Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2022 | Apr. 22, 2022 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2022 | |
Entity File Number | 001-15749 | |
Entity Registrant Name | BREAD FINANCIAL HOLDINGS, INC. | |
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 $0.01 per share | |
Trading Symbol | BFH | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 49,775,721 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001101215 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Interest income | ||
Interest and fees on loans | $ 1,066 | $ 941 |
Interest on cash and investment securities | 2 | 1 |
Total interest income | 1,068 | 942 |
Interest expense | ||
Interest on deposits | 34 | 47 |
Interest on borrowings | 45 | 60 |
Total interest expense | 79 | 107 |
Net interest income | 989 | 835 |
Non-interest income | ||
Interchange revenue, net of retailer share arrangements | (96) | (68) |
Other | 28 | 35 |
Total non-interest income | (68) | (33) |
Total net interest and non-interest income | 921 | 802 |
Provision for credit losses | 193 | 33 |
Total net interest and non-interest income, after provision for credit losses | 728 | 769 |
Non-interest expenses | ||
Employee compensation and benefits | 179 | 159 |
Card and processing expenses | 82 | 78 |
Information processing and communication | 56 | 51 |
Marketing expenses | 31 | 42 |
Depreciation and amortization | 21 | 25 |
Other | 57 | 47 |
Total non-interest expenses | 426 | 402 |
Income from continuing operations before income taxes | 302 | 367 |
Provision for income taxes | 91 | 99 |
Income from continuing operations | 211 | 268 |
(Loss) income from discontinued operations, net of income taxes | (1) | 18 |
Net income | $ 210 | $ 286 |
Basic income per share (Note 13): | ||
Income from continuing operations (in dollars per share) | $ 4.23 | $ 5.39 |
(Loss) income from discontinued operations (in dollars per share) | (0.01) | 0.37 |
Net income per share (in dollars per share) | 4.22 | 5.76 |
Diluted income per share (Note 13): | ||
Income from continuing operations (in dollars per share) | 4.21 | 5.38 |
(Loss) income from discontinued operations (in dollars per share) | (0.01) | 0.36 |
Net income per share (in dollars per share) | $ 4.20 | $ 5.74 |
Weighted average shares (Note 13): | ||
Basic (in shares) | 49.9 | 49.7 |
Diluted (in shares) | 50 | 49.8 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net income | $ 210 | $ 286 |
Other comprehensive loss: | ||
Unrealized loss on available-for-sale debt securities | (9) | (9) |
Tax benefit | 2 | 1 |
Unrealized loss on available-for-sale debt securities, net of tax | (7) | (8) |
Unrealized gain on cash flow hedges | 1 | |
Unrealized gain on cash flow hedges, net of tax | 1 | |
Foreign currency translation adjustments | (30) | |
Other comprehensive loss, net of tax | (7) | (37) |
Total comprehensive income, net of tax | $ 203 | $ 249 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
ASSETS | ||
Cash and cash equivalents | $ 2,930 | $ 3,046 |
Credit card and other loans: | ||
Total credit card and other loans (includes loans available to settle obligations of consolidated variable interest entities: 2022, $10,771; 2021, $11,215) | 16,843 | 17,399 |
Allowance for credit losses | (1,826) | (1,832) |
Credit card and other loans, net | 15,017 | 15,567 |
Investment securities | 233 | 239 |
Property and equipment, net | 220 | 215 |
Goodwill and intangible assets, net | 682 | 687 |
Other assets | 1,856 | 1,992 |
Total assets | 20,938 | 21,746 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Deposits | 10,646 | 11,027 |
Debt issued by consolidated variable interest entities | 4,816 | 5,453 |
Long-term and other debt | 1,962 | 1,986 |
Other liabilities | 1,246 | 1,194 |
Total liabilities | 18,670 | 19,660 |
Commitments and contingencies (Note 9) | ||
Stockholders' equity: | ||
Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 49.8 million shares as of both March 31, 2022 and December 31, 2021 | 1 | 1 |
Additional paid-in capital | 2,163 | 2,174 |
Retained earnings (accumulated deficit) | 113 | (87) |
Accumulated other comprehensive loss | (9) | (2) |
Total stockholders' equity | 2,268 | 2,086 |
Total liabilities and stockholders' equity | $ 20,938 | $ 21,746 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Credit Card and Loan Receivables Restricted for Securitization Investors | $ 10,771 | $ 11,215 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 200 | 200 |
Common stock, issued shares | 49.8 | 49.8 |
Consolidated Variable Interest Entities | ||
Credit Card and Loan Receivables Restricted for Securitization Investors | $ 10,771 | $ 11,215 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total |
Balance at Dec. 31, 2020 | $ 1 | $ 3,427 | $ (6,734) | $ 4,832 | $ (5) | $ 1,521 |
Balance (in shares) at Dec. 31, 2020 | 117,100,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 286 | 286 | ||||
Other comprehensive loss | (37) | (37) | ||||
Stock-based compensation | 7 | $ 7 | ||||
Repurchases of common stock (in shares) | 0 | |||||
Dividends and dividend equivalent rights declared | (10) | $ (10) | ||||
Other | (3) | (3) | ||||
Balance at Mar. 31, 2021 | $ 1 | 3,431 | $ (6,734) | 5,108 | (42) | 1,764 |
Balance (in shares) at Mar. 31, 2021 | 117,100,000 | |||||
Balance at Dec. 31, 2021 | $ 1 | 2,174 | (87) | (2) | 2,086 | |
Balance (in shares) at Dec. 31, 2021 | 49,900,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 210 | 210 | ||||
Other comprehensive loss | (7) | (7) | ||||
Stock-based compensation | 7 | 7 | ||||
Repurchases of common stock | (12) | $ (12) | ||||
Repurchases of common stock (in shares) | (200,000) | (200,000) | ||||
Dividends and dividend equivalent rights declared | (10) | $ (10) | ||||
Other | (6) | (6) | ||||
Other (in shares) | 100,000 | |||||
Balance at Mar. 31, 2022 | $ 1 | $ 2,163 | $ 113 | $ (9) | $ 2,268 | |
Balance (in shares) at Mar. 31, 2022 | 49,800,000 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | Apr. 28, 2022 | Jan. 27, 2022 | Mar. 31, 2022 | Mar. 31, 2021 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | ||||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 0.21 | $ 0.21 | $ 0.21 | $ 0.21 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 210 | $ 286 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Provision for credit losses | 193 | 33 |
Depreciation and amortization | 21 | 34 |
Deferred income taxes | (48) | (26) |
Non-cash stock compensation | 7 | 7 |
Amortization of deferred financing costs | 6 | 8 |
Amortization of deferred origination costs | 21 | 16 |
Change in other operating assets and liabilities: | ||
Change in other assets | (2) | 60 |
Change in other liabilities | 73 | 95 |
Other | 16 | 4 |
Net cash provided by operating activities | 497 | 517 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Change in credit card and other loans | 339 | 1,034 |
Change in redemption settlement assets | (13) | |
Capital expenditures | (20) | (12) |
Purchases of investment securities | (18) | (22) |
Maturities of investment securities | 12 | 22 |
Other | (3) | |
Net cash provided by investing activities | 310 | 1,009 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Unsecured borrowings under debt agreements | 175 | |
Repayments/maturities of unsecured borrowings under debt agreements | (200) | (25) |
Debt issued by consolidated variable interest entities | 525 | 175 |
Repayments/maturities of debt issued by consolidated variable interest entities | (1,162) | (2,039) |
Net (decrease) increase in deposits | (405) | 162 |
Dividends paid | (10) | (11) |
Repurchases of common stock | (12) | |
Other | (7) | (3) |
Net cash used in financing activities | (1,096) | (1,741) |
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash | (1) | |
Change in cash, cash equivalents and restricted cash | (289) | (216) |
Cash, cash equivalents and restricted cash at beginning of period | 3,923 | 3,463 |
Cash, cash equivalents and restricted cash at end of period | 3,634 | 3,247 |
Cash and cash equivalents reconciliation: | ||
Cash and cash equivalents | 2,930 | 2,634 |
Restricted cash included within Other assets | 704 | 314 |
Cash, cash equivalents and restricted cash included within Assets of discontinued operations | 299 | |
Cash, cash equivalents and restricted cash | $ 3,634 | $ 3,247 |
DESCRIPTION OF BUSINESS AND BAS
