Bread Financial Holdings Inc.

10/27/2026 | Press release | Distributed by Public on 10/27/2026 04:01

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 our unaudited Consolidated Financial Statements and related Notes included elsewhere in this quarterly report, and our audited Consolidated Financial Statements and related Notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the SEC) on February 13, 2026 (the 2025 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 2025 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 to millions of U.S. consumers. Our payment solutions deliver growth for some of the most recognized brands in travel and entertainment, specialty apparel, health and beauty, jewelry, sporting goods, technology and electronics, as well as home and furniture through our co-brand and private label credit cards and pay-over-time products providing choice and value to our shared customers. Additionally, we offer Bread Financial general purpose credit cards and saving products that empower our customers and their passions for a better life.
We have continued to diversify our product mix with our brand partners through growth of our co-brand credit card programs, which, relative to our private label credit card programs, have higher Credit sales per account and an improved credit risk mix that generally results in higher transactor balances, lower delinquencies and late fees, as well as lower losses. We also offer our proprietary credit cards along with an expanding range of our Bread Pay products, which are our installment loans and "split-pay" offerings.
Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Raymour & Flanigan, Saks Fifth Avenue, 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 and retail verticals, including travel and entertainment, specialty apparel, health and beauty, jewelry, sporting goods, technology and electronics, as well as home and furniture. 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, coupled with our customer-centric approach, 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 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:
•We have previously repurchased and may, from time to time, in the future continue to repurchase debt, including any outstanding senior unsecured notes, subordinated notes or convertible notes. In such transactions, we may pay a premium to induce these repurchases, or in certain cases repurchase at a discount, which, from a GAAP perspective, would result in an impact to Total non-interest expenses, with a corresponding impact also reflected in Net income available to common stockholders and consequently our Earnings per diluted common share. For our prior debt repurchases, we show adjustments to these three financial statement line items to exclude the impacts from our debt repurchases. We use Adjusted total non-interest expenses, Adjusted net income available to common stockholders, and Adjusted earnings per diluted common share to evaluate the ongoing operations of the Company excluding the volatility that can occur from the impacts of our debt repurchases.
•Pretax pre-provision earnings (PPNR) represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR excluding impacts from debt repurchases then excludes from PPNR the loss or gain on any debt repurchases in the period. We use PPNR and PPNR excluding impacts from debt repurchases as metrics to evaluate our results of operations before income taxes, excluding the movements that can occur within Provision for credit losses and the one-time nature of the impacts from debt repurchases.
•Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations less Dividends to preferred stockholders, divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Preferred stock and Goodwill and intangible assets, net. We use ROTCE as a metric to evaluate the Company's performance.
•Tangible book value per common share represents TCE divided by common shares outstanding. We use Tangible book value per common share, a metric used across the industry, to assess capital and performance, in conjunction with ROTCE.
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.
BUSINESS ENVIRONMENT
This Business Environment section provides an overview of our results of operations and financial position for the third quarter of 2026, as well as our related outlook for the remainder of 2026 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 2025 Form 10-K and other Quarterly Reports on Form 10-Q, 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 September 30, 2026, compared with the same period in the prior year.
Credit sales of $7.4 billion were up 9% year-over-year driven by growth in both our new and existing brand partners and increased general-purpose spending. Average and end-of-period credit card and other loans increased 6% to $18.6 billion and 7% to $18.9 billion, respectively, driven by the growth in our new partnerships, increased Credit sales and lower gross credit losses. Total interest income was up 4% from the third quarter of 2025 due primarily to higher Average credit card and other loans balances, the ongoing effects of pricing actions (such as increases to our annual percentage rates) and lower reversals of finance charges and late fees, resulting from lower gross credit losses. These attributes were partially offset by both a lower average Prime interest rate, which affects variable rate Credit card and other loans, and lower billed late fees. Our improved delinquency trends across our loan portfolio, as well as the gradual shift in product mix to a declining proportion of private label accounts, which tend to have higher billed late fees, have resulted in lower overall billed late fees. Net interest margin increased year-over-year to 18.89%, from 18.81%, as loan yields continued to benefit from the effects of pricing actions, and funding costs continued to improve. We anticipate the year-over-year benefits associated with our pricing actions will continue to diminish as a majority of our credit card loan portfolio will have repriced. Net interest margin is also expected to be affected by the ongoing gradual improvement in our payment and delinquency rate trends, and the continued shift in our product and risk mix. Non-interest income decreased $17 million from the third quarter of 2025, driven by increased costs associated with brand partner retailer share arrangements as a result of higher Credit sales, improving loan yields and lower gross credit losses, partially offset by both an increase in interchange and
merchant discount fees, due to the scaling of new brand partners, and an increase in revenue from our payment protection products as a result of new enrollment channels. Overall, Total net interest and non-interest income for the quarter was $1.0 billion, up 5% versus the third quarter of 2025.
Provision for credit losses increased during the three months ended September 30, 2026 driven by a $21 million reserve build and net principal losses of $300 million, compared with a $28 million reserve release and net principal losses of $327 million in the prior year period.
Our Allowance for credit losses slightly decreased as of September 30, 2026, relative to December 31, 2025, due to improving credit quality in our Credit card and other loans balance. Our reserve rate was 11.12% and 11.72% as of September 30, 2026 and 2025 reflecting our improving credit metrics and higher-quality new account acquisitions. We continue to maintain appropriately prudent weightings on the economic scenarios in our credit reserve modeling to ensure the adequacy of our Allowance for credit losses given the wide range of potential macroeconomic outcomes, including ongoing uncertainty regarding trade policy and global conflicts, and downstream impacts on inflation and unemployment. From an overall credit quality perspective, our percentage of customers with Vantage scores greater than 650 remains above pre-pandemic levels due to prudent credit management and a more diversified product mix, in particular with co-brand cards representing a larger proportion of our portfolio.
Total non-interest expenses of $487 million increased $11 million year-over year, driven by a $13 million increase in Information processing and communication due to new software investments and increased technology-related service contract costs and a $6 million increase in Employee compensation and benefits from increased wages, partially offset by decreased Depreciation and amortization from lower amortization related to capitalized and acquired software.
Provision for income taxes increased $45 million year-over-year, driven by a discrete tax benefit in the prior year period.
