UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549    

FORM 10-Q

(Mark One)

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

or

o    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)

Delaware	31-1429215
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3095 Loyalty Circle
Columbus, Ohio	43219
(Address of principal executive offices)	(Zip Code)

(614) 729-4000

(Registrant’s telephone number, including area code)

_______________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	BFH	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of July 26, 2024, 49,677,244 shares of common stock were outstanding.

BREAD FINANCIAL HOLDINGS, INC.

INDEX

		Page Number
	Part I: FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023	25
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023	26
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	27
	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	28
	Consolidated Statements of Cash Flows for the three months ended June 30, 2024 and 2023	30
	Notes to Consolidated Financial Statements	31
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54
	Part II: OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	57
SIGNATURES		60

PART 1: FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with the unaudited Consolidated Financial Statements and related notes thereto presented in this quarterly report and the audited Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the SEC) on February 20, 2024 (the 2023 Form 10-K). Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this report. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those identified in our other filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our 2023 Form 10-K and this and our other Quarterly Reports on Form 10-Q.

OVERVIEW

We are a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions. We create opportunities for our customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, we deliver growth for our partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later (BNPL) products such as installment loans and our “split-pay” offerings. We also offer direct-to-consumer solutions that give customers more access, choice and freedom through our branded Bread CashbackTM American Express® Credit Card and Bread SavingsTM products.

Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs). Our partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which we first began, specialty apparel. We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers). The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships. We operate our business through a single reportable segment, with our primary source of revenue being from Interest and fees on loans from our various credit card and other loan products, and to a lesser extent from contractual relationships with our brand partners.

Throughout this report, unless stated or the context implies otherwise, the terms “Bread Financial”, “BFH”, the “Company”, “we”, “our” or “us” refer to Bread Financial Holdings, Inc. and its subsidiaries on a consolidated basis. References to “Parent Company” refer to Bread Financial Holdings, Inc. on a parent-only standalone basis. In addition, in this report we may refer to the retailers and other companies with whom we do business as our “partners”, “brand partners”, or “clients”, provided that the use of the term “partner”, “partnering” or any similar term does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of Bread Financial’s relationship with any third parties. We offer our credit products through our insured depository institution subsidiaries, Comenity Bank and Comenity Capital Bank, which together are referred to herein as the “Banks”.

NON-GAAP FINANCIAL MEASURES

We prepare our audited Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (GAAP). However, certain information included herein constitutes non-GAAP financial measures. Our calculations of non-GAAP financial measures may differ from the calculations of similarly titled measures by other companies. In particular:

•The share amounts used in calculating Adjusted net income per diluted share and Adjusted income from continuing operations per diluted share have been adjusted for the anti-dilutive impact of our capped call

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transactions. In connection with the issuance of our $316 million aggregate principal amount of 4.25% Convertible Senior Notes due 2028 (the Convertible Notes) on June 13, 2023, we entered into privately negotiated capped call transactions (the Capped Calls) that are expected generally to reduce potential dilution to our common stock and/or offset certain cash payments we may be required to make in excess of the principal amount of the Convertible Notes upon conversion, redemption or repurchase thereof, with such reduction and/or offset subject to a cap of $61.48 per share. We use Adjusted net income per diluted share and Adjusted income from continuing operations per diluted share to evaluate the dilutive impact of our Convertible Notes after the anti-dilutive impact of the Capped Calls is considered.

•Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR less gain on portfolio sale then decreases PPNR by the gain on any portfolio sale in the period. We use PPNR and PPNR less gain on portfolio sale as metrics to evaluate our results of operations before income taxes, excluding the volatility that can occur within Provision for credit losses and the one-time nature of a gain on the sale of a portfolio.

•Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Goodwill and intangible assets, net. We use ROTCE as a metric to evaluate the Company's performance.

•Tangible common equity over Tangible assets (TCE/TA) represents TCE divided by Tangible assets (TA), which is Total assets reduced by Goodwill and intangible assets, net. We use TCE/TA as a metric to evaluate the Company’s capital adequacy and estimate its ability to absorb losses.

•Tangible book value per common share represents TCE divided by shares outstanding. We use Tangible book value per common share, a metric used across the industry, to estimate liquidation value.

We believe the use of these non-GAAP financial measures provide additional clarity in understanding our results of operations and trends. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see “Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures” that follows.

BUSINESS ENVIRONMENT

This Business Environment section provides an overview of our results of operations and financial position for the second quarter of 2024, as well as our related outlook for the remainder of 2024 and certain of the uncertainties associated with achieving that outlook. This section should be read in conjunction with the other information included or incorporated by reference in this Form 10-Q, including “Consolidated Results of Operations”, “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” herein, and in our 2023 Form 10-K as well as our Quarterly Report on Form 10-Q for the quarter-ended March 31, 2024, which provide further discussion of variances in our results of operations over the periods of comparison, along with other factors that could impact future results and the Company achieving its outlook. Unless otherwise specified, the discussion included herein is for the three months ended June 30, 2024, compared with the same period in the prior year.

Credit sales of $6.6 billion were down 7% year-over-year reflecting moderating consumer spending and strategic credit tightening, partially offset by new brand partner growth. Average credit card and other loans of $17.9 billion increased 1%, driven primarily by growth in our co-brand products. End-of-period credit card and other loans of $17.7 billion decreased 1% driven by the decline in Credit sales and the factors noted above. Total interest income was up 3% from the second quarter of 2023, primarily as a result of an increase in finance charge yields driven by an increase in the prime interest rate; partially offset by lower late fees driven by lower early-stage delinquency volumes and higher reversals of interest and fees resulting from higher gross credit losses. Net interest margin for the second quarter of 2024 was 18.0%, relative to 18.7% for the second quarter of 2023, driven by higher funding costs, particularly with direct-to-consumer (DTC) deposits. Non-interest income decreased $8 million, primarily driven by a decrease in the current year in merchant discount fees resulting from lower “big ticket” credit sales. Overall, Total net interest and non-interest income for the quarter was $0.9 billion, down 1% versus the second quarter of 2023.

Provision for credit losses decreased for the quarter ended June 30, 2024, relative to the second quarter of 2023, driven by a $92 million reserve release in the current period compared with a $15 million reserve release in the prior year period. The reserve releases in both years were offset by net principal losses of $382 million and $351 million for the three months ended June 30, 2024 and 2023, respectively.

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Our Allowance for credit losses decreased as of June 30, 2024, relative to December 31, 2023, due primarily to lower Credit card and other loans balances, because seasonally higher transactor balances from the fourth quarter were paid down in the first quarter, lower delinquencies and improved credit quality in the Credit card and other loans portfolio. We continue to maintain an elevated reserve rate of 12.2% as of June 30, 2024, due to the compounding effect of persistent inflation relative to wage growth, the increased cost of consumer debt, the possibility of higher unemployment levels and the potential impacts from the resumption of student loan repayments. We intend to maintain a conservative weighting of economic scenarios in our credit reserve modeling until we see sustained improvement in delinquencies and an improved macroeconomic outlook. From an overall credit quality perspective, our percentage of Vantage 660+ cardholders remains above pre-pandemic levels due to prudent credit tightening and a more diversified product mix, with co-brand and proprietary cards representing a larger portion of our portfolio.

Total non-interest expenses of $469 million decreased 12% from the second quarter of 2023. The year-over-year decrease was primarily driven by a decrease in Card and processing expenses, including fraud. Depreciation and amortization decreased due to lower amortization of developed technology. Marketing expenses were also lower, driven by decreased spending associated with brand partner and BFH joint marketing campaigns, partially offset by higher spending associated with DTC product offerings. We also had lower Employee compensation and benefits expenses due to decreased headcount and a reduction in demand-based outsourced and contract labor.

We continued strengthening our balance sheet during the second quarter of 2024, reducing our double leverage ratio to 110.1% and growing our Common equity tier 1 capital ratio to 13.8% as of June 30, 2024. Additionally, DTC deposits increased to $7.2 billion as of June 30, 2024, with average DTC deposits now representing 40% of our total funding, up from 33% a year ago.

During the second quarter of 2024 we made further progress with the implementation of our mitigation strategy in response to the final rule on credit card late fees published by the Consumer Financial Protection Bureau (CFPB). Industry organizations have challenged the final rule in court, and the ultimate outcome of such challenge, including the impact on the final rule, is uncertain. The final rule had an original effective date of May 14, 2024; however, on May 10, 2024, the United States District Court for the Northern District of Texas granted an injunction and stay of the final rule, and the injunction granted remains in effect as of the date of this report. We are closely monitoring the ongoing litigation related to the rule, but will continue to execute on our mitigation strategy given the uncertainty surrounding the timing and outcome. However, because of that uncertainty, we have updated our full year 2024 financial outlook to assume the final rule does not take effect this year. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Business Environment” in our Quarterly Report on Form 10-Q for the quarter-ended March 31, 2024 for our 2024 financial outlook inclusive of impacts from the CFPB's final rule on credit card late fees.

Our 2024 financial outlook reflects slower Credit sales growth as a result of continued moderation in consumer spending and strategic credit tightening, both of which consequently will impact growth in Credit card and other loans and Net interest and non-interest income, as well as the Net loss rate. In addition, our 2024 outlook assumes multiple interest rate decreases by the Federal Reserve Board in the second half of the year, which will slightly decrease Total net interest income.

Based on our current economic outlook, strategic credit tightening actions, higher gross credit losses, and visibility into our new business pipeline, we expect 2024 Average credit card and other loans to be down low-single digits on a percentage point basis relative to 2023. Total net interest and non-interest income, excluding the gains on portfolio sales during the years of comparison, is anticipated to be down in the low- to mid-single digits on a percentage point basis from 2023, with full year Net interest margin expected to be lower than 2023 reflecting higher reversals of interest and fees due to expected higher gross credit losses, declining interest rates, and a continued shift in product mix to co-brand and proprietary products.

As a result of efficiencies gained from our ongoing investments in technology modernization and digital advancement, along with disciplined expense management, we expect Total non-interest expense to be down mid-single digits on a percentage point basis relative to 2023. Expenses are expected to be higher in the second half of 2024 compared with the first half of the year.

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Our 2024 financial outlook assumes a full year Net loss rate in the low 8% range. We are projecting a lower Net loss rate in the second half of 2024 versus the first half as a result of the strategic credit tightening actions we have taken and an assumed gradual modest improvement in economic conditions throughout the year.

In our 2024 financial outlook we also expect our full year normalized effective tax rate to be in the range of 25% to 26%, with quarter-over-quarter variability due to the timing of certain discrete items.

We are confident in our ability to deliver strong financial results while remaining responsible and disciplined in our credit management and capital allocation.

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CONSOLIDATED RESULTS OF OPERATIONS

The following discussion provides commentary on the variances in our results of operations for the three and six months ended June 30, 2024, compared with the same periods in the prior year, as presented in the accompanying tables. This discussion should be read in conjunction with the discussion under “Business Environment” above.

Table 1: Summary of Our Financial Performance

	Three Months Ended June 30,								Six Months Ended June 30,
	2024			2023			$ Change	% Change	2024			2023			$ Change	% Change
(Millions, except per share amounts and percentages)
Total net interest and non-interest income	$	939		$	952		(13)	(1)	$	1,929		$	2,241		(312)	(14)
Provision for credit losses	290			336			(46)	(14)	611			442			169	38
Total non-interest expenses	469			530			(61)	(12)	949			1,075			(126)	(12)
Income from continuing operations before income taxes	180			86			94	108	369			724			(355)	(49)
Provision for income taxes	47			22			25	109	100			205			(105)	(51)
Income from continuing operations	133			64			69	108	269			519			(250)	(48)
Income (loss) from discontinued operations, net of income taxes (1)	—			(16)			16	(101)	(1)			(16)			15	(93)
Net income	133			48			85	180	268			503			(235)	(47)
Net income per diluted share	$	2.66		$	0.95		1.71	180	$	5.36		$	10.02		(4.66)	(47)
Adjusted net income per diluted share (2)	$	2.67		$	0.95		1.72	181	$	5.37		$	10.02		(4.65)	(46)
Income from continuing operations per diluted share	$	2.65		$	1.27		1.38	109	$	5.38		$	10.34		(4.96)	(48)
Adjusted income from continuing operations per diluted share (2)	$	2.66		$	1.27		1.39	109	$	5.39		$	10.34		(4.95)	(48)
Net interest margin (3)	18.0		%	18.7		%		(0.7)	18.3		%	18.8		%		(0.5)
Return on average tangible common equity (4)	21.8		%	13.2		%		8.6	22.5		%	56.9		%		(34.4)
Effective income tax rate - continuing operations	26.0		%	26.0		%		—	27.1		%	28.3		%		(1.2)

__________________________________

(1)Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019. For additional information refer to Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the unaudited Consolidated Financial Statements.

(2)The share amounts used in calculating Adjusted net income per diluted share and Adjusted income from continuing operations per diluted share have been adjusted for the anti-dilutive impact of our Capped Call transactions, and therefore represent a Non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

(3)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin.

(4)Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Goodwill and intangible assets, net. ROTCE is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

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Table 2: Summary of Total Net Interest and Non-interest Income, After Provision for Credit Losses

	Three Months Ended June 30,						Six Months Ended June 30,
	2024		2023		$ Change	% Change	2024		2023		$ Change	% Change
(Millions, except percentages)
Interest income
Interest and fees on loans	$	1,174	$	1,153	21	2	$	2,422	$	2,441	(19)	(1)
Interest on cash and investment securities	54		44		10	23	106		90		16	19
Total interest income	1,228		1,197		31	3	2,528		2,531		(3)	—
Interest expense
Interest on deposits	152		127		25	20	308		244		64	26
Interest on borrowings	89		78		11	15	181		178		3	2
Total interest expense	241		205		36	18	489		422		67	16
Net interest income	987		992		(5)	—	2,039		2,109		(70)	(3)
Non-interest income
Interchange revenue, net of retailer share arrangements	(84)		(74)		(10)	15	(177)		(161)		(16)	10
Gain on portfolio sale	5		—		5	nm	5		230		(225)	(98)
Other	31		34		(3)	(8)	62		63		(1)	(1)
Total non-interest income	(48)		(40)		(8)	22	(110)		132		(242)	(183)
Total net interest and non-interest income	939		952		(13)	(1)	1,929		2,241		(312)	(14)
Provision for credit losses	290		336		(46)	(14)	611		442		169	38
Total net interest and non-interest income, after provision for credit losses	$	649	$	616	33	5	$	1,318	$	1,799	(481)	(27)

__________________________________

(nm) Not meaningful, denoting a variance of 1,000 percent or more.

Total Net Interest and Non-interest Income, After Provision for Credit Losses

Interest income: Total interest income increased for the three months ended June 30, 2024, and decreased for the six months ended June 30, 2024, due to the following:

•Interest and fees on loans: increased during the three months ended June 30, 2024, due primarily to an increase in finance charge yields of approximately 31 basis points, driven by an increase in the prime interest rate; partially offset by lower late fees driven by lower early-stage delinquency volumes and higher reversals of interest and fees resulting from higher gross credit losses. Interest and fees on loans decreased during the six months ended June 30, 2024, due as well to lower late fees driven by lower early-stage delinquency volumes and higher reversals of interest and fees resulting from higher gross credit losses, as well as lower Average credit card and other loans; partially offset by an increase in finance charge yields of approximately 39 basis points, driven by an increase in the prime interest rate.

•Interest on cash and investment securities: increased for the three and six months ended June 30, 2024, due to higher average interest rates which increased interest income by $4 million and $11 million, respectively, as well as higher average balances which increased interest income by $6 million and $5 million, respectively.

Interest expense: Total interest expense increased for the three and six months ended June 30, 2024, due to the following:

•Interest on deposits increased due to higher average interest rates which increased interest expense by $25 million and $63 million over the respective periods of comparison.

•Interest on borrowings increased due to higher average interest rates which increased funding costs by $11 million and $25 million over the respective periods of comparison, and for the six month period, partially offset by lower average borrowings which decreased funding costs by $22 million.