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2022 | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION DESCRIPTION OF THE BUSINESS Effective March 23, 2022, Alliance Data Systems Corporation was renamed Bread Financial Holdings, Inc, and on April 4, 2022, its New York Stock Exchange ticker changed from “ADS” to “BFH”. Neither the name change nor the ticker change affected the legal entity structure, nor did it have an impact on the financial statements. Bread Financial Holdings, Inc. (BFH or, including its consolidated subsidiaries and variable interest entities (VIEs), the Company) is a tech-forward financial services company providing simple, personalized payment, lending and saving solutions. The Company creates opportunities for its customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, the Company delivers growth for its partners through a comprehensive product suite, including private label and co-brand credit cards, installment lending, and buy now, pay later (split-pay). The Company also offers direct-to-consumer solutions that give customers more access, choice and freedom through its branded Bread Cashback TM ® TM BASIS OF PRESENTATION The accompanying unaudited Condensed 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 presentation, in particular, as a result of the spinoff of its LoyaltyOne segment and its classification 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. The unaudited Condensed Consolidated Financial Statement should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022; if not significantly different, certain note disclosures included therein have been omitted from these unaudited Condensed Consolidated Financial Statements. The unaudited Condensed Consolidated Financial Statements included herein reflect all adjustments, which consist of normal, recurring adjustments that are, in the opinion of management, necessary to state fairly the results for the interim periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates and assumptions reflect the best judgement of management, but actual results could differ. The most significant of those estimates and assumptions relate to the Company’s Allowance for credit losses. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries in which the Company has a controlling financial interest. All intercompany transactions have been eliminated. RECENTLY ISSUED ACCOUNTING STANDARDS In March 2022, the Financial Accounting Standards Board issued new accounting and disclosure guidance for troubled debt restructurings effective January 1, 2023, with early adoption permitted. Specifically, the new guidance eliminates the previous recognition and measurement guidance for troubled debt restructurings while enhancing the disclosure requirements for certain loan modifications, including requiring disclosure of gross charge-offs by year of loan origination. The Company is evaluating the new guidance and any impacts on its financial position, results of operations and regulatory risk-based capital, none of which are expected to be material, along with any anticipated impacts on its operational processes, controls and governance. |
CREDIT CARD AND OTHER LOANS
CREDIT CARD AND OTHER LOANS | 3 Months Ended |
Mar. 31, 2022 | |
CREDIT CARD AND OTHER LOANS | |
CREDIT CARD AND OTHER LOANS | 2. 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 make a payment of less than the full balance 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 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. Primarily, 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 and ability. The Company’s credit card and other loans were as follows, as of March 31, 2022 and December 31, 2021, respectively: March 31, December 31, 2022 2021 (in millions) Credit card loans $ 16,651 $ 17,217 Installment (other) loans 192 182 Total credit card and other loans (1)(2) 16,843 17,399 Less: Allowance for credit losses (1,826) (1,832) Credit card and other loans, net $ 15,017 $ 15,567 (1) Includes $10.8 billion and $11.2 billion of credit card and other loans available to settle obligations of consolidated VIEs as of March 31, 2022 and December 31, 2021, respectively. (2) Includes $228 million and $224 million, of accrued interest and fees that have not yet been billed to cardholders as of March 31, 2022 and December 31, 2021, 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. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent; based upon the level of risk indicated, a collection strategy is deployed. If, after exhausting all in-house collection efforts, the Company is unable to collect on the account, it may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances and accompanying account(s). The following table presents the delinquency trends on the Company’s credit card and other loans portfolio based on the 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 March 31, 2022 $ 241 $ 190 $ 435 $ 866 $ 15,709 $ 16,575 As of December 31, 2021 $ 262 $ 186 $ 401 $ 849 $ 16,284 $ 17,133 (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 three months ended March 31, 2022 and 2021, the Company’s re-aged accounts represented 1.6% and 2.8%, 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 third-party fraud losses. Charged-off interest and fees reduce Interest and fees on loans, while third-party fraud losses are recorded in Card and processing expenses. Credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. 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 $136 million and $131 million for the three months ended March 31, 2022 and 2021, respectively. Modified Credit Card Loans Forbearance Programs As part of the Company’s collections strategy, the Company may offer temporary, short term (six-months or less) loan modifications in order to improve the likelihood of collections and meet the needs of the Company’s customers. The Company’s modifications for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced or deferred payment requirements, interest rate reductions and late fee waivers. The Company does not offer programs involving the forgiveness of principal. These temporary loan modifications may assist in cases where the Company believes the customer will recover from the short-term hardship and resume scheduled payments. Under these forbearance modification programs, those accounts receiving relief may not advance to the next delinquency cycle, including charge-off, in the same time frame that would have occurred had the relief not been granted. The Company evaluates its loan modification programs to determine if they represent a more than insignificant delay in payment, in which case they would then be considered a troubled debt restructuring (TDR). Loans in these short term programs that are determined to be TDR’s, will be included as such in the disclosures below. Credit Card Loans Modified as TDRs The Company considers impaired loans to be loans for which it is probable that it will be unable to collect all amounts due according to the original contractual terms of the cardholder agreement, including credit card loans modified as TDRs. In instances where cardholders are experiencing financial difficulty, the Company may modify its credit card loans with the intention of minimizing losses and improving collectability, while providing cardholders with financial relief; such credit card loans are classified as TDRs, exclusive of forbearance programs described above. Modifications, including for temporary hardship and permanent workout programs, include concessions consisting primarily of a reduced minimum payment and an interest rate reduction. The temporary programs’ concessions remain in place for a period no longer than twelve months, while the permanent programs remain in place through the payoff of the credit card loans if the cardholder complies with the terms of the program. TDR concessions do not include the forgiveness of unpaid principal, but may involve the reversal of certain unpaid interest or fee assessments, and the cardholder’s ability to make future purchases is either limited, or suspended until the cardholder successfully exits from the modification program. In accordance with the terms of the Company’s temporary hardship and permanent workout programs, the credit agreement reverts back to its original contractual terms (including the contractual interest rate) when the customer exits the program, which is either when all payments have been made in accordance with the program, or when the customer defaults out of the program. TDRs are collectively evaluated for impairment on a pooled basis. In measuring the appropriate allowance for credit losses, these modified credit card loans are included in the general pool of credit card loans, with the allowance determined under a contingent loss model. The Company’s impaired credit card loans represented less than 3% of total credit card loans as of both March 31, 2022 and December 31, 2021. As of those same dates, the Company’s recorded investment in impaired credit card loans was $264 million and $281 million, respectively, with an associated allowance for credit losses of $88 million and $81 million, respectively. The average recorded investment in impaired credit card loans was $272 million and $482 million for the three months ended March 31, 2022 and 2021, 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 $4 million and $9 million for the three months ended March 31, 2022 and 2021, respectively, in interest income associated with credit card loans in modification programs, during the period that such loans were impaired. The following table provides additional information regarding credit card