Bread Financial (NYSE:BFH) FY Conference September 09, 2025 11:15 AM ET Company ParticipantsPerry Beberman - Executive VP & CFORalph Andretta - CEO, President & DirectorConference Call ParticipantsTerry Ma - Senior Equity Research AnalystTerry MaThank you for joining, everyone. My name is Terry Ma. I cover consumer finance at Barclays. I'm very pleased to have on stage Ralph Andretta, CEO of Bread Financial, and also Perry Beberman, CFO of Bread Financial. Thank you for joining.Perry BebermanThank you.Terry ...

Core Insights - Bread Financial Holdings, Inc. reported a performance update highlighting a slight decrease in average credit card and other loans by 1% year-over-year, from $17,760 million in August 2024 to $17,598 million in August 2025 [1] - The company experienced a net loss rate improvement, decreasing from 7.8% in August 2024 to 7.6% in August 2025, indicating better credit performance [1] - Delinquency rates also showed improvement, declining from 6.2% in August 2024 to 5.8% in August 2025, reflecting a positive trend in loan repayment behavior [1] Company Overview - Bread Financial is a tech-forward financial services company that offers personalized payment, lending, and saving solutions to millions of U.S. consumers [2] - The company provides general purpose credit cards and savings products, aiming to empower customers and enhance their financial well-being [2] - Bread Financial collaborates with recognized brands in various sectors, including travel, entertainment, health, beauty, jewelry, and specialty apparel, through private label and co-brand credit cards [2]

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market engagement and confidence [1] - The Zacks Style Scores are designed to help investors select stocks with the highest potential to outperform the market in the short term [2] Zacks Style Scores Overview - The Style Scores categorize stocks based on value, growth, and momentum, assigning ratings from A to F, with A indicating the highest potential for outperformance [3] - Value Score focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [4] - Growth Score evaluates stocks based on projected earnings and sales growth, emphasizing future financial health [5] - Momentum Score identifies stocks benefiting from current price trends, utilizing recent price changes and earnings estimate shifts [6] - VGM Score combines the three Style Scores to highlight stocks with the best overall characteristics in value, growth, and momentum [6] Zacks Rank and Style Scores Interaction - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in stock selection [7] - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +23.75% since 1988, significantly outperforming the S&P 500 [8] - To optimize returns, investors should target stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [9] - The direction of earnings estimate revisions is crucial; stocks with lower ranks, even with high Style Scores, may still face price declines [10] Company Spotlight: Bread Financial Holdings - Bread Financial, a tech-forward financial services company, is part of the S&P MidCap 400 and offers personalized payment and lending solutions [11] - Currently rated 3 (Hold) by Zacks, Bread Financial has a VGM Score of A and a Value Style Score of A, with a forward P/E ratio of 7.93 [12] - Recent upward revisions in earnings estimates indicate positive momentum, with the Zacks Consensus Estimate rising to $8.35 per share [12] - Given its solid Zacks Rank and favorable Style Scores, Bread Financial is recommended for investors' consideration [13]

Core Insights - Bread Financial Holdings, Inc. (BFH) is experiencing strong investor confidence, closing at $66.19, near its 52-week high of $67.33, indicating potential for further price appreciation [1] - The stock has shown solid upward momentum, trading above its 50-day and 200-day simple moving averages of $60.42 and $56.49, respectively [1] Performance Metrics - BFH shares have rallied 8.4% year-to-date, outperforming the industry's growth of 5.4% [2] - The stock has a solid track record of beating earnings estimates in three of the past four quarters, with an average surprise of 32.01% [2] Valuation - BFH shares are trading at a forward price-to-earnings ratio of 7.71X, significantly lower than the industry average of 24.8X, the Finance sector's 17.32X, and the S&P 500 Composite's 22.8X, earning a Value Score of A [3] Growth Projections - The Zacks Consensus Estimate for BFH's 2025 earnings per share indicates a year-over-year increase of 9.8%, with revenues projected at $3.88 billion, reflecting a 1.1% improvement [7] - Analysts have raised estimates for 2025 earnings by 4.3% and for 2026 by 0.2% over the past 30 days [8] Analyst Sentiment - The average