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Non-interest income: Total non-interest income decreased for the three and six months ended June 30, 2024, due to the following:

•Interchange revenue, net of retailer share arrangements, typically a contra-revenue item for us, increased for the three and six month periods driven by a decrease in merchant discount fees, from lower “big ticket” credit sales, and interchange revenue earned, partially offset by a reduction in costs associated with brand partner retailer share arrangements.

•Gain on portfolio sale reflects the gain we recognized from the sale of a credit card portfolio in April 2024, and the gain we recognized from the sale of the BJ's Wholesale Club (BJ’s) portfolio in late February 2023.

Provision for credit losses decreased during the three months ended June 30, 2024, driven by a $92 million reserve release in the current period compared with a $15 million reserve release in the prior year period, with the reserve releases in both periods offset by net principal losses of $382 million and $351 million during those same respective periods. Provision for credit losses increased during the six months ended June 30, 2024, driven by a $164 million reserve release in the current period compared with a $252 million reserve release in the prior year period, with the release in the prior year period primarily related to the sale of the BJ's portfolio. The reserve releases in both years were offset by net principal losses of $775 million and $694 million during those same respective periods. We continue to maintain an elevated reserve rate, 12.2% as of June 30, 2024, due to the compounding effect of persistent inflation relative to wage growth, the increased cost of consumer debt, the possibility of higher unemployment levels and the potential impacts from the resumption of student loan repayments.

Table 3: Summary of Total Non-interest Expenses

	Three Months Ended June 30,						Six Months Ended June 30,
	2024		2023		$ Change	% Change	2024		2023		$ Change	% Change
(Millions, except percentages)
Non-interest expenses
Employee compensation and benefits	$	214	$	217	(3)	(2)	$	427	$	437	(10)	(2)
Card and processing expenses	77		116		(39)	(33)	164		235		(71)	(30)
Information processing and communication	73		75		(2)	(3)	147		150		(3)	(1)
Marketing expenses	33		40		(7)	(16)	61		79		(18)	(22)
Depreciation and amortization	23		35		(12)	(33)	46		69		(23)	(33)
Other	49		47		2	2	104		105		(1)	1
Total non-interest expenses	$	469	$	530	(61)	(12)	$	949	$	1,075	(126)	(12)

Total Non-interest Expenses

Non-interest expenses: Total non-interest expenses decreased for the three and six months ended June 30, 2024, due to the following:

•Employee compensation and benefits decreased due to a reduction in customer care and collections staffing as well as a reduction in demand-based outsourced and contract labor; partially offset by higher short- and long-term incentive compensation.

•Card and processing expenses decreased due primarily to lower fraud losses, as well as reduced volume-related card and statement costs.

•Marketing expenses decreased due primarily to decreased spending associated with brand partner and BFH joint marketing campaigns, partially offset by higher spending associated with DTC product offerings.

•Depreciation and amortization decreased due to lower amortization for developed technology associated with an acquisition completed in late 2020.

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Income Taxes

The Provision for income taxes increased for the three months ended June 30, 2024 primarily driven by an increase in Income from continuing operations before income taxes. The effective tax rate was 26.0% for both the three month periods ended June 30, 2024 and 2023. The Provision for income taxes decreased for the six months ended June 30, 2024 primarily driven by the decrease in Income from continuing operations before income taxes in the current year relative to the prior year period, which itself was higher due to the gain on the sale of the BJ's portfolio. The effective tax rate was 27.1% and 28.3% for the six month periods ended June 30, 2024 and 2023, respectively; the decrease in the effective tax rate was driven primarily by a discrete benefit in the current year period.

Discontinued Operations

The Income (loss) from discontinued operations, net of income taxes includes amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019, and primarily relate to contractual indemnification and tax-related matters. For additional information refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

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Table 4: Summary Financial Highlights – Continuing Operations

	As of or for the three months ended June 30,							As of or for the six months ended June 30,
	2024			2023			% Change	2024			2023			% Change
(Millions, except per share amounts and percentages)
Credit sales	$	6,570		$	7,057		(7)	$	12,600		$	14,430		(13)
PPNR (1)	470			422			11	980			1,166			(16)
Average credit card and other loans	17,872			17,652			1	18,209			18,528			(2)
End-of-period credit card and other loans	17,743			17,962			(1)	17,743			17,962			(1)
End-of-period direct-to-consumer (retail) deposits	7,193			5,993			20	7,193			5,993			20
Return on average assets (2)	2.4		%	1.2		%	1.2	2.4		%	4.6		%	(2.2)
Return on average equity (3)	16.7		%	9.4		%	7.3	17.1		%	39.7		%	(22.6)
Return on average tangible common equity (4)	21.8		%	13.2		%	8.6	22.5		%	56.9		%	(34.4)
Net interest margin (5)	18.0		%	18.7		%	(0.7)	18.3		%	18.8		%	(0.5)
Loan yield (6)	26.4		%	26.1		%	0.3	26.7		%	26.4		%	0.3
Efficiency ratio (7)	49.9		%	55.7		%	(5.8)	49.2		%	47.9		%	1.3
Double leverage ratio (8)	110.1		%	141.4		%	(31.3)	110.1		%	141.4		%	(31.3)
Common equity tier 1 capital ratio (9)	13.8		%	12.1		%	1.7	13.8		%	12.1		%	1.7
Total risk-based capital ratio (10)	15.1		%	13.4		%	1.7	15.1		%	13.4		%	1.7
Total risk-weighted assets (11)	$	18,859		$	18,745		1	18,859			18,745			1
Tangible common equity / tangible assets ratio (TCE/TA) (12)	11.3		%	9.4		%	1.9	11.3		%	9.4		%	1.9
Tangible book value per common share (13)	$	48.89		$	38.99		25	$	48.89		$	38.99		25
Payment rate (14)	14.4		%	15.0		%	(0.6)	14.4		%	15.0		%	(0.6)
Delinquency rate (15)	6.0		%	5.5		%	0.5	6.0		%	5.5		%	0.5
Net loss rate (16)	8.6		%	8.0		%	0.6	8.6		%	7.5		%	1.1
Reserve rate (17)	12.2		%	12.3		%	(0.1)	12.2		%	12.3		%	(0.1)

__________________________________

Note: Beginning in 2024, we revised the calculation of average balances to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, average balances represent the average balance at the beginning and end of each month, averaged over the periods indicated.

(1)PPNR represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

(2)Return on average assets represents annualized Income from continuing operations divided by average Total assets.

(3)Return on average equity represents annualized Income from continuing operations divided by average Total stockholders’ equity.

(4)Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Goodwill and intangible assets, net. ROTCE is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

(5)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets. See also Table 5: Net Interest Margin.

(6)Loan yield represents annualized Interest and fees on loans divided by Average credit card and other loans.

(7)Efficiency ratio represents Total non-interest expenses divided by Total net interest and non-interest income.

(8)Double leverage ratio represents Parent Company investment in subsidiaries divided by BFH consolidated equity.

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(9)Common equity tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(10)Total risk-based capital ratio represents total capital divided by total risk-weighted assets. In the calculation of total capital, we follow the Basel III Standardized Approach and therefore tier 1 capital has been increased by tier 2 capital, which for us is the allowable portion of the Allowance for credit losses.

(11)Total risk-weighted assets are generally measured by allocating assets, and specified off-balance sheet exposures, to various risk categories as defined by the Basel III Standardized Approach.

(12)Tangible common equity over tangible assets (TCE/TA) represents TCE divided by Tangible assets (TA), which is Total assets reduced by Goodwill and intangible assets, net. TCE/TA is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

(13)Tangible book value per common share represents TCE divided by shares outstanding and is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.

(14)Payment rate represents consumer payments during the last month of the period, divided by the beginning-of-month Credit card and other loans, including held for sale in applicable periods.

(15)Delinquency rate represents outstanding balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, divided by the outstanding principal amount of Credit card and other loans as of the same period-end.

(16)Net loss rate, an annualized rate, represents net principal losses for the period divided by Average credit card and other loans for the same period. Net loss rate for the three and six months ended June 30, 2023 was impacted by the transition of our credit card processing services in June 2022.

(17)Reserve rate represents the Allowance for credit losses divided by End-of-period credit card and other loans.

Table 5: Net Interest Margin

	Three Months Ended June 30, 2024							Three Months Ended June 30, 2023
	Average Balance (1)		Interest Income / Expense			Average Yield / Rate		Average Balance (1)		Interest Income / Expense			Average Yield / Rate
(Millions, except percentages)
Cash and investment securities	$	4,178	$	54		5.20	%	$	3,613	$	44		4.88	%
Credit card and other loans	17,872		1,174			26.43	%	17,652		1,153			26.12	%
Total interest-earning assets	22,050		1,228			22.41	%	21,265		1,197			22.51	%
Direct-to-consumer (retail) deposits	7,092		86			4.90	%	5,824		58			4.00	%
Wholesale deposits	6,026		66			4.41	%	7,250		69			3.81	%
Interest-bearing deposits	13,118		152			4.67	%	13,074		127			3.90	%
Secured borrowings	3,425		59			6.92	%	2,887		49			6.65	%
Unsecured borrowings	1,316		30			9.17	%	1,801		29			6.49	%
Interest-bearing borrowings	4,741		89			7.54	%	4,688		78			6.59	%
Total interest-bearing liabilities	17,859		241			5.44	%	17,762		205			4.61	%
Net interest income			$	987						$	992
Net interest margin (2)			18.0		%					18.7		%

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	Six Months Ended June 30, 2024							Six Months Ended June 30, 2023
	Average Balance (1)		Interest Income / Expense			Average Yield / Rate		Average Balance (1)		Interest Income / Expense			Average Yield / Rate
(Millions, except percentages)
Cash and investment securities	$	4,157	$	106		5.17	%	$	3,851	$	90		4.68	%
Credit card and other loans	18,209		2,422			26.74	%	18,528		2,441			26.35	%
Total interest-earning assets	22,366		2,528			22.73	%	22,379		2,531			22.62	%
Direct-to-consumer (retail) deposits	6,916		168			4.88	%	5,691		106			3.74	%
Wholesale deposits	6,398		140			4.39	%	7,558		138			3.64	%
Interest-bearing deposits	13,314		308			4.65	%	13,249		244			3.68	%
Secured borrowings	3,544		121			6.87	%	3,727		118			6.37	%
Unsecured borrowings	1,335		60			9.10	%	1,857		60			6.44	%
Interest-bearing borrowings	4,879		181			7.48	%	5,584		178			6.39	%
Total interest-bearing liabilities	18,193		489			5.41	%	18,833		422			4.49	%
Net interest income			$	2,039						$	2,109
Net interest margin (2)			18.3		%					18.8		%

______________________________

(1)Beginning in 2024, we revised the calculation of average balances to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, average balances represent the average balance at the beginning and end of each month, averaged over the periods indicated.

(2)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets.

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Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures

	As of or for the three months ended June 30,					As of or for the six months ended June 30,
	2024		2023		% Change	2024		2023		% Change
(Millions, except percentages)
Adjusted weighted average common stock outstanding – diluted
Weighted average common stock outstanding – diluted	50.2		50.3			49.9		50.2
Less: Anti-dilutive impact of Capped Call transactions	(0.2)		n/a			(0.1)		n/a
Adjusted weighted average common stock outstanding – diluted	50.0		50.3			49.8		50.2
Pretax pre-provision earnings (PPNR)
Income from continuing operations before income taxes	$	180	$	86	108	$	369	$	724	(49)
Provision for credit losses	290		336		(14)	611		442		38
Pretax pre-provision earnings (PPNR)	470		422		11	980		1,166		(16)
Less: Gain on portfolio sale	(5)		—		nm	(5)		(230)		(98)
Pretax pre-provision earnings less gain on portfolio sale	465		422		10	975		936		4
Average tangible common equity
Average total stockholders’ equity	3,202		2,731		17	3,161		2,614		21
Less: Average goodwill and intangible assets, net	(750)		(785)		(4)	(754)		(790)		(4)
Average tangible common equity	2,452		1,946		26	2,407		1,824		32
Tangible common equity (TCE)
Total stockholders’ equity	3,170		2,736		16	3,170		2,736		16
Less: Goodwill and intangible assets, net	(744)		(780)		(5)	(744)		(780)		(5)
Tangible common equity (TCE)	2,426		1,956		24	2,426		1,956		24
Tangible assets (TA)
Total assets	22,144		21,609		2	22,144		21,609		2
Less: Goodwill and intangible assets, net	(744)		(780)		(5)	(744)		(780)		(5)
Tangible assets (TA)	21,400		20,829		3	21,400		20,829		3

__________________________________

(nm) Not meaningful, denoting a variance of 1,000 percent or more.

(n/a) Not applicable.

ASSET QUALITY

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 portfolio, we closely monitor Delinquency rates and Net principal loss rates, which reflect, among other factors, our underwriting, the inherent credit risk in our portfolio and the success of our collection and recovery efforts. These rates also reflect, more broadly, the general macroeconomic conditions, including the effects of persistent inflation and higher interest rates. Our Delinquency and Net principal loss rates are also impacted by the size of our Credit card and other loans portfolio, which serves as the denominator in the calculation of these rates. Accordingly, changes in the size of our portfolio (whether due to credit tightening, acquisitions or dispositions of portfolios or otherwise) may cause

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movements in our Delinquency and Net principal loss rates that are not necessarily indicative of the underlying credit quality of the overall portfolio.

Delinquencies: An account is contractually delinquent if we do not receive the minimum payment due by the specified due date. Our policy is to continue to accrue interest and fee income on all accounts, except in limited circumstances, until the balance and all related interest and fees are paid or charged-off. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent; based upon the level of risk indicated, a collection strategy is deployed. If after exhausting all in-house collection efforts we are unable to collect on the account, we may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances.

The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit card and other loans as of the same period-end.

The following table provides the delinquency trends on our Credit card and other loans portfolio based on the principal balances outstanding as of the dates presented:

Table 7: Delinquency Trends on Credit Card and Other Loans

	June 30, 2024		% of Total		December 31, 2023		% of Total
(Millions, except percentages)
Credit card and other loans outstanding ─ principal	$	16,344	100.0	%	$	17,906	100.0	%
Outstanding balances contractually delinquent
31 to 60 days	$	290	1.8	%	$	346	1.9	%
61 to 90 days	222		1.3	%	250		1.4	%
91 or more days	467		2.9	%	567		3.2	%
Total	$	979	6.0	%	$	1,163	6.5	%

As part of our collections strategy, we may offer temporary and short term programs in order to improve the likelihood of collections and meet the needs of our customers. Our modifications, for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced payment requirements, interest rate reductions and late fee waivers. We do not offer programs involving the forgiveness of principal. These temporary loan modifications may assist in cases where we believe the customer will recover from the short-term hardship and resume scheduled payments. Under these consumer relief programs, those accounts receiving relief may not advance to the next delinquency cycle, including charge-off, in the same time frame that would have occurred had the relief not been granted. We evaluate our consumer relief programs to determine if they represent a more than insignificant delay in payment granted to borrowers experiencing financial difficulty, in which case they would then be considered a Loan Modification. For additional information, see Note 2 “Credit Card and Other Loans – Modified Credit Card Loans” to our unaudited Consolidated Financial Statements.

Net Principal Losses: Our net principal losses include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and third-party fraud losses (including synthetic fraud). Charged-off interest and fees reduce Interest and fees on loans, while third-party fraud losses are recorded in Card and processing expenses. Credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. BNPL loans such as our installment loans and our “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due. However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for credit card loans and 120 days past due for BNPL loans.

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The net principal loss rate is calculated by dividing net principal losses for the period by the Average credit card and other loans for the same period. Beginning in January 2024, we revised the calculation of Average credit card and other loans to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, Average credit card and other loans represent the average balance of the loans at the beginning and end of each month, averaged over the periods indicated. The following table provides our net principal losses for the periods presented:

Table 8: Net Principal Losses on Credit Card and Other Loans

	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
(Millions, except percentages)
Average credit card and other loans	$	17,872		$	17,652		$	18,209		$	18,528
Net principal losses	382			351			775			694
Net principal losses as a percentage of average credit card and other loans (1)	8.6		%	8.0		%	8.6		%	7.5		%

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(1)Net principal losses as a percentage of Average credit card and other loans for the three and six months ended June 30, 2023 were impacted by the transition of our credit card processing services in June 2022.

CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES

Overview

We maintain a strong focus on liquidity and capital. Our funding, liquidity and capital policies are designed to ensure that our business has sufficient liquidity and capital resources necessary to support our daily operations, our business growth, and our credit ratings related to our Parent Company’s senior unsecured notes and our public secured financings, and meet our regulatory and policy requirements, including capital and leverage ratio requirements applicable to Comenity Bank (CB) and Comenity Capital Bank (CCB) under Federal Deposit Insurance Corporation (FDIC) regulations, in a cost effective and prudent manner through both expected and unexpected market environments. We also monitor our Double Leverage Ratio, which reflects our Parent Company’s investment in its subsidiaries relative to its consolidated equity, and is often used by regulators and other stakeholders as a measure of the use of debt by a parent entity to fund its subsidiaries.

Our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured or convertible debt securities by our Parent Company, financings through our securitization programs, and deposits with the Banks. More broadly, we continuously evaluate opportunities to renew and expand our various sources of liquidity. We aim to satisfy our financing needs with a diverse set of funding sources, and we seek to maintain diversity of funding sources by type of instrument, by tenor and by investor base, among other factors, which we believe will mitigate the impact of disruptions in any one type of instrument, tenor or investor.

Our primary uses of liquidity are for underwriting Credit card and other loans, scheduled payments of principal and interest on our debt, operational expenses, capital expenditures, including digital and product innovation and technology enhancements, stock repurchases and dividends.

We may from time to time retire or purchase our outstanding debt or convertible debt securities through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise. Such repurchases or exchanges would depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and may be funded through cash on hand, borrowings under our revolving credit facility, the issuance of debt or convertible debt securities or other sources of liquidity. The amounts involved may be material.

We will also need additional financing in the future to repay or refinance our existing debt at or prior to maturity, and to fund our growth, which may include issuance of additional debt, equity or convertible securities or engaging in other capital markets or financing transactions. Given the maturities of certain of our outstanding debt instruments and the macroeconomic outlook, it is possible that we will be required to repay, extend or refinance some or all of our maturing debt in volatile and/or unfavorable markets.

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Because of the alternatives available to us, as discussed above, we believe our short-term and long-term sources of liquidity are adequate to fund not only our current operations, but also our near-term and long-term funding requirements including dividend payments, debt service obligations and repayment of debt maturities and other amounts that may ultimately be paid in connection with contingencies. However, the adequacy of our liquidity could be impacted by various factors, including pending or future legislation, regulation or litigation, macroeconomic conditions and volatility in the financial and capital markets, limiting our access to or increasing our cost of capital, which could make capital unavailable, or available but on terms that are unfavorable to us. These factors could significantly reduce our financial flexibility and cause us to contract or not grow our business, which could have a material adverse effect on our results of operations and financial condition.

We have a robust liquidity risk management framework in place which includes ongoing monitoring of our liquidity and funding positions against our risk appetite metrics and key risk indicators. During times where there may be potential risks from adverse developments in the banking industry and/or increased financial sector volatility, we may invoke our contingency funding plan to enhance daily monitoring of our liquidity and funding positions, determine potential mitigating actions if necessary and provide enhanced reporting to our Boards of Directors, at both the Bread Financial and Bank-levels, and regulators.

We maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system, and we also have a small investment securities portfolio, classified as available-for-sale, which we hold in relation to the Community Reinvestment Act. We do not have any investment securities classified as held-to-maturity.

Credit Ratings

In November 2023, we obtained credit ratings for our Parent Company from the major credit rating agencies, Moody’s Investor Services (Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch), in order to facilitate debt financings and broaden the investor base for our Parent Company debt securities.

Our management approach is designed, among other things, to maintain appropriate and stable Parent Company senior unsecured debt ratings from the credit rating agencies which help support our access to cost-effective unsecured funding as a component of our overall liquidity and capital resources.

The table below provides a summary of the credit ratings for the senior unsecured long-term debt of Bread Financial Holdings, Inc. as of June 30, 2024:

Bread Financial Holdings, Inc.	Moody’s	S&P	Fitch
Senior unsecured debt	Ba3	BB-	BB-
Outlook	Stable	Stable	Stable

We also seek to maintain appropriate and stable credit ratings for our credit card securitizations issued through World Financial Network Credit Card Master Note Trust (WFNMNT) from the rating agencies (DBRS, S&P and Fitch). The table below provides a summary of the structured finance credit ratings for certain of the asset-backed securities, specifically the Class A notes of WFNMNT as of June 30, 2024:

WFNMNT	DBRS	S&P	Fitch
Class A notes	AAA	AAA	AAA

Credit ratings are not a recommendation to buy or hold any securities and they may be revised or revoked at any time at the sole discretion of the rating agency. Downgrades in the ratings of our unsecured or secured debt could result in higher funding costs, as well as reductions in our borrowing capacity in the unsecured or secured debt markets. We believe our mix of funding, including the proportion of our DTC and wholesale deposits, to total funding, reduces the impact that a credit rating downgrade could have on our funding costs and capacity.

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Funding Sources

As referenced above, our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior unsecured or convertible debt securities by our Parent Company, financings through our securitization programs, and deposits with the Banks.

Certain of our long-term debt agreements include various restrictive financial and non-financial covenants. If we do not comply with certain of these covenants and an event of default occurs and remains uncured, the maturity of amounts outstanding may be accelerated and become payable, and, with respect to our credit agreement, the associated commitments may be terminated. As of June 30, 2024, we were in compliance with all such covenants.

Credit Agreement

In June 2023, we entered into our credit agreement with Parent Company, as borrower, certain of our domestic subsidiaries, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent and lender, and various other financial institutions, as lenders, which provides for a $700 million senior unsecured revolving credit facility (the Revolving Credit Facility). As of June 30, 2024, all $700 million remained available for future borrowings under the Revolving Credit Facility.

9.750% Senior Notes due 2029

In January 2024, we issued and sold an additional $300 million aggregate principal amount of 9.750% Senior Notes due 2029 (Senior Notes due 2029) at an issue price of 101.00% of principal plus accrued interest from December 22, 2023. The Senior Notes due 2029 issued in January 2024 were issued as additional notes under the same indenture pursuant to which the initial $600 million of Senior Notes due 2029 were issued on December 22, 2023. The Senior Notes due 2029 that were issued in both December 2023 and January 2024 constitute a single series of notes and have the same terms, other than the issue date and issue price. We used the proceeds of the January 2024 offering of Senior Notes due 2029, together with $100 million of cash on hand, to fund the redemption of $400 million in aggregate principal amount of our outstanding 7.000% Senior Notes due 2026.

Deposits

We utilize a variety of deposit products to finance our operating activities, including funding for our non-securitized credit card and other loans, and to fund the securitization enhancement requirements of the Banks. We offer DTC retail deposit products, including Individual Retirement Account savings and certificates of deposit which CCB began offering in June 2024, as well as deposits sourced through contractual arrangements with various financial counterparties (often referred to as wholesale deposits, and includes brokered deposits). Across both our retail and wholesale deposits, the Banks offer various non-maturity deposit products that are generally redeemable on demand by the customer, and as such have no scheduled maturity date. The Banks also issue certificates of deposit with scheduled maturity dates ranging between July 2024 and June 2029, in denominations of at least $1,000, on which interest is paid either monthly or at maturity.

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The following table summarizes our retail and wholesale deposit products by type and associated attributes as of the dates presented:

Table 9: Deposits

	June 30, 2024			December 31, 2023
(Millions, except percentages)
Deposits
Direct-to-consumer (retail)	$	7,193		$	6,454
Wholesale	5,776			7,140
Total deposits	$	12,969		$	13,594
Non-maturity deposit products
Non-maturity deposits	$	6,682		$	6,597
Interest rate range	0.70% - 5.64%			0.70% - 5.64%
Weighted-average interest rate	4.82		%	4.78		%
Certificates of deposit
Certificates of deposit	$	6,287		$	6,997
Interest rate range	0.80% - 5.70%			0.50% - 5.70%
Weighted-average interest rate	4.68		%	4.50		%

As of June 30, 2024 and December 31, 2023, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $517 million (4% of Total deposits) and $509 million (4% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.

Overall, we continue to improve our funding mix through actions taken to grow our DTC deposits and reduce our Parent Company unsecured borrowings, while maintaining the flexibility of secured, unsecured, and wholesale funding. Typical seasonality of credit card and other loan balance pay downs in the first quarter of each year, and efforts undertaken in 2024 to reduce our long-term unsecured debt, lowered our funding requirements by approximately $1.2 billion from year-end 2023. As a result, we opportunistically reduced our wholesale and brokered deposits and paid down a portion of our secured conduit line balances, discussed further below.

Securitization Programs Including Conduit Facilities

We sell the majority of the credit card loans originated by the Banks to certain of our master trusts (the Trusts). These securitization programs are a principal vehicle through which we finance the Banks’ credit card loans. For this purpose, we use a combination of public term asset-backed notes and private conduit facilities (the Conduit Facilities) with a consortium of lenders, including domestic money center, regional and international banks. Borrowings under the Conduit Facilities are included in Debt issued by consolidated VIEs in the Consolidated Balance Sheets.

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The table below summarizes our conduit capacities, borrowings and maturities for the periods presented:

Table 10: Conduit Borrowing Capacity Rollforward and Maturities

(Millions)	December 31, 2023				Commitment		June 30, 2024
Conduit Facilities	Capacity		Drawn (6)		Increase		Capacity		Drawn (6)		Maturity Date
Comenity Bank
WFNMNT 2009-VFN (1)	$	2,650	$	2,015	$	—	$	2,650	$	1,640	October 2025
WFNMT 2009-VFC1 (2)	275		260		—		275		260		October 2024
Comenity Capital Bank
WFCMNT 2009-VFN (3)	2,250		1,025		—		2,250		461		February 2025
CCAST 2023-VFN1 (4)	250		250		—		250		250		September 2025
CCAST 2024-VFN1 (5)	—		—		200		200		—		February 2025
Total	$	5,425	$	3,550	$	200	$	5,625	$	2,611

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(1)2009-VFN Conduit issued under World Financial Network Credit Card Master Note Trust (WFNMNT).

(2)2009-VFC1 Conduit issued under World Financial Network Credit Card Master Trust III (WFNMT).

(3)2009-VFN Conduit issued under World Financial Capital Master Note Trust (WFCMNT).

(4)2023-VFN1 Conduit issued under Comenity Capital Asset Securitization Trust (CCAST).

(5)2024-VFN1 Conduit issued under CCAST.

(6)Amounts drawn do not include $0.8 billion and $1.2 billion of debt issued by the Trusts as of June 30, 2024 and December 31, 2023, respectively, which were not sold, but were retained by us as a credit enhancement and therefore have been eliminated from the Total.

In May 2024, WFNMNT issued $570 million of Series 2024-A public term asset-backed notes, which mature in April 2027. The offering consisted of $500 million of Class A notes with a fixed interest rate of 5.47% per year, $44 million of zero coupon Class M notes, and $26 million of zero coupon Class B notes. The Class M and B notes were retained by us and eliminated from the Consolidated Balance Sheet.

As of June 30, 2024, we had approximately $11.8 billion of securitized credit card loans. Securitizations require credit enhancements in the form of cash, spread deposits, additional loans and subordinated classes. The credit enhancement is principally based on the outstanding balances of the series issued by the Trusts and by the performance of the credit card loans in the Trusts.

Early amortization events as defined within each asset-backed securitization transaction are generally driven by asset performance. We do not believe it is reasonably likely that an early amortization event will occur due to asset performance. However, if an early amortization event were declared for a Trust, the trustee of the particular Trust would retain the interest in the loans along with the excess spread that would otherwise be paid to our Bank subsidiary until the investors were fully repaid. The occurrence of an early amortization event would significantly limit or negate our ability to securitize additional credit card loans.

We have secured and continue to secure the necessary commitments to fund our credit card and other loans. However, certain of these commitments are short-term in nature and subject to renewal. There is no guarantee that these funding sources, when they mature, will be renewed on similar terms, or at all, as they are dependent on the availability of the asset-backed securitization and deposit markets at the time.

Regulation RR (Credit Risk Retention) adopted by the FDIC, the SEC, the Federal Reserve Board and certain other federal regulators mandates a minimum five percent risk retention requirement for securitizations. Such risk retention requirements may limit our liquidity by restricting the amount of asset-backed securities we are able to issue or affecting the timing of future issuances of asset-backed securities. We satisfy such risk retention requirements by maintaining a seller’s interest calculated in accordance with Regulation RR.

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Stock Repurchase Programs

On February 21, 2024, our Board of Directors approved a stock repurchase program to acquire up to $30 million in shares of our outstanding common stock in the open market during the period ending on December 31, 2024. The rationale for this repurchase program, and the amount thereof, was to offset the impact of dilution associated with issuances of employee restricted stock units, with the objective of reducing the Company’s weighted average diluted share count to approximately 50 million shares for 2024, subject to then current estimates and assumptions applicable as of the date of approval.

During the six months ended June 30, 2024, under the authorized stock repurchase program, we acquired a total of 0.3 million shares of our common stock for $11 million. Following their repurchase, these 0.3 million shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock.

As of June 30, 2024, we had $19 million remaining for future repurchases under the authorized stock repurchase program.

Dividends

During the three and six months ended June 30, 2024, we paid $11 million and $22 million in dividends to holders of our common stock. On July 25, 2024, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on September 13, 2024, to stockholders of record at the close of business on August 9, 2024.

Contractual Obligations

In the normal course of business, we enter into various contractual obligations that may require future cash payments, the vast majority of which relate to deposits, debt issued by consolidated VIEs, long-term and other debt and operating leases.

We believe that we will have access to sufficient resources to meet these commitments.

Cash Flows

The table below summarizes our cash flow activity for the periods indicated, followed by a discussion of the variance drivers impacting our Operating, Investing and Financing activities:

Table 11: Cash Flows

	Six Months Ended June 30,
	2024		2023
(Millions)
Total cash provided by (used in)
Operating activities	$	924	$	741
Investing activities	751		2,860
Financing activities	(1,219)		(4,177)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	456	$	(576)

Cash Flows from Operating Activities primarily include net income adjusted for (i) non-cash items included in net income, such as provision for credit losses, depreciation and amortization, deferred taxes and other non-cash items, and (ii) changes in the balances of operating assets and liabilities, which can fluctuate in the normal course of business due to the amount and timing of payments. We generated cash flows from operating activities of $924 million and $741 million for the six months ended June 30, 2024 and 2023, respectively. The net cash provided by operating activities during these periods was primarily driven by cash generated from net income for the periods after adjusting for the Provision for credit losses, and for the six months ended June 30, 2023, the Gain on portfolio sale.

Cash Flows from Investing Activities primarily include changes in Credit card and other loans. Cash provided by investing activities was $751 million and $2,860 million for the six months ended June 30, 2024 and 2023, respectively. The net cash provided by investing activities during the six months ended June 30, 2024 was primarily due to the paydown of Credit card and other loans and the sale of a credit card loan portfolio. The net cash provided by investing activities during the six

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months ended June 30, 2023 was primarily due to the sale of the BJ's portfolio and the paydown of Credit card and other loans.

Cash Flows from Financing Activities primarily include changes in deposits and long-term debt. Cash used in financing activities was $1,219 million and $4,177 million for the six months ended June 30, 2024 and 2023, respectively. The net cash used in financing activities during these periods was primarily driven by net repayments of both debt issued by consolidated variable interest entities (securitizations) and unsecured borrowings, as well as a net decrease in deposits.

INFLATION AND SEASONALITY

Although we cannot precisely determine the impact of inflation on our operations, we have generally sought to rely on operating efficiencies from scale, technology modernization and digital advancement, and expansion in lower cost jurisdictions (in select circumstances) to offset increased costs of employee compensation and other operating expenses impacted by inflation. We also recognize that a customer’s ability and willingness to repay us has been negatively impacted by factors such as inflation and the effects of higher interest rates, which results in higher delinquencies that could lead to increased credit losses, as reflected in our elevated Reserve rate. If the efforts to control inflation in the U.S. and globally are not successful and inflationary pressures continue to persist, they could magnify the slowdown in the domestic and global economies and increase the risk of a recession, which may adversely impact our business, results of operations and financial condition.

