The upcoming report from Bread Financial Holdings (BFH) is expected to reveal quarterly loss of $0.73 per share, indicating an increase of 72.8% compared to the year-ago period. Analysts forecast revenues of $987.07 million, representing a decrease of 4.5% year over year.Over the past 30 days, the consensus EPS estimate for the quarter has been adjusted upward by 12.6% to its current level. This demonstrates the covering analysts' collective reassessment of their initial projections during this period.Prior ...

COLUMBUS, Ohio--(BUSINESS WIRE)--Bread Financial™ (NYSE: BFH), a tech-forward financial services company that provides simple, flexible payment, lending and saving solutions, today announced that Allegra Driscoll has been named executive vice president and chief technology officer. Ms. Driscoll joins Bread Financial from American Express, where she most recently served as SVP, Chief Information Officer of the Global Commercial Services Unit. “We are thrilled to welcome Allegra to our organization and exe ...

Financial Data and Key Metrics Changes - The company reported net income of $171 million for the third quarter, with a return on equity of 25% [38] - Revenue for the quarter was $1.0 billion, up 5% year-over-year, while income from continuing operations increased by 29% to $173 million [65] - The net loss rate for the quarter was 6.9%, compared to 5.0% in the third quarter of 2022 and 8.0% in the second quarter of 2023 [67] Business Line Data and Key Metrics Changes - Credit sales decreased by 13% year-over-year to $6.7 billion, influenced by the sale of the BJs Wholesale Club portfolio and strategic credit tightening [45] - Average loans remained flat year-over-year, driven by new partner additions and a lower consumer payment rate [25] - Total non-interest expenses increased by 3% year-over-year but declined by $28 million or 5% sequentially [26] Market Data and Key Metrics Changes - The economic environment remains challenging, with consumers facing persistent inflation, high interest rates, and the resumption of student loan payments [20] - The delinquency rate for the third quarter was 6.3%, up from the second quarter, driven by macroeconomic pressures [67] - The company anticipates that the fourth quarter net loss rate will be approximately 8%, influenced by seasonal trends and consumer payment pressures [70] Company Strategy and Development Direction - The company aims to grow responsibly, strengthen its balance sheet, optimize data and technology, and strategically invest in its business [21] - The management team is committed to driving responsible growth that delivers long-term shareholder value, focusing on sustainable profitable growth [22] - The company is developing mitigation strategies in anticipation of regulatory changes regarding credit card late fees, which could significantly impact its business [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in their disciplined credit risk management and ability to drive sustainable value through the full economic cycle [23] - The company expects consumer macroeconomic pressures to continue, leading to softer consumer spending and lower loan growth in 2024 [72] - Management indicated that losses are expected to peak in 2024, with the net loss rate influenced by ongoing macroeconomic challenges [72] Other Important Information - The company completed a $35 million share repurchase during the quarter, representing 935,000 shares [19] - The tangible book value per share exceeded $42, nearly tripling since the fourth quarter of 2020 [38] - The company has reduced parent-level debt by 55% over the past three years, paying down more than $1.7 billion [43] Q&A Session Summary Question: What are the mitigation efforts regarding the CFPB rules? - Management is testing different APRs and fees to close gaps and is collaborating with partners to address potential impacts [75] Question: How will the reserve rate migrate next year? - The reserve rate is expected to remain steady, influenced by macroeconomic conditions and consumer payment pressures [89] Question: Did the company grow too aggressively post-COVID? - Management believes they have remained disciplined in growth, with proactive risk management across the borrower lifecycle [123] Question: What is the outlook for delinquency rates? - Delinquency rates are expected to remain elevated due to inflation pressures, but management is focused on reducing early-stage delinquency [126] Question: How does the company view its capital structure? - The company aims to support responsible growth while reducing debt and building capital ratios to fortify its balance sheet [83]

As of September 30, 2023, we did not have any amounts remaining for future repurchases under the authorized stock repurchase program. Dividends __________________________________ Not meaningful, denoting a variance of 100 percent or more. (nm) Given the nature of our business, the credit quality of our assets, in particular our Credit card and other loans, is a key determinant underlying our ongoing financial performance and overall financial condition. When it comes to our Credit card and other loans portf ...

