73) | ||
Net | 53 | 77 | ||
Impairment of intangible assets | 0 | 0 | $ 0 | |
Trade names | ||||
Indefinite Lived Assets | ||||
Indefinite lived assets | 1 | 1 | ||
Total Intangible Assets | ||||
Net | 1 | 1 | ||
Customer contracts and lists | ||||
Schedule of Finite and Indefinite-lived Intangible Assets | ||||
Finite lived assets, gross | 9 | 9 | ||
Accumulated Amortization | (3) | |||
Finite lived assets, net | $ 6 | $ 9 | ||
Amortization Life and Method | ||||
Useful life | 3 years | 3 years | ||
Total Intangible Assets | ||||
Accumulated Amortization | $ (3) | |||
Premium on purchased credit card loan portfolios | ||||
Schedule of Finite and Indefinite-lived Intangible Assets | ||||
Finite lived assets, gross | 133 | $ 138 | ||
Accumulated Amortization | (89) | (73) | ||
Finite lived assets, net | 44 | 65 | ||
Total Intangible Assets | ||||
Accumulated Amortization | $ (89) | $ (73) | ||
Premium on purchased credit card loan portfolios | Minimum | ||||
Amortization Life and Method | ||||
Useful life | 1 year | 1 year | ||
Premium on purchased credit card loan portfolios | Maximum | ||||
Amortization Life and Method | ||||
Useful life | 13 years | 13 years | ||
Noncompete agreements | ||||
Schedule of Finite and Indefinite-lived Intangible Assets | ||||
Finite lived assets, gross | $ 2 | $ 2 | ||
Finite lived assets, net | $ 2 | $ 2 | ||
Amortization Life and Method | ||||
Useful life | 5 years | 5 years | ||
Bread | ||||
Total Intangible Assets | ||||
Acquired intangible assets | $ 11 | |||
Bread | Customer relationships | ||||
Total Intangible Assets | ||||
Acquired intangible assets | $ 9 | |||
Weighted average life | 3 years | |||
Bread | Noncompete agreements | ||||
Total Intangible Assets | ||||
Acquired intangible assets | $ 2 | |||
Weighted average life | 5 years |
GOODWILL AND INTANGIBLE ASSET_5
GOODWILL AND INTANGIBLE ASSETS, NET - Maturity Schedule (Details) - USD ($) $ in Millions | Dec. 03, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Intangible assets | ||||
Amortization expense | $ 29 | $ 34 | $ 48 | |
Estimated amortization expense related to intangible assets for the next five years and thereafter | ||||
2022 | 20 | |||
2023 | 15 | |||
2024 | 11 | |||
2025 | 2 | |||
2026 | 1 | |||
Thereafter | $ 3 | |||
Bread | ||||
Intangible assets | ||||
Acquired intangible assets | $ 11 | |||
Bread | Customer relationships | ||||
Intangible assets | ||||
Acquired intangible assets | $ 9 | |||
Weighted average life | 3 years | |||
Bread | Noncompete agreements | ||||
Intangible assets | ||||
Acquired intangible assets | $ 2 | |||
Weighted average life | 5 years |
OTHER ASSETS (Details)
OTHER ASSETS (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Other Assets | ||
Restricted Cash | $ 877 | $ 323 |
Deferred contract costs | 364 | 311 |
Deferred tax asset, net | 302 | 289 |
Accounts receivable, net | 151 | 114 |
Right of use assets - operating | $ 97 | $ 119 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Other Assets, Total | Other Assets, Total |
Investment in LVI | $ 50 | |
Other | 151 | $ 207 |
Other Assets, Total | $ 1,992 | $ 1,363 |
LEASES (Details)
LEASES (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Lessee, Lease, Description [Line Items] | |||
Asset impairments | $ 0 | $ 64 | $ 52 |
Non-interest expenses | |||
Lessee, Lease, Description [Line Items] | |||
Asset impairments | $ 18 | ||
Minimum | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease terms | 1 year | ||
Maximum | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease terms | 17 years |
LEASES - Lease expense (Details
LEASES - Lease expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Lease expense | |||
Operating lease cost | $ 23 | $ 25 | $ 24 |
Short-term lease cost | 1 | 1 | |
Variable lease cost | 2 | 2 | 3 |
Sublease income | (5) | (1) | |
Total | $ 20 | $ 27 | 28 |
Weighted-average remaining lease term (in years): operating leases | 9 years 9 months 18 days | 10 years 3 months 18 days | |
Weighted-average discount rate : operating leases | 5.80% | 5.80% | |
Supplemental cash flow information related to leases was as follows: | |||
Operating cash flows from operating leases | $ 25 | $ 28 | 27 |
Operating leases - Right-of-use assets obtained in exchange for lease obligations | $ 5 | $ 1 | $ 23 |
LEASES - Maturities of lease li
LEASES - Maturities of lease liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Lease liabilities | ||
2022 | $ 20 | |
2023 | 21 | |
2024 | 21 | |
2025 | 20 | |
2026 | 19 | |
Thereafter | 86 | |
Total undiscounted lease liabilities | 187 | |
Less: Amount representing interest | (47) | |
Total present value of minimum lease payments | $ 140 | $ 172 |
BORROWINGS OF LONG-TERM AND O_3
BORROWINGS OF LONG-TERM AND OTHER DEBT (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||
Nov. 30, 2021 | Jul. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2020 | Sep. 22, 2020 | Dec. 20, 2019 | |
Debt | |||||||||
Total long-term and other debt | $ 2,008,000,000 | $ 2,008,000,000 | |||||||
Less: Unamortized discount and debt issuance costs | 22,000,000 | 22,000,000 | |||||||
Retail deposit | 3,200,000,000 | 3,200,000,000 | $ 1,700,000,000 | ||||||
Deposits | 11,027,000,000 | 11,027,000,000 | 9,793,000,000 | ||||||
Debt issued by consolidated variable interest entities | 5,453,000,000 | 5,453,000,000 | 5,710,000,000 | ||||||
Total borrowings of long-term and other debt | 18,466,000,000 | 18,466,000,000 | 18,309,000,000 | ||||||
Loss from extinguishment of debt | $ (72,000,000) | ||||||||
Wholesale deposit | 7,800,000,000 | 7,800,000,000 | 8,100,000,000 | ||||||
Maturities of long-term and other debt | |||||||||
2022 | 231,000,000 | 231,000,000 | |||||||
2023 | 177,000,000 | 177,000,000 | |||||||
2024 | 1,100,000,000 | 1,100,000,000 | |||||||
2026 | 500,000,000 | 500,000,000 | |||||||
Long-Term and Other Debt | 1,986,000,000 | 1,986,000,000 | |||||||
Maturities Of Deposits | |||||||||
2022 | 9,096,000,000 | 9,096,000,000 | |||||||
2023 | 1,217,000,000 | 1,217,000,000 | |||||||
2024 | 627,000,000 | 627,000,000 | |||||||
2025 | 57,000,000 | 57,000,000 | |||||||
2026 | 36,000,000 | 36,000,000 | |||||||
Total maturities | 11,033,000,000 | 11,033,000,000 | |||||||
Unamortized discount | (6,000,000) | (6,000,000) | |||||||
Total Deposits | 11,027,000,000 | 11,027,000,000 | |||||||
Maturities Of Debt by Consolidated VIEs | |||||||||
2022 | 3,034,000,000 | 3,034,000,000 | |||||||
2023 | 2,421,000,000 | 2,421,000,000 | |||||||
Total maturities | 5,455,000,000 | 5,455,000,000 | |||||||
Unamortized discount | (2,000,000) | (2,000,000) | |||||||
Total non-recourse borrowings of consolidated securitization entities | 5,453,000,000 | 5,453,000,000 | 5,710,000,000 | ||||||
Maturities of total | |||||||||
2022 | 12,361,000,000 | 12,361,000,000 | |||||||
2023 | 3,815,000,000 | 3,815,000,000 | |||||||
2024 | 1,727,000,000 | 1,727,000,000 | |||||||
2025 | 57,000,000 | 57,000,000 | |||||||
2026 | 536,000,000 | 536,000,000 | |||||||
Total maturities | 18,496,000,000 | 18,496,000,000 | |||||||
Unamortized discount on convertible senior notes | (30,000,000) | (30,000,000) | |||||||
Total | 18,466,000,000 | 18,466,000,000 | |||||||
Spinoff | Loyalty One Segment | |||||||||
Debt | |||||||||
Spinoff adjustment to prepayment on loans | $ 25,000,000 | ||||||||
Aggregate principal payments as a percentage of extended term loans | 86.00% | ||||||||