With respect to seasonality, our revenues, earnings and cash flows are affected by increased consumer spending patterns leading up to and including the holiday shopping season in the fourth quarter of each year and, to a lesser extent, during the first quarter of each year as Credit card and other loans are paid down. Net loss rates for our Credit card and other loans portfolio also have historically exhibited seasonal patterns and generally tend to be the highest in the first quarter of the year. While the effects of the seasonal trends discussed above remain evident, macroeconomic trends, such as those discussed within the Business Environment sections of our quarterly and annual reports on Forms 10-Q and Form 10-K generally have a more significant impact on our key financial metrics and can outweigh any seasonal impacts that we may experience.

LEGISLATIVE, REGULATORY MATTERS AND CAPITAL ADEQUACY

CB is subject to various regulatory capital requirements administered by the State of Delaware and the FDIC. CCB is also subject to various regulatory capital requirements administered by the FDIC, as well as the State of Utah. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by our regulators. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Banks must meet specific capital guidelines that involve quantitative measures of their assets and liabilities as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by these regulators about components, risk weightings and other factors. In addition, both Banks are limited in the amounts they can pay as dividends to the Parent Company. For additional information about legislative and regulatory matters impacting us, see “Business–Supervision and Regulation” under Part I of our 2023 Form 10-K. For additional detail regarding the CFPB's final rule relating to credit card late fees, see “Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Business Environment” and “Risk Factors” included herein and in our 2023 Form 10-K and our Quarterly Report on Form 10-Q for the quarter-ended March 31, 2024.

Quantitative measures, established by regulations to ensure capital adequacy, require the Banks to maintain minimum amounts and ratios of Tier 1 capital to average assets, and Common equity tier 1, Tier 1 capital and Total capital, all to risk weighted assets. Failure to meet these minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions by the Banks’ regulators that if undertaken, could have a direct material effect on CB’s and/or CCB’s operating activities, as well as our operating activities. Based on these regulations, as of June 30, 2024 and 2023, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The Banks seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer. Although Bread Financial is not a bank holding company as defined, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies. As of June 30, 2024 the actual capital ratios and minimum ratios for each Bank, as well as Bread Financial, are as follows:

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Table 12: Capital Ratios

	Actual Ratio			Minimum Ratio for Capital Adequacy Purposes		Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions
Total Company
Common equity tier 1 capital ratio (1)	13.8		%	4.5	%	6.5	%
Tier 1 capital ratio (2)	13.8			6.0		8.0
Total risk-based capital ratio (3)	15.1			8.0		10.0
Tier 1 leverage capital ratio (4)	12.0			4.0		5.0
Total risk-weighted assets (5)	$	18,859
Comenity Bank
Common equity tier 1 capital ratio (1)	18.0		%	4.5	%	6.5	%
Tier 1 capital ratio (2)	18.0			6.0		8.0
Total risk-based capital ratio (3)	19.4			8.0		10.0
Tier 1 leverage capital ratio (4)	15.7			4.0		5.0
Comenity Capital Bank
Common equity tier 1 capital ratio (1)	18.1		%	4.5	%	6.5	%
Tier 1 capital ratio (2)	18.1			6.0		8.0
Total risk-based capital ratio (3)	19.5			8.0		10.0
Tier 1 leverage capital ratio (4)	15.7			4.0		5.0

__________________________________

(1)Common equity tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(2)Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(3)Total risk-based capital ratio represents total capital divided by total risk-weighted assets. In the calculation of total capital, we follow the Basel III Standardized Approach and therefore tier 1 capital has been increased by tier 2 capital, which for us is the allowable portion of the Allowance for credit losses.

(4)Tier 1 leverage capital ratio represents tier 1 capital divided by total average assets, after certain adjustments.

(5)Total risk-weighted assets are generally measured by allocating assets, and specified off-balance sheet exposures, to various risk categories as defined by the Basel III Standardized Approach.

The Banks adopted the option provided by the interim final rule issued by joint federal bank regulatory agencies, which largely delayed the effects of the current expected credit loss (CECL) model on their regulatory capital for two years, until January 1, 2022, after which the effects are phased-in over a three-year period through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period includes both the initial impact of our adoption of CECL as of January 1, 2020, and 25% of subsequent changes in our Allowance for credit losses during each quarter of the two-year period ended December 31, 2021. In accordance with the interim final rule, we began to ratably phase-in these effects on January 1, 2022.

We are also involved, from time to time, in reviews, investigations, subpoenas, supervisory actions and other proceedings (both formal and informal) by governmental agencies regarding our business, which could subject us to significant fines, penalties, obligations to change our business practices, significant restrictions on our existing business or ability to develop new business, cease-and-desist orders, safety-and-soundness directives or other requirements resulting in increased expenses, diminished income and damage to our reputation.

On November 20, 2023, following the consent of the Board of Managers of Comenity Servicing LLC (the Servicer), the FDIC issued a consent order to the Servicer. The Servicer is not one of our Bank subsidiaries, but is our wholly-owned

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subsidiary that services substantially all of our loans. The consent order arose out of the June 2022 transition of our credit card processing services to strategic outsourcing partners and addresses certain shortcomings in the Servicer’s information technology (IT) systems development, project management, business continuity management, cloud operations, and third-party oversight. The Servicer entered into the consent order for the purpose of resolving these matters without admitting or denying any violations of law or regulation set forth in the order. The consent order does not contain any monetary penalties or fines.

The Servicer continues to take significant steps to strengthen the organization’s IT governance and address the other issues identified in the consent order, working diligently to ensure that all of the requirements of the consent order are satisfied. Without limiting the generality of the foregoing, the Servicer has taken steps to address each provision within the consent order that required action be taken by a specified deadline, including providing a copy of the consent order to the Parent Company Board of Directors, increasing the size and governance processes of the Servicer’s Board of Managers, establishing an Executive Oversight Committee to oversee and ensure compliance with the consent order, and submitting all required reports and plans of action to the FDIC. The Servicer is committed to complying with each of the ongoing or longer-term requirements of the consent order, including the enhancement of its compliance management processes and related corporate governance, compliance with the applicable system conversion requirements, and enhanced risk management and reporting requirements. In addition, the Board of Directors of each of the Banks oversee the Servicer’s compliance with the requirements of the consent order and provide effective challenge of Servicer management toward that end.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no significant changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)” included in our 2023 Form 10-K.

RECENTLY ISSUED ACCOUNTING STANDARDS

See the “Recently Adopted and Recently Issued Accounting Standards” under Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the unaudited Consolidated Financial Statements.

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Cautionary Note Regarding Forward-Looking Statements

This Form 10-Q and the documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 other words or phrases of similar import. Similarly, statements that describe our business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding, and the guidance we give with respect to, our anticipated operating or financial results, future financial performance and outlook, future dividend declarations and future economic conditions.

We believe that our expectations are based on reasonable assumptions. Forward-looking statements, however, are subject to a number of risks and uncertainties that are difficult to predict and, in many cases, beyond our control. Accordingly, our actual results could differ materially from the projections, anticipated results or other expectations expressed in this report, and no assurances can be given that our expectations will prove to have been correct. Factors that could cause the outcomes to differ materially include, but are not limited to, the following:

•macroeconomic conditions, including market conditions, inflation, higher interest rates, labor market conditions, recessionary pressures or a concern over a prolonged economic slowdown, and the related impact on consumer spending behavior, payments, debt levels, savings rates and other behavior;

•global political, market, public health and social events or conditions, including ongoing wars and military conflicts;

•future credit performance of our customers, including the level of future delinquency and write-off rates;

•loss of, or reduction in demand for services from, significant brand partners or customers in the highly competitive markets in which we compete;

•the concentration of our business in U.S. consumer credit;

•increases or volatility in the Allowance for credit losses that may result from the application of the CECL model;

•inaccuracies in the models and estimates on which we rely, including the amount of our Allowance for credit losses and our credit risk management models;

•increases in fraudulent activity;

•failure to identify, complete or successfully integrate or disaggregate business acquisitions, divestitures and other strategic initiatives;

•the extent to which our results are dependent upon our brand partners, including our brand partners’ financial performance and reputation, as well as the effective promotion and support of our products by brand partners;

•continued financial responsibility with respect to a divested business, including required equity ownership, guarantees, indemnities or other financial obligations;

•increases in the cost of doing business, including market interest rates;

•our level of indebtedness and inability to access financial or capital markets, including asset-backed securitization funding or deposits markets;

•restrictions that limit our Banks’ ability to pay dividends to us;

•pending and future litigation;

•pending and future legislation, regulation, supervisory guidance and regulatory and legal actions including, but not limited to, those related to financial regulatory reform and consumer financial services practices, as well as any such actions with respect to late fees, interchange fees or other charges;

•increases in regulatory capital requirements or other support for our Banks;

•impacts arising from or relating to the transition of our credit card processing services to third party service providers that we completed in 2022;

•failures or breaches in our operational or security systems, including as a result of cyberattacks, unanticipated impacts from technology modernization projects, failure of our information security controls or otherwise;

•loss of consumer information or other data due to compromised physical or cyber security, including disruptive attacks from financially motivated bad actors and third party supply chain issues;

•any tax or other liability or adverse impacts arising out of or related to the spinoff of our former LoyaltyOne segment or the bankruptcy filings of Loyalty Ventures Inc. (LVI) and certain of its subsidiaries and subsequent litigation or other disputes; and

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•those factors identified in our filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our 2023 Form 10-K and our Quarterly Report on Form 10-Q for the quarter-ended March 31, 2024.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. In addition, the CFPB issued a final rule earlier this year that, absent a successful legal challenge, will place significant limits on credit card late fees, which would have a significant impact on our business and results of operations for at least the short term and, depending on the effectiveness of the mitigating actions that we have taken or may in the future take in anticipation of, or in response to, the final rule, may potentially adversely impact us over the long term; we cannot provide any assurance as to the effective date of the rule, the result of any pending or future challenges or other litigation relating to the rule, or our ability to mitigate or offset the impact of the rule on our business and results of operations.

Any forward-looking statements contained in this Form 10-Q speak only as of the date made, and we undertake no obligation, other than as required by applicable law, to update or revise any forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

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Table of Contents

Item 1. Financial Statements.

BREAD FINANCIAL HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions, except per share amounts)
Interest income
Interest and fees on loans	$	1,174	$	1,153	$	2,422	$	2,441
Interest on cash and investment securities	54		44		106		90
Total interest income	1,228		1,197		2,528		2,531
Interest expense
Interest on deposits	152		127		308		244
Interest on borrowings	89		78		181		178
Total interest expense	241		205		489		422
Net interest income	987		992		2,039		2,109
Non-interest income
Interchange revenue, net of retailer share arrangements	(84)		(74)		(177)		(161)
Gain on portfolio sale	5		—		5		230
Other	31		34		62		63
Total non-interest income	(48)		(40)		(110)		132
Total net interest and non-interest income	939		952		1,929		2,241
Provision for credit losses	290		336		611		442
Total net interest and non-interest income, after provision for credit losses	649		616		1,318		1,799
Non-interest expenses
Employee compensation and benefits	214		217		427		437
Card and processing expenses	77		116		164		235
Information processing and communication	73		75		147		150
Marketing expenses	33		40		61		79
Depreciation and amortization	23		35		46		69
Other	49		47		104		105
Total non-interest expenses	469		530		949		1,075
Income from continuing operations before income taxes	180		86		369		724
Provision for income taxes	47		22		100		205
Income from continuing operations	133		64		269		519
Income (loss) from discontinued operations, net of income taxes (1)	—		(16)		(1)		(16)
Net income	$	133	$	48	$	268	$	503
Basic income per share (Note 14)
Income from continuing operations	$	2.69	$	1.28	$	5.42	$	10.37
Income (loss) from discontinued operations	$	—	$	(0.33)	$	(0.02)	$	(0.33)
Net income per share	$	2.69	$	0.95	$	5.40	$	10.04
Diluted income per share (Note 14)
Income from continuing operations	$	2.65	$	1.27	$	5.38	$	10.34
Income (loss) from discontinued operations	$	0.01	$	(0.32)	$	(0.02)	$	(0.32)
Net income per share	$	2.66	$	0.95	$	5.36	$	10.02
Weighted average common shares outstanding (Note 14)
Basic	49.6		50.1		49.6		50.1
Diluted	50.2		50.3		49.9		50.2

___________________________________________________________

(1)Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019. For additional information refer to Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the unaudited Consolidated Financial Statements.

See Notes to unaudited Consolidated Financial Statements.

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BREAD FINANCIAL HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions)
Net income	$	133	$	48	$	268	$	503
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale debt securities	—		(2)		(4)		1
Tax benefits	—		1		1		—
Unrealized gain (loss) on available-for-sale debt securities, net of tax	—		(1)		(3)		1
Other comprehensive income (loss), net of tax	—		(1)		(3)		1
Total comprehensive income, net of tax	$	133	$	47	$	265	$	504

See Notes to unaudited Consolidated Financial Statements.

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BREAD FINANCIAL HOLDINGS, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

	June 30, 2024		December 31, 2023
(Millions, except per share amounts)
ASSETS
Cash and cash equivalents	$	4,053	$	3,590
Credit card and other loans
Total credit card and other loans (includes loans available to settle obligations of consolidated variable interest entities June 30, 2024, $11,779; December 31, 2023, $12,844, respectively)	17,743		19,333
Allowance for credit losses	(2,164)		(2,328)
Credit card and other loans, net	15,579		17,005
Investments (Fair value: June 30, 2024, $224; December 31, 2023, $217)	264		253
Property and equipment, net	157		167
Goodwill and intangible assets, net	744		762
Other assets	1,347		1,364
Total assets	$	22,144	$	23,141
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	12,994		13,620
Debt issued by consolidated variable interest entities	3,458		3,898
Long-term and other debt	1,296		1,394
Other liabilities	1,226		1,311
Total liabilities	18,974		20,223
Commitments and contingencies (Note 10)
Stockholders’ equity
Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 49.7 million shares as of June 30, 2024 and 49.3 million shares as of December 31, 2023, respectively.	1		1
Additional paid-in capital	2,179		2,169
Retained earnings	1,012		767
Accumulated other comprehensive loss	(22)		(19)
Total stockholders’ equity	3,170		2,918
Total liabilities and stockholders’ equity	$	22,144	$	23,141

See Notes to unaudited Consolidated Financial Statements.

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BREAD FINANCIAL HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended June 30, 2024	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
(Millions)
Balance as of March 31, 2024	49.6	$	1	$	2,163	$	890	$	(22)	$	3,032
Net income	—	—		—		133		—		133
Other comprehensive loss	—	—		—		—		—		—
Stock-based compensation	—	—		14		—		—		14
Dividends and dividend equivalent rights declared ($0.21 per common share)	—	—		—		(11)		—		(11)
Issuance of shares to employees, net of shares withheld for employee taxes	0.1	—		2		—		—		2
Balance as of June 30, 2024	49.7	$	1	$	2,179	$	1,012	$	(22)	$	3,170

Three Months Ended June 30, 2023	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
(Millions)
Balance as of March 31, 2023	50.1	$	1	$	2,197	$	537	$	(19)	$	2,716
Net income	—	—		—		48		—		48
Other comprehensive loss	—	—		—		—		(1)		(1)
Stock-based compensation	—	—		12		—		—		12
Capped call transactions for convertible senior notes due 2028	—	—		(30)		—		—		(30)
Dividends and dividend equivalent rights declared ($0.21 per common share)	—	—		—		(11)		—		(11)
Issuance of shares to employees, net of shares withheld for employee taxes	—	—		2		—		—		2
Balance as of June 30, 2023	50.1	$	1	$	2,181	$	574	$	(20)	$	2,736

See Notes to unaudited Consolidated Financial Statements.