loans modified as TDRs during the specified periods: Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card loans 37,998 $ 56 $ 56 63,628 $ 93 $ 93 The following table provides additional information regarding credit card loans modified as TDRs that have subsequently defaulted within 12 months of their modification dates during the specified periods; the probability of default is factored into the allowance for credit losses: Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted 21,653 $ 29 51,009 $ 67 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 the total credit card loans balance at each of March 31, 2022 and December 31, 2021, 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 during the specified periods: Vantage March 31, December 31, 2022 2021 661 or 601 to 600 or 661 or 601 to 600 or Higher 660 Less Higher 660 Less Credit card loans 61 % 27 % 12 % 62 % 26 % 12 % 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 $192 million and $182 million as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022, approximately 85% of these loans were originated by customers with Fair Isaac Corporation (FICO) scores of 660 or above, and approximately 15% of these loans were originated by customers with FICO scores below 660. Similarly, as of December 31, 2021, approximately 84% and 16% 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 $112.0 billion as of both March 31, 2022 and December 31, 2021. While this amount 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 March 31, 2022 and December 31, 2021, there were no credit card loans held for sale and no portfolio sales were made during either of the three months ended March 31, 2022 or 2021. Portfolio Acquisitions No portfolio acquisitions were made during either of the three months ended March 31, 2022 or 2021. |
ALLOWANCE FOR CREDIT LOSSES
ALLOWANCE FOR CREDIT LOSSES | 3 Months Ended |
Mar. 31, 2022 | |
ALLOWANCE FOR CREDIT LOSSES | |
ALLOWANCE FOR CREDIT LOSSES | 3. ALLOWANCE FOR CREDIT LOSSES 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 March 31, 2022 and December 31, 2021, accrued interest and fees that have not yet been billed to cardholders were $228 million and $224 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 Company measures its allowance for credit losses on installment loans using a statistical model to estimate projected losses over the remaining term of the loans, inclusive of an assumption for prepayments. The model is based on the historical statistical relationship between loan loss performance and certain macroeconomic data pooled based on credit quality risk score, term of the underlying loans, vintage and geographic location. As of March 31, 2022 and December 31, 2021, the allowance for credit losses on installment loans was $15 million and $14 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 three months ended March 31: Three Months Ended March 31, 2022 2021 (in millions) Beginning balance $ 1,832 $ 2,008 Provision for credit losses (1) 193 33 Net principal charge-offs (2) (199) (198) Ending balance $ 1,826 $ 1,843 (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 $43 million and $51 million for the three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022, the allowance for credit losses remained relatively flat. For the three months ended March 31, 2021, the decrease in the allowance for credit losses was due to improvement in the macroeconomic outlook, a decline in credit card and other loans due to the pandemic and lower principal charge-offs. |
SECURITIZATIONS
SECURITIZATIONS | 3 Months Ended |
Mar. 31, 2022 | |
SECURITIZATIONS | |
SECURITIZATIONS | 4. 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 the Company, which are eliminated in consolidation. The Trusts are consolidated 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 three months ended March 31, 2022 and 2021, no such triggering events occurred. The following tables provide the total securitized credit card loans and related delinquencies, and net principal charge-offs of securitized credit card loans for the periods specified: March 31, December 31, 2022 2021 (in millions) Total credit card loans – available to settle obligations of consolidated VIEs $ 10,771 $ 11,215 Of which: principal amount of credit card loans 91 days or more past due $ 169 $ 159 Three Months Ended March 31, 2022 2021 (in millions) Net charge-offs of securitized principal $ 116 $ 131 |
INVESTMENT SECURITIES
INVESTMENT SECURITIES | 3 Months Ended |
Mar. 31, 2022 | |
INVESTMENT SECURITIES | |
INVESTMENT SECURITIES | 5. INVESTMENT SECURITIES The Company’s investment securities consist of available-for-sale (AFS) securities, which are debt securities, U.S. Treasury bonds and mutual funds, as well as equity securities. These investments are carried at fair value on the Consolidated Balance Sheets within Investment securities. 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 March 31, 2022 and December 31, 2021, respectively: March 31, 2022 December 31, 2021 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) AFS and equity securities $ 241 $ — $ (8) $ 233 $ 237 $ 4 $ (2) $ 239 Total $ 241 $ — $ (8) $ 233 $ 237 $ 4 $ (2) $ 239 The following table provides information about the Company’s AFS debt securities with gross unrealized losses, as of March 31, 2022 and December 31, 2021, respectively. March 31, 2022 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) AFS debt securities $ 107 $ (5) $ 28 $ (3) $ 135 $ (8) Total $ 107 $ (5) $ 28 $ (3) $ 135 $ (8) December 31, 2021 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) AFS debt securities $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) Total $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) As of March 31, 2022, the amortized cost and estimated fair value of the Company’s AFS debt securities, which are mortgage-backed securities with no stated maturities, was $175 million and $167 million, respectively. There were no realized gains or losses from the sale of any investment securities for either of the three months ended March 31, 2022 or 2021. |
DEPOSITS
DEPOSITS | 3 Months Ended |
Mar. 31, 2022 | |
DEPOSITS. | |
DEPOSITS | 6. DEPOSITS As of March 31, 2022 and December 31, 2021, deposits were categorized as interest-bearing or non-interest-bearing as follows: March 31, December 31, 2022 2021 (in millions) Interest-bearing $ 10,620 $ 11,027 Non-interest-bearing (including cardholder credit balances) 26 — Total deposits $ 10,646 $ 11,027 Deposits by deposit type as of March 31, 2022 and December 31, 2021 were as follows: March 31, December 31, 2022 2021 (in millions) Savings accounts: Direct-to-consumer $ 2,045 $ 1,713 Wholesale 3,865 3,873 Certificates of deposit: Direct-to-consumer 1,516 1,467 Wholesale 3,194 3,974 Cardholder credit balances 26 — Total deposits $ 10,646 $ 11,027 The scheduled maturities of certificates of deposit as of March 31, 2022 were as follows: (in millions) 2022 (1) $ 2,603 2023 1,329 2024 648 2025 70 2026 48 Thereafter 12 Total certificates of deposit 4,710 (1) The 2022 balance includes $6 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit. As of March 31, 2022 and December 31, 2021, certificates of deposit that exceeded applicable FDIC insurance limits which are generally $250,000 or more, in the aggregate, were $511 million and $500 million, respectively. |
OTHER NON-INTEREST INCOME AND O
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES | 3 Months Ended |
Mar. 31, 2022 | |
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES | |
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSE | 7. OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES The following table provides the components of Other non-interest income: Three Months Ended March 31, 2022 2021 (in millions) Payment protection products $ 38 $ 35 Loss from equity method investment (12) — Other 2 — Total other non-interest income $ 28 $ 35 The following table provides the components of Other non-interest expenses: Three Months Ended March 31, 2022 2021 (in millions) Professional services and regulatory fees $ 31 $ 31 Occupancy expense 6 7 Other (1) 20 9 Total other non-interest expenses $ 57 $ 47 (1) Primarily related to costs associated with various other individually insignificant operating activities. |
FAIR VALUES OF FINANCIAL INSTRU
FAIR VALUES OF FINANCIAL INSTRUMENTS | 3 Months Ended |