Proceeds from spinoff | $ 750,000,000 | ||||||||
Repayment of line of credit | $ 725,000,000 | 25,000,000 | |||||||
Term loan outstanding | Spinoff | Loyalty One Segment | |||||||||
Debt | |||||||||
Common equity tier 1 capital | 11 | ||||||||
No term loan outstanding | Spinoff | Loyalty One Segment | |||||||||
Debt | |||||||||
Common equity tier 1 capital | 10 | ||||||||
Series 2019-A asset backed term notes | |||||||||
Debt | |||||||||
Expected repayment amount | 563,000,000 | 563,000,000 | |||||||
Series 2019-B asset backed term notes | |||||||||
Debt | |||||||||
Expected repayment amount | 399,000,000 | 399,000,000 | |||||||
Series 2019-C asset backed term notes | |||||||||
Debt | |||||||||
Expected repayment amount | 684,000,000 | 684,000,000 | |||||||
Series 2018-A Notes | |||||||||
Debt | |||||||||
Principal payments collected during accumulation period | 846,000,000 | ||||||||
Asset backed term notes | |||||||||
Debt | |||||||||
Debt repaid by the company | 2,100,000,000 | ||||||||
Amount borrowed | 0 | ||||||||
Retained amount of subordinated class of notes | 281,000,000 | ||||||||
Total deposits | |||||||||
Debt | |||||||||
Less: Unamortized discount and debt issuance costs | 6,000,000 | 6,000,000 | 12,000,000 | ||||||
Deposits | 11,033,000,000 | 11,033,000,000 | 9,805,000,000 | ||||||
Deposits | 11,027,000,000 | 11,027,000,000 | 9,793,000,000 | ||||||
Certificates of deposit | |||||||||
Debt | |||||||||
Deposits | $ 5,447,000,000 | $ 5,447,000,000 | $ 6,015,000,000 | ||||||
Certificates of deposit | Comenity Bank and Comenity Capital Bank | |||||||||
Debt | |||||||||
Weighted average interest rate (as a percent) | 1.91% | 1.91% | 2.58% | ||||||
Certificates of deposit | Minimum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 0.20% | 0.20% | |||||||
Certificates of deposit | Minimum | Comenity Bank and Comenity Capital Bank | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 0.20% | 0.20% | 0.15% | ||||||
Denomination amount of certificate of deposits | $ 1,000 | ||||||||
Certificates of deposit | Maximum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 3.75% | 3.75% | |||||||
Certificates of deposit | Maximum | Comenity Bank and Comenity Capital Bank | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 3.75% | 3.75% | 3.75% | ||||||
Money market deposits | |||||||||
Debt | |||||||||
Money market deposits | $ 5,586,000,000 | $ 5,586,000,000 | $ 3,790,000,000 | ||||||
Debt instrument description of Variable rate basis | Federal Funds rate | ||||||||
Money market deposits | Comenity Bank and Comenity Capital Bank | |||||||||
Debt | |||||||||
Weighted average interest rate (as a percent) | 0.68% | 0.68% | 1.00% | ||||||
Money market deposits | Minimum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 0.05% | 0.05% | 0.38% | ||||||
Money market deposits | Minimum | Comenity Bank and Comenity Capital Bank | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 0.05% | 0.05% | 0.38% | ||||||
Money market deposits | Maximum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 3.50% | 3.50% | 3.50% | ||||||
Money market deposits | Maximum | Comenity Bank and Comenity Capital Bank | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 3.50% | 3.50% | 3.50% | ||||||
Non-recourse borrowings of consolidated securitization entities | |||||||||
Debt | |||||||||
Less: Unamortized discount and debt issuance costs | $ 2,000,000 | $ 2,000,000 | $ 5,000,000 | ||||||
Total Debt issued by consolidated VIEs: | 5,455,000,000 | 5,455,000,000 | 5,715,000,000 | ||||||
Debt issued by consolidated variable interest entities | 5,453,000,000 | 5,453,000,000 | 5,710,000,000 | ||||||
Maturities Of Debt by Consolidated VIEs | |||||||||
Total non-recourse borrowings of consolidated securitization entities | 5,453,000,000 | 5,453,000,000 | 5,710,000,000 | ||||||
Fixed rate asset-backed term note securities | |||||||||
Debt | |||||||||
Total Debt issued by consolidated VIEs: | $ 1,572,000,000 | $ 1,572,000,000 | 3,424,000,000 | ||||||
Fixed rate asset-backed term note securities | Minimum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 2.21% | 2.21% | |||||||
Fixed rate asset-backed term note securities | Maximum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 3.61% | 3.61% | |||||||
Secured Loan Facility | |||||||||
Debt | |||||||||
Total Debt issued by consolidated VIEs: | 86,000,000 | ||||||||
Conduit asset-backed securities | |||||||||
Debt | |||||||||
Maximum borrowing capacity | $ 4,500,000,000 | $ 4,500,000,000 | |||||||
Total Debt issued by consolidated VIEs: | 3,883,000,000 | 3,883,000,000 | $ 2,205,000,000 | ||||||
Reduction in Credit Facility | 1,300,000,000 | 1,300,000,000 | |||||||
Line of credit amount outstanding | $ 3,900,000,000 | $ 3,900,000,000 | |||||||
Debt instrument description of Variable rate basis | LIBOR | ||||||||
Conduit asset-backed securities | Minimum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 0.89% | 0.89% | 1.39% | ||||||
Conduit asset-backed securities | Maximum | |||||||||
Debt | |||||||||
Interest Rate (as a percent) | 0.96% | 0.96% | 1.89% | ||||||
Long-term and other debt | |||||||||
Debt | |||||||||
Total long-term and other debt | $ 2,008,000,000 | $ 2,008,000,000 | $ 2,834,000,000 | ||||||
Less: Unamortized discount and debt issuance costs | 22,000,000 | 22,000,000 | 28,000,000 | ||||||
Long-term and other debt | 1,986,000,000 | 1,986,000,000 | 2,806,000,000 | ||||||
Senior Notes Due 2024 | |||||||||
Debt | |||||||||
Principal amount of debt | $ 850,000,000 | ||||||||
Total long-term and other debt | $ 850,000,000 | $ 850,000,000 | 850,000,000 | ||||||
Interest Rate (as a percent) | 4.75% | 4.75% | 4.75% | 4.75% | |||||
Senior Notes Due 2026 | |||||||||
Debt | |||||||||
Principal amount of debt | $ 500,000,000 | ||||||||
Total long-term and other debt | $ 500,000,000 | $ 500,000,000 | 500,000,000 | ||||||
Interest Rate (as a percent) | 7.00% | 7.00% | 7.00% | 7.00% | |||||
2017 Credit Agreement | |||||||||
Debt | |||||||||
Total availability under Credit Facility | $ 750,000,000 | $ 750,000,000 | |||||||
Revolving line of credit | |||||||||
Debt | |||||||||
Maximum borrowing capacity | 750,000,000 | ||||||||
Debt instrument description of Variable rate basis | LIBOR | ||||||||
Term loans | |||||||||
Debt | |||||||||
Total long-term and other debt | $ 658,000,000 | $ 658,000,000 | $ 1,484,000,000 | ||||||
Weighted average interest rate (as a percent) | 1.85% | 1.85% | 1.90% | ||||||
Line of credit amount outstanding | $ 658,000,000 | ||||||||
Debt instrument description of Variable rate basis | LIBOR | LIBOR |
OTHER LIABILITIES (Details)
OTHER LIABILITIES (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
OTHER LIABILITIES | ||
Account Payable And Other Brand Partner Liabilities | $ 291 | $ 354 |
Accrued Liabilities | 314 | 384 |
Operating lease liabilities | $ 140 | $ 172 |
Operating Lease, Liability, Statement of Financial Position [Extensible List] | Total other liabilities | Total other liabilities |
Long Term Tax Reserves | $ 313 | $ 347 |
Other Sundry Liabilities | 136 | 102 |
Total other liabilities | $ 1,194 | $ 1,359 |
OTHER NON-INTEREST INCOME AND_3
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Other Noninterest Income [Abstract] | |||
Payment protection products | $ 141 | $ 156 | $ 174 |
Gain on portfolio and other sales | 10 | 20 | 41 |
Other | 5 | 1 | 4 |