Our efforts to further strengthen and optimize our Consolidated Balance Sheet continued in the third quarter of 2026. Consumer deposits increased 21% to $9.9 billion as of September 30, 2026, with average consumer deposits representing 53% of our total funding, up from 47% a year ago. The successful completion of our bank merger on October 1 better positions us to further increase consumer deposits as a core funding source over time and provides additional balance sheet and funding flexibility with a larger, simplified bank structure. During the quarter we were able to return value to stockholders through share repurchases, buying back 0.7 million shares, or $75 million of common stock, resulting in $374 million of remaining share repurchase authorization as of September 30, 2026. We also repurchased $24 million of our 8.375% Fixed-Rate Reset Subordinated Notes Due 2035 utilizing cash on hand, and have $326 million in remaining principal outstanding as of September 30, 2026. Our Common equity tier one capital ratio (CET1) of 13.1% decreased from 14.0% in the third quarter of 2025, as net earnings over the period were more than offset by the impact from our common stock repurchases, dividend payments, risk weighted assets growth, as well as debt repurchases.
Our revised 2026 financial outlook is based on strong year-to-date results, reflecting continued consumer resilience, inflation remaining above the Federal Reserve Board's (FRB) target rate of 2%, and a generally stable labor market.
Based on our current economic outlook and visibility into our new business pipeline and partner growth, as well as both the expected continued improvement in our Net principal loss rate and our ongoing expectations for strong cardholder payment rates, we now expect growth in 2026 Average credit card and other loans to be up approximately 4% from full year 2025. Growth in Total net interest and non-interest income is now anticipated to be up approximately 5% from full year 2025, primarily driven by the growth in Average credit card and other loans. We anticipate our full year Net interest margin to be slightly higher than 2025 as a result of improved funding costs. We continually focus on expanding and diversifying our product offerings, including ways to leverage our loan origination and servicing-related capabilities.
We manage our expense growth based on revenue generation and ongoing investment in our business. Accordingly, we expect to deliver positive operating leverage in 2026, excluding the pretax impacts from our debt repurchases, a Non-GAAP financial measure. We continue to invest in AI capabilities, technology modernization, marketing and product innovation to drive growth and efficiencies.
Given the continued improvement in our credit metrics, our 2026 financial outlook now assumes a full year Net principal loss rate to be below 7%. This updated guidance contemplates our visibility into the current delinquency pipeline and a
resilient consumer, combined with stable macroeconomic conditions, our disciplined credit management and continued risk and product mix shifts.
In our 2026 financial outlook, we expect our full year normalized effective tax rate to be in the range of 25% to 27% with quarter-over-quarter variability due to the timing of certain discrete items.
Overall, our third quarter results reinforce the quality and durability of our earnings model and the underlying financial discipline. We remain confident in our ability to execute on our strategy and deliver attractive returns while creating long-term value for our stockholders.
Note: We are unable to provide a quantitative reconciliation of the forward-looking 2026 financial outlook for the Non-GAAP financial measure above, to its most directly comparable forward-looking GAAP measure, as we cannot reliably predict all of the necessary components of such a forward-looking GAAP measure without unreasonable effort.
CONSOLIDATED RESULTS OF OPERATIONS
The following discussion provides commentary on the variances in our results of operations for the three and nine months ended September 30, 2026, 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 September 30, Nine Months Ended September 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Millions, except per share amounts and percentages)
Total net interest and non-interest income $ 1,017 $ 971 46 5 $ 3,027 $ 2,870 157 5
Provision for credit losses 321 299 22 7 937 869 68 8
Total non-interest expenses 487 476 11 2 1,442 1,433 9 1
Income from continuing operations before income taxes 209 196 13 6 648 568 80 14
Provision for income taxes 53 8 45 539 165 100 65 66
Income from continuing operations 156 188 (32) (17) 483 468 15 3
Loss from discontinued operations, net of income taxes (1)
- - - - - (4) 4 (100)
Net income 156 188 (32) (17) 483 464 19 4
Dividends declared to preferred stockholders (6) - (6) nm (10) - (10) nm
Net income available to common stockholders $ 150 $ 188 (38) (20) $ 473 $ 464 9 2
Adjusted net income available to common stockholders *(2)
$ 151 $ 191 (40) (21) $ 475 $ 479 (4) (1)
Earnings per diluted common share $ 3.82 $ 3.96 (0.14) (4) $ 11.54 $ 9.65 1.89 20
Adjusted earnings per diluted common share *(2)
$ 3.84 $ 4.02 (0.18) (4) $ 11.60 $ 9.96 1.64 16
Net interest margin (3)
18.89 % 18.81 % 0.08 18.87 % 18.19 % 0.7
Return on average equity (4)
17.7 % 22.4 % (4.7) 18.6 % 19.2 % (0.6)
Return on average tangible common equity *(5)
23.6 % 28.6 % (5.0) 24.3 % 24.8 % (0.5)
Effective income tax rate - continuing operations 25.5 % 4.3 % 21.2 25.5 % 17.5 % 8.0
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*Represents a Non-GAAP financial measure. See "Non-GAAP Financial Measures" and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
(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 Significant Accounting Policies" to the unaudited Consolidated Financial Statements.
(2)Adjusts Net income available to common stockholders and Earnings per diluted common share for the impacts from our debt repurchases.
(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 equity represents annualized Income from continuing operations divided by average Total stockholders' equity.
(5)Return on average tangible common equity (ROTCE) represents annualized Income from continuing operations, less Dividends to preferred stockholders, divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Preferred stock and Goodwill and intangible assets, net.
(nm) Not meaningful, denoting a variance of 1,000 percent or more.
Table 2: Summary of Total Net Interest and Non-interest Income, After Provision for Credit Losses
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Millions, except percentages)
Interest income
Interest and fees on loans $ 1,254 $ 1,198 56 5 $ 3,673 $ 3,531 142 4
Interest on cash and investment securities 40 44 (4) (10) 114 135 (21) (15)
Total interest income 1,294 1,242 52 4 3,787 3,666 121 3
Interest expense
Interest on deposits 148 139 9 6 420 417 3 1
Interest on borrowings 51 71 (20) (29) 166 238 (72) (30)
Total interest expense 199 210 (11) (6) 586 655 (69) (10)
Net interest income 1,095 1,032 63 6 3,201 3,011 190 6
Non-interest income
Interchange revenue, net of retailer share arrangements (144) (111) (33) 30 (361) (289) (72) 25
Other 66 50 16 33 187 148 39 27
Total non-interest income (78) (61) (17) 27 (174) (141) (33) 23
Total net interest and non-interest income 1,017 971 46 5 3,027 2,870 157 5
Provision for credit losses 321 299 22 7 937 869 68 8
Total net interest and non-interest income, after provision for credit losses $ 696 $ 672 24 4 $ 2,090 $ 2,001 89 4
Total Net Interest and Non-interest Income, After Provision for Credit Losses
Interest income: Total interest income increased for the three and nine months ended September 30, 2026, due to the following:
•Interest and fees on loans increased due to higher Average credit card and other loans balances, the ongoing effects of pricing actions and lower reversals of finance charges and late fees, resulting from lower gross credit losses. These attributes were partially offset by both lower average Prime interest rates which affects variable rate Credit card and other loans, and lower billed late fees. Collectively, these drivers had the effect of increasing the yield from finance charges and late fees for the nine months ended September 30, 2026 by approximately 25 basis points. For the three months ended September 30, 2026, the yield from finance charges and late fees decreased by approximately 25 basis points due to lower billed late fees in the current year period and higher Average Credit card and other loans. Our lower delinquency volumes and the gradual shift in product mix to a lower proportion of private label accounts, which tend to have higher billed late fees, have resulted in lower overall billed late fees.