Mar. 31, 2022 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | 8. 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 three months ended March 31, 2022 and 2021, 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: March 31, 2022 December 31, 2021 Carrying Fair Carrying Fair Amount Value Amount Value (in millions) Financial assets Credit card and other loans, net $ 15,017 $ 17,308 $ 15,567 $ 17,989 Investment securities 233 233 239 239 Financial liabilities Deposits 10,646 10,675 11,027 11,135 Debt issued by consolidated VIEs 4,816 4,820 5,453 5,467 Long-term and other debt 1,962 1,980 1,986 2,053 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. Investment 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: March 31, 2022 Total Level 1 Level 2 Level 3 (in millions) Investment securities $ 233 $ 46 $ 187 $ — Total assets measured at fair value $ 233 $ 46 $ 187 $ — December 31, 2021 Total Level 1 Level 2 Level 3 (in millions) Investment securities $ 239 $ 48 $ 191 $ — Total assets measured at fair value $ 239 $ 48 $ 191 $ — Financial Instruments Disclosed but Not Carried at Fair Value The following tables summarize the Company’s financial assets and financial liabilities that are measured at amortized cost, and not required to be carried at fair value on a recurring basis, as of March 31, 2022 and December 31, 2021 respectively. The fair values of these financial instruments are estimates as of March 31, 2022 and December 31, 2021, and require management’s judgment; therefore, these figures may not be indicative of future fair values, nor can the fair value of the Company be estimated by aggregating all of the amounts presented. March 31, 2022 Fair Value Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and other loans, net $ 17,308 $ — $ — $ 17,308 Total $ 17,308 $ — $ — $ 17,308 Financial liabilities: Deposits $ 10,675 $ — $ 10,675 $ — Debt issued by consolidated VIEs 4,820 — 4,820 — Long-term and other debt 1,980 — 1,980 — Total $ 17,475 $ — $ 17,475 $ — December 31, 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 $ — 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 either of the three months ended March 31, 2022 or 2021. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 9. 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 the Banks is currently subject to regular examinations by the Consumer Financial Protection Bureau (CFPB) due to each Bank’s total assets not having exceeded $10.0 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 March 31, 2022, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of March 31, 2022, are as follows: Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 Leverage capital ratio (1) 19.4 % 4.0 % 5.0 % Common Equity Tier 1 capital ratio (2) 22.5 4.5 6.5 Tier 1 capital ratio (3) 22.5 6.0 8.0 Total Risk-based capital ratio (4) 23.8 8.0 10.0 Comenity Capital Bank Tier 1 Leverage capital ratio (1) 17.2 % 4.0 % 5.0 % Common Equity Tier 1 capital ratio (2) 19.3 4.5 6.5 Tier 1 capital ratio (3) 19.3 6.0 8.0 Total Risk-based capital ratio (4) 20.7 8.0 10.0 Combined Banks Tier 1 Leverage capital ratio (1) 18.2 % 4.0 % 5.0 % Common Equity Tier 1 capital ratio (2) 20.8 4.5 6.5 Tier 1 capital ratio (3) 20.8 6.0 8.0 Total Risk-based capital ratio (4) 22.1 8.0 10.0 (1) The Tier 1 Leverage capital ratio represents tier 1 capital divided by total average assets, after certain adjustments. (2) The Common Equity Tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets. (3) The Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. (4) The Total Risk-based capital ratio represents total capital divided by total risk-weighted assets. 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. 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 and other proceedings, arising in the ordinary course of business that it believes will not have a material adverse effect on its business, consolidated financial condition or liquidity, including claims and lawsuits alleging breaches of the Company’s contractual obligations, arbitrations, class actions and other litigation, arising in connection with its business activities. The Company is also involved, from time to time, in reviews, investigations, subpoenas and other proceedings (both formal and informal) by governmental agencies regarding its business (collectively, “regulatory matters”), which could subject the Company to significant fines, penalties, obligations to change its business practices or other requirements resulting in increased expenses, diminished income and damage to the Company’s reputation. |
CHANGES IN ACCUMULATED OTHER CO
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS | 3 Months Ended |
Mar. 31, 2022 | |
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | 10. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows: Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended March 31, 2022 on Securities Flow Hedges Investment Hedge Adjustments Loss (in millions) Balance as of December 31, 2021 $ 1 $ — $ — $ (3) $ (2) Changes in other comprehensive loss (7) — — — (7) Balance as of March 31, 2022 $ (6) $ — $ — $ (3) $ (9) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended March 31, 2021 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance as of December 31, 2020 $ 23 $ (1) $ (7) $ (20) $ (5) Changes in other comprehensive (loss) income (8) 1 — (30) (37) Balance as of March 31, 2021 $ 15 $ — $ (7) $ (50) $ (42) (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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2022 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 11. STOCKHOLDERS’ EQUITY Stock Repurchase Programs On February 28, 2022, the Company’s Board of Directors approved a stock repurchase program to acquire up to 200,000 shares of the Company’s outstanding common stock in the open market during the one-year period ending on February 28, 2023. As of March 31, 2022, the Company had repurchased 200,000 shares of its common stock under this program for $12 million. Following their repurchase, these 200,000 shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock. As of March 31, 2022, the Company had no shares remaining for repurchase under the approved repurchase program. During the three months ended March 31, 2021, the Company did not repurchase any shares of its common stock. Stock Compensation Expense During the three months ended March 31, 2022, the Company awarded 531,448 service-based restricted stock units with a weighted average grant date fair value per share of $72.21 as determined on the date of grant. Service-based restricted stock units typically vest ratably over three years provided that the participant is employed by the Company on each such vesting date. During the three months ended March 31, 2022, the Company awarded 82,513 performance-based restricted stock units with pre-defined vesting criteria that permit a range from 0% to 150% to be earned. The fair market value of these awards is $72.42. If the performance targets are met, the restrictions will lapse (i.e., the awards will vest) with respect to the entire award on February 17, 2025, provided that the participant is employed by the Company on the vesting date. For the three months ended March 31, 2022 and 2021, the Company recognized $7 million and $5 million in stock-based compensation expense, respectively. Dividends On January 27, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share on the Company’s common stock to stockholders of record at the close of business on February 11, 2022, resulting in a dividend payment of $10 million on March 18, 2022. On April 28, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share on the Company’s common stock, payable on June 17, 2022, to stockholders of record at the close of business on May 13, 2022. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2022 | |
INCOME TAXES | |
INCOME TAXES | 12. INCOME TAXES Provision for income taxes decreased $8 million, or 7%, to $91 million for the three months ended March 31, 2022, primarily driven by the decrease in Income from continuing operations before income taxes. The effective tax rate was 30.2% and 26.9% for the three months ended March 31, 2022 and March 31, 2021, respectively. The increase in the effective tax rate primarily related to discrete charges in the current period and an increase in nondeductible items over those in the prior year period. The Company is under examination by the Internal Revenue Service as well as tax authorities in various states. The tax years under examination and open for examination vary by jurisdiction, but 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 | 3 Months Ended |
Mar. 31, 2022 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 13. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the three months ended March 31: Three Months Ended March 31, 2022 2021 (in millions, except per share amounts) Numerator: Income from continuing operations $ 211 $ 268 (Loss) income from discontinued operations, net of income taxes (1) 18 Net income $ 210 $ 286 Denominator: Basic: Weighted average common stock 49.9 49.7 Weighted average effect of dilutive securities: Add: net effect of dilutive unvested restricted stock awards (1) 0.1 0.1 Diluted 50.0 49.8 Basic EPS: Income from continuing operations $ 4.23 $ 5.39 (Loss) income from discontinued operations $ (0.01) $ 0.37 Net income per share $ 4.22 $ 5.76 Diluted EPS: Income from continuing operations $ 4.21 $ 5.38 (Loss) income from discontinued operations $ (0.01) $ 0.36 Net income per share $ 4.20 $ 5.74 (1) For the three months ended March 31, 2022 and 2021, 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. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 3 Months Ended |