Total other non-interest income | 156 | 177 | 219 |
Other Noninterest Expenses [Abstract] | |||
Professional services and regulatory fees | 136 | 114 | 120 |
Asset impairment charges | 64 | 11 | |
Portfolio valuation adjustments (to reflect the lower of cost or market) | 0 | (8) | 190 |
Loss on extinguishment of debt | 72 | ||
Other | 86 | 108 | 119 |
Total other non-interest expenses | $ 222 | $ 286 | $ 512 |
FAIR VALUES OF FINANCIAL INST_3
FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair Value of Instruments (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2021 | Dec. 31, 2020 | |
Fair Value of Financial Instruments | ||
Transfers into or out of Level 3 | $ 0 | $ 0 |
Transfers between Levels 1 and 2 | 0 | 0 |
Financial assets | ||
Credit card and loan receivables, net | 15,567 | 14,776 |
Available-for-sale securities | 239 | 225 |
Financial liabilities | ||
Deposits | 11,135 | 10,016 |
Debt issued by consolidated variable interest entities | 5,453 | 5,710 |
Non-recourse borrowings of consolidated securitization entities | 5,467 | 5,783 |
Long-term and other debt | 2,053 | 2,875 |
Total liabilities measured at fair value | 18,655 | 18,674 |
Carrying Amount | ||
Financial assets | ||
Credit card and loan receivables, net | 15,567 | 14,776 |
Available-for-sale securities | 239 | 225 |
Financial liabilities | ||
Deposits | 11,027 | 9,793 |
Debt issued by consolidated variable interest entities | 5,453 | 5,710 |
Long-term and other debt | 1,986 | 2,806 |
Fair Value | ||
Financial assets | ||
Credit card and loan receivables, net | 17,989 | 17,301 |
Available-for-sale securities | 239 | 225 |
Financial liabilities | ||
Deposits | 11,135 | 10,016 |
Debt issued by consolidated variable interest entities | 5,467 | 2,783 |
Long-term and other debt | $ 2,053 | $ 2,875 |
FAIR VALUES OF FINANCIAL INST_4
FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair Value Level Disclosure (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Assets disclosed at fair value | ||
Available-for-sale securities | $ 239 | $ 225 |
Total assets measured at fair value | 17,989 | 17,301 |
Level 3 | ||
Assets disclosed at fair value | ||
Total assets measured at fair value | 17,989 | 17,301 |
Recurring | ||
Assets disclosed at fair value | ||
Available-for-sale securities | 239 | 225 |
Total assets measured at fair value | 239 | 225 |
Recurring | Level 1 | ||
Assets disclosed at fair value | ||
Available-for-sale securities | 48 | 34 |
Total assets measured at fair value | 48 | 34 |
Recurring | Level 2 | ||
Assets disclosed at fair value | ||
Available-for-sale securities | 191 | 191 |
Total assets measured at fair value | $ 191 | $ 191 |
FAIR VALUES OF FINANCIAL INST_5
FAIR VALUES OF FINANCIAL INSTRUMENTS - Assets and Liabilities Not Carried at Fair Value (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Dec. 31, 2020 |
Financial assets | ||
Credit card and loan receivables, net | $ 17,989 | $ 17,301 |
Total assets measured at fair value | 17,989 | 17,301 |
Financial liabilities | ||
Deposits | 11,135 | 10,016 |
Debt issued by consolidated VIEs | 5,467 | 5,783 |
Long-term and other debt | 2,053 | 2,875 |
Total liabilities measured at fair value | 18,655 | 18,674 |
Level 2 | ||
Financial liabilities | ||
Deposits | 11,135 | 10,016 |
Debt issued by consolidated VIEs | 5,467 | 5,783 |
Long-term and other debt | 2,053 | 2,875 |
Total liabilities measured at fair value | 18,655 | 18,674 |
Level 3 | ||
Financial assets | ||
Credit card and loan receivables, net | 17,989 | 17,301 |
Total assets measured at fair value | $ 17,989 | $ 17,301 |
FAIR VALUES OF FINANCIAL INST_6
FAIR VALUES OF FINANCIAL INSTRUMENTS - Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | |||
Asset Impairment Charges | $ 0 | $ 64 | $ 52 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Regulatory Matters and Cardholders (Details) $ in Millions | Jan. 19, 2021USD ($)item | Jan. 31, 2022USD ($) | Jan. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2021USD ($) |
Comenity Bank | |||||
Tier 1 capital to average assets | |||||
Tier 1 capital to average assets, Actual Ratio (as a prcent) | 20 | ||||
Tier 1 capital to average assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4 | ||||
Tier 1 capital to average assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | 5 | ||||
Common Equity Tier 1 capital to risk-weighted assets | |||||
Common Equity Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 21.4 | ||||
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | ||||
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 6.50% | ||||
Banking Regulation, Risk-Based Information [Abstract] | |||||
Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 21.4 | ||||
Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6 | ||||
Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8 | ||||
Total capital to risk-weighted assets, Actual Ratio (as a percent) | 22.7 | ||||
Total capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8 | ||||
Total capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent) | 10 | ||||
Comenity Capital Bank | |||||
Tier 1 capital to average assets | |||||
Tier 1 capital to average assets, Actual Ratio (as a prcent) | 17.3 | ||||
Tier 1 capital to average assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4 | ||||
Tier 1 capital to average assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | 5 | ||||
Common Equity Tier 1 capital to risk-weighted assets | |||||
Common Equity Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 18.6 | ||||
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | ||||
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 6.50% | ||||
Banking Regulation, Risk-Based Information [Abstract] | |||||
Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 18.6 | ||||
Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6 | ||||
Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8 | ||||
Total capital to risk-weighted assets, Actual Ratio (as a percent) | 19.9 | ||||
Total capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8 | ||||
Total capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent) | 10 | ||||
Combined Banks | |||||
Tier 1 capital to average assets | |||||
Tier 1 capital to average assets, Actual Ratio (as a prcent) | 18.6 | ||||
Tier 1 capital to average assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4 | ||||
Tier 1 capital to average assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | 5 | ||||
Common Equity Tier 1 capital to risk-weighted assets | |||||
Common Equity Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 20 | ||||
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | ||||
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 6.50% | ||||
Banking Regulation, Risk-Based Information [Abstract] | |||||
Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 20 | ||||
Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6 | ||||
Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8 | ||||
Total capital to risk-weighted assets, Actual Ratio (as a percent) | 21.3 | ||||
Total capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8 | ||||
Total capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent) | 10 | ||||
Discontinued Operations, Disposed of by Sale | |||||
Contingencies | |||||
Loss Contingency, Loss in Period | $ 150 | ||||
Epsilon | Discontinued Operations, Disposed of by Sale | |||||