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BREAD FINANCIAL HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2024	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
(Millions)
Balance as of December 31, 2023	49.3	$	1	$	2,169	$	767	$	(19)	$	2,918
Cumulative effect of change in accounting principle (1)	—	—		—		(1)		—		(1)
Net income	—	—		—		268		—		268
Other comprehensive loss	—	—		—		—		(3)		(3)
Stock-based compensation	—	—		28		—		—		28
Repurchases of common stock	(0.3)	—		(11)		—		—		(11)
Dividends and dividend equivalent rights declared ($0.42 per common share)	—	—		—		(22)		—		(22)
Issuance of shares to employees, net of shares withheld for employee taxes	0.7	—		(7)		—		—		(7)
Balance as of June 30, 2024	49.7	$	1	$	2,179	$	1,012	$	(22)	$	3,170

Six Months Ended June 30, 2023	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
(Millions)
Balance as of December 31, 2022	49.9	$	1	$	2,192	$	93	$	(21)	$	2,265
Net income	—	—		—		503		—		503
Other comprehensive income	—	—		—		—		1		1
Stock-based compensation	—	—		21		—		—		21
Capped call transactions for convertible senior notes due 2028	—	—		(30)		—		—		(30)
Dividends and dividend equivalent rights declared ($0.42 per common share)	—	—		—		(22)		—		(22)
Issuance of shares to employees, net of shares withheld for employee taxes	0.2	—		(2)		—		—		(2)
Balance as of June 30, 2023	50.1	$	1	$	2,181	$	574	$	(20)	$	2,736

__________________________________

(1)Represents the cumulative effect, net of tax, of adopting the proportional amortization method of accounting for our tax credit investment. For additional information refer to Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the unaudited Consolidated Financial Statements.

See Notes to unaudited Consolidated Financial Statements.

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BREAD FINANCIAL HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2024		2023
(Millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	268	$	503
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses	611		442
Depreciation and amortization	46		69
Deferred income taxes	(45)		(30)
Non-cash stock compensation	28		22
Amortization of deferred financing costs	11		13
Amortization of deferred origination costs	50		44
Gain on portfolio sale	(5)		(230)
Change in other operating assets and liabilities
Change in other assets	45		88
Change in other liabilities	(81)		(183)
Other	(4)		3
Net cash provided by operating activities	924		741
CASH FLOWS FROM INVESTING ACTIVITIES
Change in credit card and other loans	693		477
Proceeds from sale of credit card loan portfolios	100		2,499
Purchase of credit card loan portfolio	—		(81)
Purchases of investments	(23)		(24)
Maturities of investments	7		6
Other, including capital expenditures	(26)		(17)
Net cash provided by investing activities	751		2,860
CASH FLOWS FROM FINANCING ACTIVITIES
Unsecured borrowings under debt agreements	300		801
Repayments/maturities of unsecured borrowings under debt agreements	(407)		(1,297)
Debt issued by consolidated variable interest entities	700		1,392
Repayments/maturities of debt issued by consolidated variable interest entities	(1,139)		(4,182)
Net decrease in deposits	(627)		(779)
Payment of deferred financing costs	(6)		(49)
Payment for capped call transactions	—		(39)
Dividends paid	(22)		(21)
Repurchase of common stock	(11)		—
Other	(7)		(3)
Net cash used in financing activities	(1,219)		(4,177)
Change in cash, cash equivalents and restricted cash	456		(576)
Cash, cash equivalents and restricted cash at beginning of period	3,616		3,927
Cash, cash equivalents and restricted cash at end of period	$	4,072	$	3,351
SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents reconciliation
Cash and cash equivalents	$	4,053	$	3,325
Restricted cash included within Other assets	19		26
Total cash, cash equivalents and restricted cash	$	4,072	$	3,351

The unaudited Consolidated Statements of Cash Flows are presented with the combined cash flows from continuing and discontinued operations.

See Notes to unaudited Consolidated Financial Statements.

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BREAD FINANCIAL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

We are a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions. We create opportunities for our customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, we deliver growth for our partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later (BNPL) products such as installment loans and our “split-pay” offerings. We also offer direct-to-consumer solutions that give customers more access, choice and freedom through our branded Bread CashbackTM American Express® Credit Card and Bread SavingsTM products.

Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs). Our partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which we first began, specialty apparel. We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, allows us to offer products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers). The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships. We operate our business through a single reportable segment, with our primary source of revenue being from Interest and fees on loans from our various credit card and other loan products, and to a lesser extent from contractual relationships with our brand partners.

Throughout this report, unless stated or the context implies otherwise, the terms “Bread Financial”, “BFH”, the “Company”, “we”, “our” or “us” refer to Bread Financial Holdings, Inc. and its subsidiaries on a consolidated basis. References to “Parent Company” refer to Bread Financial Holdings, Inc. on a parent-only standalone basis. In addition, in this report we may refer to the retailers and other companies with whom we do business as our “partners”, “brand partners”, or “clients”, provided that the use of the term “partner”, “partnering” or any similar term does not mean or imply a formal legal partnership, and is not meant in any way to alter the terms of Bread Financial’s relationship with any third parties. We offer our credit products through our insured depository institution subsidiaries, Comenity Bank and Comenity Capital Bank, which together are referred to herein as the “Banks”.

BASIS OF PRESENTATION

These unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 20, 2024 (the 2023 Form 10-K). If not significantly different, certain note disclosures included therein have been omitted from these unaudited Consolidated Financial Statements.

The unaudited Consolidated Financial Statements included herein reflect all adjustments, which consist of normal, recurring adjustments that are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The unaudited Consolidated Financial Statements also include amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019. Such amounts have been classified within Discontinued operations and primarily relate to the after-tax impact of contractual indemnification and tax-related matters. For additional information about our previously disclosed discontinued operations please refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates and assumptions reflect the best judgment of management, but actual results could differ. The most significant of those estimates and assumptions relate to the Allowance for credit losses, Provision for income taxes and Goodwill.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The accompanying unaudited Consolidated Financial Statements include the accounts of the Company and all subsidiaries in which we have a controlling financial interest. All intercompany transactions have been eliminated.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to our significant accounting policies as discussed in Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” included in our 2023 Form 10-K.

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting Standards Recently Adopted
Standard	Guidance	Timing and Financial Statement Impact
Investments - Equity Method and Joint Ventures: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method Issued March 2023	Expands the election to apply the proportional amortization method of accounting to tax credit investments beyond low-income-housing tax credit investments, when certain conditions are met.	Adopted under the modified retrospective method on January 1, 2024, which resulted in an insignificant decrease to retained earnings. Adoption did not have a significant impact on our results of operations, financial position, regulatory risk-based capital, or on our operational processes, controls and governance in support of the new guidance.
Accounting Standards Recently Issued but Not Yet Adopted
Standard	Guidance	Timing and Financial Statement Impact
Segment Reporting: Improvements to Reportable Segment Disclosures Issued November 2023	Requires interim and annual disclosure of significant segment expense categories and amounts that are regularly provided to the chief operating decision maker, as well as disclosure of the aggregate amount and description of other segment items beyond significant segment expenses.	Effective beginning with our Annual Report on Form 10-K for the year ending December 31, 2024, and effective for interim reporting periods beginning in 2025. Early adoption is permitted, although we do not plan to early adopt. Adoption will result in expanded disclosures for our single reportable segment but is not expected to have a significant impact on our financial reporting, or on our operational processes, controls and governance in support of the new guidance.
Income Taxes: Improvements to Income Tax Disclosures Issued December 2023	Requires greater disaggregation of rate reconciliation and income taxes paid information, as well as other changes intended to enhance the transparency and decision-usefulness of income tax disclosures.	Effective beginning with our Annual Report on Form 10-K for the year ending December 31, 2025. Early adoption is permitted, although we do not plan to early adopt. Adoption will require enhancements to our income tax disclosures but is not expected to have a significant impact on our financial reporting, or on our operational processes, controls and governance in support of the new guidance.

2. CREDIT CARD AND OTHER LOANS

Our payment and lending solutions result in the origination of Credit card and other loans, which are recorded at the time a borrower enters into a point-of-sale transaction with a merchant. Credit card loans represent revolving lines of credit and have a range of terms that include credit limits, interest rates and fees, which can be revised over time based on new information about the cardholder, in accordance with applicable regulations and the governing terms and conditions. Cardholders choosing to make a payment of less than the full balance due, instead of paying in full, are subject to finance charges and are required to make monthly payments based on pre-established amounts. Other loans, which consist primarily of BNPL products such as installment loans and our “split-pay” offerings, have a range of fixed terms such as interest rates, fees and repayment periods, and borrowers are required to make pre-established monthly payments over the term of the loan in accordance with the applicable terms and conditions. Credit card and other loans include principal and any related accrued interest and fees and are presented on the Consolidated Balance Sheets net of the Allowance for credit losses. We continue to accrue interest and fee income on all accounts, except in limited circumstances, until the related balance and all related interest and fees are paid or charged-off.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We generally classify our Credit card and other loans as held for investment. We sell a majority of our credit card loans originated by Comenity Bank (CB) and by Comenity Capital Bank (CCB), which together are referred to herein as the “Banks”, to certain of our master trusts (the Trusts), which are consolidated VIEs, and therefore these loans are restricted for securitization investors. All new originations of Credit card and other loans are determined to be held for investment at origination because we have the intent and ability to hold them for the foreseeable future. In determining what constitutes the foreseeable future, we consider the average life and homogenous nature of our Credit card and other loans. In assessing whether our Credit card and other loans continue to be held for investment, we also consider capital levels and scheduled maturities of funding instruments used. The assertion regarding the intent and ability to hold Credit card and other loans for the foreseeable future can be made with a high degree of certainty given the maturity distribution of our direct-to-consumer (DTC or retail) deposits and other funding instruments; the demonstrated ability to replace maturing time-based deposits and other borrowings with new deposits or borrowings; and historic payment activity on Credit card and other loans. Due to the homogenous nature of our credit card loans, amounts are classified as held for investment on a brand partner portfolio basis. From time to time certain credit card loans are classified as held for sale, as determined on a brand partner portfolio basis. We carry held for sale assets at the lower of aggregate cost or fair value and continue to recognize finance charges on an accrual basis. Cash flows associated with Credit card and other loans originated or purchased for investment are classified as Cash flows from investing activities, regardless of any subsequent change in intent and ability.

The following table provides Credit card and other loans, as of the dates presented:

	June 30, 2024		December 31, 2023
(Millions)
Credit card loans	$	17,428	$	18,999
BNPL and other loans	315		334
Total credit card and other loans (1)(2)	17,743		19,333
Less: Allowance for credit losses	(2,164)		(2,328)
Credit card and other loans, net	$	15,579	$	17,005

__________________________________

(1)Includes $11.8 billion and $12.8 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of June 30, 2024 and December 31, 2023, respectively.

(2)Includes $375 million and $371 million, of accrued interest and fees that have not yet been billed to cardholders as of June 30, 2024 and December 31, 2023, respectively.

Credit Card and Other Loans Aging

The following table provides the delinquency trends of our Credit card and other loans portfolio, based on the amortized cost, as of the dates presented:

	Aging Analysis of Delinquent Amortized Cost Credit Card and Other Loans (1)
	31 to 60 Days Past Due		61 to 90 Days Past Due		91 or more Days Past Due		Total		Total Current		Total
(Millions)
June 30, 2024	$	358	$	290	$	661	$	1,309	$	16,030	$	17,339
December 31, 2023	$	422	$	323	$	809	$	1,554	$	17,373	$	18,927

__________________________________

(1)BNPL and other loans delinquencies have been included with credit card loan delinquencies in the table above, as amounts were insignificant as of each period presented. As permitted by GAAP, the primary difference between the amortized cost basis included in the table above and the carrying value of our Credit card and other loans relates to the exclusion of unbilled finance charges and fees from the amortized cost basis. As of June 30, 2024 and December 31, 2023, accrued interest and fees that have not yet been billed to cardholders were $375 million and $371 million, respectively, included in Credit card and other loans on the Consolidated Balance Sheets.     

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

From time to time we may re-age cardholders’ accounts, with the intent of assisting delinquent cardholders who have experienced financial difficulties but who demonstrate both an ability and willingness to repay the amounts due, this practice affects credit card loan delinquencies and principal losses. Accounts meeting specific defined criteria are re-aged when the cardholder makes one or more consecutive payments aggregating to a certain pre-defined amount of their account balance. Upon re-aging, the outstanding balance of a delinquent account is returned to current status. Our re-aged accounts as a percentage of Total credit card and other loans represented 4.5% and 3.2% for the three months ended June 30, 2024 and 2023, respectively, and 5.1% and 2.7% for the six months ended June 30, 2024 and 2023, respectively. Our re-aging practices comply with regulatory guidelines.

Credit Quality Indicators for Our Credit Card and Other Loans

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 portfolio, we closely monitor Delinquency rates and Net principal loss rates, which reflect, among other factors, our underwriting, the inherent credit risk in our portfolio and the success of our collection and recovery efforts. These rates also reflect, more broadly, the general macroeconomic conditions, including the effects of persistent inflation and higher interest rates. Our Delinquency and Net principal loss rates are also impacted by the size of our Credit card and other loans portfolio, which serves as the denominator in the calculation of these rates. Accordingly, changes in the size of our portfolio (whether due to credit tightening, acquisitions or dispositions of portfolios or otherwise) may cause movements in our Delinquency and Net principal loss rates that are not necessarily indicative of the underlying credit quality of the overall portfolio.

Delinquencies: An account is contractually delinquent if we do not receive the minimum payment due by the specified due date. Our policy is to continue to accrue interest and fee income on all accounts, except in limited circumstances, until the balance and all related interest and fees are paid or charged-off. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent; based upon the level of risk indicated, a collection strategy is deployed. If after exhausting all in-house collection efforts we are unable to collect on the account, we may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances.

The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit card and other loans as of the same period-end. As of June 30, 2024 and December 31, 2023, our Delinquency rates were 6.0% and 6.5%, respectively.

Net Principal Losses: Our net principal losses include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and third-party fraud losses (including synthetic fraud). Charged-off interest and fees reduce Interest and fees on loans, while third-party fraud losses are recorded in Card and processing expenses. Credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. BNPL loans such as our installment loans and our “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due. However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for credit card loans and 120 days past due for BNPL loans. We record the actual losses for unpaid interest and fees as a reduction to Interest and fees on loans, which were $264 million and $243 million for the three months ended June 30, 2024 and 2023, respectively, and $542 million and $485 million for the six months ended June 30, 2024 and 2023 respectively.

The net principal loss rate is calculated by dividing net principal losses for the period by the Average credit card and other loans for the same period. Beginning in January 2024, we revised the calculation of Average credit card and other loans to more closely align with industry practice by incorporating an average daily balance. Prior to 2024, Average credit card and other loans represent the average balance of the loans at the beginning and end of each month, averaged over the periods indicated. For the three months ended June 30, 2024 and 2023, our Net principal loss rates were 8.6% and 8.0%,

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

respectively, for the six months ended June 30, 2024 and 2023, our Net Principal loss rates were 8.6% and 7.5% respectively.

Overall Credit Quality: As part of our credit risk management activities for our credit card loans portfolio, we assess overall credit quality by reviewing information from credit bureaus and other sources relating to our cardholders’ broader credit performance. We utilize VantageScore (Vantage) credit scores to assist in our assessment of credit quality. Vantage credit scores are obtained at origination of the account and are refreshed monthly thereafter to assist in predicting customer behavior. We categorize these Vantage credit scores into the following three credit score categories: (i) 661 or higher, which are considered the strongest credits and therefore have the lowest credit risk; (ii) 601 to 660, considered to have moderate credit risk; and (iii) 600 or less, which are considered weaker credits and therefore have the highest credit risk. In certain limited circumstances there are customer accounts for which a Vantage score is not available and we use alternative sources to assess credit risk and predict behavior. The table below excludes less than 0.1% of the total credit card loans balance as of June 30, 2024 and December 31, 2023, representing those customer accounts for which a Vantage credit score is not available. The following table reflects the distribution of credit card loans by Vantage score as of the dates presented:

	Vantage
	June 30, 2024						December 31, 2023
	661 or Higher		601 to 660		600 or Lower		661 or Higher		601 to 660		600 or Lower
Credit card loans	58	%	27	%	15	%	57	%	27	%	16	%

As part of our credit risk management activities for our BNPL loans portfolio, we also assess overall credit quality by reviewing information from credit bureaus. We have historically utilized Fair Isaac Corporation (FICO) credit scores to assist in our assessment of the credit quality for our BNPL loans portfolio, but in early 2024 we completed a transition to Vantage scoring. The scoring scale produced by both FICO and Vantage is similar in that scores of 600 or less are considered weaker scores and as per our categorization method would have the highest credit risk. The amortized cost basis of BNPL loans totaled $303 million and $317 million as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024, approximately 83% of these loans were originated with customers with scores of 661 or above, and correspondingly approximately 17% of these loans were originated with customers with scores below 661. Similarly, as of December 31, 2023, approximately 82% and 18% of these loans were originated with customers with scores of 661 or above, and below 661, respectively.