Mar. 31, 2022 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | 14. DISCONTINUED OPERATIONS LoyaltyOne On November 5, 2021, the separation of Loyalty Ventures Inc. (Loyalty Ventures) from the Company was completed after market close (the Separation). The Separation, which has been classified as discontinued operations, was achieved through the Company’s distribution of 81% of the shares of Loyalty Ventures common stock to holders of the Company’s common stock as of the close of business on the record date of October 27, 2021. The Company’s stockholders of record received one share of Loyalty Ventures common stock for every two The Company accounts for its 19% ownership interest in Loyalty Ventures following the equity method of accounting. As of March 31, 2022, the carrying amount of the Company’s ownership interest in Loyalty Ventures, which investment totaled was $38 million, and is included in Other assets in the Consolidated Balance Sheet. The following table summarizes the results of operations of the Company’s former LoyaltyOne segment, direct costs identifiable to the LoyaltyOne segment, and the allocation of interest expense on corporate debt, for the three months ended March 31, 2021: (in millions) Total interest income $ — Total interest expense (1) 3 Net interest income (3) Total non-interest income 176 Total non-interest expenses 145 Income before provision from income taxes 28 Provision for income taxes 10 Income from discontinued operations, net of income taxes $ 18 (1) 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 depreciation and amortization, and capital expenditures of the Company’s former LoyaltyOne segment for the three months ended March 31, 2021: (in millions) Depreciation and amortization $ 9 Capital expenditures $ 5 |
DESCRIPTION OF BUSINESS AND B_2
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited Condensed 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 presentation, in particular, as a result of the spinoff of its LoyaltyOne segment and its classification 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. The unaudited Condensed Consolidated Financial Statement should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022; if not significantly different, certain note disclosures included therein have been omitted from these unaudited Condensed Consolidated Financial Statements. The unaudited Condensed Consolidated Financial Statements included herein reflect all adjustments, which consist of normal, recurring adjustments that are, in the opinion of management, necessary to state fairly the results for the interim periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates and assumptions reflect the best judgement of management, but actual results could differ. The most significant of those estimates and assumptions relate to the Company’s Allowance for credit losses. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries in which the Company has a controlling financial interest. All intercompany transactions have been eliminated. |
RECENTLY ISSUED ACCOUNTING STANDARDS | RECENTLY ISSUED ACCOUNTING STANDARDS In March 2022, the Financial Accounting Standards Board issued new accounting and disclosure guidance for troubled debt restructurings effective January 1, 2023, with early adoption permitted. Specifically, the new guidance eliminates the previous recognition and measurement guidance for troubled debt restructurings while enhancing the disclosure requirements for certain loan modifications, including requiring disclosure of gross charge-offs by year of loan origination. The Company is evaluating the new guidance and any impacts on its financial position, results of operations and regulatory risk-based capital, none of which are expected to be material, along with any anticipated impacts on its operational processes, controls and governance. |
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 make a payment of less than the full balance 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 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. Primarily, 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 and ability. |
Allowance for Credit Losses | 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 March 31, 2022 and December 31, 2021, accrued interest and fees that have not yet been billed to cardholders were $228 million and $224 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 the Company, which are eliminated in consolidation. The Trusts are consolidated 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 investment securities consist of available-for-sale (AFS) securities, which are debt securities, U.S. Treasury bonds and mutual funds, as well as equity securities. These investments are carried at fair value on the Consolidated Balance Sheets within Investment securities. 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. |
CREDIT CARD AND OTHER LOANS (Ta
CREDIT CARD AND OTHER LOANS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
CREDIT CARD AND OTHER LOANS | |
Schedule of components of credit card and other loans | March 31, December 31, 2022 2021 (in millions) Credit card loans $ 16,651 $ 17,217 Installment (other) loans 192 182 Total credit card and other loans (1)(2) 16,843 17,399 Less: Allowance for credit losses (1,826) (1,832) Credit card and other loans, net $ 15,017 $ 15,567 (1) Includes $10.8 billion and $11.2 billion of credit card and other loans available to settle obligations of consolidated VIEs as of March 31, 2022 and December 31, 2021, respectively. (2) Includes $228 million and $224 million, of accrued interest and fees that have not yet been billed to cardholders as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 $ 241 $ 190 $ 435 $ 866 $ 15,709 $ 16,575 As of December 31, 2021 $ 262 $ 186 $ 401 $ 849 $ 16,284 $ 17,133 (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 | Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card loans 37,998 $ 56 $ 56 63,628 $ 93 $ 93 The following table provides additional information regarding credit card loans modified as TDRs that have subsequently defaulted within 12 months of their modification dates during the specified periods; the probability of default is factored into the allowance for credit losses: Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted 21,653 $ 29 51,009 $ 67 |
Schedule of composition of obligor credit quality | Vantage March 31, December 31, 2022 2021 661 or 601 to 600 or 661 or 601 to 600 or Higher 660 Less Higher 660 Less Credit card loans 61 % 27 % 12 % 62 % 26 % 12 % |
ALLOWANCE FOR CREDIT LOSSES (Ta
ALLOWANCE FOR CREDIT LOSSES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
ALLOWANCE FOR CREDIT LOSSES | |
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 | Three Months Ended March 31, 2022 2021 (in millions) Beginning balance $ 1,832 $ 2,008 Provision for credit losses (1) 193 33 Net principal charge-offs (2) (199) (198) Ending balance $ 1,826 $ 1,843 (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 $43 million and $51 million for the three months ended March 31, 2022 and 2021, respectively. |
SECURITIZATIONS (Tables)
SECURITIZATIONS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
SECURITIZATIONS | |
Schedule of securitized credit card receivables, delinquencies and net charge-offs | March 31, December 31, 2022 2021 (in millions) Total credit card loans – available to settle obligations of consolidated VIEs $ 10,771 $ 11,215 Of which: principal amount of credit card loans 91 days or more past due $ 169 $ 159 Three Months Ended March 31, 2022 2021 (in millions) Net charge-offs of securitized principal $ 116 $ 131 |
INVESTMENT SECURITIES (Tables)
INVESTMENT SECURITIES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
INVESTMENT SECURITIES | |
Schedule of principal components of other investments, which are carried at fair value | March 31, 2022 December 31, 2021 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) AFS and equity securities $ 241 $ — $ (8) $ 233 $ 237 $ 4 $ (2) $ 239 Total $ 241 $ — $ (8) $ 233 $ 237 $ 4 $ (2) $ 239 |
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 | March 31, 2022 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) AFS debt securities $ 107 $ (5) $ 28 $ (3) $ 135 $ (8) Total $ 107 $ (5) $ 28 $ (3) $ 135 $ (8) December 31, 2021 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) AFS debt securities $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) Total $ 57 $ (1) $ 15 $ (1) $ 72 $ (2) |
DEPOSITS (Tables)
DEPOSITS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
DEPOSITS. | |
Schedule of Customer Deposits Based on Interest | March 31, December 31, 2022 2021 (in millions) Interest-bearing $ 10,620 $ 11,027 Non-interest-bearing (including cardholder credit balances) 26 — Total deposits $ 10,646 $ 11,027 |