•Interest on cash and investment securities decreased due to lower average interest rates, which decreased interest income by $7 million and $21 million, over the respective periods of comparison, partially offset in the three month period by higher average balances, which increased interest income by $3 million.
Interest expense: Total interest expense decreased for the three and nine months ended September 30, 2026, due to the following:
•Interest on deposits increased due to higher average consumer deposit balances, which increased funding costs by $18 million and $39 million, over the respective periods of comparison, partially offset by lower average interest rates, which decreased interest expense by $9 million and $36 million, over those same respective periods.
•Interest on borrowings decreased due to lower average borrowings, which decreased funding costs by $13 million and $51 million, over the respective periods of comparison, and lower average interest rates, which decreased funding costs by $7 million and $21 million, over those same respective periods.
Non-interest income: Total non-interest income decreased for the three and nine months ended September 30, 2026, due to the following:
•Interchange revenue, net of retailer share arrangements, typically a contra-revenue item for us, increased due to an increase in costs associated with brand partner retailer share arrangements, partially offset by an increase in interchange and merchant discount fees due to the scaling of new brand partners over the periods of comparison.
•Other increased due primarily to an increase in revenue from our payment protection products as a result of new enrollment channels.
Provision for credit losses increased for the three and nine months ended September 30, 2026. For the three month period, the increase was driven by a $21 million reserve build and net principal losses of $300 million, compared with a $28 million reserve release and net principal losses of $327 million in the prior year period. For the nine month period, the increase was driven by a $10 million reserve release and net principal losses of $947 million, compared with a $171 million reserve release and net principal losses of $1,040 million in the prior year period. Our reserve rate was 11.12% and 11.72% as of September 30, 2026 and 2025, respectively, reflecting our improving credit metrics and higher-quality new account acquisitions. We continue to maintain appropriately prudent weightings on the economic scenarios in our credit reserve modeling to ensure the adequacy of our Allowance for credit losses given the wide range of potential macroeconomic outcomes, including ongoing uncertainty regarding trade policy and global conflicts, and downstream impacts on inflation and unemployment.
Table 3: Summary of Total Non-interest Expenses
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 $ Change % Change 2026 2025 $ Change % Change
(Millions, except percentages)
Non-interest expenses
Employee compensation and benefits $ 228 $ 222 6 3 $ 673 $ 648 25 4
Card and processing expenses 79 81 (2) (3) 240 244 (4) (2)
Information processing and communication 85 72 13 19 242 230 12 5
Marketing expenses 35 38 (3) (6) 106 106 - 1
Depreciation and amortization 17 20 (3) (13) 55 61 (6) (11)
Other 43 43 - (2) 126 144 (18) (12)
Total non-interest expenses $ 487 $ 476 11 2 $ 1,442 $ 1,433 9 1
Adjusted total non-interest expenses (1)
$ 486 $ 473 13 3 $ 1,439 $ 1,414 25 2
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(1)Adjusts Total non-interest expenses for the impacts from our debt repurchases, representing $1 million and $3 million for the three months ended September 30, 2026 and 2025, and $3 million and $19 million for the nine months ended September 30, 2026 and 2025, respectively, and therefore represent Non-GAAP financial measures. See "Non-GAAP Financial Measures" and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
Total Non-interest Expenses
Non-interest expenses: Total non-interest expenses increased for both the three and nine months ended September 30, 2026. Adjusted total non-interest expenses, which represents a Non-GAAP financial measure and has been adjusted for the impacts from our debt repurchases, also increased over those same periods of comparison.
•Employee compensation and benefits increased primarily due to higher wages related to annual merit increases and incentive compensation, and during the nine month period increased medical claims, partially offset by operational excellence initiatives.
•Information processing and communication increased primarily due to new software investments and increased technology-related service contract costs.
•Depreciation and amortization decreased primarily due to lower amortization related to capitalized and acquired software.
•Other was essentially flat during the three month period, and decreased during the nine month period due primarily to the net impacts year-over-year from our debt repurchases.
Income Taxes
The Provision for income taxes increased for the three and nine months ended September 30, 2026. The effective tax rate was 25.5% and 4.3% for the three months ended September 30, 2026 and 2025, respectively, and 25.5% and 17.5% for the nine months ended September 30, 2026 and 2025, respectively. Both the increases in the Provision for income taxes and in the effective tax rates over the periods of comparison were primarily attributable to a discrete tax benefit in the prior year.
Discontinued Operations
The 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 relates 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.