Modified Credit Card Loans

Consumer Relief Programs

As part of our collections strategy, we may offer temporary and short term programs in order to improve the likelihood of collections and meet the needs of our customers. Our modifications, for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced payment requirements, interest rate reductions and late fee waivers. We do not offer programs involving the forgiveness of principal. These temporary loan modifications may assist in cases where we believe the customer will recover from the short-term hardship and resume scheduled payments. Under these consumer relief programs, those accounts receiving relief may not advance to the next delinquency cycle, including charge-off, in the same time frame that would have occurred had the relief not been granted. We evaluate our consumer relief programs to determine if they represent a more than insignificant delay in payment granted to borrowers experiencing financial difficulty, in which case they would then be considered a Loan Modification. Loans in these short term programs that are determined to be Loan Modifications, will be included as such in the disclosure below.

Credit Card Loans - Modifications for Borrowers Experiencing Financial Difficulty (Loan Modifications)

In instances where cardholders are experiencing financial difficulty, we may modify our credit card loans with the intention of minimizing losses and improving collectability, while providing cardholders with financial relief; such credit card loans are classified as Loan Modifications, exclusive of the temporary, short-term consumer relief programs described above. Loan Modifications include concessions consisting primarily of a reduced minimum payment, late fee waiver, and/or an

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interest rate reduction. The majority of concessions remain in place for a period no longer than 12 months; however, for certain modifications the concessions remain in place through the payoff of the credit card loans if the cardholder complies with the terms of the program.

Loan Modification concessions do not include the forgiveness of unpaid principal, but may involve the reversal of certain unpaid interest or fee assessments, and the cardholder’s ability to make future purchases is either limited, or suspended until the cardholder successfully exits from the modification program. In accordance with the terms of our workout programs, the credit agreement reverts back to its original contractual terms (including the contractual interest rate) when the customer exits the program, which is either when all payments have been made in accordance with the program, or when the customer defaults out of the program.

Loan Modifications are collectively evaluated for impairment on a pooled basis in measuring the appropriate Allowance for credit losses. The following table provides information relating to credit card loans to borrowers experiencing financial difficulty that were granted a concession under a Loan Modification program during the periods presented:

	Three Months Ended June 30, 2024						Three Months Ended June 30, 2023
	Account Balances (1)		% of Total Credit Card Loans		Weighted Average Interest Rate Reduction (% points)		Account Balances (1)		% of Total Credit Card Loans		Weighted Average Interest Rate Reduction (% points)
(Millions, except percentages)
Credit card loans	$	86	0.5	%	21.5	%	$	59	0.3	%	20.0	%

	Six Months Ended June 30, 2024						Six Months Ended June 30, 2023
	Account Balances (1)		% of Total Credit Card Loans		Weighted Average Interest Rate Reduction (% points)		Account Balances (1)		% of Total Credit Card Loans		Weighted Average Interest Rate Reduction (% points)
(Millions, except percentages)
Credit card loans	$	174	1.0	%	21.4	%	$	106	0.6	%	20.1	%

__________________________________

(1)Represents the outstanding balances as of June 30, 2024 and 2023, of all Loan Modifications undertaken in the past three and six months, respectively, for credit card loans that remain in modification programs as of June 30, 2024 and 2023. The outstanding balances include principal, accrued interest and fees.

Interest income on these impaired credit card loans is accounted for in the same manner as non-impaired credit card loans, and cash collections are allocated according to the same payment hierarchy methodology applied for credit card loans not in Loan Modification programs.

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The following table reflects the performance of our credit card loans that were modified within the 12 months prior to the dates presented and remain in a Loan Modification program as of the dates presented:

	Aging Analysis of Delinquent Amortized Cost Loan Modifications - Credit Card Loans
	31 to 60 Days Past Due		61 to 90 Days Past Due		91 or more Days Past Due		Total		Total Current		Total
(Millions)
June 30, 2024	$	17	$	15	$	20	$	52	$	239	$	291
December 31, 2023	$	17	$	16	$	22	$	55	$	214	$	269

The following table provides additional information regarding credit card Loan Modifications that have subsequently defaulted within 12 months of their modification dates (or since implementation beginning January 1, 2023), for the periods presented; the probability of default is factored into the Allowance for credit losses:

	Three Months Ended June 30, 2024			Three Months Ended June 30, 2023
	Number of Modifications	Outstanding Balance		Number of Modifications	Outstanding Balance
(Millions, except for Number of modifications)
Loan Modifications that subsequently defaulted	8,448	$	15	2,118	$	4

	Six Months Ended June 30, 2024			Six Months Ended June 30, 2023
	Number of Modifications	Outstanding Balance		Number of Modifications	Outstanding Balance
(Millions, except for Number of modifications)
Loan Modifications that subsequently defaulted	14,505	$	25	2,450	$	4

Unfunded Lending Commitments

We manage potential credit risk in unfunded lending commitments by reviewing each potential customer’s credit application and evaluating the applicant’s financial history and ability and perceived willingness to repay. Credit card loans are made primarily on an unsecured basis, and our Cardholders reside throughout the U.S. and are not significantly concentrated in any one geographic area.

We manage our potential risk in credit commitments by limiting the total amount of credit, both by individual customer and across our credit card loan portfolio, by monitoring the size and maturity of our loan portfolio and applying consistent risk-based underwriting standards reflective of current and anticipated macroeconomic conditions. We have the unilateral ability to cancel or reduce unused credit card lines at any time. Unused credit card lines available to cardholders totaled approximately $105 billion and $113 billion as of June 30, 2024 and December 31, 2023, respectively. While this amount represented the total available unused credit card lines, we have not experienced and do not anticipate that all cardholders will access their entire available line at any given point in time.

Portfolio Sales

As of June 30, 2024 and December 31, 2023, there were no credit card loans held for sale.

We previously announced the non-renewal of our contract with BJ’s Wholesale Club (BJ’s) and the sale of the BJ’s portfolio, which closed in late February 2023, for a total purchase price of $2.5 billion on a loan portfolio of $2.3 billion, resulting in a $230 million Gain on portfolio sale.

In late April 2024 we sold a credit card portfolio for cash consideration of $102 million.

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Portfolio Acquisition

In October 2023, we acquired a credit card portfolio for cash consideration of $388 million.

3. ALLOWANCE FOR CREDIT LOSSES

The Allowance for credit losses represents our estimate of expected credit losses over the estimated life of our Credit card and other loans, incorporating future macroeconomic forecasts in addition to information about past events and current conditions. Our estimate under the Current Expected Credit Loss (CECL) approach is significantly influenced by the composition, characteristics and quality of our portfolio of credit card and other loans, as well as the prevailing economic conditions and forecasts utilized. The estimate of the Allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees. Principal losses, net of recoveries are deducted from the Allowance for credit losses. Losses of unpaid interest and fees as well as any adjustments to the Allowance for credit losses associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans. The Allowance for credit losses is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness on a quarterly basis.

In estimating our Allowance for credit losses, for each identified segment of loans sharing similar risk characteristics, management uses modeling and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors. This modeling uses historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships, to determine expected credit performance. Our quantitative estimate of expected credit losses under CECL is impacted by certain forecasted macroeconomic variables. We consider the macroeconomic forecast used to be reasonable and supportable over the estimated life of the Credit card and other loans portfolio, with no reversion period. In addition to the quantitative estimate of expected credit losses, we also incorporate qualitative adjustments for certain factors such as Company-specific risks, changes in current macroeconomic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the Allowance for credit losses reflects our best estimate of current expected credit losses.

Credit Card Loans

We use a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics. We have evaluated multiple risk characteristics across our credit card loans portfolio, and determined delinquency status and overall credit quality to be the most significant characteristics for estimating expected credit losses. To estimate our Allowance for credit losses, we segment our credit card loans on the basis of delinquency status, credit quality risk score and product. These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances warrant. In determining the estimated life of our credit card loans, payments were applied to the measurement date balance with no payments allocated to future purchase activity. We use a combination of First In First Out and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) methodologies to model balance paydown.

BNPL Loans

We measure our Allowance for credit losses on BNPL loans using a statistical model to estimate projected losses over the remaining terms of the loans, inclusive of an assumption for prepayments. The model is based on the historical statistical relationship between loan loss performance and certain macroeconomic data pooled based on credit quality risk score, term of the underlying loans, vintage and geographic location. As of June 30, 2024 and December 31, 2023, the Allowance for credit losses on BNPL loans was $35 million and $32 million, respectively.

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Allowance for Credit Losses Rollforward

The following table provides our Allowance for credit losses for our Credit card and other loans. The amount of the related Allowance for credit losses on BNPL and other loans is insignificant and therefore has been included in the table below for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions)
Beginning balance	$	2,255	$	2,223	$	2,328	$	2,464
Provision for credit losses (1)	290		336		611		442
Change in the estimate for uncollectible unpaid interest and fees	—		—		—		5
Net principal losses (2)	(381)		(351)		(775)		(703)
Ending balance	$	2,164	$	2,208	$	2,164	$	2,208

__________________________________

(1)Provision for credit losses includes a build/release for the Allowance, as well as replenishment of Net principal losses.

(2)Net principal losses are presented net of recoveries of $101 million and $80 million for the three months ended June 30, 2024 and 2023, respectively, and $201 million and $173 million for the six months ended June 30, 2024 and 2023, respectively. Net principal losses for the six months ended June 30, 2023 include a $10 million adjustment related to the effects of the purchase of previously written-off accounts that were sold to a third-party debt collection agency; no such adjustment was made in the current period.

For the three and six months ended June 30, 2024, the factors that influenced the decrease in the balance of the Allowance for credit losses noted in the table above are lower Credit card and other loans, lower delinquency rates, and improved credit quality. The increase in the reserve rate from 12.0% as of December 31, 2023 to 12.2% as of June 30, 2024, is due to the seasonally higher transactor balances during the fourth quarter, which were subsequently paid down.

4. SECURITIZATIONS

We account for transfers of financial assets as either sales or financings. Transfers of financial assets that are accounted for as a sale are removed from the Consolidated Balance Sheets with any realized gain or loss reflected in the Consolidated Statements of Income during the period in which the sale occurs. Transfers of financial assets that are not accounted for as a sale are treated as a financing.

We regularly securitize the majority of our credit card loans through the transfer of those loans to one of our Trusts. We perform the decision making for the Trusts, as well as servicing the cardholder accounts that generate the credit card loans held by the Trusts. In our capacity as a servicer, we administer the loans, collect payments and charge-off uncollectible balances. Servicing fees are earned by a subsidiary, which are eliminated in consolidation.

The Trusts are consolidated VIEs because they have insufficient equity at risk to finance their activities – the issuance of debt securities and notes, collateralized by the underlying credit card loans. Because we perform the decision making and servicing for the Trusts, we have the power to direct the activities that most significantly impact the Trusts’ economic performance (the collection of the underlying credit card loans). In addition, we hold all of the variable interests in the Trusts, with the exception of the liabilities held by third-parties. These variable interests provide us with the right to receive benefits and the obligation to absorb losses, which could be significant to the Trusts. As a result of these considerations, we are deemed to be the primary beneficiary of the Trusts and therefore consolidate the Trusts.

The Trusts issue debt securities and notes, which are non-recourse to us. The collections on the securitized credit card loans held by the Trusts are available only for payment of those debt securities and notes, or other obligations arising in the securitization transactions. For our securitized credit card loans, during the initial phase of a securitization reinvestment period, we generally retain principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets. During the amortization or accumulation period of a securitization, the investors’ share of

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principal collections (in certain cases, up to a maximum specified amount each month) is either distributed to the investors or held in an account until it accumulates to the total amount due, at which time it is paid to the investors in a lump sum.

Under the Indentures of each Trust and its Indenture Supplements, we are required to maintain minimum interests in our Trusts ranging from a minimum of 4% up to a maximum of 10% of the securitized credit card loans. This requirement is met through a transferor’s interest and is supplemented through excess funding deposits which represent cash amounts deposited with the trustee of the securitizations. Cash collateral, restricted deposits are generally released proportionately as investors are repaid. Under the terms of the Trusts, the occurrence of certain triggering events associated with the performance of the securitized credit card loans in each Trust could result in certain required actions, including payment of Trust expenses, the establishment of reserve funds, or early amortization of the debt securities and/or notes, in a worst-case scenario. During the three and six months ended June 30, 2024 and 2023, no such triggering events occurred.

The following tables reflect the total securitized credit card loans and related delinquencies, and net principal losses of securitized credit card loans for the periods presented:

	June 30, 2024		December 31, 2023
(Millions)
Total credit card loans – available to settle obligations of consolidated VIEs	$	11,779	$	12,844
Of which: principal amount of credit card loans 91 days or more past due	$	279	$	323

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions)
Net principal losses of securitized credit card loans	$	216	$	197	$	437	$	413

5. INVESTMENTS

Investments include investment securities and various other investments primarily held by the Banks for Community Reinvestment Act (CRA) purposes. Investment securities consist of available-for-sale (AFS) debt securities, which are mortgage-backed securities and municipal bonds, and equity securities, which are mutual funds. Investment securities are carried at fair value on the Consolidated Balance Sheets. We also have other investments, which primarily include a portfolio of investments in certain limited partnerships and limited liability companies accounted for under the equity method, and therefore are recorded at cost and adjusted each period for our share of the investee’s earnings or losses, less any impairment. Other investments also include an insignificant tax credit investment where we elected to apply the proportional amortization method of accounting, for which the impacts of both the amortization of the investment and income tax benefits are fully recognized in the Provision for income taxes.

The following table provides a summary of our Investments as of the dates presented:

	June 30, 2024		December 31, 2023
(Millions)
Investment securities:
Available-for-sale debt securities	$	178	$	171
Equity securities	46		46
Total investment securities	224		217
Equity method and other investments	40		36
Total Investments	$	264	$	253

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For AFS debt securities in an unrealized loss position, any estimated credit losses are recognized in the Consolidated Statements of Income by establishing or adjusting an existing Allowance for credit losses for such losses. We typically invest in highly-rated securities with low probabilities of default; therefore, we did not have an Allowance for credit losses as of June 30, 2024 and December 31, 2023, and did not recognize any credit losses for the periods presented. Any unrealized gains, or any portion of an AFS debt security’s non-credit-related unrealized losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. Realized gains and losses are recorded in Other non-interest expenses in the Consolidated Statements of Income upon disposition of the AFS debt security, using the specific identification method. Gains and losses on investments in equity securities and CRA-related equity method investments are recorded in Other non-interest expenses in the Consolidated Statements of Income.

The table below reflects unrealized gains and losses on AFS debt securities as of the dates presented:

	June 30, 2024								December 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
(Millions)
Available-for-sale securities	$	203	$	—	$	(25)	$	178	$	192	$	—	$	(21)	$	171
Total	$	203	$	—	$	(25)	$	178	$	192	$	—	$	(21)	$	171

The following tables provide information about AFS debt securities in a gross unrealized loss position and the length of time that individual securities have been in a continuous unrealized loss position, as of the dates presented:

	June 30, 2024
	Less than 12 months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(Millions)
Available-for-sale securities	$	28	$	(1)	$	147	$	(24)	$	175	$	(25)
Total	$	28	$	(1)	$	147	$	(24)	$	175	$	(25)

	December 31, 2023
	Less than 12 months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(Millions)
Available-for-sale securities	$	23	$	—	$	141	$	(21)	$	164	$	(21)
Total	$	23	$	—	$	141	$	(21)	$	164	$	(21)

As of June 30, 2024, our AFS debt securities included mortgage-backed securities, which do not have a single maturity date, with an amortized cost and estimated fair value of $174 million and $152 million, respectively, and municipal bonds, all of which have a maturity date greater than ten years, with an amortized cost and estimated fair value of $29 million and $26 million, respectively.