Financial Performance - Total net interest and non-interest income increased by $59 million (7%) to $952 million for the three months ended June 30, 2023, compared to the same period in 2022[62] - Provision for credit losses decreased by $68 million (17%) to $336 million for the three months ended June 30, 2023, compared to the same period in 2022[62] - Net income increased by $36 million to $48 million for the three months ended June 30, 2023, compared to the same period in 2022[62] - Total interest income increased by 12% year-over-year, with a net interest margin of 18.7% for Q2 2023[79] - Non-interest income increased by $45 million, primarily due to merchant discount fees and interchange revenue[79] - Net principal losses increased by $113 million and $256 million for the three and six months ended June 30, 2023, respectively[90] Expenses and Efficiency - Total non-interest expenses increased by $57 million (12%) to $530 million for the three months ended June 30, 2023, compared to the same period in 2022[62] - Total non-interest expenses increased by 12% year-over-year, driven by higher employee compensation and technology investments[80] - The company expects second half 2023 total non-interest expenses to be lower than the first half, driven by improved operating efficiencies and lower intangible amortization expense[59] Credit and Loans - Credit sales decreased by 13% year-over-year to $7.1 billion, driven by the sale of the BJ's Wholesale Club portfolio and macroeconomic headwinds[79] - Average credit card and other loans increased by 4%, while end-of-period loans increased by 1%, driven by new brand partners and moderation in consumer payment rates[79] - The company expects full-year 2023 average credit card and other loans to grow in the low- to mid-single digits relative to 2022[83] - The 2023 financial outlook assumes a full-year net loss rate in the low-to-mid 7% range, with a reserve rate of 12.3% as of June 30, 2023[84] Capital and Liquidity - The company's TCE/TA ratio was 9.4% as of June 30, 2023, reflecting a strengthened balance sheet and improved capital ratios[56] - Direct-to-consumer (DTC) deposits comprised 33% of the funding mix as of June 30, 2023, with a reduction in debt of over $500 million[82] - The company maintains a significant majority of its liquidity portfolio on deposit within the Federal Reserve banking system[110] Reserves and Credit Quality - The reserve rate increased to 12.3% as of June 30, 2023, compared to 11.5% as of December 31, 2022, due to the sale of the BJ's portfolio and softening economic indicators[55] - The company's Vantage 660+ cardholder percentage remains materially above pre-pandemic levels due to prudent credit tightening actions and a more diversified product mix[55] Tax and Dividends - The company expects full-year normalized effective tax rate to remain in the range of 25% to 26% for 2023[60] - Dividends paid to common stockholders were $11 million and $21 million for the three and six months ended June 30, 2023, respectively[366] - Quarterly cash dividend of $0.21 per share declared on July 27, 2023, payable on September 15, 2023[366] Comprehensive Loss and Fair Value - Accumulated Other Comprehensive Loss increased from $(19) million to $(20) million for the three months ended June 30, 2023[362] - Accumulated Other Comprehensive Loss increased from $(9) million to $(14) million for the three months ended June 30, 2022[362] - Accumulated Other Comprehensive Loss decreased from $(21) million to $(20) million for the six months ended June 30, 2023[362] - Accumulated Other Comprehensive Loss increased from $(2) million to $(14) million for the six months ended June 30, 2022[362] - Money market and other non-maturity deposits carrying values approximate their fair values due to short-term duration and no defined maturity[353] Market and Interest Rate Risk - No material change in exposure to interest rate risk or other market risks compared to 2022 Form 10-K[385] - No transfers into or out of Level 3, and no transfers between Levels 1 and 2 for the three and six months ended June 30, 2023 and 2022[351] Financial Outlook - The company's 2023 financial outlook reflects slowing sales growth due to self-moderated consumer spending and targeted credit tightening[58]

Bread Financial Holdings, Inc. (NYSE:BFH) Q2 2023 Earnings Conference Call July 27, 2023 8:30 AM ET Company Participants Brian Vereb - Head of Investor Relations Ralph Andretta - President & Chief Executive Officer Perry Beberman - Executive Vice President & Chief Financial Officer Conference Call Participants Sanjay Sakhrani - KBW Robert Napoli - William Blair Mihir Bhatia - Bank of America Merrill Lynch Jeff Adelson - Morgan Stanley Bill Carcache - Wolfe Research Dominick Gabriele - Oppenheimer Reggie ...

UNITED STATES (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-15749 _______________________________________ Table of Contents Washington, D.C. 20549 Delaware 31-1429215 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (614) 729-4000 (Registr ...

