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)

Financial Data and Key Metrics Changes - Revenue for Q4 was $1 billion, increasing 21% year-over-year, driven by higher average loan balances and improved loan yields [10] - Full-year revenue reached $3.8 billion, a 17% increase compared to 2021, while total non-interest expenses increased 15% [11] - Pretax pre-provision earnings increased 19% versus 2021, indicating strong quality of growth [6] Business Line Data and Key Metrics Changes - Bread Financial credit sales were up 11% year-over-year to $32.9 billion, with average loans increasing 13% [11] - Average and end-of-period loans for Q4 were each up 23%, driven by new program additions and organic growth from existing brand partners [21] - Retail deposits on the Bread Savings platform increased to $5.5 billion, a 72% year-over-year growth [25] Market Data and Key Metrics Changes - The net loss rate for the quarter was 6.3%, slightly better than earlier projections, with a full-year net loss rate expected to be approximately 7% [55][56] - The delinquency rate for Q4 was 5.5%, slightly below the previous quarter, following typical seasonality [32] - The reserve rate increased to 11.5% due to elevated inflation and increasing consumer debt levels [33] Company Strategy and Development Direction - The company is focused on ongoing technology investments, with over $125 million spent in 2022 on modernization and digital advancement [16] - A new long-term credit card relationship was signed with Hard Rock International, expanding the company's reach across generations [18] - The company plans to build on its 2022 momentum in 2023, despite a challenging macroeconomic landscape, with a strong business development pipeline [19] Management's Comments on Operating Environment and Future Outlook - Management expects inflationary pressures and gradually rising unemployment levels to impact the business in 2023 [19][37] - The company remains confident in its ability to manage through economic cycles, leveraging its differentiated underwriting and credit risk modeling [8][27] - Management anticipates that the net loss rate will hover above the historic average during challenging economic periods [8] Other Important Information - The company was recognized for its commitment to environmental, social, and governance (ESG) practices, earning a spot on Newsweek's 2023 list of America's most responsible companies [17] - The company has secured renewals with brand partners representing approximately 85% of year-end 2022 credit card balances through 2025 [23] Q&A Session Summary Question: What are the expectations for the reserve rate and its components? - Management expects the reserve rate to increase due to the sale of the BJ's portfolio and continued economic weakness, potentially reaching around 12.5% by year-end [60][61] Question: How is the competitive environment affecting the company? - The competitive environment remains strong, with the company focusing on profitable growth and responsible portfolio expansion [49][68] Question: What are the expectations for delinquencies and losses in 2023? - Delinquencies are expected to trend higher due to inflationary pressures, even with a strong labor market, impacting payment abilities for moderate-income families [82][83] Question: How will late fees be affected by potential regulations? - The company is prepared to adjust to any regulatory changes regarding late fees, similar to past adjustments made during the Card Act [74][75]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-15749 BREAD FINANCIAL HOLDINGS, INC. (Exact name of registrant as specified in its charter) d financic Delaware 31-1429215 (State or other j ...

Bread Financial Holdings, Inc. (NYSE:BFH) Q3 2022 Earnings Conference Call October 27, 2022 8:30 AM ET Company Participants Brian Vereb - Head, IR Ralph Andretta - CEO, President & Director Perry Beberman - EVP & CFO Conference Call Participants Sanjay Sakhrani - KBW Robert Napoli - William Blair & Company Mihir Bhatia - Bank of America Merrill Lynch Bill Carcache - Wolfe Research Jeffrey Adelson - Morgan Stanley John Pancari - Evercore ISI David Scharf - JMP Securities Reginald Smith - JPMorgan Chase & Co. ...

Financial Performance - Revenue increased by 15% to $979 million in 3Q22 compared to $851 million in 3Q21[9, 10] - Net income decreased by 35% to $134 million in 3Q22 compared to $206 million in 3Q21[9, 10] - Diluted EPS decreased by 35% to $2.69 in 3Q22 compared to $4.11 in 3Q21[9, 10] - Pretax pre-provision earnings (PPNR) increased by 17% to $493 million in 3Q22 compared to $420 million in 3Q21[5, 10] - Average loans increased by 14% to $17.6 billion in 3Q22 compared to $15.5 billion in 3Q21[5, 9] Balance Sheet and Credit Quality - End-of-period loans increased by 16% in 3Q22 compared to 3Q21[5, 32] - Retail deposit growth increased by 70% in 3Q22 compared to 3Q21 and 24% compared to 2Q22[5] - Net interest margin increased by 1% to 19.9% in 3Q22 compared to 18.9% in 3Q21[5, 32] - The company anticipates the full year net loss rate to be in the low-to-mid 5% range[20] - End-of-period direct-to-consumer deposits increased 70% to $5.176 billion [32]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-15749 BREAD FINANCIAL HOLDINGS, INC. (Exact name of registrant as specified in its charter) | --- | --- | |-------------------------------------- ...