There were no realized gains or losses from the sale of any investment securities for the three and six months ended June 30, 2024 and 2023.

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6. DEPOSITS

Deposits were categorized as interest-bearing or non-interest-bearing as follows, as of the dates presented:

	June 30, 2024		December 31, 2023
(Millions)
Interest-bearing	$	12,969	$	13,594
Non-interest-bearing (including cardholder credit balances)	25		26
Total deposits	$	12,994	$	13,620

Deposits by deposit type as of the dates presented:

	June 30, 2024		December 31, 2023
(Millions)
Savings accounts
Direct-to-consumer (retail)	$	3,035	$	2,863
Wholesale	3,647		3,734
Certificates of deposit
Direct-to-consumer (retail)	4,158		3,591
Wholesale	2,129		3,406
Cardholder credit balances	25		26
Total deposits	$	12,994	$	13,620

The scheduled maturities of certificates of deposit were as follows as of June 30, 2024:

(Millions)
2024 (1)	$	2,304
2025	2,661
2026	479
2027	647
2028	178
Thereafter	18
Total certificates of deposit	$	6,287

__________________________________

(1)The 2024 balance includes $4 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit.

As of June 30, 2024 and December 31, 2023, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $517 million (4% of Total deposits) and $509 million (4% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.

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7. OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

The following table provides the components of Other non-interest income for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions)
Payment protection products	$	31	$	33	$	61	$	67
Loss from equity method investment	—		—		—		(6)
Other	—		1		1		2
Total other non-interest income	$	31	$	34	$	62	$	63

The following table provides the components of Other non-interest expenses for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions)
Professional services and regulatory fees	$	31	$	34	$	60	$	72
Occupancy expense	6		5		12		10
Other (1)	12		8		32		23
Total other non-interest expenses	$	49	$	47	$	104	$	105

__________________________________

(1)Primarily related to costs associated with various other individually insignificant operating activities.

8. FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value is defined under GAAP as the price that would be required to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; with such a transaction based on the principal market, or in the absence of a principal market the most advantageous market for the specific instrument. GAAP provides for a three-level fair value hierarchy that classifies the inputs to valuation techniques used to measure fair value, defined as follows:

Level 1: Inputs that are unadjusted quoted prices for identical assets or liabilities in active markets that the entity can access.

Level 2: Inputs, other than those included within Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, or inputs other than quoted prices that are observable for the asset or liability.

Level 3: Inputs that are unobservable (e.g., internally derived assumptions) and reflect an entity’s assumptions about estimates market participants would use in pricing the asset or liability based on the best information available under the circumstances. In particular, Level 3 inputs and valuation techniques involve judgment and as a result are not necessarily indicative of amounts we would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts.

We monitor the market conditions and evaluate the fair value hierarchy levels at least quarterly. For the three and six months ended June 30, 2024 and 2023, there were no transfers into or out of Level 3, and no transfers between Levels 1 and 2.

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The following table summarizes the carrying values and fair values of our financial assets and financial liabilities as of the dates presented:

	June 30, 2024				December 31, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
(Millions)
Financial assets
Credit card and other loans, net	$	15,579	$	18,044	$	17,005	$	19,802
Investment securities	224		224		217		217
Financial liabilities
Deposits	12,994		12,935		13,620		13,583
Debt issued by consolidated VIEs	3,458		3,461		3,898		3,900
Long-term and other debt	1,296		1,467		1,394		1,457

Valuation Techniques Used in the Fair Value Measurement of Financial Assets and Financial Liabilities

Credit card and other loans, net: Our Credit card and other loans are recorded at amortized cost, less the Allowance for credit losses, on the Consolidated Balance Sheets. In estimating the fair values, we use a discounted cash flow model (i.e., Level 3 inputs), primarily because a comparable whole loan sales market for similar loans does not exist, and therefore there is a lack of observable pricing inputs. We use various internally derived inputs, including projected income, discount rates and forecasted write-offs; economic value attributable to future loans generated by the cardholder accounts is not included in the fair values.

Investment securities: Investment securities consist of AFS debt securities, including both mortgage-backed securities and municipal bonds, as well as equity securities, which are mutual funds, and are recorded at fair value on the Consolidated Balance Sheets. Quoted prices of identical or similar investment securities in active markets are used to estimate the fair values (i.e., Level 1 or Level 2 inputs).

Deposits: Money market and other non-maturity deposits carrying values approximate their fair values because they are short-term in duration and have no defined maturity. GAAP requires that the fair values of deposit liabilities with no stated maturities equal their carrying values and does not permit recognition of the inherent funding value of the instruments. Certificates of deposit are recorded at their historical issuance cost on the Consolidated Balance Sheets, adjusted for unamortized fees, with the fair value being estimated based on the currently observable market rates available to us for similar deposits with similar remaining maturities (i.e., Level 2 inputs). Interest payable is included within Other liabilities on the Consolidated Balance Sheets.

Debt issued by consolidated VIEs: We record debt issued by our consolidated VIEs at amortized cost (including unamortized fees, issuance costs, premiums and discounts, where applicable) on the Consolidated Balance Sheets. Interest payable is included within Other liabilities on the Consolidated Balance Sheets. Fair value is estimated based on the currently observable market rates available to us for similar debt instruments with similar remaining maturities or quoted market prices for the same transaction (i.e., Level 2 inputs).

Long-term and other debt: We record long-term and other debt at amortized cost (including unamortized fees, issuance costs, premiums and discounts, where applicable) on the Consolidated Balance Sheets. Interest payable is included within Other liabilities on the Consolidated Balance Sheets. The fair value is estimated based on the currently observable market rates available to us for similar debt instruments with similar remaining maturities, or quoted market prices for the same transaction (i.e., Level 2 inputs).

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Financial Instruments Measured at Fair Value on a Recurring Basis

The following tables summarize our financial instruments measured at fair value on a recurring basis, categorized by the fair value hierarchy described in the preceding paragraphs as of the dates presented:

	June 30, 2024
	Total		Level 1		Level 2		Level 3
(Millions)
Investment securities	$	224	$	46	$	178	$	—
Total assets measured at fair value	$	224	$	46	$	178	$	—

	December 31, 2023
	Total		Level 1		Level 2		Level 3
(Millions)
Investment securities	$	217	$	46	$	171	$	—
Total assets measured at fair value	$	217	$	46	$	171	$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including equity method investments, property and equipment, right-of-use assets, deferred contract costs, goodwill and intangible assets. These assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances, such as upon impairment. We did not have any impairments for the three and six months ended June 30, 2024 or for the three months ended June 30, 2023. During the six months ended June 30, 2023 we wrote-off the remaining $6 million of our equity method investment in Loyalty Ventures Inc. (LVI).

Financial Instruments Disclosed but Not Carried at Fair Value

The fair values of financial instruments that are measured at amortized cost are estimates, and require management’s judgment; therefore, these fair value estimates may not be indicative of future fair values, nor can our fair value be estimated by aggregating all of the amounts presented. The following tables summarize our financial assets and financial liabilities that are measured at amortized cost, and not required to be carried at fair value on a recurring basis, as of the dates presented:

	June 30, 2024
	Fair Value		Level 1		Level 2		Level 3
(Millions)
Financial assets
Credit card and other loans, net	$	18,044	$	—	$	—	$	18,044
Total	$	18,044	$	—	$	—	$	18,044
Financial liabilities
Deposits	$	12,935	$	—	$	12,935	$	—
Debt issued by consolidated VIEs	3,461		—		3,461		—
Long-term and other debt	1,467		—		1,467		—
Total	$	17,863	$	—	$	17,863	$	—

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	December 31, 2023
	Fair Value		Level 1		Level 2		Level 3
(Millions)
Financial assets
Credit card and other loans, net	$	19,802	$	—	$	—	$	19,802
Total	$	19,802	$	—	$	—	$	19,802
Financial liabilities
Deposits	$	13,583	$	—	$	13,583	$	—
Debt issued by consolidated VIEs	3,900		—		3,900		—
Long-term and other debt	1,457		—		1,457		—
Total	$	18,940	$	—	$	18,940	$	—

9. REGULATORY MATTERS AND CAPITAL ADEQUACY

Regulatory Matters

CB is subject to various regulatory capital requirements administered by the State of Delaware and the FDIC. CCB is also subject to various regulatory capital requirements administered by the FDIC, as well as the State of Utah. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by our regulators. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Banks must meet specific capital guidelines that involve quantitative measures of their assets and liabilities as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by these regulators about components, risk weightings and other factors. In addition, both Banks are limited in the amounts they can pay as dividends to the Parent Company.

Quantitative measures, established by regulations to ensure capital adequacy, require the Banks to maintain minimum amounts and ratios of Tier 1 capital to average assets, and Common equity tier 1, Tier 1 capital and Total capital, all to risk weighted assets. Failure to meet these minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions by the Banks’ regulators that if undertaken, could have a direct material effect on CB’s and/or CCB’s operating activities, as well as our operating activities. Based on these regulations, as of June 30, 2024 and 2023, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The Banks seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer. Although Bread Financial is not a bank holding company as defined, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies. As of June 30, 2024 the actual capital ratios and minimum ratios for each Bank, as well as Bread Financial, are as follows:

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	Actual Ratio			Minimum Ratio for Capital Adequacy Purposes		Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions
Total Company
Common equity tier 1 capital ratio (1)	13.8		%	4.5	%	6.5	%
Tier 1 capital ratio (2)	13.8			6.0		8.0
Total risk-based capital ratio (3)	15.1			8.0		10.0
Tier 1 leverage capital ratio (4)	12.0			4.0		5.0
Total risk-weighted assets (5)	$	18,859
Comenity Bank
Common equity tier 1 capital ratio (1)	18.0		%	4.5	%	6.5	%
Tier 1 capital ratio (2)	18.0			6.0		8.0
Total risk-based capital ratio (3)	19.4			8.0		10.0
Tier 1 leverage capital ratio (4)	15.7			4.0		5.0
Comenity Capital Bank
Common equity tier 1 capital ratio (1)	18.1		%	4.5	%	6.5	%
Tier 1 capital ratio (2)	18.1			6.0		8.0
Total risk-based capital ratio (3)	19.5			8.0		10.0
Tier 1 leverage capital ratio (4)	15.7			4.0		5.0

__________________________________

(1)Common equity tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(2)Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets. In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(3)Total risk-based capital ratio represents total capital divided by total risk-weighted assets. In the calculation of total capital, we follow the Basel III Standardized Approach and therefore tier 1 capital has been increased by tier 2 capital, which for us is the allowable portion of the Allowance for credit losses.

(4)Tier 1 leverage capital ratio represents tier 1 capital divided by total average assets, after certain adjustments.

(5)Total risk-weighted assets are generally measured by allocating assets, and specified off-balance sheet exposures, to various risk categories as defined by the Basel III Standardized Approach.

We are also involved, from time to time, in reviews, investigations, subpoenas, supervisory actions and other proceedings (both formal and informal) by governmental agencies regarding our business, which could subject us to significant fines, penalties, obligations to change our business practices, significant restrictions on our existing business or ability to develop new business, cease-and-desist orders, safety-and-soundness directives or other requirements resulting in increased expenses, diminished income and damage to our reputation.

On November 20, 2023, following the consent of the Board of Managers of Comenity Servicing LLC (the Servicer), the FDIC issued a consent order to the Servicer. The Servicer is not one of our Bank subsidiaries, but is our wholly-owned subsidiary that services substantially all of our loans. The consent order arose out of the June 2022 transition of our credit card processing services to strategic outsourcing partners and addresses certain shortcomings in the Servicer’s information technology (IT) systems development, project management, business continuity management, cloud operations, and third-party oversight. The Servicer entered into the consent order for the purpose of resolving these matters without admitting or denying any violations of law or regulation set forth in the order. The consent order does not contain any monetary penalties or fines.

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The Servicer continues to take significant steps to strengthen the organization’s IT governance and address the other issues identified in the consent order, working diligently to ensure that all of the requirements of the consent order are satisfied. Without limiting the generality of the foregoing, the Servicer has taken steps to address each provision within the consent order that required action be taken by a specified deadline, including providing a copy of the consent order to the Parent Company Board of Directors, increasing the size and governance processes of the Servicer’s Board of Managers, establishing an Executive Oversight Committee to oversee and ensure compliance with the consent order, and submitting all required reports and plans of action to the FDIC. The Servicer is committed to complying with each of the ongoing or longer-term requirements of the consent order, including the enhancement of its compliance management processes and related corporate governance, compliance with the applicable system conversion requirements, and enhanced risk management and reporting requirements. In addition, the Board of Directors of each of the Banks oversee the Servicer’s compliance with the requirements of the consent order and provide effective challenge of Servicer management toward that end.

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time we are subject to various lawsuits, claims, disputes, or potential claims or disputes, and other proceedings, arising in the ordinary course of business that we believe, based on our current knowledge, will not have a material adverse effect on our business, consolidated financial condition or liquidity, including claims and lawsuits alleging breaches of our contractual obligations, arbitrations, class actions and other litigation, arising in connection with our business activities. However, in light of the uncertainties involved in such matters, including the fact that some pending legal proceedings are at preliminary stages or seek an indeterminate amount of damages, penalties or fines, it is possible that the outcome of legal proceedings could have a material impact on our results of operations. Certain legal proceedings involving us or our subsidiaries are described further below.

On February 20, 2024, we and our general counsel were named as defendants in an adversary proceeding filed by the liquidating trustee in LVI’s Chapter 11 bankruptcy case in the United States Bankruptcy Court for the Southern District of Texas, captioned Pirinate Consulting Group, LLC v. Bread Financial Holdings, Inc., Case No. 24-03027 (Bankr. S.D. Tex.), alleging actual and constructive fraudulent transfers, among other claims, in connection with our spinoff of LVI. Also on February 20, 2024, the liquidating trustee filed an action in the United States District Court for the District of Delaware against us, each of the members of our Board of Directors at the time of the spinoff, and certain members of our management team, captioned Pirinate Consulting Group, LLC v. Bread Financial Holdings, Inc., Case No. 24-cv-00226-RGA (D. Del.), alleging certain breaches of fiduciary duties (and aiding and abetting breaches of fiduciary duties) in connection with the spinoff. Subsequently, the liquidating trustee voluntarily dismissed without prejudice the complaint in the District of Delaware and commenced on March 20, 2024 a substantially similar action in Delaware Chancery Court, captioned Pirinate Consulting Group, LLC v. Bread Financial Holdings, Inc., Case No. 2024-0277-MTZ (Del. Ch.), against the same parties and asserting the same claims. Among other things, in each of the Texas and Delaware actions, the liquidating trustee seeks damages in the amount of approximately $750 million plus interest, fees and expenses.

We and certain current and former members of our management team have also been named as defendants in other litigation matters relating to the LVI spinoff. LoyaltyOne, Co. (the LVI subsidiary that operated its Canadian AIR MILES business) filed suit against us and our general counsel in the Ontario Superior Court of Justice in Canada on October 18, 2023, in an action captioned LoyaltyOne, Co. v. Bread Financial Holdings, Inc. et al. The lawsuit asserts that our general counsel, in his capacity as a pre-spinoff director of LoyaltyOne, Co., breached various fiduciary duties owed to LoyaltyOne, Co. in connection with the LVI spinoff and certain other transactions, and that Bread Financial assisted in and benefited from those breaches. The lawsuit seeks damages in the amount of $775 million. LoyaltyOne, Co. is also contesting our entitlement to certain potential tax refunds under the tax matters agreement, in proceedings pursuant to the Canadian Companies’ Creditors Arrangement Act in the Commercial List of the Ontario Superior Court of Justice, captioned In re Matter of a Plan of Compromise or Arrangement of LoyaltyOne, Co., Case No. CV-23-00696017-00CL. Finally, on April 27, 2023, we and certain current and former members of our management team were named as defendants in a putative federal securities class action filed in the United States District Court for the Southern District of Ohio, captioned Newtyn Partners, LP v. Alliance Data Systems n/k/a Bread Financial Holdings, Inc., Case No. 23-cv-1451-EAS (S.D. Ohio), concerning disclosures made about LVI’s business prior to the spinoff. The lead plaintiff in this matter filed an

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amended complaint on March 21, 2024 and is seeking, among other things, a class action designation and an award of damages in an amount to be proven at trial, plus fees and expenses.