Financial Data and Key Metrics Changes - Bread Financial's credit sales increased by 7% year-over-year to $7.4 billion, despite a decline in consumer sentiment and discretionary spending due to inflation [13][21] - Revenue for the quarter was $1.3 billion, up 40% compared to Q1 2022, driven by a $230 million gain from the sale of the BJs portfolio [22] - Total net interest income rose by 13% from Q1 2022, while noninterest income was $172 million, including the gain on sale [23] - The company reported a net loss rate of 7% for the quarter, with an increase in the reserve rate to 12.3% due to seasonality and the BJs portfolio sale [30][32] Business Line Data and Key Metrics Changes - Co-branded and proprietary spend now accounts for approximately 50% of total credit sales, with average loans increasing by 17% year-over-year [21] - The company experienced net positive inflows of deposit balances on its savings platform, growing by 3% from year-end [18] - The delinquency rate for Q1 was 5.7%, slightly up from the previous quarter, influenced by inflationary pressures [30] Market Data and Key Metrics Changes - The company noted a shift from discretionary to non-discretionary spending among consumers, impacting overall sales trends [13][74] - Direct-to-consumer average deposits grew by 70% year-over-year to $5.6 billion, representing 28% of the total funding mix [28] Company Strategy and Development Direction - The company is focused on sustainable, profitable growth, enhancing its capital position, and optimizing data and technology [14][36] - Bread Financial aims to continue diversifying its product offerings and partner base, with a strong business development pipeline [15][55] - The company plans to invest up to $30 million from the gain on sale to accelerate technology and digital transformation [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic challenges, citing improved credit risk management and a diversified portfolio [17][35] - The outlook for 2023 remains unchanged, with expectations for mid-single-digit loan growth and consistent revenue growth [39] - Management anticipates that inflation will remain elevated but moderating, with a gradual increase in unemployment [43] Other Important Information - The company has significantly improved its capital ratios, nearly tripling its TCE to TA ratio since Q1 2020, and reducing parent-level debt by nearly 40% [11][36] - Bread Financial was recognized in Newsweek's list of America's most trustworthy companies for 2023, reflecting its commitment to integrity and governance [12] Q&A Session Summary Question: Perspectives on the economy and discretionary spending - Management acknowledged persistent inflation and its impact on consumer behavior, noting a shift towards non-discretionary spending due to diversified product offerings [48] Question: Business development and partner pipeline - The company reported a strong pipeline for new partnerships, with expectations for continued success in securing new contracts [55] Question: Update on loyalty ventures situation - Management confirmed their significant stake in loyalty ventures and expressed alignment with its interests, despite external economic challenges [63] Question: Flexibility to dividend excess capital - The company indicated that its high capital ratios at the bank level would allow for dividends to be paid up to the parent company to support debt restructuring [64] Question: Delinquency performance and outlook - Management discussed the elevated delinquency rates and the expected impact of transition-related items on future loss rates, expressing confidence in improved performance in the latter half of the year [68] Question: Trends in purchase volume and consumer behavior - Management noted a slight decline in consumer traffic but emphasized that those who visit retail partners are more intent on purchasing rather than browsing [74] Question: Share repurchase strategy - Management stated that the focus remains on strengthening the balance sheet and investing in growth rather than immediate share repurchases [99] Question: Performance of Bread Pay - Management clarified that Bread Pay is one of several products and continues to be invested in, despite not being the primary focus [101]

V bread financial. Bread Financial 1Q23 Investor Deck February 13, 2023 Forward-looking statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements give our expectations or forecasts of future events and can generally be identified by the use of words such as "believe," "expect," "anticipate," "estimate," "intend," "project," "plan," "likely," "may," "should" or ...