Schedule of Customer Deposits by Deposit Type | March 31, December 31, 2022 2021 (in millions) Savings accounts: Direct-to-consumer $ 2,045 $ 1,713 Wholesale 3,865 3,873 Certificates of deposit: Direct-to-consumer 1,516 1,467 Wholesale 3,194 3,974 Cardholder credit balances 26 — Total deposits $ 10,646 $ 11,027 |
Schedule of Maturities of Certificates of Deposit | The scheduled maturities of certificates of deposit as of March 31, 2022 were as follows: (in millions) 2022 (1) $ 2,603 2023 1,329 2024 648 2025 70 2026 48 Thereafter 12 Total certificates of deposit 4,710 (1) The 2022 balance includes $6 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit. |
OTHER NON-INTEREST INCOME AND_2
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
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: Three Months Ended March 31, 2022 2021 (in millions) Payment protection products $ 38 $ 35 Loss from equity method investment (12) — Other 2 — Total other non-interest income $ 28 $ 35 |
Components of Other non-interest expenses | Three Months Ended March 31, 2022 2021 (in millions) Payment protection products $ 38 $ 35 Loss from equity method investment (12) — Other 2 — Total other non-interest income $ 28 $ 35 |
FAIR VALUES OF FINANCIAL INST_2
FAIR VALUES OF FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | |
Schedule of estimated fair value of Company's financial instruments | March 31, 2022 December 31, 2021 Carrying Fair Carrying Fair Amount Value Amount Value (in millions) Financial assets Credit card and other loans, net $ 15,017 $ 17,308 $ 15,567 $ 17,989 Investment securities 233 233 239 239 Financial liabilities Deposits 10,646 10,675 11,027 11,135 Debt issued by consolidated VIEs 4,816 4,820 5,453 5,467 Long-term and other debt 1,962 1,980 1,986 2,053 |
Schedule of assets and liabilities carried at fair value measured on recurring basis | March 31, 2022 Total Level 1 Level 2 Level 3 (in millions) Investment securities $ 233 $ 46 $ 187 $ — Total assets measured at fair value $ 233 $ 46 $ 187 $ — December 31, 2021 Total Level 1 Level 2 Level 3 (in millions) Investment securities $ 239 $ 48 $ 191 $ — Total assets measured at fair value $ 239 $ 48 $ 191 $ — |
Schedule of assets and liabilities disclosed but not carried at fair value | March 31, 2022 Fair Value Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and other loans, net $ 17,308 $ — $ — $ 17,308 Total $ 17,308 $ — $ — $ 17,308 Financial liabilities: Deposits $ 10,675 $ — $ 10,675 $ — Debt issued by consolidated VIEs 4,820 — 4,820 — Long-term and other debt 1,980 — 1,980 — Total $ 17,475 $ — $ 17,475 $ — December 31, 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 $ — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES. | |
Schedule of actual capital ratios and minimum ratios | The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of March 31, 2022, are as follows: Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 Leverage capital ratio (1) 19.4 % 4.0 % 5.0 % Common Equity Tier 1 capital ratio (2) 22.5 4.5 6.5 Tier 1 capital ratio (3) 22.5 6.0 8.0 Total Risk-based capital ratio (4) 23.8 8.0 10.0 Comenity Capital Bank Tier 1 Leverage capital ratio (1) 17.2 % 4.0 % 5.0 % Common Equity Tier 1 capital ratio (2) 19.3 4.5 6.5 Tier 1 capital ratio (3) 19.3 6.0 8.0 Total Risk-based capital ratio (4) 20.7 8.0 10.0 Combined Banks Tier 1 Leverage capital ratio (1) 18.2 % 4.0 % 5.0 % Common Equity Tier 1 capital ratio (2) 20.8 4.5 6.5 Tier 1 capital ratio (3) 20.8 6.0 8.0 Total Risk-based capital ratio (4) 22.1 8.0 10.0 (1) The Tier 1 Leverage capital ratio represents tier 1 capital divided by total average assets, after certain adjustments. (2) The Common Equity Tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets. (3) The Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. (4) The Total Risk-based capital ratio represents total capital divided by total risk-weighted assets. |
CHANGES IN ACCUMULATED OTHER _2
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS | |
Schedule of changes in each component of accumulated comprehensive income (loss), net of tax effects | Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended March 31, 2022 on Securities Flow Hedges Investment Hedge Adjustments Loss (in millions) Balance as of December 31, 2021 $ 1 $ — $ — $ (3) $ (2) Changes in other comprehensive loss (7) — — — (7) Balance as of March 31, 2022 $ (6) $ — $ — $ (3) $ (9) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended March 31, 2021 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance as of December 31, 2020 $ 23 $ (1) $ (7) $ (20) $ (5) Changes in other comprehensive (loss) income (8) 1 — (30) (37) Balance as of March 31, 2021 $ 15 $ — $ (7) $ (50) $ (42) (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. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted net income per share | Three Months Ended March 31, 2022 2021 (in millions, except per share amounts) Numerator: Income from continuing operations $ 211 $ 268 (Loss) income from discontinued operations, net of income taxes (1) 18 Net income $ 210 $ 286 Denominator: Basic: Weighted average common stock 49.9 49.7 Weighted average effect of dilutive securities: Add: net effect of dilutive unvested restricted stock awards (1) 0.1 0.1 Diluted 50.0 49.8 Basic EPS: Income from continuing operations $ 4.23 $ 5.39 (Loss) income from discontinued operations $ (0.01) $ 0.37 Net income per share $ 4.22 $ 5.76 Diluted EPS: Income from continuing operations $ 4.21 $ 5.38 (Loss) income from discontinued operations $ (0.01) $ 0.36 Net income per share $ 4.20 $ 5.74 (1) For the three months ended March 31, 2022 and 2021, 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. |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
LoyaltyOne | |
Schedule of financial statement information for discontinued operations | (in millions) Total interest income $ — Total interest expense (1) 3 Net interest income (3) Total non-interest income 176 Total non-interest expenses 145 Income before provision from income taxes 28 Provision for income taxes 10 Income from discontinued operations, net of income taxes $ 18 (1) 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. (in millions) Depreciation and amortization $ 9 Capital expenditures $ 5 |
CREDIT CARD AND OTHER LOANS - A
CREDIT CARD AND OTHER LOANS - Allowance for Loan Loss and Delinquencies (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Receivables | $ 15,709 | $ 16,284 | ||
Total credit card and other loans | 16,843 | 17,399 | ||
Total credit card loans - available to settle obligations of consolidated VIEs | 10,771 | 11,215 | ||
Unbilled Finance Charges | 228 | $ 224 | 224 | |
Less: Credit card and other loans - restricted for securitization investors | 10,771 | 11,215 | ||
Unbilled finance charges | 228 | 224 | 224 | |
Allowance for credit losses | (1,826) | $ (1,843) | (1,832) | $ (2,008) |
Credit card and loan receivables, net | $ 15,017 | 15,567 | ||
Period an account becomes past due before a proprietary collection scoring algorithm automatically scores the risk of an account becoming further delinquent | 30 days | |||
Principal receivables balances contractually delinquent: | ||||
Re-aged accounts as percentage of total credit card and loan receivables | 1.60% | 2.80% | ||
Modified Credit Card Receivables | ||||
Impaired credit card and loan receivables | $ 264 | 281 | ||
Allowance for loan loss on impaired credit card receivables | $ 88 | $ 81 | ||
Maximum percentage of credit card receivables to total portfolio | 3.00% | 3.00% | ||
Average recorded investment in impaired credit card receivables | $ 272 | $ 482 | ||
Interest income on modified credit card receivables | $ 4 | $ 9 | ||
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 | |||
Maximum | ||||
Modified Credit Card Receivables | ||||
Number of days after notification of creditor's bankruptcy or death when an account is charged-off | 180 days | |||
Consolidated Variable Interest Entities | ||||
Total credit card loans - available to settle obligations of consolidated VIEs | $ 10,771 | $ 11,215 | ||
Less: Credit card and other loans - restricted for securitization investors | 10,771 | 11,215 | ||
Credit card loans | ||||
Receivables | $ 16,651 | 17,217 | ||
Modified Credit Card Receivables | ||||
Maximum period of time temporary programs' concessions remain in place | 12 months | |||
Installment (other) loans | ||||
Receivables | $ 192 | 182 | ||
Allowance for credit losses | $ (15) | $ (14) | ||
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 |
CREDIT CARD AND OTHER LOANS -_2
CREDIT CARD AND OTHER LOANS - Amortized Cost Basis Credit Card and Loan Receivables (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Financing Receivable, Past Due [Line Items] | ||
Receivables | $ 15,709 | $ 16,284 |
Total | 16,575 | 17,133 |
31 to 60 days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | 241 | 262 |
61 to 90 days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | 190 | 186 |
91 or more days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | 435 | 401 |
Total delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Receivables | $ 866 | $ 849 |