price target for BFH is $70.14 per share, suggesting a potential upside of 5.9% from the last closing price [10] Financial Health - BFH's return on invested capital in the trailing 12 months was 9.7%, outperforming the industry average of 5.1%, indicating efficient fund utilization [13] - The company is focused on strengthening its balance sheet, lowering debt, and has shown impressive free cash flow conversion [17] Strategic Initiatives - BFH expects credit sales growth driven by strong consumer spending, new partnerships, and holiday demand, with strategic investments in digital innovation and marketing [6][16] - The company plans to pay down $100 million in remaining 2026 bonds this year to improve leverage [17] Shareholder Value - BFH is committed to returning value to shareholders through share repurchases and intends to focus on mergers and acquisitions [18] - The company has a favorable VGM Score of A, indicating attractive value, growth, and momentum compared to peers [19]

Core Viewpoint - Bread Financial Holdings, Inc. is actively participating in the Barclays 23rd Annual Global Financial Services Conference, highlighting its commitment to engaging with investors and stakeholders in the financial services sector [1][2]. Company Overview - Bread Financial is a tech-forward financial services company that offers personalized payment, lending, and saving solutions to millions of U.S. consumers [1][3]. - The company provides general purpose credit cards and savings products, aiming to empower customers and enhance their quality of life [3]. - Bread Financial also supports growth for recognized brands in various sectors, including travel, entertainment, health, beauty, jewelry, and specialty apparel through private label and co-brand credit cards [3]. Event Details - The fireside chat featuring Bread Financial's President and CEO Ralph Andretta, along with EVP and CFO Perry Beberman, is scheduled for September 9 at 11:15 a.m. ET and will be broadcast live [2]. - A replay of the webcast will be available for 90 days after the event, ensuring accessibility for interested parties [2].

Core Viewpoint - Bread Financial Holdings, Inc. has authorized a new share repurchase plan of up to $200 million with no expiration date, indicating a commitment to returning value to shareholders and strengthening its capital position [1][2]. Group 1: Share Repurchase Plan - The Board of Directors has approved a plan to repurchase up to $200 million of common stock [1]. - The repurchase plan is flexible and does not obligate the company to acquire a specific number of shares, allowing for suspension or termination based on market conditions and other factors [3]. Group 2: Company Positioning - The company is focused on strengthening its balance sheet and executing capital priorities to grow responsibly while returning value to shareholders [2]. - Bread Financial is described as a tech-forward financial services company that offers personalized payment, lending, and saving solutions to millions of U.S. consumers [4].

Core Viewpoint - Bread Financial Holdings, Inc. has completed its cash tender offers for its senior and subordinated notes, with the offers expiring on August 21, 2025, and details regarding the amounts tendered are provided [1][2]. Group 1: Tender Offer Details - The cash tender offers included the Company's 9.750% Senior Notes due 2029 and 8.375% Fixed-Rate Reset Subordinated Notes due 2035 [1]. - A total of $31,288,000 of the 2029 Notes and $121,000 of the 2035 Notes were validly tendered [2]. - The total outstanding principal amount for the 2029 Notes was $750,012,000, while the 2035 Notes had an outstanding principal of $400,000,000 [2]. Group 2: Financial Considerations - The consideration for the 2029 Notes was $1,070 per $1,000 principal amount, while the 2035 Notes had a consideration of $1,025 per $1,000 principal amount [2]. - The Company accepted $28,402,000 of the 2029 Notes and $121,000 of the 2035 Notes for purchase on the Early Participation Date, with settlement occurring on August 11, 2025 [2]. Group 3: Management and Execution - J.P. Morgan Securities LLC acted as the sole lead dealer manager for the tender offers, with several other firms serving as co-dealer managers [4]. - The tender offers were conducted in accordance with the terms outlined in the Offer to Purchase, and no tenders submitted after the expiration date were valid [2][4]. Group 4: Company Overview - Bread Financial is a tech-forward financial services company that provides payment, lending, and saving solutions to U.S. consumers [8]. - The Company offers general purpose credit cards and savings products, as well as private label and co-brand credit cards for recognized brands in various sectors [8].