PART I [Business](index=6&type=section&id=Item%201.%20Business) Bread Financial is a tech-forward financial services company specializing in personalized payment, lending, and saving solutions - The company operates as a single segment after completing the spinoff of its former LoyaltyOne segment in November 2021, simplifying its business model to focus on tech-forward financial services[374](index=374&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk) - Key strategic initiatives include rebranding as Bread Financial, expanding its product suite with BNPL and direct-to-consumer offerings, and investing over **$125 million** in technology, digital capabilities, and marketing[396](index=396&type=chunk)[425](index=425&type=chunk) Credit Sales and End-of-Period Loans Breakdown (2022) | Category | Private Label | Co-Brand | Bread Pay | Other | | :--- | :--- | :--- | :--- | :--- | | **Full Year Credit Sales** | 47% | 49% | 4% | - | | **End-of-Period Loans** | 39% | 56% | 1% | 4% | - The company's primary product offerings include private label credit cards (exclusive to a partner), co-brand credit cards (usable on major networks like MasterCard and Visa), Bread Pay™ (installment and split-pay loans), and Bread Savings™ (direct-to-consumer deposits)[382](index=382&type=chunk)[401](index=401&type=chunk)[404](index=404&type=chunk)[406](index=406&type=chunk) - In **2022**, the company completed the transition of its credit card processing services to Fiserv to enhance speed to market, improve digital integration, and increase operational efficiencies[408](index=408&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks primarily from macroeconomic instability, including inflation and potential recession [Macroeconomic, Strategic, Business and Competitive Risks](index=23&type=section&id=Macroeconomic%2C%20Strategic%2C%20Business%20and%20Competitive%20Risks) The company's performance is highly sensitive to macroeconomic conditions such as inflation, rising interest rates, and recession risk - Adverse macroeconomic conditions directly impact loan volumes and revenues; a recession or prolonged economic weakness could significantly increase delinquencies and charge-offs, with the **delinquency rate** at **5.5%** and the full-year **net loss rate** at **5.4%** as of December **31**, **2022**[1](index=1&type=chunk)[547](index=547&type=chunk) Revenue and Loan Concentration (2022) | Metric | Five Largest Programs | Ulta Beauty Program | Victoria's Secret Program | BJ's Wholesale Club Program | | :--- | :--- | :--- | :--- | :--- | | **% of Total Net Interest & Non-Interest Income** | ~47% | >10% | >10% | ~10% | | **% of End-of-Period Loans** | ~41% | - | - | ~11% | - The company relies extensively on complex models for managing credit risk, pricing, and reserving; inaccurate assumptions or model errors, especially regarding macroeconomic conditions, could lead to sub-optimal decisions and have a material adverse effect on results[528](index=528&type=chunk) - The amount of the **Allowance for Credit Losses** is a critical estimate; the CECL accounting standard requires reserving for lifetime expected losses, which can create volatility, and an underestimation could result in insufficient coverage of actual losses[529](index=529&type=chunk)[558](index=558&type=chunk)[589](index=589&type=chunk) [Liquidity, Market and Credit Risks](index=31&type=section&id=Liquidity%2C%20Market%20and%20Credit%20Risks) The company's primary funding sources include customer deposits, securitization of credit card loans, and unsecured borrowings - The company relies on securitizing **credit card loans** as a significant funding source; an early amortization event, triggered by deteriorating asset performance or partner bankruptcies, could significantly limit the ability to securitize additional loans and adversely affect liquidity[10](index=10&type=chunk)[578](index=578&type=chunk) - Customer deposits are an increasingly important source of funds, growing **72%** to **$5.5 billion** in **2022**; intense competition for deposits and regulatory restrictions could affect the availability and cost of this funding[12](index=12&type=chunk)[611](index=611&type=chunk) - The company's level of indebtedness requires substantial interest and principal payments; covenants in debt agreements restrict the ability to incur additional debt, pay dividends, and make certain investments, which could limit operational flexibility and growth[14](index=14&type=chunk)[647](index=647&type=chunk) - Profitability is sensitive to changes in market interest rates; while recent Federal Reserve rate increases have had a nominal benefit, a scenario where funding costs rise faster than asset yields could adversely affect **net interest income**[16](index=16&type=chunk)[616](index=616&type=chunk)[649](index=649&type=chunk) [Legal, Regulatory and Compliance Risks](index=36&type=section&id=Legal%2C%20Regulatory%20and%20Compliance%20Risks) The business operates in a highly regulated environment, subject to oversight from the FDIC, CFPB, and various state authorities - The business is subject to extensive and evolving