Contingencies | |||||
Loss contingency, total | $ 150 | ||||
Number of installment payments | item | 2 | ||||
Loss contingency accrual | $ 75 | ||||
Loss contingency, payment | $ 75 | $ 75 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||
Jun. 30, 2015 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Jul. 01, 2015 | Jul. 20, 2001 | |
EDCP | ||||||
Retirement Plans | ||||||
Vested percentage | 100.00% | |||||
Retirement Savings Plan | ||||||
Retirement Plans | ||||||
Number of shares registered for issuance | 1,500,000 | |||||
Number of shares available for issuance | 290,897 | |||||
Minimum age limit of employees covered by the plan | 18 years | |||||
Service period after which seasonal employees begin receiving employer matching contribution | 12 months | |||||
Service period after which employees begin receiving employer matching contribution | 180 days | |||||
Percentage of employees' contribution matched by employer | 5.00% | |||||
Company's matching and discretionary contributions | $ 15,000,000 | $ 16,000,000 | $ 35,000,000 | |||
Executive Deferred Compensation Plan | EDCP | ||||||
Retirement Plans | ||||||
Deferred compensation liability | 18,000,000 | $ 19,000,000 | ||||
2005 Employee Stock Purchase Plan | Retirement Savings Plan | ||||||
Retirement Plans | ||||||
Number of shares available for issuance | 441,327 | |||||
2015 Employee Stock Purchase Plan | ||||||
Employee Stock Purchase Plan | ||||||
Maximum amount of common stock permitted to be purchased annually per employee | $ 25,000 | |||||
Maximum percentage of voting power after purchase of common stock under ESPP | 5.00% | |||||
Offering period under ESPP | 6 months | |||||
Purchase price of common stock as a percentage of fair market value of shares | 85.00% | |||||
Maximum number of shares reserved for issuance under the ESPP | 1,441,327 | |||||
Number of shares issued under the ESPP | 57,713 | |||||
Weighted-average issue price of shares issued under the ESPP (in dollars per share) | $ 70.44 | |||||
Number of shares issued under the ESPP since the inception of the plan | 571,825 | |||||
Retirement Plans | ||||||
Number of shares available for issuance | 869,502 | 1,000,000 |
CHANGES IN ACCUMULATED OTHER _3
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Millions | Nov. 05, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | $ (5) | |||
Changes in other comprehensive income (loss) | 3 | $ 95 | $ 38 | |
Recognition of foreign currency translation adjustments upon sale of business | 54 | 4 | 27 | |
Balance at the end of the period | (2) | (5) | ||
Unrealized gain (loss) on net investment hedges | 7 | 5 | ||
Epsilon | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 27 | |||
Precima | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 4 | |||
LoyaltyOne | ||||
Accumulated Other Comprehensive Income | ||||
Unrealized gain (loss) on net investment hedges | $ (7) | |||
Net Unrealized Gains (Losses) on Securities | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | 23 | 2 | (11) | |
Changes in other comprehensive income (loss) | (21) | 21 | 13 | |
Balance at the end of the period | 1 | 23 | 2 | |
Net Unrealized Gains (Losses) on Securities | LoyaltyOne | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | (1) | |||
Net Unrealized Gains (Losses) on Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (1) | |||
Changes in other comprehensive income (loss) | 2 | (1) | ||
Balance at the end of the period | (1) | |||
Net Unrealized Gains (Losses) on Cash Flow Hedges | LoyaltyOne | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | (1) | |||
Net Unrealized Gains (Losses) on Net Investment Hedge | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (7) | (7) | (12) | |
Changes in other comprehensive income (loss) | 5 | |||
Balance at the end of the period | (7) | (7) | ||
Net Unrealized Gains (Losses) on Net Investment Hedge | LoyaltyOne | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 7 | |||
Foreign Currency Translation Adjustment (Losses) Gains | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (20) | (95) | (115) | |
Changes in other comprehensive income (loss) | (37) | 71 | (7) | |
Balance at the end of the period | (3) | (20) | (95) | |
Foreign Currency Translation Adjustment (Losses) Gains | Epsilon | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 4 | 27 | ||
Foreign Currency Translation Adjustment (Losses) Gains | LoyaltyOne | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 54 | |||
Accumulated Other Comprehensive Loss | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (5) | (100) | (138) | |
Changes in other comprehensive income (loss) | 3 | 95 | 38 | |
Changes in other comprehensive income (loss) | (56) | 91 | 11 | |
Balance at the end of the period | (2) | (5) | (100) | |
Accumulated Other Comprehensive Loss | Epsilon | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | $ 4 | $ 27 | ||
Accumulated Other Comprehensive Loss | LoyaltyOne | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | $ 59 |
STOCKHOLDERS' EQUITY - Stock Re
STOCKHOLDERS' EQUITY - Stock Repurchase Programs (Details) - USD ($) $ in Millions | 12 Months Ended | ||||||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Jul. 01, 2020 | Jun. 30, 2020 | Jun. 09, 2020 | Jul. 01, 2015 | |
Stock Repurchase Programs | |||||||
Number of shares repurchased | 0 | 0 | 6,300,000 | ||||
Total cost of shares repurchased | $ 976 | ||||||
2019 Stock Repurchase Program | |||||||
Stock Repurchase Programs | |||||||
Amount remaining of a stock repurchase plan that expired | $ 348 | ||||||
2015 Omnibus Incentive Plan | |||||||
Stock Compensation Plans | |||||||
Shares of common stock reserved for grant | 5,100,000 | ||||||
2020 Omnibus Incentive Plan | |||||||
Stock Compensation Plans | |||||||
Shares of common stock reserved for grant | 2,400,000 | 2,400,000 | |||||
Stock Repurchase Programs | |||||||
Maximum award amount | $ 1 |
STOCKHOLDERS' EQUITY - Stock Co
STOCKHOLDERS' EQUITY - Stock Compensation Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | |||
Stock-based compensation expense | $ 25 | $ 15 | $ 18 |
Forfeiture rate (as a percent) | 5.00% | 5.00% | 5.00% |
Unrecognized expenses | $ 35 | ||
Approximate weighted average period for recognizing expenses | 1 year 9 months 18 days | ||
Income tax benefits related to stock-based compensation expense | $ 4 | $ 3 | $ 3 |
Discontinued Operations, Held-for-sale | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | |||
Stock-based compensation expense | $ 4 | $ 6 | $ 37 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock Unit Awards and Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | Jan. 27, 2022 | Jul. 30, 2021 | Nov. 30, 2021 | Mar. 31, 2020 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Dividends | |||||||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 1.26 | $ 0.84 | $ 2.52 | ||||
Dividends declared | $ 42 | $ 60 | $ 127 | ||||
Dividends paid | 42 | 61 | 127 | ||||
Treasury Stock | |||||||
Dividends | |||||||
Retirement of treasury stock | $ (6,733) | 6,733 | |||||
Retained Earnings | |||||||
Dividends | |||||||
Dividends declared | 42 | $ 60 | $ 127 | ||||
Retirement of treasury stock | 5,453 | (5,453) | |||||
Additional Paid-In Capital | |||||||
Dividends | |||||||
Retirement of treasury stock | $ 1,280 | $ (1,280) | |||||
Common Stock | |||||||
Dividends | |||||||