Financial Data and Key Metrics Changes - Bread Financial reported credit sales of $8.1 billion, up 10% year-over-year, with revenue increasing 17% compared to Q2 2021 [22][23] - Average loans rose by 11%, while end-of-period loans increased by 13%, driven by strong credit sales and moderating payment rates [22][23] - Net income was $12 million with diluted EPS of $0.25, impacted by a $166 million CECL reserve build and a $21 million write-down related to Loyalty Ventures [25][26] Business Line Data and Key Metrics Changes - The company experienced strong growth in consumer deposit balances, with retail deposit balances up 75% year-over-year [8] - The American Express Bread Cashback Card showed early success, particularly among millennial and Gen-X consumers, with strong spending in everyday categories [9] - The company signed over 50 new small- and medium-sized partners in the second quarter, focusing on profitable lending [16] Market Data and Key Metrics Changes - Delinquency rates increased to 4.4%, while the net loss rate was 5.6%, reflecting normalization from historical lows [23][34] - The reserve rate increased to 11.2% due to heightened economic uncertainty and a potential recession [35][36] - The company noted that consumer sentiment has weakened, but retail sales continue to rise, indicating a resilient consumer base [11] Company Strategy and Development Direction - Bread Financial is focused on sustainable, profitable growth, with strategic investments in technology modernization and digital advancement totaling over $125 million [42][44] - The company aims to diversify its portfolio through new partnerships and acquisitions, including a significant relationship with AAA [13][58] - The management team emphasizes a proactive approach to credit risk management and has implemented a recession readiness playbook [46][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the consumer's financial position despite concerns about a potential recession, noting low unemployment and rising wages [11][12] - The company anticipates continued loan growth in the low double-digit range for 2022, driven by strong sales activity and new business signings [39][40] - Management remains cautious about the economic outlook, adjusting reserve rates to reflect increased recession probabilities [35][56] Other Important Information - The company completed a significant technology migration to the cloud, enhancing operational efficiencies and scalability [18][19] - Noninterest income was negatively impacted by a $21 million write-down related to Loyalty Ventures, but excluding this, it correlated closely with credit sales growth [27][28] - The company is not planning to be a strategic investor in Loyalty Ventures and intends to monetize its remaining stake [80][81] Q&A Session Summary Question: Credit outlook and reserve build - Management expressed confidence in the portfolio mix but acknowledged the need for a conservative approach due to rising unemployment scenarios [51][52][54] Question: Return on equity targets - The company continues to target a mid- to high 20% return on equity, with growth pace being a variable factor [57] Question: AAA portfolio size and implications - Management did not disclose the exact size of the AAA portfolio but indicated it would contribute significantly to growth [58][59] Question: Reserve rate outlook amid recession - Management believes the reserve rate may remain elevated during economic strain but expects it to decrease once the economic outlook improves [60][68] Question: Portfolio yield and NIM guidance - The company anticipates a lag in passing on rate increases to consumers, with NIM expected to hover around 19% [75][76] Question: Performance across different cohorts - Management reported strong spending across proprietary and co-brand cards, indicating consumer engagement despite inflationary pressures [73][74] Question: Late fees and regulatory engagement - The company is adapting to regulatory changes and diversifying its portfolio to reduce reliance on any single product [90][91]

Table of Contents 9 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or | --- | --- | --- | |-----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|------------------------------------------------------------ ...

Bread Financial Holdings, Inc. (NYSE:BFH) Q1 2022 Earnings Conference Call April 28, 2022 8:30 AM ET Company Participants Brian Vereb - Head, IR Ralph Andretta - CEO, President & Director Perry Beberman - EVP & CFO Conference Call Participants Sanjay Sakhrani - KBW Jeffrey Adelson - Morgan Stanley, Research Division, Research Associate Robert Napoli - William Blair & Company Bill Carcache - Wolfe Research David Scharf - JMP Securities Michael Young - Truist Securities Reginald Smith - JPMorgan Chase & Co. M ...

\ bread financial. Bread Financial First Quarter 2022 Results April 28, 2022 Ralph Andretta President & CEO Perry Beberman EVP & CFO Forward-Looking Statements This presentation 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," "est ...