government regulation, which can be costly and limit product offerings; a key risk is the CFPB's February **2023** proposed rule to reduce the credit card late fee safe harbor amount to **$8**, a significant decrease from current inflation-adjusted levels of **$30** for an initial fee and **$41** for subsequent fees[23](index=23&type=chunk)[621](index=621&type=chunk)[622](index=622&type=chunk) - The company is exposed to litigation, including class action lawsuits; while arbitration clauses have historically limited this exposure, their future enforceability is not guaranteed, and mass arbitrations could present a significant risk[25](index=25&type=chunk) - The company's banks must maintain minimum regulatory capital levels; failure to meet these requirements could trigger corrective actions by regulators, restrict the banks' ability to pay dividends to the parent company, and potentially require capital injections from the parent[27](index=27&type=chunk)[626](index=626&type=chunk) - Compliance with privacy and data protection laws (e.g., GLBA, CCPA) and anti-money laundering regulations (e.g., Bank Secrecy Act) is critical; noncompliance can lead to significant fines, sanctions, and reputational harm[31](index=31&type=chunk)[64](index=64&type=chunk)[630](index=630&type=chunk) [Cybersecurity, Technology and Vendor Risks](index=41&type=section&id=Cybersecurity%2C%20Technology%20and%20Vendor%20Risks) The company faces significant risks related to cybersecurity, technology infrastructure, and reliance on third-party vendors - The transition of **credit card** processing services to Fiserv in June **2022** led to unanticipated platform stability issues, causing outages in call centers and online customer service platforms, resulting in customer complaints, reputational damage, and regulatory scrutiny[635](index=635&type=chunk)[698](index=698&type=chunk) - Failure to protect customer data and privacy from unauthorized access or cyberattacks could damage the company's reputation, expose it to legal claims from partners and customers, and result in regulatory enforcement actions[36](index=36&type=chunk)[699](index=699&type=chunk) - The business relies on numerous third-party vendors for a range of products and services; the failure of a significant vendor to meet contractual requirements, comply with regulations, or prevent a security breach could cause economic and reputational harm[69](index=69&type=chunk) - The financial services industry is subject to rapid technological change; if the company cannot successfully invest in and compete with new technologies, its revenue and profitability could be adversely affected[71](index=71&type=chunk)[637](index=637&type=chunk) [Properties](index=47&type=section&id=Item%202.%20Properties) As of December **31**, **2022**, the company leases **14** general office properties totaling approximately **1 million** square feet Principal Leased Facilities | Location | Square Footage | Lease Expiration Date | | :--- | :--- | :--- | | Coeur D'Alene, Idaho | 114,000 | July 31, 2038 | | Columbus, Ohio | 326,354 | September 12, 2032 | | Columbus, Ohio | 103,161 | June 30, 2024 | PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on the New York Stock Exchange under the ticker symbol "BFH" - The company's common stock trades on the NYSE under the ticker "**BFH**", which changed from "**ADS**" on April **4**, **2022**, following the corporate name change to Bread Financial Holdings, Inc[92](index=92&type=chunk)[684](index=684&type=chunk) - On January **26**, **2023**, the Board of Directors declared a quarterly cash dividend of **$0.21** per share; the company expects to continue paying quarterly dividends, subject to Board approval and other factors[120](index=120&type=chunk)[685](index=685&type=chunk) Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October 1-31 | 4,076 | $30.61 | | November 1-30 | 3,651 | $36.75 | | December 1-31 | 3,816 | $38.22 | | **Total** | **11,543** | **$35.07** | Stock Performance Comparison (Value of $100 Invested on 12/31/2017) | Date | Bread Financial Holdings, Inc. | S&P 500 Index | S&P Financial Index | Peer Group Index | | :--- | :--- | :--- | :--- | :--- | | 12/31/2017 | $100.00 | $100.00 | $100.00 | $100.00 | | 12/31/2018 | $59.98 | $95.62 | $86.97 | $98.31 | | 12/31/2019 | $45.92 | $125.72 | $114.91 | $141.60 | | 12/31/2020 | $31.08 | $148.85 | $112.96 | $184.87 | | 12/31/2021 | $35.39 | $191.58 | $152.54 | $196.11 | | 12/31/2022 | $20.37 | $156.89 | $136.48 | $145.48 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=50&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) In **2022**, Bread Financial saw strong top-line growth, with **total net interest and non-interest income** increasing **17%** to **$3.8 billion** [Business Environment and 2023 Outlook](index=50&type=section&id=Business%20Environment%20and%202023%20Outlook) The company's **2023** financial outlook anticipates mid-single-digit growth in **average credit card** and other **loans** - The company's **2023** financial outlook anticipates mid-single-digit growth in **average credit card** and other **loans**, with **total