Table 4: Summary Financial Highlights - Continuing Operations
As of or for the three months ended September 30, As of or for the nine months ended September 30,
2026 2025 % Change 2026 2025 % Change
(Millions, except per share amounts and percentages)
Credit sales $ 7,424 $ 6,787 9 $ 21,471 $ 19,707 9
PPNR *(1)
530 495 7 1,585 1,437 10
PPNR excluding impacts from debt repurchases *(1)
531 498 7 1,588 1,456 9
Average credit card and other loans 18,591 17,596 6 18,358 17,813 3
End-of-period credit card and other loans 18,850 17,655 7 18,850 17,655 7
End-of-period consumer deposits $ 9,900 $ 8,188 21 9,900 8,188 21
Effective tax rate 25.5 % 4.3 % 21.2 25.5 % 17.5 % 8.0
Return on average assets (2)
2.7 % 3.4 % (0.7) 2.9 % 2.8 % 0.1
Return on average equity (3)
17.7 % 22.4 % (4.7) 18.6 % 19.2 % (0.6)
Return on average tangible common equity *(4)
23.6 % 28.6 % (5.0) 24.3 % 24.8 % (0.5)
Net interest margin (5)
18.89 % 18.81 % 0.08 18.87 % 18.19 % 0.68
Loan yield (6)
26.76 % 27.01 % (0.25) 26.75 % 26.51 % 0.24
Efficiency ratio (7)
47.9 % 49.0 % (1.1) 47.6 % 49.9 % (2.3)
Adjusted efficiency ratio (7)
47.8 % 48.7 % (0.9) 47.5 % 49.3 % (1.8)
Common equity tier 1 capital ratio (8)
13.1 % 14.0 % (0.9) 13.1 % 14.0 % (0.9)
Book value per common share (9)
$ 85.23 $ 72.08 18 $ 85.23 $ 72.08 18
Tangible book value per common share *(10)
$ 66.95 $ 56.36 19 $ 66.95 $ 56.36 19
Cash dividend per common share $ 0.23 $ 0.21 10 $ 0.69 $ 0.63 10
Payment rate (11)
14.7 % 14.9 % (0.2) 15.0 % 14.9 % 0.1
Delinquency rate (12)
5.57 % 6.04 % (0.47) 5.57 % 6.04 % (0.47)
Net principal loss rate (13)
6.40 % 7.39 % (0.99) 6.90 % 7.81 % (0.91)
Reserve rate (14)
11.12 % 11.72 % (0.60) 11.12 % 11.72 % (0.60)
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*Represents a Non-GAAP financial measure. See "Non-GAAP Financial Measures" and Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures.
(1)PPNR represents Income from continuing operations before income taxes and the Provision for credit losses. PPNR excluding impacts from debt repurchases excludes from PPNR impacts from our debt repurchases in the period.
(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, less Dividends to preferred stockholders, divided by average Tangible common equity. Tangible common equity (TCE) represents Total stockholders' equity reduced by Preferred stock and Goodwill and intangible assets, net.
(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. Adjusted efficiency ratio excludes impacts from debt repurchases in the period.
(8)Common equity tier 1 capital ratio represents tier 1 capital reduced by Preferred stock, 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 by Goodwill and intangible assets, net. For additional information, see "Legislative, Regulatory Matters and Capital Adequacy" included elsewhere in this report.
(9)Book value per common share represents Total stockholders' equity less Preferred stock, divided by common shares outstanding.
(10)Tangible book value per common share represents TCE divided by common shares outstanding.
(11)Payment rate represents consumer payments during the period, divided by the aggregate of the opening monthly Credit card and other loans balances during the period, including held for sale in applicable periods.
(12)Delinquency rate represents outstanding balances that are contractually delinquent (i.e., principal balances 30 days past due or more) 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.
(13)Net principal loss rate, an annualized rate, represents net principal losses for the period divided by Average credit card and other loans for the same period, using an average daily balance calculation methodology.
(14)Reserve rate represents the Allowance for credit losses divided by End-of-period credit card and other loans.
(nm) Not meaningful, denoting a variance of 1,000 percent or more.
Table 5: Net Interest Margin
Three Months Ended September 30, 2026 Three Months Ended September 30, 2025
Average Balance Interest Income / Expense Average Yield / Rate Average Balance Interest Income / Expense Average Yield / Rate
(Millions, except percentages)
Cash and investment securities $ 4,412 $ 40 3.55 % $ 4,173 $ 44 4.18 %
Credit card and other loans 18,591 1,254 26.76 % 17,596 1,198 27.01 %
Total interest-earning assets 23,003 1,294 22.31 % 21,769 1,242 22.64 %
Consumer deposits 9,633 96 3.94 % 8,139 86 4.23 %
Wholesale deposits 5,487 52 3.79 % 5,296 53 3.94 %
Interest-bearing deposits 15,120 148 3.89 % 13,435 139 4.11 %
Secured borrowings 2,387 34 5.50 % 2,872 43 5.88 %
Unsecured borrowings 836 17 8.18 % 1,129 28 9.92 %
Interest-bearing borrowings 3,223 51 6.20 % 4,001 71 7.02 %
Total interest-bearing liabilities $ 18,343 $ 199 4.29 % $ 17,436 $ 210 4.78 %
Net interest income $ 1,095 $ 1,032
Net interest margin (1)
18.89 % 18.81 %
Nine Months Ended September 30, 2026 Nine Months Ended September 30, 2025
Average Balance Interest Income / Expense Average Yield / Rate Average Balance Interest Income / Expense Average Yield / Rate
(Millions, except percentages)
Cash and investment securities $ 4,316 $ 114 3.53 % $ 4,322 $ 135 4.17 %
Credit card and other loans 18,358 3,673 26.75 % 17,813 3,531 26.50 %
Total interest-earning assets 22,674 3,787 22.33 % 22,135 3,666 22.14 %
Consumer deposits 9,070 269 3.96 % 7,994 262 4.38 %
Wholesale deposits 5,397 151 3.75 % 5,228 155 3.96 %
Interest-bearing deposits 14,467 420 3.88 % 13,222 417 4.21 %
Secured borrowings 2,803 113 5.42 % 3,481 152 5.84 %
Unsecured borrowings 852 53 8.27 % 1,159 86 9.92 %
Interest-bearing borrowings 3,655 166 6.09 % 4,640 238 6.86 %
Total interest-bearing liabilities $ 18,122 $ 586 4.33 % $ 17,862 $ 655 4.90 %
Net interest income $ 3,201 $ 3,011
Net interest margin (1)
18.87 % 18.19 %
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(1)Net interest margin represents annualized Net interest income divided by average Total interest-earning assets.