In all these actions related to the spinoff, we believe the allegations contained in the complaints are without merit and intend to defend the cases. We cannot predict at this point the length of time that these actions will be ongoing or the liability, if any, which may arise therefrom.

Some matters pending against us specify the damages sought, others seek an unspecified amount of damages or are at very early stages of the legal process. In matters where the amount of damages claimed against us are stated, the claimed amount may be exaggerated and/or unsupported. While some matters have not yet progressed sufficiently through discovery or have had development of important factual information and legal issues to enable us to estimate an amount of loss or a range of possible loss, other matters may have progressed sufficiently to enable an estimate of an amount of loss, or a range of possible loss. We accrue for a loss contingency when it is both probable that a loss has occurred, and the amount of loss can be reasonably estimated; however, there may be instances in which an exposure to a loss contingency exceeds our accrual. On a quarterly basis we evaluate developments in the legal proceedings against us that could cause an increase or decrease in the amount of the accrual that has been previously recorded.

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BREAD FINANCIAL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in each component of Accumulated other comprehensive loss, net of tax effects, are as follows for the periods presented:

Three Months Ended June 30, 2024	Net Unrealized Losses on AFS Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of March 31, 2024	$	(19)	$	(3)	$	(22)
Changes in other comprehensive income	—		—		—
Balance as of June 30, 2024	$	(19)	$	(3)	$	(22)

Three Months Ended June 30, 2023	Net Unrealized Losses on AFS Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of March 31, 2023	$	(16)	$	(3)	$	(19)
Changes in other comprehensive loss	(1)		—		(1)
Balance as of June 30, 2023	$	(17)	$	(3)	$	(20)

Six Months Ended June 30, 2024	Net Unrealized Losses on AFS Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of December 31, 2023	$	(16)	$	(3)	$	(19)
Changes in other comprehensive loss	(3)		—		(3)
Balance as of June 30, 2024	$	(19)	$	(3)	$	(22)

Six Months Ended June 30, 2023	Net Unrealized Gains (Losses) on AFS Securities		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of December 31, 2022	$	(18)	$	(3)	$	(21)
Changes in other comprehensive income	1		—		1
Balance as of June 30, 2023	$	(17)	$	(3)	$	(20)

12. STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

On February 21, 2024, our Board of Directors approved a stock repurchase program to acquire up to $30 million in shares of our outstanding common stock in the open market during the period ending on December 31, 2024. The rationale for this repurchase program, and the amount thereof, was to offset the impact of dilution associated with issuances of employee restricted stock units, with the objective of reducing the Company’s weighted average diluted share count to approximately 50 million shares for 2024, subject to then current estimates and assumptions applicable as of the date of approval.

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BREAD FINANCIAL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the six months ended June 30, 2024, under the authorized stock repurchase program, we acquired a total of 0.3 million shares of our common stock for $11 million. Following their repurchase, these 0.3 million shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock.

As of June 30, 2024, we had $19 million remaining for future repurchases under the authorized stock repurchase program.

Stock Compensation Expense

During the six months ended June 30, 2024, we awarded 1,291,296 service-based restricted stock units (RSUs) with a weighted average grant date fair market value per share of $37.63 as determined on the date of grant. Service-based restricted stock units typically vest ratably over three years provided that the participant is employed by us on each such vesting date.

During the six months ended June 30, 2024, we awarded 221,358 performance-based restricted stock units with a fair market value of $37.57 to our Named Executive Officers. Performance-based RSUs cliff vest at the end of three years, if specific performance measures tied to our financial performance are met, which are measured annually over the three-year period. For the performance-based RSUs awarded in 2024, the predefined vesting criteria typically permit a range from 0% to 150% to be earned. Accruals of compensation cost for an award with a performance condition are based on the probable outcome of that performance condition. If the performance targets are met, the awards will vest with respect to the entire award on February 15, 2027, provided that the participant is employed by us on the vesting date.

For the three months ended June 30, 2024 and 2023, we recognized $14 million and $12 million in stock-based compensation expense, respectively. For the six months ended June 30, 2024 and 2023, we recognized $28 million and $22 million in stock-based compensation expense, respectively.

Dividends

During the three and six months ended June 30, 2024, we paid $11 million and $22 million in dividends to holders of our common stock. On July 25, 2024, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on September 13, 2024, to stockholders of record at the close of business on August 9, 2024.

13. INCOME TAXES

The Provision for income taxes increased for the three months ended June 30, 2024 primarily driven by an increase in Income from continuing operations before income taxes. The effective tax rate was 26.0% for both the three month periods ended June 30, 2024 and 2023. The Provision for income taxes decreased for the six months ended June 30, 2024 primarily driven by the decrease in Income from continuing operations before income taxes in the current year relative to the prior year period, which itself was higher due to the gain on the sale of the BJ's portfolio. The effective tax rate was 27.1% and 28.3% for the six month periods ended June 30, 2024 and 2023, respectively; the decrease in the effective tax rate was driven primarily by a discrete benefit in the current year period.

We are under examination by the Internal Revenue Service as well as tax authorities in various states. The tax years under examination and open for examination vary by jurisdiction. U.S. Federal income tax returns are no longer subject to examination for years before 2015, and with a few exceptions, state and local income tax returns are no longer subject to examination for years before 2015. Foreign income tax returns are no longer subject to examination for years before 2018.

14. EARNINGS PER SHARE

Basic earnings (losses) per share (EPS) is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of unvested restricted stock awards, or other dilutive securities. Diluted EPS is based on (i) the weighted average number of common and potentially dilutive common shares (unvested restricted stock awards outstanding during the year), pursuant to the Treasury Stock method, and (ii) the potential conversion of our 4.25% Convertible Senior Notes due 2028 (the Convertible Notes), pursuant to the If-converted method.

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BREAD FINANCIAL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
(Millions, except per share amounts)
Numerator
Income from continuing operations	$	133	$	64	$	269	$	519
Income (loss) from discontinued operations, net of income taxes (1)	—		(16)		(1)		(16)
Net income	$	133	$	48	$	268	$	503
Denominator
Weighted average common stock outstanding – basic	49.6		50.1		49.6		50.1
Weighted average effect of dilutive securities
Add: net effect of dilutive unvested restricted stock awards (2)	0.4		0.2		0.2		0.1
Add: dilutive effect of Convertible Notes (3)(4)	0.2		—		0.1		—
Weighted average common stock outstanding – diluted	50.2		50.3		49.9		50.2
Basic EPS
Income from continuing operations	$	2.69	$	1.28	$	5.42	$	10.37
Income (loss) from discontinued operations	$	—	$	(0.33)	$	(0.02)	$	(0.33)
Net income per share	$	2.69	$	0.95	$	5.40	$	10.04
Diluted EPS
Income from continuing operations	$	2.65	$	1.27	$	5.38	$	10.34
Income (loss) from discontinued operations	$	0.01	$	(0.32)	$	(0.02)	$	(0.32)
Net income per share	$	2.66	$	0.95	$	5.36	$	10.02

__________________________________

(1)Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019. For additional information refer to Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the unaudited Consolidated Financial Statements.

(2)As the effect would have been anti-dilutive, for the three months ended June 30, 2024 and 2023, approximately 0.2 million and 1.5 million, respectively, and for the six months ended June 30, 2024, and 2023 approximately 1.1 million and 1.6 million , respectively, restricted stock awards were excluded from each calculation of weighted average dilutive common shares.

(3)Holders of the Convertible Notes may convert their notes under certain conditions until March 15, 2028, and on or after such date without condition. Upon any such conversion, we will repay the aggregate principal amount of the Convertible Notes in cash, and pay or deliver, as the case may be, cash, shares of our common stock or a combination of both (at our election), in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes. At our option, we may redeem for cash, all or a portion of the Convertible Notes on or after June 21, 2026, and before the 51st scheduled trading day before the maturity date, but only if the closing price of our common stock reaches specified targets as defined in the indenture governing the Convertible Notes. We may also, from time to time, retire or purchase all or a portion of the outstanding Convertible Notes through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.

The conversion feature of the Convertible Notes has a dilutive impact on EPS when the average market price of our common stock for the period exceeds the conversion price of $38.43 per share. For the three months ended June 30, 2024 the average market price exceeded the conversion price and the dilutive effect is therefore included in the table above. With the three months ended June 30, 2024 being the first period in which the average market price of our common stock exceeded the conversion price, a weighted average of the quarterly results from the Dilutive effect of Convertible Notes is computed, and has been reflected in the table above for the six months ended June 30, 2024.

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BREAD FINANCIAL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4)In connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call transactions (the Capped Calls) with certain financial institution counterparties. These transactions are expected generally to reduce potential dilution to our common stock upon any conversion of Convertible Notes and/or offset certain cash payments we may be required to make in excess of the principal amount of the Convertible Notes upon conversion, redemption or repurchase thereof, with such reduction and/or offset subject to a cap of $61.48 per share. Diluted weighted average common stock does not include the impact of the Capped Calls we entered into concurrently with the issuance of the Convertible Notes, as the effect would have been anti-dilutive. If shares were delivered to us under the Capped Calls, those shares would offset, up to the cap, the dilutive effect of the shares that we would issue upon conversion of the Convertible Notes.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

Market risk is the risk to earnings or asset and liability values resulting from movements in market prices. Our principal market risk exposure arises from volatility in interest rates and changes in the relationship between the interest rates on our assets (such as Credit card and other loans and investments) and the interest rates on our liabilities (such as deposits and debt), which may include repricing risk, basis risk, yield curve risk and options risk, and their consequential impact on economic value, capitalization levels, cost of capital and earnings.

There has been no material change from our 2023 Form 10-K related to our exposure to interest rate risk or other market risks.

Item 4. Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

Refer to (i) Part II, Item 1A, “Risk Factors—The LoyaltyOne spinoff could result in substantial tax liability to us and our stockholders, and more generally, we have been adversely affected by LVI’s performance, and we may continue to be adversely affected by LVI’s ongoing bankruptcy proceedings or litigation or other disputes involving or relating to LVI.” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, (ii) Note 10, “Commitments and Contingencies” to our unaudited Consolidated Financial Statements, and (iii) “Risk Factors—Legal, Regulatory and Compliance Risks” of our 2023 Form 10-K, each of which is incorporated herein by reference.

Item 1A. Risk Factors.

There have been no material changes to the Risk Factors previously disclosed in our 2023 Form 10-K, as supplemented by our Quarterly Report on Form 10-Q for the quarter-ended March 31, 2024. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. For a discussion of the recent trends and uncertainties impacting our business, see also “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) — Business Environment”.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents information with respect to purchases of our common stock made by or on behalf of us during the three months ended June 30, 2024:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
					(Millions)
April 1-30	2,485	$	35.72	—	$	19
May 1-31	2,217	41.34		—	19
June 1-30	2,166	40.76		—	19
Total	6,868	$	39.12	—	$	19

__________________________________

(1)During the periods presented, (i) 6,868 shares of our common stock were purchased by the administrator of our Bread Financial 401(k) Plan for the benefit of the employees who participated in that portion of the 401(k) Plan and (ii) no shares of our common stock were repurchased by the Company, pursuant to a Rule 10b5-1 trading plan previously adopted by the Company, during an open trading window.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

(a)None

(b)None

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(c)During the three months ended June 30, 2024, no Section 16 officer or director of the Parent Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits.

a)Exhibits:

EXHIBIT INDEX

			Incorporated by Reference
Exhibit No.	Filer	Description	Form	Exhibit	Filing Date
3.1	(a)	Third Amended and Restated Certificate of Incorporation of the Registrant.	8-K	3.2	6/10/16
3.2	(a)	Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant.	8-K	3.1	3/24/22
3.3	(a)	Certificate of Designations of Series A Preferred Non-Voting Convertible Preferred Stock of the Registrant.	8-K	3.1	4/29/19
3.4	(a)	Sixth Amended and Restated Bylaws of the Registrant.	8-K	3.2	3/24/22
4	(a)	Specimen Certificate for shares of Common Stock of the Registrant.	10-Q	4	8/8/03
10.1	(b) (c) (d)	Fifth Amended and Restated Service Agreement, dated as of April 1, 2024, by and between Comenity Bank and Comenity Servicing LLC.	8-K	99.1	4/4/24
10.2	(b) (c) (d)	Supplemental Indenture No. 8 to Master Indenture, dated as of April 26, 2024, between World Financial Network Credit Card Master Note Trust and U.S. Bank National Association.	8-K	4.1	4/30/24
10.3	(b) (c) (d)	Second Amendment to Series 2023-A Indenture Supplement, dated as of April 26, 2024, between World Financial Network Credit Card Master Note Trust and U.S. Bank National Association.	8-K	4.2	4/30/24
10.4	(b) (c) (d)	Thirteenth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of April 26, 2024, among WFN Credit Company, LLC, as transferor, Comenity Bank, as servicer, and U.S. Bank National Association, as trustee.	8-K	4.3	4/30/24
10.5	(b) (c) (d)	Fifth Amendment to Receivables Purchase Agreement, dated as of April 26, 2024, between Comenity Bank and WFN Credit Company, LLC.	8-K	4.4	4/30/24
10.6	(b) (c) (d)	Eleventh Amendment to Transfer and Servicing Agreement, dated as of April 26, 2024, among Comenity Bank, WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust.	8-K	4.5	4/30/24
10.7	(b) (c) (d)	First Addendum to Appendix A of Fifth Amended and Restated Service Agreement, dated as of April 30, 2024, between Comenity Servicing LLC and Comenity Bank.	8-K	99.1	5/2/24

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			Incorporated by Reference
Exhibit No.	Filer	Description	Form	Exhibit	Filing Date
10.8	(b) (c) (d)	Series 2024-A Indenture Supplement, dated as of May 15, 2024, between World Financial Network Credit Card Master Note Trust and U.S. Bank National Association.	8-K	4.1	5/21/24
10.9	(b) (c) (d)	Second Addendum to Appendix A of Fifth Amended and Restated Service Agreement, dated as of May 31, 2024, between Comenity Servicing LLC and Comenity Bank.	8-K	99.1	6/4/24
10.10	(b) (c) (d)	Third Addendum to Appendix A of Fifth Amended and Restated Service Agreement, dated as of June 30, 2024, between Comenity Servicing LLC and Comenity Bank.	8-K	99.1	7/2/24
*+10.11	(a)	Form of Time-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc. 2024 Omnibus Incentive Plan.
*^+10.12	(a)	Form of Performance-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc. 2024 Omnibus Incentive Plan.
*+10.13	(a)	Form of Non-employee Director Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc. 2024 Omnibus Incentive Plan.
*31.1	(a)	Certification of Chief Executive Officer of Bread Financial Holdings, Inc. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
*31.2	(a)	Certification of Chief Financial Officer of Bread Financial Holdings, Inc. pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
**32.1	(a)	Certification of Chief Executive Officer of Bread Financial Holdings, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
**32.2	(a)	Certification of Chief Financial Officer of Bread Financial Holdings, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
*101	(a)	The following financial information from Bread Financial Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
*104	(a)	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

__________________________________

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*Filed herewith

**Furnished herewith

+    Management contract, compensatory plan or arrangement

^    Certain exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Bread Financial Holdings, Inc. hereby undertakes to furnish supplementally copies of any of the omitted exhibits upon request by the U.S. Securities and Exchange Commission.

(a)Bread Financial Holdings, Inc.

(b)WFN Credit Company, LLC

(c)World Financial Network Credit Card Master Trust

(d)World Financial Network Credit Card Master Note Trust

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Bread Financial Holdings, Inc. has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

	BREAD FINANCIAL HOLDINGS, INC.
DATE: August 1, 2024
	By:	/s/ RALPH J. ANDRETTA
		Ralph J. Andretta
		President and Chief Executive Officer
DATE: August 1, 2024
	By:	/s/ PERRY S. BEBERMAN
		Perry S. Beberman
		Executive Vice President and Chief Financial Officer

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