CREDIT CARD AND OTHER LOANS - T
CREDIT CARD AND OTHER LOANS - Troubled Debt Restructurings (Details) - Consumer Portfolio $ in Millions | 3 Months Ended | |
Mar. 31, 2022USD ($)item | Mar. 31, 2021USD ($)item | |
Troubled debt restructurings - credit card loans | ||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||
Number of Restructurings | item | 37,998 | 63,628 |
Pre-modification Outstanding Balance | $ 56 | $ 93 |
Post-modification Outstanding Balance | $ 56 | $ 93 |
Troubled debt restructurings that subsequently defaulted | ||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||
Number of Restructurings | item | 21,653 | 51,009 |
Outstanding Balance | $ 29 | $ 67 |
CREDIT CARD AND OTHER LOANS - C
CREDIT CARD AND OTHER LOANS - Credit Quality on Amortized Cost Basis (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Credit Quality | ||
Receivables | $ 15,709 | $ 16,284 |
Customer accounts as a percentage of total credit card loans balance for which a Vantage credit score is not available | 0.10% | 0.10% |
Unused credit card lines available to cardholders | $ 112,000 | $ 112,000 |
Installment (other) loans | ||
Credit Quality | ||
Receivables | $ 192 | $ 182 |
Installment (other) loans | FICO Score, From 660 and Above | ||
Credit Quality | ||
Percentage of total amortized cost basis of revolving loan receivables outstanding | 85 | 84 |
Installment (other) loans | FICO Score Below 660 | ||
Credit Quality | ||
Percentage of total amortized cost basis of revolving loan receivables outstanding | 15 | 16 |
Credit Card Receivable | No Score | Credit Score, from 661 or Higher | ||
Credit Quality | ||
Percentage of amortized cost basis of credit card receivables outstanding | 61.00% | 62.00% |
Credit Card Receivable | No Score | Credit Score, From 601 to 660 | ||
Credit Quality | ||
Percentage of amortized cost basis of credit card receivables outstanding | 27.00% | 26.00% |
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 | 3 Months Ended | ||
Mar. 31, 2022USD ($)item | Mar. 31, 2021USD ($)item | Dec. 31, 2021USD ($)item | |
Portfolio Held For Sale | |||
Number of credit card portfolios held for sale | item | 0 | 0 | |
Number of credit card portfolios sold | item | 0 | 0 | |
Portfolio Acquisitions | |||
Number of credit card portfolios acquired | item | 0 | 0 | |
Securitized Credit Card and Loan Receivables | |||
Total credit card loans - available to settle obligations of consolidated VIEs | $ | $ 10,771 | $ 11,215 | |
Of which: principal amount of credit card loans 91 days or more past due | $ | 169 | $ 159 | |
Net charge-offs of securitized principal | $ | $ 116 | $ 131 | |
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 | 3 Months Ended | ||
Mar. 31, 2022USD ($)item | Mar. 31, 2021USD ($) | Dec. 31, 2021USD ($) | |
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 | 1,832 | $ 2,008 | |
Provision for credit losses | 193 | 33 | |
Net principal charge-offs | (199) | (198) | |
Balance at end of period | 1,826 | 1,843 | |
Recoveries | 43 | 51 | |
Actual charge-offs for unpaid interest and fees | 136 | 131 | |
Unbilled Finance Charges | 228 | $ 224 | $ 224 |
Installment (other) loans | |||
Allowance for Loan Loss | |||
Balance at beginning of period | 14 | ||
Balance at end of period | $ 15 | ||
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 | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Total credit card loans - available to settle obligations of consolidated VIEs | $ 10,771 | $ 11,215 | |
Of which: principal amount of credit card loans 91 days or more past due | 169 | $ 159 | |
Net charge-offs of securitized principal | $ 116 | $ 131 | |
Minimum | |||
Minimum interests requirement (as a percent) | 4.00% | ||
Maximum | |||
Minimum interests requirement (as a percent) | 10.00% |
INVESTMENT SECURITIES (Details)
INVESTMENT SECURITIES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Marketable Securities, Fair Value to Amortized Cost, after Allowance for Credit Loss [Abstract] | |||
Amortized Cost | $ 241 | $ 237 | |
Unrealized Gains | 4 | ||
Unrealized Losses | (8) | (2) | |
Fair Value | 233 | 239 | |
Fair Value | |||
Less than 12 months | 107 | 57 | |
12 Months or Greater | 28 | 15 | |
Total | 135 | 72 | |
Unrealized Losses | |||
Less than 12 months | (5) | (1) | |
12 Months or Greater | (3) | (1) | |
Total | (8) | (2) | |
Estimated Fair Value | |||
Gains or losses from the sale of investment securities | 0 | $ 0 | |
AFS and equity securities | |||
Marketable Securities, Fair Value to Amortized Cost, after Allowance for Credit Loss [Abstract] | |||
Amortized Cost | 241 | 237 | |
Unrealized Gains | 4 | ||
Unrealized Losses | (8) | (2) | |
Fair Value | 233 | $ 239 | |
Mortgage-backed securities | |||
Amortized Cost | |||
Mortgage-backed securities with no stated maturity | 175 | ||
Estimated Fair Value | |||
Mortgage-backed securities with no stated maturity | $ 167 |
DEPOSITS - Customer Deposits Ba
DEPOSITS - Customer Deposits Based on Interest (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
DEPOSITS. | ||
Interest-bearing | $ 10,620 | $ 11,027 |
Non-interest-bearing (including cardholder credit balances) | 26 | |
Total deposits | $ 10,646 | $ 11,027 |
DEPOSITS - Customer Deposits _2
DEPOSITS - Customer Deposits Based on Deposit Type (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Deposit Liability [Line Items] | ||
Certificates of deposit | $ 4,710 | |
Cardholder credit balances | 26 | |
Total deposits | 10,646 | $ 11,027 |
Direct-to-consumer | ||
Deposit Liability [Line Items] | ||
Savings accounts | 2,045 | 1,713 |
Certificates of deposit | 1,516 | 1,467 |
Wholesale | ||
Deposit Liability [Line Items] | ||
Savings accounts | 3,865 | 3,873 |
Certificates of deposit | 3,194 | $ 3,974 |
Cardholder credit balances | ||
Deposit Liability [Line Items] | ||
Cardholder credit balances | $ 26 |
DEPOSITS - Maturities of Certif
DEPOSITS - Maturities of Certificates of Deposit (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
DEPOSITS. | ||
2022 | $ 2,603 | |
2023 | 1,329 | |
2024 | 648 | |
2025 | 70 | |
2026 | 48 | |
Thereafter | 12 | |
Deposits | 4,710 | |
Unamortized debt issuance costs | 6 | |
Certificates of deposit that exceeded applicable FDIC insurance limits which are generally $250,000 or more | $ 511 | $ 500 |
OTHER NON-INTEREST INCOME AND_3
OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Other Noninterest Income [Abstract] | ||
Payment protection products | $ 38 | $ 35 |
Loss from equity method investment | (12) | |
Other | 2 | |
Total other non-interest income | 28 | 35 |
Other Noninterest Expenses [Abstract] | ||
Professional services and regulatory fees | 31 | 31 |
Occupancy expense | 6 | 7 |
Other | 20 | 9 |
Total other non-interest expenses | $ 57 | $ 47 |
FAIR VALUES OF FINANCIAL INST_3
FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair Value of Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
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 | 15,017 | $ 15,567 | |
Financial liabilities | |||
Deposits | 10,675 | 11,135 | |
Debt issued by consolidated variable interest entities | 4,816 | 5,453 | |
Non-recourse borrowings of consolidated securitization entities | 4,820 | 5,467 | |
Long-term and other debt | 1,980 | 2,053 | |
Total liabilities measured at fair value | 17,475 | 18,655 | |
Carrying Amount | |||
Financial assets | |||
Credit card and loan receivables, net | 15,017 | 15,567 | |
Investment securities | 233 | 239 | |
Financial liabilities | |||
Deposits | 10,646 | 11,027 | |
Debt issued by consolidated variable interest entities | 4,816 | 5,453 | |
Long-term and other debt | 1,962 | 1,986 | |
Fair Value | |||
Financial assets | |||
Credit card and loan receivables, net | 17,308 | 17,989 | |
Investment securities | 233 | 239 | |
Financial liabilities | |||
Deposits | 10,675 | 11,135 | |
Debt issued by consolidated variable interest entities | 4,820 | 5,467 | |
Long-term and other debt | $ 1,980 | $ 2,053 |
FAIR VALUES OF FINANCIAL INST_4
FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair Value Level Disclosure (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Assets disclosed at fair value | ||
Total assets measured at fair value | $ 17,308 | $ 17,989 |
Level 3 | ||
Assets disclosed at fair value | ||
Total assets measured at fair value | 17,308 | 17,989 |
Recurring | ||
Assets disclosed at fair value | ||
Investment securities | 233 | 239 |
Total assets measured at fair value | 233 | 239 |
Recurring | Level 1 | ||
Assets disclosed at fair value | ||
Investment securities | 46 | 48 |
Total assets measured at fair value | 46 | 48 |
Recurring | Level 2 | ||
Assets disclosed at fair value | ||
Investment securities | 187 | 191 |
Total assets measured at fair value | $ 187 | $ 191 |
FAIR VALUES OF FINANCIAL INST_5
FAIR VALUES OF FINANCIAL INSTRUMENTS - Assets and Liabilities Not Carried at Fair Value (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Financial assets | ||
Credit card and loan receivables, net | $ 17,308 | $ 17,989 |
Total assets measured at fair value | 17,308 | 17,989 |