Table 6: Reconciliation of GAAP to Non-GAAP Financial Measures
As of or for the three months ended September 30, As of or for the nine months ended September 30,
2026 2025 % Change 2026 2025 % Change
(Millions, except percentages)
Adjusted net income available to common stockholders
Net income available to common stockholders $ 150 $ 188 (20) $ 473 $ 464 2
Impacts from debt repurchases 1 3 (65) 2 15 (84)
Adjusted net income available to common stockholders $ 151 $ 191 (21) $ 475 $ 479 (1)
Adjusted earnings per diluted common share
Earnings per diluted common share $ 3.82 $ 3.96 (4) $ 11.54 $ 9.65 20
Impacts from debt repurchases 0.02 0.06 (57) 0.06 0.31 (81)
Adjusted earnings per diluted common share $ 3.84 $ 4.02 (4) $ 11.60 $ 9.96 16
Adjusted total non-interest expenses
Total non-interest expenses $ 487 $ 476 2 $ 1,442 $ 1,433 1
Impacts from debt repurchases 1 3 (60) 3 19 (82)
Adjusted total non-interest expenses $ 486 $ 473 3 $ 1,439 $ 1,414 2
Pretax pre-provision earnings (PPNR)
Income from continuing operations before income taxes $ 209 $ 196 6 $ 648 $ 568 14
Provision for credit losses 321 299 7 937 869 8
Pretax pre-provision earnings (PPNR) 530 495 7 1,585 1,437 10
Impacts from debt repurchases 1 3 (60) 3 19 (82)
PPNR excluding impacts from debt repurchases $ 531 $ 498 7 $ 1,588 $ 1,456 9
Average tangible common equity
Average total stockholders' equity
$ 3,497 $ 3,335 5 $ 3,464 $ 3,255 6
Less: Average preferred stock (201) - nm (139) - nm
Less: Average goodwill and intangible assets, net (699) (728) (4) (707) (736) (4)
Average tangible common equity $ 2,597 $ 2,607 - $ 2,618 $ 2,519 4
Tangible common equity (TCE)
Total stockholders' equity
$ 3,437 $ 3,317 4 $ 3,437 $ 3,317 4
Less: Preferred stock (201) - nm (201) - nm
Less: Goodwill and intangible assets, net (694) (723) (4) (694) (723) (4)
Tangible common equity (TCE) $ 2,542 $ 2,594 (2) $ 2,542 $ 2,594 (2)
______________________________
(nm) Not meaningful, denoting a variance of 1,000 percent or more.
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 compounding effect of
persistent inflation relative to wage growth, and higher interest rates. Our Delinquency rates 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, which may include tech-enabled, targeted collections strategies to engage with cardholders in the most efficient communication channel. 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., principal balances 30 days past due or more) 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
September 30, 2026 % of Total December 31, 2025 % of Total
(Millions, except percentages)
Credit card and other loans outstanding ─ principal $ 16,584 100.00 % $ 16,886 100.00 %
Outstanding balances contractually delinquent:
30 to 59 days 283 1.70 % 283 1.67 %
60 to 89 days 205 1.24 % 215 1.27 %
90 or more days 435 2.63 % 473 2.81 %
Total $ 923 5.57 % $ 971 5.75 %
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 Credit card and other loans 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. Our credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. Our pay-over-time products, which include installment loans and "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 installment loans and "split-pay" offerings.
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, using an average daily balance calculation methodology. 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 September 30, Nine Months Ended September 30,
2026 2025 2026 2025
(Millions, except percentages)
Average credit card and other loans $ 18,591 $ 17,596 $ 18,358 $ 17,813
Net principal losses 300 327 947 1,040
Net principal losses as a percentage of average credit card and other loans 6.40 % 7.39 % 6.90 % 7.81 %
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, subordinated notes, preferred stock 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 regulations, in a cost effective and prudent manner through both expected and unexpected market environments.
Our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior and/or subordinated unsecured notes and preferred stock by our Parent Company, as well as financings through our securitization programs, and deposits with the Banks. In particular, our consumer deposits increased 21% year-over-year to $9.9 billion as of September 30, 2026, with our average consumer deposits representing 53% of total funding, up from 47% a year ago. 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, repurchases of equity and debt securities, and payments of dividends.
We have in the past, and may from time to time in the future, retire or repurchase our outstanding debt, including our senior or subordinated unsecured notes, through redemptions, 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 new 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 the issuance of additional debt or equity securities or engaging in other capital markets or financing transactions. As part of our financing strategy and capital structure optimization, we have issued subordinated notes and publicly-traded preferred stock, and in the future we may continue to seek to further optimize our capital structure. Given the maturities of certain of our outstanding debt instruments and depending on the prevailing macroeconomic conditions, it is possible that we may be required to repay, extend or refinance some or all of our future debt maturities in volatile and/or unfavorable markets.
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 plans 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
We obtain credit ratings for our Parent Company from the three 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 credit 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.
In October 2026 two of our credit rating agencies refreshed their credit ratings and related outlooks for our Parent Company. Moody's upgraded their credit ratings of our Parent Company's senior unsecured debt, subordinated debt and preferred stock and changed their outlook from "Positive" to "Stable" in conjunction with their upgrades. Fitch affirmed their credit ratings for our senior unsecured debt and preferred stock, and upgraded their credit ratings of our subordinated debt; they also affirmed their "Stable" outlook in conjunction with this refresh of their credit ratings. S&P has not published updated ratings as of the date of this report.
The table below provides a summary of the credit ratings for the outstanding senior unsecured debt, subordinated debt and preferred stock of our Parent Company as of the dates presented:
September 30, 2026 October 27, 2026
Bread Financial Holdings, Inc. Moody's S&P Fitch Moody's S&P Fitch
Senior unsecured debt Ba2 BB- BB Ba1 BB- BB
Subordinated debt Ba2 B B+ Ba1 B BB-
Preferred stock B1 - B- Ba3 - B-
Outlook Positive Positive Stable Stable Positive Stable
We also seek to maintain appropriate and stable credit ratings for our credit card securitizations. The table below provides a summary of the structured finance credit ratings for certain of the asset-backed securities issued through World Financial
Network Credit Card Master Note Trust (WFNMNT) from the rating agencies (DBRS, S&P and Fitch), specifically the outstanding Class A notes of WFNMNT as of September 30, 2026:
WFNMNT
DBRS (1)
S&P Fitch
Class A notes AAA AAA AAA
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(1)Does not include our Series 2024-B public asset-backed-notes.
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 consumer and wholesale deposits, to total funding, reduces the impact that a credit rating downgrade could have on our funding costs and capacity.
Funding Sources
As referenced above, our primary sources of liquidity include cash generated from operating activities, our bank credit facility, issuances of senior or subordinated unsecured notes and preferred stock by our Parent Company, as well as 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 September 30, 2026, we were in compliance with all such covenants.
Credit Agreement
In October 2024, we entered into our amended Credit Agreement with the 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), which matures in October 2028. As of September 30, 2026, our Revolving Credit Facility was undrawn and all $700 million remained available for future borrowings.
In September 2026, we entered into an amendment to our Credit Agreement in connection with our previously-disclosed merger of CB with and into CCB, with CCB being the surviving entity. The merger was approved by the applicable regulators on July 31, 2026, and was consummated on October 1, 2026.
Senior and Subordinated Unsecured Notes
The following table provides a summary of our outstanding Long-term and other debt, consisting of senior and subordinated unsecured notes, as of September 30, 2026:
Table 9: Long-term and other debt
Description Issuance Date Maturity Interest Rate Principal Amount Originally Issued Principal Amount Outstanding
(Millions, except percentages)
Senior notes due 2031 November 2025 May 2031 6.750% $ 500 $ 500
Subordinated notes due 2035 March 2025 June 2035 8.375% 400 326
$ 900 $ 826
Throughout 2026, we have repurchased $74 million in aggregate principal amount of our 8.375% Fixed-Rate Reset Subordinated Notes Due 2035, in the open market, with cash on hand.