Performance Update - Bread Financial Holdings, Inc. reported a net loss rate of 7.6% for July 2025, down from 8.0% in July 2024, indicating an improvement in credit performance [1] - The delinquency rate decreased to 5.8% as of July 31, 2025, compared to 6.2% a year earlier, reflecting better loan management [1] - Net principal losses for July 2025 were $114 million, a slight decrease from $120 million in July 2024 [1] Company Overview - Bread Financial is a tech-forward financial services company that offers personalized payment, lending, and saving solutions to millions of U.S. consumers [2] - The company provides general purpose credit cards and savings products, aiming to empower customers and enhance their quality of life [2] - Bread Financial also supports growth for recognized brands in various sectors through private label and co-brand credit cards [2]

Core Viewpoint - Bread Financial Holdings, Inc. has announced the results of its cash tender offers for its Senior Notes and Subordinated Notes, with a total of $28,402,000 in 9.750% Senior Notes due 2029 and $121,000 in 8.375% Fixed-Rate Reset Subordinated Notes due 2035 validly tendered by the Early Participation Date [1][2] Summary by Category Tender Offer Details - The Company expects to accept the tendered Notes for a Total Consideration of $1,070 for each $1,000 principal amount of the 2029 Notes and $1,025 for each $1,000 principal amount of the 2035 Notes [1][2] - Settlement of the accepted Notes is anticipated to occur on August 11, 2025, subject to the satisfaction or waiver of conditions set forth in the Offer to Purchase [1][3] Financial Information - The outstanding principal amount of the 9.750% Senior Notes due 2029 is $750,012,000, while the outstanding principal amount of the 8.375% Fixed-Rate Reset Subordinated Notes due 2035 is $400,000,000 [2] - The Total Consideration includes an Early Participation Amount of $50.00 for all Notes validly tendered and not validly withdrawn by the Early Participation Date [4][5] Management and Agents - J.P. Morgan Securities LLC is acting as the Sole Lead Dealer Manager for the Tender Offers, with several other firms serving as co-dealer managers [8]

```python import urllib.parse def generate_report_outline(outline_data): markdown_lines = [] def format_chunk_references(chunk_nums): if not chunk_nums: return "" return "".join(f"[{num}](index={num}&type=chunk)" for num in sorted(chunk_nums)) Manually apply bolding to key metrics in insight content as per requirements This step would ideally be part of the input data or a more advanced NLP process. For this task, it's hardcoded based on analysis of the provided content. def apply_bolding_to_insights(item): if 'key_points' in item and item['key_points']: for kp in item['key_points']: if kp['type'] == 'insight': content = kp['content'] if "The provision for credit losses decreased" in content: content = content.replace("$74 million reserve release in Q2 2025", "**$74 million reserve release in Q2 2025**") content = content.replace("$92 million release in the prior-year period", "**$92 million release in the prior-year period**") content = content.replace("11.9% as of June 30, 2025", "**11.9% as of June 30, 2025**") elif "The company strengthened its balance sheet" in content: content = content.replace("$150 million share repurchase program", "**$150 million share repurchase program**") content = content.replace("$150 million tender offer for its 9.750% Senior Notes due 2029", "**$150 million tender offer for its 9.750% Senior Notes due 2029**") content = content.replace("13.0%", "**13.0%**") elif "The 2025 financial outlook was updated" in content: content = content.replace("7.8% and 7.9%", "**7.8% and 7.9%**") elif "Total non-interest expenses increased" in content: content = content.replace("$12 million YoY", "**$12 million YoY**") elif "The effective tax rate for Q2 2025" in content: content = content.replace("20.5%", "**20.5%**") content = content.replace("26.0% in Q2 2024", "**26.0% in Q2 2024**") elif "Key financing activities in H1 2025" in content: content = content.replace("$100M of 7.000% Senior Notes", "**$100M of 7.000% Senior Notes**") content = content.replace("$150M tender offer for 9.750% Senior Notes", "**$150M