Financial liabilities | ||
Deposits | 10,675 | 11,135 |
Debt issued by consolidated VIEs | 4,820 | 5,467 |
Long-term and other debt | 1,980 | 2,053 |
Total liabilities measured at fair value | 17,475 | 18,655 |
Level 2 | ||
Financial liabilities | ||
Deposits | 10,675 | 11,135 |
Debt issued by consolidated VIEs | 4,820 | 5,467 |
Long-term and other debt | 1,980 | 2,053 |
Total liabilities measured at fair value | 17,475 | 18,655 |
Level 3 | ||
Financial assets | ||
Credit card and loan receivables, net | 17,308 | 17,989 |
Total assets measured at fair value | $ 17,308 | $ 17,989 |
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 | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | ||
Asset Impairment Charges | $ 0 | $ 0 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Regulatory Matters and Cardholders (Details) $ in Millions | Jan. 19, 2021USD ($)item | Jan. 31, 2022USD ($) | Jan. 31, 2021USD ($) | Dec. 31, 2020USD ($) | Mar. 31, 2022 |
Comenity Bank | |||||
Tier 1 capital to average assets | |||||
Tier 1 Leverage capital ratio, Actual Ratio (as a percent) | 19.4 | ||||
Tier 1 Leverage capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4 | ||||
Tier 1 Leverage capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 5 | ||||
Common Equity Tier 1 capital to risk-weighted assets | |||||
Common Equity Tier 1 capital ratio, Actual Ratio (as a percent) | 22.5 | ||||
Common Equity Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | ||||
Common Equity Tier 1 capital ratio, 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 ratio, Actual Ratio (as a percent) | 22.5 | ||||
Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6 | ||||
Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8 | ||||
Total Risk-based capital ratio, Actual Ratio (as a percent) | 23.8 | ||||
Total Risk-based capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8 | ||||
Total Risk-based capital ratio, 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 Leverage capital ratio, Actual Ratio (as a percent) | 17.2 | ||||
Tier 1 Leverage capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4 | ||||
Tier 1 Leverage capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 5 | ||||
Common Equity Tier 1 capital to risk-weighted assets | |||||
Common Equity Tier 1 capital ratio, Actual Ratio (as a percent) | 19.3 | ||||
Common Equity Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | ||||
Common Equity Tier 1 capital ratio, 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 ratio, Actual Ratio (as a percent) | 19.3 | ||||
Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6 | ||||
Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8 | ||||
Total Risk-based capital ratio, Actual Ratio (as a percent) | 20.7 | ||||
Total Risk-based capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8 | ||||
Total Risk-based capital ratio, 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 Leverage capital ratio, Actual Ratio (as a percent) | 18.2 | ||||
Tier 1 Leverage capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4 | ||||
Tier 1 Leverage capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 5 | ||||
Common Equity Tier 1 capital to risk-weighted assets | |||||
Common Equity Tier 1 capital ratio, Actual Ratio (as a percent) | 20.8 | ||||
Common Equity Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | ||||
Common Equity Tier 1 capital ratio, 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 ratio, Actual Ratio (as a percent) | 20.8 | ||||
Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6 | ||||
Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8 | ||||
Total Risk-based capital ratio, Actual Ratio (as a percent) | 22.1 | ||||
Total Risk-based capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8 | ||||
Total Risk-based capital ratio, 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, payment | $ 75 | $ 75 |
CHANGES IN ACCUMULATED OTHER _3
CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Accumulated Other Comprehensive Income | ||
Balance | $ 2,086 | $ 1,521 |
Changes in other comprehensive income (loss) | (7) | (37) |
Balance | 2,268 | 1,764 |
Net Unrealized Gains (Losses) on Securities | ||
Accumulated Other Comprehensive Income | ||
Balance | 1 | 23 |
Changes in other comprehensive income (loss) | (7) | (8) |
Balance | (6) | 15 |
Net Unrealized Gains (Losses) on Cash Flow Hedges | ||
Accumulated Other Comprehensive Income | ||
Balance | (1) | |
Changes in other comprehensive income (loss) | 1 | |
Net Unrealized Gains (Losses) on Net Investment Hedge | ||
Accumulated Other Comprehensive Income | ||
Balance | (7) | |
Balance | (7) | |
Foreign Currency Translation Adjustment Gains | ||
Accumulated Other Comprehensive Income | ||
Balance | (3) | (20) |
Changes in other comprehensive income (loss) | (30) | |
Balance | (3) | (50) |
Accumulated Other Comprehensive Loss | ||
Accumulated Other Comprehensive Income | ||
Balance | (2) | (5) |
Changes in other comprehensive income (loss) | (7) | (37) |
Balance | $ (9) | $ (42) |
STOCKHOLDERS' EQUITY - Stock Re
STOCKHOLDERS' EQUITY - Stock Repurchase Programs (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Feb. 28, 2022 | |
Stock Repurchase Programs | |||
Amount of company's outstanding common stock authorized to be repurchased | $ 200,000 | ||
Term of stock repurchase program | 1 year | ||
Number of shares repurchased | 200,000 | 0 | |
Total cost of shares repurchased | $ 12,000,000 | ||
Number of shares remaining under the repurchase plan | 0 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock Unit Awards and Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 28, 2022 | Mar. 18, 2022 | Jan. 27, 2022 | Mar. 31, 2022 | Mar. 31, 2021 |
Dividends | |||||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 0.21 | $ 0.21 | $ 0.21 | $ 0.21 | |
Dividends declared | $ 10 | $ 10 | |||
Dividends paid | $ 10 | 10 | 11 | ||
Stock-based compensation expense | 7 | 5 | |||
Retained Earnings | |||||
Dividends | |||||
Dividends declared | $ 10 | $ 10 | |||
Performance-based restricted stock unit awards | |||||
Number of Shares | |||||
Shares granted (in shares) | 82,513 | ||||
Weighted Average Fair Value | |||||
Weighted average grant-date fair value (in dollars per share) | $ 72.42 | ||||
Dividends | |||||
Percentage of stock units on which restrictions will lapse in February 2025 | 100.00% | ||||
Service-based restricted stock unit awards | |||||
Number of Shares | |||||
Shares granted (in shares) | 531,448 | ||||
Weighted Average Fair Value | |||||
Weighted average grant-date fair value (in dollars per share) | $ 72.21 | ||||
Stock Compensation Plans, Additional Disclosures | |||||
Award vesting period | 3 years | ||||
Minimum | Performance-based restricted stock unit awards | |||||
Dividends | |||||
Percentage of stock units to vest | 0.00% | ||||
Maximum | Performance-based restricted stock unit awards | |||||
Dividends | |||||
Percentage of stock units to vest | 150.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
INCOME TAXES | ||
Effective tax rate utilized (as a percent) | 30.20% | 26.90% |
Decrease in provision for income taxes during the period | $ 8 | |
Provision for income taxes | $ 91 | $ 99 |
Decrease in income tax provision during the period (as a percent) | 7.00% |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Numerator: | ||
Income from continuing operations | $ 211 | $ 268 |
(Loss) income from discontinued operations, net of income taxes | (1) | 18 |
Net income | $ 210 | $ 286 |
Denominator: | ||
Basic: Weighted average common stock | 49.9 | 49.7 |
Weighted average effect of dilutive securities: | ||
Add: net effect of dilutive unvested restricted stock awards (1) (in shares) | 0.1 | 0.1 |
Diluted (in shares) | 50 | 49.8 |
Basic EPS: | ||
Income from continuing operations (in dollars per share) | $ 4.23 | $ 5.39 |
(Loss) income from discontinued operations (in dollars per share) | (0.01) | 0.37 |
Net income per share (in dollars per share) | 4.22 | 5.76 |
Diluted EPS: | ||
Income from continuing operations (in dollars per share) | 4.21 | 5.38 |
(Loss) income from discontinued operations (in dollars per share) | (0.01) | 0.36 |
Net income per share (in dollars per share) | $ 4.20 | $ 5.74 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) $ in Millions | Nov. 05, 2021 | Mar. 31, 2021USD ($) | Mar. 31, 2022USD ($) |
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 | $ 38 | ||
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 | ||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | |||
Total interest expense | $ 3 | ||
Net interest income | (3) | ||
Total non-interest income | (176) | ||
Total non-interest expenses | 145 | ||
Income before provision from income taxes | 28 | ||
Provision for income taxes | 10 | ||
Income from discontinued operations, net of income taxes | 18 | ||
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||
Mandatory payment per credit agreement | 725 | ||
Depreciation and amortization | 9 | ||
Capital expenditures | $ 5 |