Deposits
The Banks use a variety of deposit products to finance their operating activities, including funding for non-securitized credit card and other loans, and to fund their securitization enhancement requirements. The Banks offer consumer deposit products, including Individual Retirement Accounts, as well as deposits sourced through contractual arrangements with various financial counterparties (often referred to as wholesale deposits, and includes brokered deposits) and various non-maturity deposit products that are generally redeemable on demand by the customer, and as such have no scheduled maturity date. The Banks have also issued certificates of deposit with scheduled maturity dates ranging between October 2026 and September 2031, in denominations of at least $1,000, on which interest is paid either monthly or at maturity. The following table summarizes these consumer and wholesale deposit products by type and associated attributes as of the dates presented:
Table 10: Interest-bearing Deposits
September 30, 2026 December 31, 2025
(Millions, except percentages)
Deposits
Consumer deposits $ 9,900 $ 8,523
Wholesale 5,579 5,368
Total interest-bearing deposits $ 15,479 $ 13,891
Non-maturity deposit products
Non-maturity deposits $ 8,963 $ 7,700
Interest rate range 0.850% - 4.18% 0.70% - 4.05%
Weighted-average interest rate 3.94 % 3.74 %
Certificates of deposit
Certificates of deposit $ 6,516 $ 6,191
Interest rate range 0.850% - 4.95% 0.850% - 5.31%
Weighted-average interest rate 4.08 % 4.12 %
As of September 30, 2026 and December 31, 2025, consumer deposits that exceeded applicable Federal Deposit Insurance Corporation (FDIC) insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $786 million (5% of Total deposits) and $638 million (5% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.
Securitization Programs Including Conduit Facilities
We sell a 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. Both our public term asset-backed notes and borrowings under the Conduit Facilities in the form of variable funding notes (VFNs) are included in Debt issued by consolidated Variable Interest Entities (VIEs) in the Consolidated Balance Sheets. Throughout 2026, $399 million of public term asset-backed notes matured and were repaid, of which $49 million were previously retained by us and therefore eliminated from the Consolidated Balance Sheets.
The table below summarizes our conduit capacities, borrowings and maturities for the periods presented:
Table 11: Conduit Borrowing Capacity Rollforward and Maturities
(Millions) December 31, 2025 Commitment September 30, 2026
Conduit Facilities Capacity Drawn Change Capacity Drawn
Maturity Date (4)
Comenity Bank
WFNMNT 2009-VFN (1)
$ 1,750 $ 1,363 $ - $ 1,750 $ 1,056 October 2027
Comenity Capital Bank
WFCMNT 2009-VFN (2)
2,000 712 (2,000) - - -
BFCIT 2026-VFN1 (3)
- - 2,000 2,000 265 September 2028
Total $ 3,750 $ 2,075 $ - $ 3,750 $ 1,321
__________________________________
(1)2009-VFN Conduit issued under World Financial Network Credit Card Master Note Trust (WFNMNT). In September 2026, the Maturity Date of the 2009-VFN Conduit was extended to October 2027.
(2)2009-VFN Conduit issued under World Financial Capital Master Note Trust (WFCMNT) was retired on September 1, 2026 pursuant to the related Omnibus Termination, Consent and Waiver Agreement.
(3)2026-VFN1 Conduit issued under Bread Financial Card Issuance Trust (BFCIT) on September 1, 2026. With the merger of CB with and into CCB, BFCIT will serve as our principal revolving master trust vehicle for the issuance of VFNs and other asset-backed funding arrangements going forward.
(4)Maturity Date with respect to conduit borrowings means the date on which the revolving period for the applicable Conduit Facility expires. The revolving period may be extended or renewed (unless an early amortization event occurs prior to the Maturity Date). Absent the extension or renewal of the revolving period, the Conduit Facility shall enter controlled amortization on the Maturity Date and may no longer be drawn upon.
As of September 30, 2026, we had approximately $11.5 billion of securitized credit card loans. Securitizations require credit enhancements, which may be provided in the form of cash, spread deposits, excess collateral, additional loans and/or 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 FRB 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.
Equity
Preferred Stock
As reflected in the table below, in May 2026 we authorized and issued 135,000 shares of preferred stock as depositary shares (the Depositary Shares) for gross proceeds of $135 million, with each Depositary Share representing a 1/40th interest in our Series B 8.875% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share (the Series B Preferred Stock). The Series B Preferred Stock has a liquidation preference of $25 per Depositary Share (equivalent to $1,000 per share of Series B Preferred Stock) and as of September 30, 2026, the aggregate liquidation value was $135 million. We used the net proceeds of the offering to enter into a preferred stock transaction with one of our subsidiary banks, CCB, pursuant to which CCB issued preferred stock to Parent Company on terms substantially the same as those of the Series B Preferred Stock. The CCB preferred stock is eliminated in consolidation.
The following table provides information about our preferred stock as of the dates presented:
Table 12: Preferred Stock Issued and Outstanding
Per Annum Dividend Rate
Carrying Amount
Series (1)
Issuance Date
Earliest
Redemption Date
Total Shares
Liquidation Preference September 30, 2026 December 31, 2025
(Millions, except share amounts)
Series A November 25, 2025 December 15, 2030 8.625 % 75,000 $ 75 $ 72 $ 71
Series B May 12, 2026 December 15, 2031 8.875 % 135,000 135 130 -
Total $ 210 $ 202 $ 71
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(1)Issued as depositary shares representing 1/40th interest in a share of the corresponding series of non-cumulative perpetual preferred stock, par value $0.01 per share. Dividends are payable quarterly in arrears on March 15, June 15, September 15 and December 15, at a fixed rate, in each case when, as and if declared by our Board of Directors.
Stock Repurchase Authorizations
Periodically, we repurchase shares of our common stock pursuant to Board-approved share repurchase authorizations. The rationale for our repurchase authorizations, and the amounts thereof, is to execute against our previously disclosed capital priorities to grow responsibly, maintain balance sheet strength, and return value to stockholders.