Treasury stock, shares retired | 67,400,000 | 67,400,000 | |||||
Restricted stock units | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 513,132 | 577,267 | 513,132 | 796,912 | |||
Shares granted (in shares) | 888,245 | 481,566 | 704,235 | ||||
Shares vested (in shares) | (192,400) | (170,018) | (441,503) | ||||
Shares forfeited (in shares) | (513,677) | (247,413) | (546,512) | ||||
Balance at the end of the period (in shares) | 759,435 | 577,267 | 513,132 | ||||
Outstanding and Expected to Vest (in shares) | 633,480 | ||||||
Weighted Average Fair Value | |||||||
Balance at the beginning of the period (in dollars per share) | $ 172.06 | $ 103.89 | $ 172.06 | $ 218.81 | |||
Shares granted (in dollars per share) | 88.18 | 89.11 | 161.05 | ||||
Shares vested (in dollars per share) | 118.78 | 175.09 | 218.45 | ||||
Shares forfeited (in dollars per share) | 93.16 | 166.93 | 188.40 | ||||
Balance at the end of the period (in dollars per share) | 89.14 | $ 103.89 | $ 172.06 | ||||
Outstanding and Expected to Vest (in dollars per share) | $ 90.09 | ||||||
Restricted stock, additional disclosures | |||||||
Total fair value of units vested | $ 23 | $ 30 | $ 96 | ||||
Aggregate intrinsic value of units outstanding and expected to vest | $ 42 | ||||||
Market-based restricted stock unit awards | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 24,288 | 22,227 | 24,288 | 56,229 | |||
Shares granted (in shares) | 2,641 | 20,770 | 37,878 | ||||
Shares forfeited (in shares) | (5,801) | (22,831) | (69,819) | ||||
Balance at the end of the period (in shares) | 19,067 | 22,227 | 24,288 | ||||
Restricted stock, additional disclosures | |||||||
Attainment percentage | 100.00% | 100.00% | 100.00% | ||||
Increase in granted shares | 2,641 | ||||||
Performance-based restricted stock unit awards | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 230,272 | 221,226 | 230,272 | 423,242 | |||
Shares granted (in shares) | 111,542 | 219,186 | 420,239 | ||||
Shares vested (in shares) | (24,677) | (42,097) | (262,773) | ||||
Shares forfeited (in shares) | (216,675) | (186,135) | (350,436) | ||||
Balance at the end of the period (in shares) | 91,416 | 221,226 | 230,272 | ||||
Restricted stock, additional disclosures | |||||||
Attainment percentage | 100.00% | 100.00% | 100.00% | ||||
Increase in granted shares | 12,659 | ||||||
Stock Compensation Plans, Additional Disclosures | |||||||
Award vesting period | 3 years | ||||||
Service-based restricted stock unit awards | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 258,572 | 333,814 | 258,572 | 317,441 | |||
Shares granted (in shares) | 774,062 | 241,610 | 246,118 | ||||
Shares vested (in shares) | (167,723) | (127,921) | (178,730) | ||||
Shares forfeited (in shares) | (291,201) | (38,447) | (126,257) | ||||
Balance at the end of the period (in shares) | 648,952 | 333,814 | 258,572 | ||||
Restricted stock, additional disclosures | |||||||
Increase in granted shares | 96,556 | ||||||
Stock Compensation Plans, Additional Disclosures | |||||||
Award vesting period | 3 years | ||||||
Subsequent event | |||||||
Dividends | |||||||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 0.21 | ||||||
Minimum | Performance-based restricted stock unit awards | |||||||
Stock Compensation Plans, Additional Disclosures | |||||||
Earned percentage | 0.00% | ||||||
Maximum | Performance-based restricted stock unit awards | |||||||
Stock Compensation Plans, Additional Disclosures | |||||||
Earned percentage | 170.00% |
INCOME TAXES - Components of In
INCOME TAXES - Components of Income Tax and Reconciliation and Deferred Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2017 | |
Components of income before income taxes: | ||||
Income from continuing operations before income taxes | $ 1,044 | $ 301 | $ 662 | |
Deferred | ||||
Total deferred income tax benefit | (15) | (223) | (186) | |
Total provision for income taxes | $ 247 | 93 | 156 | |
Federal statutory rate (as a percent) | 21.00% | 35.00% | ||
Reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate | ||||
Expected expense at statutory rate | $ 219 | 63 | 139 | |
Increase (decrease) in income taxes resulting from: | ||||
State income taxes, net of federal benefit | 33 | 6 | 33 | |
Impact of 2017 Tax Reform | (8) | (2) | (30) | |
Non-deductible expenses (non-taxable income) | 4 | 6 | 7 | |
IRC Section 199, net of tax reserves | 12 | |||
Other | (1) | 8 | 7 | |
Total provision for income taxes | 247 | 93 | 156 | |
Deferred tax assets | ||||
Deferred revenue | 17 | 14 | ||
Allowance for credit losses | 447 | 482 | ||
Net operating loss carryforwards and other carryforwards | 42 | 43 | ||
Operating lease liabilities | 33 | 42 | ||
Accrued expenses and other | 65 | 75 | ||
Total deferred tax assets | 604 | 656 | ||
Valuation allowance | (8) | (8) | ||
Deferred tax assets, net of valuation allowance | 596 | 648 | ||
Deferred tax liabilities | ||||
Deferred income | 221 | 291 | ||
Depreciation | 28 | 14 | ||
Right of use assets | 22 | 28 | ||
Intangible assets | 23 | 26 | ||
Total deferred tax liabilities | 294 | 359 | ||
Total - Net deferred tax asset (liability) | 302 | 289 | ||
Amounts recognized in the consolidated balance sheets: | ||||
Total - Net deferred tax asset (liability) | 302 | 289 | ||
Continuing Operations | ||||
Current | ||||
Federal | 218 | 228 | 123 | |
State | 49 | 36 | 35 | |
Total current income tax expense | 267 | 264 | 158 | |
Deferred | ||||
Federal | (13) | (143) | (9) | |
State | (7) | (28) | 7 | |
Total deferred income tax benefit | (20) | (171) | (2) | |
Total provision for income taxes | 247 | 93 | 156 | |
Increase (decrease) in income taxes resulting from: | ||||
Total provision for income taxes | $ 247 | $ 93 | $ 156 |
INCOME TAXES - Operating Loss C
INCOME TAXES - Operating Loss Carryforward (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Reconciliation of unrecognized tax benefits | |||
Balance at the beginning of the period | $ 255 | $ 215 | $ 223 |
Increases related to prior years' tax positions | 1 | 59 | 2 |
Decreases related to prior years' tax positions | (13) | (23) | (66) |
Increases related to current year tax positions | 12 | 11 | 58 |
Settlements during the period | (8) | (5) | (1) |
Lapses of applicable statutes of limitation | (2) | (1) | |
Balance at the end of the period | 247 | 255 | 215 |
Cumulative interest and penalties with respect to unrecognized tax benefits | 76 | 69 | 60 |
Potential interest and penalties with respect to unrecognized tax benefits | 8 | 9 | 2 |
Unrecognized tax benefits, if recognized, would impact effective tax rate | 241 | $ 243 | $ 198 |
Capital losses | |||
Operating Loss, Carryforwards | |||
Capital loss carryforward | 7 | ||
Federal | |||
Operating Loss, Carryforwards | |||
Net operating loss carryovers | 132 | ||
Foreign | |||
Operating Loss, Carryforwards | |||
Tax credits | 34 | ||
State | |||
Operating Loss, Carryforwards | |||
Net operating loss carryovers | 231 | ||
Tax credits | $ 3 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 25, 2019 | Oct. 31, 2019 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Numerator: | |||||
Income from continuing operations | $ 797 | $ 208 | $ 506 | ||
Less: Dividends declared on preferred stock | 3 | ||||
Less: Allocation of undistributed earnings | 6 | ||||
Income from continuing operations - basic | 797 | 208 | 497 | ||