tender offer for 9.750% Senior Notes**") content = content.replace("$400M of 8.375% Subordinated Notes", "**$400M of 8.375% Subordinated Notes**") elif "Direct-to-consumer (DTC) deposits increased" in content: content = content.replace("12% year-over-year to $8.1 billion", "**12% year-over-year to $8.1 billion**") content = content.replace("45% of total funding", "**45% of total funding**") elif "The company completed its authorized $150 million stock repurchase program" in content: content = content.replace("$150 million stock repurchase program", "**$150 million stock repurchase program**") content = content.replace("3.2 million shares", "**3.2 million shares**") elif "In two separate actions, the liquidating trustee for LVI is seeking damages" in content: content = content.replace("$750 million", "**$750 million**") kp['content'] = content if 'children' in item and item['children']: for child in item['children']: apply_bolding_to_insights(child) Apply bolding to the entire outline data Deep copy the outline to avoid modifying the original input if it's used elsewhere import copy processed_outline_data = copy.deepcopy(outline_data) for item in processed_outline_data: apply_bolding_to_insights(item) def _generate_raw_lines(item): raw_lines = [] level = item['level'] title = item['title'] item_id = item['item_id'] summary = item['summary'] start_page = item.get('start_page') heading_prefix = '' * level if start_page is not None: encoded_item_id = urllib.parse.quote(item_id) raw_lines.append(f"{heading_prefix} [{title}](index={start_page}&type=section&id={encoded_item_id})") else: raw_lines.append(f"{heading_prefix} {title}") has_summary = False if summary: Ensure summary is a single sentence and remove trailing period formatted_summary = summary.replace('\n', ' ').strip() if formatted_summary.endswith('.'): formatted_summary = formatted_summary[:-1] raw_lines.append(formatted_summary) has_summary = True if 'key_points' in item and item['key_points']: if has_summary: Blank line between summary and key points raw_lines.append("") for kp in item['key_points']: if kp['type'] == 'insight': content = kp['content'].replace('\n', ' ').strip() if content.endswith('.'): content = content[:-1] references = format_chunk_references(kp.get('chunk_num', [])) raw_lines.append(f"- {content}{references}") elif kp['type'] == 'table': raw_lines.append(f" {kp['title']}") raw_lines.append(kp['content']) Process children if 'children' in item and item['children']: for child in item['children']: raw_lines.extend(_generate_raw_lines(child)) Add a blank line at the end of this section's content (including children's content) This blank line will be removed later if it's not needed (e.g., between parent and first child heading). Only add if this section actually produced some content (summary or key_points or children) and it's not just a heading with no content. if has_summary or ('key_points' in item and item['key_points']) or ('children' in item and item['children']): raw_lines.append("") return raw_lines all_raw_lines = [] for item in processed_outline_data: all_raw_lines.extend(_generate_raw_lines(item)) Post-processing to remove redundant blank lines, especially between parent and child headings final_output_lines = [] i = 0 while i < len(all_raw_lines): current_line = all_raw_lines[i] final_output_lines.append(current_line) Check for pattern: Heading -> Blank Line -> Child Heading if current_line.startswith('') and i + 2 < len(all_raw_lines): next_line = all_raw_lines[i+1] next_next_line = all_raw_lines[i+2] if next_line == "" and next_next_line.startswith(''): current_level = len(current_line.split(' ')[0]) next_next_level = len(next_next_line.split(' ')[0]) if next_next_level > current_level: Parent heading followed by blank line then child heading Skip the blank line by advancing 'i' i += 1 i += 1 Remove any trailing blank lines at the very end of the report while final_output_lines and final_output_lines[-1] == "": final_output_lines.pop() return "\n".join(final_output_lines) ``` Part I: FINANCIAL INFORMATION [Item 1. Financial Statements](index=30&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2025, and 2024, including the Consolidated Statements of Income, Comprehensive Income, Balance