The following table provides information about our common stock repurchases under our various Board-approved share repurchase authorizations, for the periods presented:
Table 13: Authorized Share Repurchases
(Millions) Amount Authorized for Repurchase
Number of Shares Repurchased (1)
Approximate Dollar Value of Shares Repurchased (2)
Amount Remaining for Future Repurchases
As of December 31, 2025
$ 240
For the three months ended:
March 31, 2026
$ 600 2.0 $ 150 $ 690
June 30, 2026
- 2.8 241 449
September 30, 2026
- 0.7 75 374
Total $ 600 5.5 $ 466
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(1)Upon repurchase, these shares were retired and ceased to be outstanding shares of common stock, and are now treated as authorized but unissued shares of common stock. Does not include the 1.5 million shares that were retired in connection with the termination of our Capped Call transactions, discussed below.
(2)Excludes excise taxes on stock repurchases.
Capped Call Transactions
In connection with the prior issuance of our 4.25% Convertible Senior Notes due 2028 (Convertible Notes), we entered into privately negotiated capped call (Capped Call) transactions with certain financial institution counterparties in June 2023. At that time, these transactions were expected generally to reduce potential dilution to our common stock upon any conversion of Convertible Notes and/or offset any cash payments we were required to make in excess of the principal amount of the Convertible Notes, with such reduction and/or offset subject to a cap, based on the cap price. As of December 31, 2025, all of the Capped Call transactions remained outstanding, notwithstanding that no Convertible Notes were outstanding at that time. For additional information on the June 2023 issuance of our Convertible Notes and the subsequent repurchases in 2024 and 2025, as well as information on our Capped Call transactions, refer to Note 10, "Borrowings of Long-Term and Other Debt" to the audited Consolidated Financial Statements included in our Annual Reports on Form 10-K for the years ended December 31, 2025 and 2024.
In February 2026 we entered into a separate, privately negotiated termination agreement (each, a Capped Call Unwind Agreement) with each financial institution counterparty to the Capped Call transactions, thereby terminating all of the outstanding Capped Call transactions, and resulting in the receipt of an aggregate 1.5 million shares of our common stock, with a value of $111 million, from the Capped Call counterparties pursuant to the Capped Call Unwind Agreements. Following their receipt, these shares were retired and ceased to be outstanding shares of common stock, and are now treated as authorized but unissued shares of common stock.
Dividends
The table below summarizes the cash dividend activity we had on our preferred and common stock for the dates presented:
Table 14: Dividends
(Millions, except per share amounts)
Preferred Stock - Series A Preferred Stock - Series B Common Stock
Dividend Declaration Date Dividend Payment Date Amount Per Share Amount Amount Per Share Amount Amount Per Share
Amount (1)
January 29, 2026 March 16, 2026 $ 26.35 $ 2 $ - $ - $ 0.23 $ 10
April 23, 2026 June 15, 2026 21.56 2 - - 0.23 9
July 23, 2026 September 15, 2026 21.56 2 30.32 4 0.23 10
$ 6 $ 4 $ 29
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(1)Excludes dividend equivalent rights paid during the period.
On October 22, 2026, our Board of Directors declared quarterly cash dividends of (i) $21.56 per share on our Series A preferred stock, (ii) $22.19 per share on our Series B preferred stock, and (iii) $0.25 per share on our common stock, each payable on December 15, 2026, to the applicable stockholders of record at the close of business on November 30, 2026. The declaration and payment of future dividends on our preferred and common stock are subject to approval by our Board of Directors, based upon a review of relevant considerations and regulatory and other restrictions on our ability to pay dividends, including restrictions imposed by the terms of each series of our outstanding preferred stock.
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 contracts and 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 15: Cash Flows
Nine Months Ended September 30,
2026 2025
(Millions)
Total cash provided by (used in):
Operating activities $ 1,621 $ 1,524
Investing activities (1,028) 132
Financing activities (15) (1,591)
Net increase in cash, cash equivalents and restricted cash $ 578 $ 65
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 $1,621 million and $1,524 million for the nine months ended September 30, 2026 and 2025, respectively. The Net cash provided by operating activities during these periods was primarily driven by cash generated from Net income after adjusting for the Provision for credit losses.
Cash Flows from Investing Activities primarily include changes in Credit card and other loans. Net cash used in investing activities was $1,028 million for the nine months ended September 30, 2026 and Net cash provided by investing activities was $132 million for the nine months ended September 30, 2025. The Net cash used in investing activities for the nine months ended September 30, 2026 was primarily driven by Net principal losses and an increase in installment loans, partially offset by the seasonal paydown of credit card loans. The Net cash provided by investing activities for the nine months ended September 30, 2025 was primarily due to the seasonal 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 $15 million and $1,591 million for the nine months ended September 30, 2026 and 2025, respectively. The Net cash used in financing activities during the nine months ended September 30, 2026 was primarily driven by net repayments of debt issued by consolidated variable interest entities (i.e., securitizations) and the repurchases of common stock and subordinated debt, partially offset by a net increase in deposits and net proceeds from the issuance of preferred stock. For the nine months ended September 30, 2025 the net cash used in financing activities was primarily driven by repayments of debt issued by consolidated variable interest entities and the repurchases of common stock, partially offset by the net increase 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 along with other operational excellence initiatives, as well as expansion in lower cost jurisdictions 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 recent inflation and elevated interest rates, and any persistent effects therefrom, which may result in higher delinquencies and 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 and resulting adverse economic impacts continue to persist, including due to changes to, or the imposition of, tariffs and/or trade barriers, increased fuel prices and ongoing wars and international tensions and uncertainties, they could further increase repayment pressure on consumers as well as the risk of a recessionary environment or stagflation 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 principal 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 and lowest in the third quarter. 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 Form 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
Our business is subject to extensive federal and state laws and regulations, as well as related regulation and supervision, including by the FDIC, Consumer Financial Protection Bureau (CFPB) and other federal and state authorities. Pending and future laws and regulations (federal and state) may adversely impact our business. Without limiting the foregoing, CB is subject to various regulatory capital requirements administered by the Delaware Office of the State Bank Commissioner and the FDIC. CCB is also subject to various regulatory capital requirements administered by the Utah Department of Financial Institutions and the FDIC. 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, each 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 September 30, 2026 and 2025, 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 under the Bank Holding Company Act, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies.
On December 17, 2025, we filed applications with the federal and respective state banking regulators for permission to merge CB with and into CCB, with CCB being the surviving entity. The merger was approved by the applicable regulators on July 31, 2026, and was consummated on October 1, 2026. The merger is not expected to have a significant impact on our consolidated financial position, results of operations, or liquidity. For additional discussion, refer to "Part I, Item 1. Business - Supervision and Regulation - Planned Merger of CB with and into CCB" in our 2025 Form 10-K.