net interest and non-interest income** growth aligned with this rate[63](index=63&type=chunk) - The full-year **2023** **Net Interest Margin** is expected to be consistent with the **2022** rate of **19.2%**[63](index=63&type=chunk) - The **2023** outlook assumes a **net loss rate** of approximately **7%**, reflecting continued pressure on consumers' ability to pay due to persistent inflation[97](index=97&type=chunk) - The outlook for **2023** is influenced by the sale of the BJ's Wholesale Club portfolio, which in **2022** generated approximately **10%** of **total net interest and non-interest income** and represented **11%** of **total loans**[63](index=63&type=chunk) [Consolidated Results of Operations](index=52&type=section&id=Consolidated%20Results%20of%20Operations) For the year ended December **31**, **2022**, **total net interest and non-interest income** increased by **17%** to **$3.8 billion** Consolidated Financial Performance Summary (in Millions, except per share data) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | **Total net interest and non-interest income** | $3,826 | $3,272 | 17% | | **Provision for credit losses** | $1,594 | $544 | 193% | | **Total non-interest expenses** | $1,932 | $1,684 | 15% | | **Income from continuing operations** | $224 | $797 | (72)% | | **Diluted EPS from continuing operations** | $4.47 | $15.95 | (72)% | - The increase in **Provision for credit losses** was primarily due to a **$626 million** reserve build, driven by a **23%** increase in end-of-period **loan** balances, higher net principal losses, and a higher reserve rate due to a weaker macroeconomic outlook[96](index=96&type=chunk)[100](index=100&type=chunk) - **Total non-interest expenses** increased by **$248 million** (**15%**), primarily due to higher employee compensation, information processing costs related to the **credit card** platform transition, and marketing expenses[101](index=101&type=chunk)[133](index=133&type=chunk) [Asset Quality](index=57&type=section&id=Asset%20Quality) The company's asset quality metrics showed signs of normalization from pandemic-era lows Delinquency and Net Loss Rate Trends | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Delinquency Rate (End-of-Period)** | 5.5% | 3.9% | 4.4% | | **Net Loss Rate (Full Year)** | 5.4% | 4.6% | 6.6% | - Both the **delinquency rate** and net principal **loss rate** for **2022** were impacted by the transition of the company's **credit card** processing services[110](index=110&type=chunk)[140](index=140&type=chunk) [Consolidated Liquidity and Capital Resources](index=59&type=section&id=Consolidated%20Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash from operations, deposits, and securitization programs - Primary sources of liquidity include cash from operations, deposits, securitization programs, and debt issuances; the company believes these sources are adequate to fund current and long-term requirements[142](index=142&type=chunk)[143](index=143&type=chunk) Key Funding Sources (as of Dec 31, 2022) | Funding Source | Amount (Millions) | | :--- | :--- | | **Total Deposits** | $13,826 | | - Direct-to-consumer (retail) | $5,466 | | - Wholesale | $8,321 | | Debt issued by consolidated VIEs (Securitizations) | $6,115 | | Long-term and other debt | $1,892 | - During **2022**, the company increased its private conduit facilities capacity by **$2.1 billion** to a total of **$6.5 billion**[115](index=115&type=chunk) Combined Banks Capital Ratios (as of Dec 31, 2022) | Ratio | Actual Ratio | Minimum to be Well Capitalized | | :--- | :--- | :--- | | **Common Equity Tier 1 capital ratio** | 17.0% | 6.5% | | **Tier 1 capital ratio** | 17.0% | 8.0% | | **Total Risk-based capital ratio** | 18.3% | 10.0% | | **Tier 1 Leverage capital ratio** | 15.6% | 5.0% | [Critical Accounting Estimates](index=64&type=section&id=Critical%20Accounting%20Estimates) The company's most critical accounting estimates involve the **Allowance for Credit Losses** and the **Provision for Income Taxes** - The two most critical accounting estimates are the **Allowance for Credit Losses** and the **Provision for Income Taxes**[182](index=182&type=chunk) - The **Allowance for Credit Losses** is estimated using the CECL model, which considers historical loss experience, current conditions, and reasonable forecasts; the estimate is sensitive to assumptions, with a **100** basis point change in the allowance as a percentage of **loans** resulting in an approximately **$210 million** change as of December **31**, **2022**[156](index=156&type=chunk)[184](index=184&type=chunk)[746](index=746&type=chunk) - Estimating the **Provision for Income Taxes** is complex and requires judgment regarding the realizability of deferred tax assets and the technical merits of uncertain tax positions; as of December **31**, **2022**, the company had **$282 million** in unrecognized tax benefits[158](index=158&type=chunk)[185](index=185&type=chunk)[784](index=784&type=chunk) [Financial Statements and Supplementary Data](index=66&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal year ended December **31**, **2022** [Report