Income (loss) from discontinued operations, net of tax | 4 | 6 | (228) | ||
Net income - basic | $ 801 | $ 214 | $ 269 | ||
Denominator: | |||||
Weighted average shares, basic | 49,700,000 | 47,800,000 | 50,000,000 | ||
Weighted average effect of dilutive securities: | |||||
Shares from assumed conversion of preferred stock (in shares) | 800,000 | ||||
Net effect of dilutive unvested restricted stock (1) (in shares) | 300,000 | 100,000 | 100,000 | ||
Denominator for diluted calculations (in shares) | 50,000,000 | 47,900,000 | 50,900,000 | ||
Basic income (loss) attributable to common stockholders per share: | |||||
Income from continuing operations (in dollars per share) | $ 16.02 | $ 4.36 | $ 9.94 | ||
Income (loss) from discontinued operations (in dollars per share) | 0.07 | 0.11 | (4.56) | ||
Net income per share (in dollars per share) | $ 16.09 | $ 4.47 | $ 5.38 | ||
Diluted income per share (1): | |||||
Income from continuing operations | $ 797 | $ 208 | $ 506 | ||
Income (loss) from discontinued operations, net of tax | 4 | 6 | (228) | ||
Net income | $ 801 | $ 214 | $ 278 | ||
Diluted income per share: | |||||
Income from continuing operations (in dollars per share) | $ 15.95 | $ 4.35 | $ 9.94 | ||
Income (loss) from discontinued operations | 0.07 | 0.11 | (4.48) | ||
Net income per share (in dollars per share) | $ 16.02 | $ 4.46 | $ 5.46 | ||
Series A Non-Voting Convertible Preferred Stock | |||||
Diluted income per share: | |||||
Conversion of stock, shares converted | 150,000 | ||||
Value Act Holdings, L.P. | Series A Non-Voting Convertible Preferred Stock | |||||
Diluted income per share: | |||||
Conversion of stock, shares issued | 150,000 | ||||
Value Act Holdings, L.P. | Common Stock A Member | |||||
Diluted income per share: | |||||
Conversion of stock, shares converted | 1,500,000 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Millions | Apr. 25, 2019 | Dec. 31, 2021 | Oct. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Cash and cash equivalents | $ 3,046 | $ 2,796 | ||||
Restricted cash included within Other assets (1) | 877 | 323 | ||||
Cash, cash equivalents and restricted cash included within Assets of discontinued operations | 344 | |||||
Total cash, cash equivalents and restricted cash | 3,923 | 3,463 | $ 3,958 | $ 3,968 | ||
Series A Non-Voting Convertible Preferred Stock | ||||||
Conversion of stock, shares converted | 150,000 | |||||
Spinoff | ||||||
Equity method investment | 48 | |||||
Bread | ||||||
Deferred consideration | $ 75 | $ 75 | ||||
Equity consideration shares of common stock | 1,900,000 | 1,900,000 | ||||
Value Act Holdings, L.P. | Common Stock A Member | ||||||
Conversion of stock, shares converted | 1,500,000 | |||||
Value Act Holdings, L.P. | Series A Non-Voting Convertible Preferred Stock | ||||||
Conversion of stock, shares issued | 150,000 |
DISCONTINUED OPERATIONS AND B_3
DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION (Details) $ in Millions | Nov. 05, 2021USD ($) | Jul. 01, 2019USD ($) | Dec. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Apr. 30, 2019USD ($) | Apr. 12, 2019USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Investment carrying amount | $ 50 | ||||||
Assets : | |||||||
Total assets of discontinued operations | $ 2,463 | ||||||
Liabilities: | |||||||
Total liabilities of discontinued operations | 1,357 | ||||||
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||||||
Long-term Debt | $ 1,986 | ||||||
Depreciation and amortization | $ 73 | ||||||
Capital expenditures | 56 | ||||||
Loyalty Ventures | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Ownership interest | 19.00% | 19.00% | |||||
Investment carrying amount | $ 50 | ||||||
LoyaltyOne | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Percentage of shares distributed to common stockholders | 81.00% | ||||||
Stockholders' Equity Note, Stock Split, Conversion Ratio | 0.40 | ||||||
Proceeds from spinoff | $ 750 | ||||||
Debt repaid by the company | 725 | ||||||
Repayments of borrowings | $ 25 | ||||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | |||||||
Total interest income | 1 | 1 | 2 | ||||
Total interest expense | 11 | 17 | 31 | ||||
Net interest income | (10) | (16) | (29) | ||||
Total non-interest income | 574 | 765 | 1,033 | ||||
Total non-interest expenses | 519 | 656 | 927 | ||||
Income before provision (benefit) from income taxes | 45 | 93 | 77 | ||||
Provision (benefit) for income taxes | 36 | 6 | 10 | ||||
(Loss) income from discontinued operations, net of taxes | 9 | 87 | 67 | ||||
Assets : | |||||||
Cash and cash equivalents | 286 | ||||||
Accounts receivable, net | 270 | ||||||
Inventories | 164 | ||||||
Redemption settlement assets, restricted | 693 | ||||||
Property and equipment, net | 98 | ||||||
Goodwill | 736 | ||||||
Other assets | 216 | ||||||
Total assets of discontinued operations | 2,463 | ||||||
Liabilities: | |||||||
Accounts payable | 68 | ||||||
Accrued expenses | 61 | ||||||
Deferred revenue | 1,004 | ||||||
Other liabilities | 224 | ||||||
Total liabilities of discontinued operations | 1,357 | ||||||
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||||||
Mandatory payment per credit agreement | 725 | ||||||
Depreciation and amortization | 31 | 78 | 80 | ||||
Capital expenditures | 15 | 24 | 41 | ||||
Epsilon | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Consideration, cash associated with disposal group | $ 42.2 | ||||||
Transaction costs | 79 | ||||||
After tax loss on sale | 252 | ||||||
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||||||
Mandatory payment per credit agreement | 500 | ||||||
Epsilon | Senior Notes | |||||||
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||||||
Long-term Debt | $ 2,000 | ||||||
Epsilon | Discontinued Operations, Held-for-sale | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Total consideration | $ 4,000 | ||||||
Epsilon | Discontinued Operations, Disposed of by Sale | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Total consideration | 4,452 | ||||||
Net carrying value of assets and liabilities (including other comprehensive income) | 3,940 | ||||||
Pre-tax gain on deconsolidation | $ 512 | ||||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | |||||||
Total interest expense | 64 | ||||||
Net interest income | (64) | ||||||
Total non-interest income | 963 | ||||||
Total non-interest expenses | 7 | 110 | 519 | ||||
Income before provision (benefit) from income taxes | 7 | 110 | (380) | ||||
Provision (benefit) for income taxes | (2) | (29) | 675 | ||||
(Loss) income from discontinued operations, net of taxes | $ (5) | $ (81) | $ (295) |
DISCONTINUED OPERATIONS AND B_4
DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION - Bank holding company financial presentation (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2021USD ($)segment | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Revenues | |||
Interest and fees on loans | $ 3,861 | $ 3,931 | $ 4,729 |
Interest on cash and investment securities | 7 | 21 | 98 |
Total interest income | 3,868 | 3,952 | 4,827 |
Interest expense | |||
Interest on deposits | 167 | 238 | 307 |
Interest on borrowings | 216 | 261 | 331 |
Total interest expense | 383 | 499 | 638 |
Net interest income | 3,485 | 3,453 | 4,189 |
Non-interest income | |||
Interchange Revenue, Net of Retailer Share Arrangements | (369) | (332) | (358) |