Sheets, Stockholders' Equity, and Cash Flows, providing a comprehensive view of the company's financial performance and position Consolidated Statements of Income Highlights (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total net interest and non-interest income | $929 | $939 | (1.1%) | | Provision for credit losses | $274 | $290 | (5.5%) | | Total non-interest expenses | $481 | $469 | 2.6% | | Income from continuing operations | $139 | $133 | 4.5% | | Net income | $139 | $133 | 4.5% | | Diluted EPS | $2.94 | $2.66 | 10.5% | Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Assets | $21,821 | $22,891 | | Credit card and other loans, net | $15,558 | $16,655 | | Total Deposits | $13,340 | $13,082 | | Total Liabilities | $18,655 | $19,840 | | Total Stockholders' Equity | $3,166 | $3,051 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=3&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) This section provides management's perspective on the company's financial condition and results of operations for the second quarter of 2025, covering the overall business environment, detailed analysis of operating results, asset quality, liquidity, capital resources, and regulatory matters, with key themes including stable credit sales growth, improving credit metrics, active balance sheet management through debt and share repurchases, and an updated financial outlook for 2025 reflecting continued consumer resiliency [Overview](index=3&type=section&id=OVERVIEW) Bread Financial is a tech-forward financial services company providing personalized payment, lending, and saving solutions, diversifying its product mix with co-brand credit cards and Bread Pay products, serving a wide range of well-known brand partners and operating as a single reportable segment, deriving primary revenue from interest and fees on loans - The company operates as a single reportable segment, with its primary revenue source being interest and fees on loans from its credit card and other loan products[14](index=14&type=chunk) - Bread Financial is diversifying its product mix by growing its co-brand credit card programs and expanding its Bread Pay products, which include installment loans and "split-pay" offerings[13](index=13&type=chunk) - The partner base includes major brands such as AAA, Dell Technologies, the NFL, Saks Fifth Avenue, Ulta, and Victoria's Secret, diversified across various retail verticals[14](index=14&type=chunk) [Business Environment](index=4&type=section&id=BUSINESS%20ENVIRONMENT) In Q2 2025, credit sales grew 4% year-over-year to $6.8 billion, driven by new partners and higher spending, though loan balances remained flat, with net interest margin decreasing to 17.7% from 18.0% due to lower late fees, and the company actively managed its balance sheet by completing a $150 million share repurchase and a $150 million debt tender offer, updating its 2025 financial outlook to reflect a lower net principal loss rate of 7.8% to 7.9%, with average loans expected to be flat to slightly lower than 2024 Q2 2025 Performance Highlights | Metric | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Credit Sales | $6.8 billion | +4% | | Average credit card and other loans | $17.7 billion | -1% | | Net Interest Margin | 17.7% | -0.3 ppt | - The provision for credit losses decreased, driven by a **$74 million reserve release in Q2 2025** compared to a **$92 million release in the prior-year period**. The allowance for credit loss reserve rate was **11.9% as of June 30, 2025**[22](index=22&type=chunk)[23](index=23&type=chunk) - The company strengthened its balance sheet by completing a **$150 million share repurchase program** and a **$150 million tender offer for its 9.750% Senior Notes due 2029**. The Common Equity Tier 1 (CET1) ratio was **13.0%**[25](index=25&type=chunk) - The 2025 financial outlook was updated to assume a full-year Net Principal Loss Rate between **7.8% and 7.9%**, an improvement from previous expectations, due to better-than-expected credit performance in the first half of the year[30](index=30&type=chunk) [Consolidated Results of Operations](index=7&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) For Q2 2025, total net interest and non-interest income decreased 1% YoY to $929 million, with net income increasing 4% to $139 million and diluted EPS growing 11% to $2.94, driven by lower interest and fees on loans due to fewer late fees, partially offset by pricing actions, while total non-interest expenses rose 3%, primarily due to a $13 million impact from debt repurchases, and the effective tax rate fell to 20.5% from 26.0% due to a discrete tax benefit Financial Performance Summary (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total net interest and non-interest income | $929 | $939 | (1)% | | Provision for credit losses | $274 | $290 | (5)% | | Total non-interest expenses | $481 | $469 | 3% | | Net income | $139 | $133 | 4% | | Net income per diluted share | $2.94 | $2.66 | 11% | - Interest and fees on loans decreased primarily due to lower billed late fees resulting from lower delinquency volumes and a product mix shift away from private label accounts[38](index=38&type=chunk) - Total non-interest expenses increased by **$12 million YoY** for the quarter, while adjusted total non-interest expenses (a non-GAAP measure excluding impacts from repurchased debt) remained relatively flat[40](index=40&type=chunk)[41](index=41&type=chunk) - The effective tax rate for Q2 2025 was **20.5%**, down from **26.0% in Q2 2024**, primarily due to a discrete tax benefit related to a California law change[44](index=44&type=chunk) [Asset Quality](index=15&type=section&id=ASSET%20QUALITY) Asset quality improved in Q2 2025, with the delinquency rate on credit card and other loans decreasing to 5.7% as of June 30, 2025, from 5.9% at the end of 2024, and the annualized net principal loss rate for the quarter also improved to 7.9% from 8.6% in the prior-year period, though hurricane-related customer assistance actions in late 2024 negatively impacted Q2 2025 losses by approximately $13 million Delinquency Trends on Credit Card and Other Loans | Delinquency Status | June 30, 2025 (% of Total) | Dec 31, 2024 (% of Total) | | :--- | :--- | :--- | | 31 to 60 days | 1.7% | 1.7% | | 61 to 90 days | 1.3% | 1.3% | | 91 or more days | 2.8% | 2.9% | | **Total Delinquent** | **5.7%** | **5.9%** | Net Principal Loss Rate | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30 | 7.9% | 8.6% | | Six Months Ended June 30 | 8.0% | 8.6% | - Hurricane-related customer assistance actions taken in late 2024 negatively impacted net principal losses in the second quarter of 2025[57](index=57&type=chunk) [Consolidated Liquidity and Capital Resources](index=16&type=section&id=CONSOLIDATED%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains a strong liquidity and capital position, with primary funding sources including operating cash flow, deposits, and securitization programs, and in the first half of 2025, executed several financing transactions to optimize its balance sheet, including issuing $400 million in subordinated notes and repurchasing various other notes, while direct-to-consumer (DTC) deposits grew 12% YoY to $8.1 billion, representing 45% of total funding, and the company also completed a $150 million share repurchase program - In Q4 2024, both Moody's and Fitch upgraded their credit ratings outlook for the company from "Stable" to "Positive"[70](index=70&type=chunk) - Key financing activities in H1 2025 included redeeming **$100M of 7.000% Senior Notes**, completing a **$150M tender offer for 9.750% Senior Notes**, and issuing **$400M of 8.375% Subordinated Notes**[73](index=73&type=chunk)[76](index=76&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - Direct-to-consumer (DTC) deposits increased **12% year-over-year to $8.1 billion** as of June 30, 2025, now comprising **45% of total funding**[25](index=25&type=chunk)[48](index=48&type=chunk) - The company completed its authorized **$150 million stock repurchase program** during the first half of 2025, acquiring **3.2 million shares**[99](index=99&type=chunk)[254](index=254&type=chunk) [Legislative, Regulatory Matters and Capital Adequacy](index=24&type=section&id=LEGISLATIVE%2C%20REGULATORY%20MATTERS%20AND%20CAPITAL%20ADEQUACY) The company and its subsidiary banks are subject to extensive regulation and must meet specific capital requirements, with both banks classified as "well capitalized" as of June 30, 