of Independent Registered Public Accounting Firm](index=86&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the company's consolidated financial statements as of December **31**, **2022** - The auditor, Deloitte & Touche LLP, expressed an unqualified opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting as of December **31**, **2022**[199](index=199&type=chunk)[220](index=220&type=chunk) - The **Allowance for Credit Losses** was identified as a Critical Audit Matter due to the significant and subjective judgments made by management in its estimation, particularly regarding the CECL model, forecasted economic conditions, and qualitative adjustments[191](index=191&type=chunk)[192](index=192&type=chunk)[196](index=196&type=chunk) [Consolidated Financial Statements](index=89&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail the company's financial performance and position Consolidated Statement of Income Highlights (in Millions) | Line Item | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net interest income** | $4,181 | $3,485 | $3,453 | | **Provision for credit losses** | $1,594 | $544 | $1,266 | | **Total non-interest expenses** | $1,932 | $1,684 | $1,731 | | **Net income** | **$223** | **$801** | **$214** | Consolidated Balance Sheet Highlights (in Millions) | Line Item | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Credit card** and other **loans**, net | $18,901 | $15,567 | | **Total assets** | **$25,407** | **$21,746** | | **Deposits** | $13,826 | $11,027 | | Total liabilities | $23,142 | $19,660 | | **Total stockholders' equity** | **$2,265** | **$2,086** | Consolidated Statement of Cash Flows Highlights (in Millions) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,848 | $1,543 | $1,883 | | **Net cash (used in) provided by investing activities** | $(5,111) | $(1,691) | $1,774 | | **Net cash provided by (used in) financing activities** | $3,267 | $608 | $(4,167) | [Notes to Consolidated Financial Statements](index=95&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the accounting policies and financial figures presented in the consolidated statements - The company's five largest **credit card** programs accounted for approximately **47%** of **total net interest and non-interest income** and **41%** of end-of-period **loans** in **2022**; the Ulta Beauty and Victoria's Secret programs each accounted for more than **10%** of income[296](index=296&type=chunk) Allowance for Credit Losses Rollforward (in Millions) | Description | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Beginning balance | $1,832 | $2,008 | $1,815 | | **Provision for credit losses** | $1,594 | $544 | $1,266 | | Net principal losses | $(972) | $(720) | $(1,083) | | **Ending balance** | **$2,464** | **$1,832** | **$2,008** | - The company regularly securitizes its **credit card loans** through trusts, which are consolidated VIEs; as of Dec **31**, **2022**, **total** securitized **credit card loans** were **$15.4 billion**[824](index=824&type=chunk)[846](index=846&type=chunk) - As of Dec **31**, **2022**, **total borrowings** were **$8.0 billion**, consisting of **$1.9 billion** in long-term and other debt (including senior notes) and **$6.1 billion** in debt issued by consolidated VIEs (securitizations)[862](index=862&type=chunk)[879](index=879&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December **31**, **2022** - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[189](index=189&type=chunk) - Management assessed the effectiveness of internal control over financial reporting using the COSO framework and concluded that it was effective as of December **31**, **2022**[791](index=791&type=chunk) - The independent auditor, Deloitte & Touche LLP, also audited and provided an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December **31**, **2022**[199](index=199&type=chunk)[792](index=792&type=chunk) PART III [Directors, Executive Officers, Corporate Governance, Compensation, and Related Party Transactions](index=68&type=section&id=Items%2010-14) Information required for Part III, covering directors, executive officers, corporate governance, executive compensation, security ownership - The information for Items **10**, **11**, **12**, **13**, and **14** is incorporated by reference from the Proxy Statement for the **2023** Annual Meeting of Stockholders[223](index=223&type=chunk)[224](index=224&type=chunk)[274](index=274&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=69&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits filed as part of the Form **10-K**, including corporate governance documents, material contracts, and certifications - This section contains a list of all exhibits filed with the Form **10-K**, including key agreements like the Amended and Restated Credit Agreement and various Indentures for senior notes[5](index=5&type=chunk)[227](index=227&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to SEC rules are filed as exhibits **31.1**, **31.2**, **32.1**, and **32.2**[5](index=5&type=chunk) - Financial information formatted in Inline XBRL is included as Exhibit **101**[6](index=6&type=chunk)