Other | 156 | 177 | 219 |
Payment protection products | 157 | 178 | |
Gain on portfolio and other sales | 10 | 20 | 41 |
Total non-interest income | (213) | (155) | (139) |
Total net interest and non-interest income | 3,272 | 3,298 | 4,050 |
Provision for credit losses | 544 | 1,266 | 1,188 |
Total net interest and non-interest income, after provision for credit losses | 2,728 | 2,032 | 2,862 |
Operating expenses | |||
Loss on extinguishment of debt | 72 | ||
Non-interest expenses | |||
Employee Compensation And Benefits | 671 | 609 | 721 |
Card and processing expenses | 323 | 396 | 479 |
Information processing and communication | 191 | 187 | |
Marketing expenses | 160 | 143 | 205 |
Depreciation and amortization | 92 | 106 | 96 |
Other | 222 | 286 | 512 |
Gain on portfolio and other sales | (10) | (20) | (41) |
Total non-interest expenses | 1,684 | 1,731 | 2,200 |
Operating income | 301 | 662 | |
Income from continuing operations before income taxes | 1,044 | 301 | 662 |
Provision for income taxes | 247 | 93 | 156 |
Income from continuing operations | 797 | 208 | 506 |
Income (loss) from discontinued operations, net of income taxes | 4 | 6 | (228) |
Net income | $ 801 | 214 | 278 |
Number of Operating Segments | segment | 1 | ||
Finance charges, net | |||
Revenues | |||
Interest and fees on loans | 3,931 | 4,729 | |
Interest expense | |||
Net interest income | 3,931 | 4,729 | |
Securitization funding costs | |||
Revenues | |||
Interest on cash and investment securities | 1 | 7 | |
Interest expense | |||
Interest on borrowings | 167 | 220 | |
Net interest income | (166) | (213) | |
Interest expense on deposits | |||
Revenues | |||
Interest on cash and investment securities | 18 | 81 | |
Interest expense | |||
Interest on deposits | 238 | 307 | |
Net interest income | (220) | (226) | |
Interest expense on long-term and other debt, net | |||
Revenues | |||
Interest on cash and investment securities | 2 | 10 | |
Interest expense | |||
Interest on borrowings | 94 | 111 | |
Net interest income | (92) | (101) | |
Services revenue | |||
Non-interest income | |||
Interchange Revenue, Net of Retailer Share Arrangements | (332) | (358) | |
Other | 157 | 178 | |
Payment protection products | 157 | 178 | |
Total non-interest income | (175) | (180) | |
Cost of operations expense | |||
Non-interest income | |||
Other | 20 | 41 | |
Gain on portfolio and other sales | 20 | 41 | |
Total non-interest income | 20 | 41 | |
Non-interest expenses | |||
Employee Compensation And Benefits | 562 | 654 | |
Card and processing expenses | 396 | 479 | |
Information processing and communication | 177 | 168 | |
Marketing expenses | 143 | 204 | |
Other | 242 | 377 | |
Gain on portfolio and other sales | (20) | (41) | |
Total non-interest expenses | 1,520 | 1,882 | |
General and administrative expense. | |||
Non-interest expenses | |||
Employee Compensation And Benefits | 47 | 67 | |
Information processing and communication | 14 | 19 | |
Marketing expenses | 1 | ||
Other | 44 | 63 | |
Total non-interest expenses | 105 | 150 | |
Depreciation and other amortization | |||
Non-interest expenses | |||
Depreciation and amortization | 70 | 48 | |
Total non-interest expenses | 70 | 48 | |
Amortization of purchased intangibles | |||
Non-interest expenses | |||
Depreciation and amortization | 36 | 48 | |
Total non-interest expenses | 36 | 48 | |
Loss on extinguishment of debt | |||
Non-interest expenses | |||
Other | 72 | ||
Total non-interest expenses | 72 | ||
Historical as Reported | |||
Revenues | |||
Services | 117 | 216 | |
Redemption, net | 473 | 637 | |
Finance charges, net | 3,931 | 4,729 | |
Total interest income | 4,521 | 5,582 | |
Interest expense | |||
Net interest income | 4,521 | 5,582 | |
Non-interest income | |||
Total net interest and non-interest income | 4,521 | 5,582 | |
Provision for credit losses | 1,266 | 1,188 | |
Total net interest and non-interest income, after provision for credit losses | 3,255 | 4,394 | |
Operating expenses | |||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | 2,077 | 2,688 | |
General and administrative | 106 | 150 | |
Depreciation and amortization | 99 | 80 | |
Amortization of purchased intangibles | 85 | 96 | |
Loss on extinguishment of debt | 72 | ||
Non-interest expenses | |||
Total non-interest expenses | 2,367 | 3,086 | |
Operating income | 888 | 1,308 | |
Securitization Funding Costs | 166 | 213 | |
Interest expense on deposits | 220 | 226 | |
Interest expense on long-term and other debt, net | 108 | 130 | |
Total interest expense, net | 494 | 569 | |
Income from continuing operations before income taxes | 394 | 739 | |
Provision for income taxes | 99 | 166 | |
Income from continuing operations | 295 | 573 | |
Income (loss) from discontinued operations, net of income taxes | (81) | (295) | |
Net income | 214 | 278 | |
Adjustments for Discontinued Operations | |||
Revenues | |||
Services | (292) | (396) | |
Redemption, net | (473) | (637) | |
Total interest income | (765) | (1,033) | |
Interest expense | |||
Net interest income | (765) | (1,033) | |
Non-interest income | |||
Total net interest and non-interest income | (765) | (1,033) | |
Total net interest and non-interest income, after provision for credit losses | (765) | (1,033) | |
Operating expenses | |||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | (577) | (847) | |
General and administrative | (1) | ||
Depreciation and amortization | (29) | (32) | |
Amortization of purchased intangibles | (49) | (48) | |
Non-interest expenses | |||
Total non-interest expenses | (656) | (927) | |
Operating income | (109) | (106) | |
Interest expense on long-term and other debt, net | (16) | (29) | |
Total interest expense, net | (16) | (29) | |
Income from continuing operations before income taxes | (93) | (77) | |
Provision for income taxes | (6) | (10) | |
Income from continuing operations | (87) | (67) | |
Income (loss) from discontinued operations, net of income taxes | 87 | 67 | |
As Adjusted for Discontinued Operations | |||
Revenues | |||
Services | (175) | (180) | |
Finance charges, net | 3,931 | 4,729 | |
Total interest income | 3,756 | 4,549 | |
Interest expense | |||
Net interest income | 3,756 | 4,549 | |
Non-interest income | |||
Total net interest and non-interest income | 3,756 | 4,549 | |
Provision for credit losses | 1,266 | 1,188 | |
Total net interest and non-interest income, after provision for credit losses | 2,490 | 3,361 | |
Operating expenses | |||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | 1,500 | 1,841 | |
General and administrative | 105 | 150 | |
Depreciation and amortization | 70 | 48 | |
Amortization of purchased intangibles | 36 | 48 | |
Loss on extinguishment of debt | 72 | ||
Non-interest expenses | |||
Total non-interest expenses | 1,711 | 2,159 | |
Operating income | 779 | 1,202 | |
Securitization Funding Costs | 166 | 213 | |
Interest expense on deposits | 220 | 226 | |
Interest expense on long-term and other debt, net | 92 | 101 | |
Total interest expense, net | 478 | 540 | |
Income from continuing operations before income taxes | 301 | 662 | |
Provision for income taxes | 93 | 156 | |
Income from continuing operations | 208 | 506 | |
Income (loss) from discontinued operations, net of income taxes | 6 | (228) | |
Net income | 214 | 278 | |
As Adjusted for Discontinued Operations | Cost of operations expense | |||
Non-interest expenses | |||