2025, and the company's consolidated Common Equity Tier 1 (CET1) ratio at 13.0%, while an outstanding FDIC consent order from November 2023 with its servicing subsidiary related to IT systems does not include monetary penalties Capital Ratios as of June 30, 2025 | Ratio | Total Company | Minimum for Adequacy | Minimum to be Well Capitalized | | :--- | :--- | :--- | :--- | | Common equity tier 1 capital ratio | 13.0% | 4.5% | 6.5% | | Tier 1 capital ratio | 13.0% | 6.0% | 8.0% | | Total risk-based capital ratio | 16.5% | 8.0% | 10.0% | | Tier 1 leverage capital ratio | 11.4% | 4.0% | 5.0% | - In November 2023, the FDIC issued a consent order to the company's servicing subsidiary, Comenity Servicing LLC, related to IT systems development and oversight following a 2022 platform transition, with the order containing no monetary penalties or fines[116](index=116&type=chunk)[243](index=243&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risk, identifying interest rate risk as the principal market risk arising from movements in interest rates and their impact on the company's assets and liabilities, with no material change in its market risk exposure since its 2024 Form 10-K filing - The company's principal market risk exposure is interest rate risk, stemming from changes in rates on its assets (loans, investments) and liabilities (deposits, debt)[267](index=267&type=chunk) - There has been no material change from the 2024 Form 10-K regarding the company's exposure to interest rate risk or other market risks[268](index=268&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no changes in internal control over financial reporting occurring during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective[269](index=269&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are likely to materially affect, such controls[270](index=270&type=chunk) Part II: OTHER INFORMATION [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) This section references ongoing legal matters, particularly those stemming from the 2021 spinoff of Loyalty Ventures Inc. (LVI), with the company facing lawsuits alleging fraudulent transfers and breaches of fiduciary duty, seeking damages around $750 million, which the company believes are without merit and is defending against - The company is a defendant in multiple legal proceedings related to the spinoff of its former LoyaltyOne segment (LVI), including claims of fraudulent transfer and breach of fiduciary duty[246](index=246&type=chunk)[273](index=273&type=chunk) - In two separate actions, the liquidating trustee for LVI is seeking damages of approximately **$750 million** plus interest, fees, and expenses[246](index=246&type=chunk) - The company believes the allegations in these spinoff-related actions are without merit and intends to defend the cases[249](index=249&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the Risk Factors previously disclosed in the company's 2024 Form 10-K[274](index=274&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the second quarter of 2025, with a total of 1,081,151 shares purchased at an average price of $44.35 per share, completing the company's publicly announced share repurchase program Common Stock Purchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30 | 1,076,955 | $44.32 | | May 1-31 | 1,608 | $51.32 | | June 1-30 | 2,588 | $54.00 | | **Total** | **1,081,151** | **$44.35** | [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) This section reports that during the three months ended June 30, 2025, no Section 16 officer or director of the Parent Company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - During Q2 2025, no Section 16 officer or director adopted or terminated a Rule 10b5-1 trading arrangement[280](index=280&type=chunk) [Item 6. Exhibits](index=66&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q, with key exhibits including certifications from the Chief Executive Officer and Chief Financial Officer as required by the Securities Exchange Act of 1934, as well as financial data formatted in Inline XBRL - The filing includes certifications from the CEO and CFO pursuant to Rule 13a-14(a) and Section 1350 of the Sarbanes-Oxley Act[284](index=284&type=chunk)[285](index=285&type=chunk) ```