The following table provides the actual capital ratios and minimum ratios for the Company, as well as each Bank, as of the periods presented:
Table 16: Capital Ratios
Ratio/Dollar Value
Minimum Ratio for
Capital Adequacy
Purposes *
Minimum Ratio to be
Well Capitalized under
Prompt Corrective
Action Provisions
(Millions, except percentages) September 30, 2026 December 31, 2025
Total Company
Common equity tier 1 capital ratio (1)
13.1 % 13.0 % 4.5 % N/A
Tier 1 capital ratio (2)
14.1 13.4 6.0 N/A
Total risk-based capital ratio (3)
17.1 16.8 8.0 N/A
Tier 1 leverage capital ratio (4)
12.4 12.4 4.0 N/A
Total risk-weighted assets (5)
$ 19,728 $ 19,755
Comenity Bank
Common equity tier 1 capital ratio (1)
15.5 % 15.1 % 4.5 % 6.5 %
Tier 1 capital ratio (2)
15.5 15.1 6.0 8.0
Total risk-based capital ratio (3)
16.9 16.5 8.0 10.0
Tier 1 leverage capital ratio (4)
13.6 14.1 4.0 5.0
Comenity Capital Bank
Common equity tier 1 capital ratio (1)
12.4 % 13.5 % 4.5 % 6.5 %
Tier 1 capital ratio (2)
14.1 14.1 6.0 8.0
Total risk-based capital ratio (3)
17.5 17.5 8.0 10.0
Tier 1 leverage capital ratio (4)
12.5 13.2 4.0 5.0
______________________________
*The listed capital adequacy ratios exclude the Capital Conservation Buffer.
(1)Common equity tier 1 capital ratio represents tier 1 capital reduced by Preferred stock, 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 by Goodwill and intangible assets, net. See below for a reconciliation of our Total stockholders' equity under GAAP to tier 1 and tier 2 capital under the Basel III Standardized Approach.
(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. For us, tier 1 capital is primarily comprised of CET1 capital and Preferred stock. See below for a reconciliation of our Total stockholders' equity under GAAP to tier 1 and tier 2 capital under the Basel III Standardized Approach.
(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 comprised of subordinated notes, as well as the allowable portion of the Allowance for credit losses. See below for a reconciliation of our Total stockholders' equity under GAAP to tier 1 and tier 2 capital under the Basel III Standardized Approach.
(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 following table provides a reconciliation of our Total stockholders' equity under GAAP to Basel III Standardized Approach Common equity tier 1 capital, Tier 1 capital, Tier 2 capital and Total capital, as of the date presented:
Table 17: Capital Reconciliations
September 30, 2026
(Millions)
Total stockholders' equity $ 3,437
Less:
Preferred stock
201
Total common stockholders' equity
3,236
Less:
Goodwill (1)
593
Intangible assets 60
Other 3
Common equity tier 1 capital 2,580
Add:
Preferred stock
201
Tier 1 capital 2,781
Subordinated notes 326
Qualifying allowance for credit losses (2)
269
Tier 2 capital 595
Total capital $ 3,376
__________________________________
(1)Goodwill, net of the related $41 million deferred tax liability.
(2)Represents the allowable portion of the Allowance for credit losses, which is a maximum of 1.25% of RWA.
The following table provides the changes in our Basel III Standardized Approach Common equity tier 1 capital, Tier 1 capital and Tier 2 capital for the period presented:
Table 18: Capital Rollforwards
Three months ended
September 30, 2026 		Nine months ended
September 30, 2026
(Millions)
Common equity tier 1 capital beginning balance $ 2,493 $ 2,569
Net income
156 483
Dividends declared on preferred and common stock (16) (39)
Repurchases of common stock
(76) (472)
Changes in additional paid-in capital 16 17
Changes in intangible assets 7 22
Common equity tier 1 capital 2,580 2,580
Additional Tier 1 capital beginning balance 201 71
Change in preferred stock - 130
Tier 1 capital 2,781 2,781
Tier 2 capital beginning balance 614 670
Change in subordinated notes (24) (75)
Change in qualifying allowance for credit losses 5 -
Tier 2 capital 595 595
Total capital $ 3,376 $ 3,376
Further information about each Bank's capital components and calculations can be found in each Bank's Consolidated Reports of Condition and Income Form FFIEC 041 (Call Reports) as filed with the FDIC.
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.
In November 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 did not contain any monetary penalties or fines. The consent order was terminated by the FDIC on March 31, 2026.
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 2025 Form 10-K.
RECENTLY ISSUED ACCOUNTING STANDARDS
See the "Recently Issued Accounting Standards" in Note 1, "Description of Business, Basis of Presentation and Significant Accounting Policies" to the unaudited Consolidated Financial Statements.
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 or stock repurchases 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 inflation, interest rates, labor market conditions, financial and capital market conditions, recessionary pressures or concerns over a prolonged economic slowdown, and the related impact on consumer spending behavior, payments, debt levels, savings rates and other behaviors;
•domestic and international political events and conditions, including significant shifts in trade policy, such as changes to, or the imposition of, tariffs and/or trade barriers and consequently any economic impacts, volatility, uncertainty and geopolitical instability resulting therefrom, as well as ongoing wars, military conflicts, and international tensions or hostilities;
•local or global public health issues, climate-related events, impacts to the power grid, and natural disasters;
•future credit performance of our customers, including the level of future delinquency and charge-off rates;
•loss of, or reduction in demand for services and/or products from, significant brand partners or customers in the highly competitive markets in which we operate, including competition from new and non-traditional competitors, such as financial technology companies, and with respect to new products, services and technologies, such as the emergence or increase in popularity of agentic commerce, digital payment platforms and currencies and other alternative payment and deposit solutions;
•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 current expected credit loss (CECL) model;
•inaccuracies in the models and estimates on which we rely, including our credit risk management models and the amount of our Allowance for credit losses;
•increases in fraudulent activity;
•failure to identify, complete or successfully integrate or disaggregate business acquisitions, divestitures and other strategic initiatives, including, with respect to divested businesses, any associated guarantees, indemnities or other liabilities;
•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;
•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 ability to pay dividends and repurchase our stock, and restrictions that limit our Banks' ability to pay dividends to us;
•pending and future litigation;
•pending and future federal, state, local and foreign legislation, executive action, 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 that would place limits on credit card interest rates or late fees, interchange fees or other charges;
•increases in regulatory capital requirements or other support for our Banks;
•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 liability or other 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, including the pending litigation against us in connection with the spinoff; and
•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 2025 Form 10-K and this quarterly report.
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.
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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