Total non-interest expenses | 1,500 | 1,841 | |
As Adjusted for Discontinued Operations | General and administrative expense. | |||
Non-interest expenses | |||
Total non-interest expenses | 105 | 150 | |
As Adjusted for Discontinued Operations | Depreciation and other amortization | |||
Non-interest expenses | |||
Total non-interest expenses | 70 | 48 | |
As Adjusted for Discontinued Operations | Amortization of purchased intangibles | |||
Non-interest expenses | |||
Total non-interest expenses | 36 | 48 | |
As Adjusted for Discontinued Operations | Loss on extinguishment of debt | |||
Non-interest expenses | |||
Total non-interest expenses | 72 | ||
Adjustments for Bank Holding Company Presentation | |||
Revenues | |||
Services | 175 | 180 | |
Finance charges, net | (3,931) | (4,729) | |
Interest and fees on loans | 3,931 | 4,729 | |
Interest on cash and investment securities | 21 | 98 | |
Total interest income | 196 | 278 | |
Interest expense | |||
Interest on deposits | 238 | 307 | |
Interest on borrowings | 261 | 331 | |
Total interest expense | 499 | 638 | |
Net interest income | (303) | (360) | |
Non-interest income | |||
Interchange Revenue, Net of Retailer Share Arrangements | (332) | (358) | |
Other | 177 | 219 | |
Total non-interest income | (155) | (139) | |
Total net interest and non-interest income | (458) | (499) | |
Total net interest and non-interest income, after provision for credit losses | (458) | (499) | |
Operating expenses | |||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | (1,500) | (1,841) | |
General and administrative | (105) | (150) | |
Depreciation and amortization | (70) | (48) | |
Amortization of purchased intangibles | (36) | (48) | |
Loss on extinguishment of debt | (72) | ||
Non-interest expenses | |||
Employee Compensation And Benefits | 609 | 721 | |
Card and processing expenses | 396 | 479 | |
Information processing and communication | 191 | 187 | |
Marketing expenses | 143 | 205 | |
Depreciation and amortization | 106 | 96 | |
Other | 286 | 512 | |
Total non-interest expenses | 20 | 41 | |
Operating income | (478) | (540) | |
Securitization Funding Costs | (166) | (213) | |
Interest expense on deposits | (220) | (226) | |
Interest expense on long-term and other debt, net | (92) | (101) | |
Total interest expense, net | $ (478) | $ (540) |
PARENT-ONLY FINANCIAL STATEME_3
PARENT-ONLY FINANCIAL STATEMENTS (Details) - USD ($) shares in Millions, $ in Millions | 1 Months Ended | 12 Months Ended | |||
Dec. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Assets: | |||||
Cash and cash equivalents | $ 3,046 | $ 3,046 | $ 2,796 | ||
Investment in LVI | 50 | 50 | |||
Other assets | 1,992 | 1,992 | 1,363 | ||
Total assets | 21,746 | 21,746 | 22,547 | ||
Liabilities: | |||||
Long-term and other debt | 1,986 | 1,986 | 2,806 | ||
Other liabilities | 1,194 | 1,194 | 1,359 | ||
Total liabilities | 19,660 | 19,660 | 21,025 | ||
Stockholders' equity | 2,086 | 2,086 | 1,522 | $ 1,589 | $ 2,332 |
Total liabilities and stockholders' equity | 21,746 | 21,746 | 22,547 | ||
Statements of Income | |||||
Investment income | 3,868 | 3,952 | 4,827 | ||
Interest expense, net | 383 | 499 | 638 | ||
Net interest income | 3,485 | 3,453 | 4,189 | ||
Total net interest and non-interest income | 3,272 | 3,298 | 4,050 | ||
Total non-interest expenses | 1,684 | 1,731 | 2,200 | ||
Income before income taxes and equity in undistributed net income (loss) of subsidiaries | 1,044 | 301 | 662 | ||
Benefit for income taxes | (247) | (93) | (156) | ||
Net income | 801 | 214 | 278 | ||
Other comprehensive income (loss): | |||||
Net income | 801 | 214 | 278 | ||
Other comprehensive income, net of tax | 3 | 95 | 38 | ||
Statements of Cash Flows | |||||
Net cash (used in) provided by operating activities | 1,543 | 1,883 | 1,218 | ||
Investing activities: | |||||
Proceeds from sale of business | 27 | 4,410 | |||
Net cash (used in) provided by investing activities | (1,691) | 1,774 | 2,861 | ||
Financing activities: | |||||
Debt proceeds from spinoff of Loyalty Ventures Inc. | 652 | ||||
Payment of debt extinguishment costs | (46) | ||||
Payment of deferred financing costs | (13) | (19) | (45) | ||
Purchase of treasury shares | (976) | ||||
Dividends paid | (42) | (61) | (127) | ||
Proceeds from issuance of common stock | 4 | 3 | 12 | ||
Other | (8) | 1 | (28) | ||
Net cash provided by (used in) financing activities | 608 | (4,167) | (4,092) | ||
Change in cash, cash equivalents and restricted cash | 460 | (495) | (10) | ||
Cash, cash equivalents and restricted cash at end of year | 3,923 | 3,923 | 3,463 | 3,958 | |
Cash, cash equivalents and restricted cash at beginning of year | 3,463 | 3,958 | 3,968 | ||
Parent company | |||||
Assets: | |||||
Investment in subsidiaries | 4,446 | 4,446 | 5,127 | ||
Investment in LVI | 50 | 50 | |||
Other assets | 123 | 123 | 42 | ||
Total assets | 4,619 | 4,619 | 5,169 | ||
Liabilities: | |||||
Long-term and other debt | 1,985 | 1,985 | 2,805 | ||
Intercompany liabilities, net | 482 | 482 | 742 | ||
Other liabilities | 66 | 66 | 100 | ||
Total liabilities | 2,533 | 2,533 | 3,647 | ||
Stockholders' equity | 2,086 | 2,086 | 1,522 | ||
Total liabilities and stockholders' equity | 4,619 | 4,619 | 5,169 | ||
Statements of Income | |||||
Investment income | 12 | 13 | 19 | ||
Interest expense, net | 103 | 110 | 130 | ||
Net interest income | (91) | (97) | (111) | ||
Dividends from subsidiaries | 535 | 256 | 923 | ||
Total net interest and non-interest income | 444 | 159 | 812 | ||
Total non-interest expenses | 1 | 1 | 71 | ||
Income before income taxes and equity in undistributed net income (loss) of subsidiaries | 443 | 158 | 741 | ||
Benefit for income taxes | 36 | 21 | 42 | ||
Income before equity in undistributed net income (loss) of subsidiaries | 479 | 179 | 783 | ||
Equity in undistributed net income (loss) of subsidiaries | 322 | 35 | (505) | ||
Net income | 801 | 214 | 278 | ||
Other comprehensive income (loss): | |||||
Net income | 801 | 214 | 278 | ||
Other comprehensive income, net of tax | 7 | 5 | |||
Total comprehensive income, net of tax | 808 | 214 | 283 | ||
Statements of Cash Flows | |||||
Net cash (used in) provided by operating activities | (398) | (138) | (1,029) | ||
Investing activities: | |||||
Investment in subsidiaries | (3) | (135) | |||
Proceeds from sale of business | 4,118 | ||||
Dividends received | 533 | 256 | 923 | ||
Purchases of available-for-sale securities | (10) | ||||
Net cash (used in) provided by investing activities | 523 | 253 | 4,906 | ||
Financing activities: | |||||
Debt proceeds from spinoff of Loyalty Ventures Inc. | 750 | ||||
Borrowings under debt agreements | 38 | 1,276 | 3,083 | ||
Repayments of borrowings | (864) | (1,320) | (5,778) | ||
Payment of debt extinguishment costs | (46) | ||||
Payment of deferred financing costs | (4) | (9) | (21) | ||
Purchase of treasury shares | (976) | ||||
Dividends paid | (42) | (61) | (127) | ||
Proceeds from issuance of common stock | 4 | 3 | 12 | ||
Other | (7) | (4) | (24) | ||
Net cash provided by (used in) financing activities | (125) | $ (115) | (3,877) | ||
Non-cash investing items | |||||
Non-cash dividend | $ 3,000 | ||||
Spinoff | |||||
Non-cash investing items | |||||
Equity method investment | $ 48 | $ 48 | |||
Bread | |||||
Non-cash investing items | |||||
Equity consideration shares of common stock | 1.9 | 1.9 |