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Item 9A. Controls and Procedures

2023-02-28 compared with 2022-02-25 · 996 added, 1076 removed, 837 unchanged (71% of the section changed)

1 unchanged sentence

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of December 31, 2021 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

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2021, 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.

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 fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4 unchanged sentences

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

Tabl e of Contents

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

3 unchanged sentences

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013) .

Based on those criteria and management’s assessment, with the participation of the Chief Executive Officer and Chief Financial Officer, we conclude that our internal control over financial reporting was effective as of December 31, 2021.

Based on those criteria and management’s assessment, with the participation of the Chief Executive Officer and Chief Financial Officer, we conclude that, as of December 31, 2022, our internal control over financial reporting was effective.

The effectiveness of internal control over financial reporting as of December 31, 2022, has been audited by Deloitte & Touche LLP, our independent registered public accounting firm who also audited our Consolidated Financial Statements;

3 unchanged sentences

Not applicable.

Directors, Executive Officer s and Corporate Governance.

Tabl e of Contents

Directors, Executive Officers and Corporate Governance.

Incorporated by reference to the Proxy Statement for the 2023 Annual Meeting of our stockholders, which will be filed with the SEC not later than 120 days after December 31, 2022.

1 unchanged sentence

Incorporated by reference to the Proxy Statement for the 2023 Annual Meeting of our stockholders, which will be filed with the SEC not later than 120 days after December 31, 2022.

Security Ownership of Certain Beneficial Owner s and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Incorporated by reference to the Proxy Statement for the 2023 Annual Meeting of our stockholders, which will be filed with the SEC not later than 120 days after December 31, 2022.

Certain Relationships and Related Transaction s, and Director Independence.

Certain Relationships and Related Transactions, and Director Independence.

Incorporated by reference to the Proxy Statement for the 2023 Annual Meeting of our stockholders, which will be filed with the SEC not later than 120 days after December 31, 2022.

Principal Accounting Fee s and Services.

Principal Accounting Fees and Services.

Incorporated by reference to the Proxy Statement for the 2023 Annual Meeting of our stockholders, which will be filed with the SEC not later than 120 days after December 31, 2022.

Tabl e of Contents

Exhibits, Financial Statement Schedules.

a) The following documents are filed as part of this Annual Report:

a) The following documents are filed as part of this Annual Report on Form 10-K:

(1) Financial Statements

4 unchanged sentences

Incorporated by Reference

Third Amended and Restated Certificate of Incorporation of the Registrant.

Certificate of Designations of Series A Preferred Non-Voting Convertible Preferred Stock of the Registrant

Fifth Amended and Restated Bylaws of the Registrant.

Specimen Certificate for shares of Common Stock of the Registrant.

Description of Registrant’s Common Stock

Alliance Data Systems Corporation Executive Deferred Compensation Plan, amended and restated effective January 1, 2018.

Alliance Data Systems Corporation 2010 Omnibus Incentive Plan.

Alliance Data Systems Corporation 2015 Omnibus Incentive Plan.

Alliance Data Systems Corporation 2020 Omnibus Incentive Plan.

Form of Time-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2015 Omnibus Incentive Plan.

Form of Performance-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2015 Omnibus Incentive Plan (2020 grant Strategic)

Form of Time-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2020 Omnibus Incentive Plan.

Form of Performance-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2020 Omnibus Incentive Plan (2021 grant).

Form of Non-employee Director Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan.

Incorporated by Reference

Form of Non-employee Director Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2015 Omnibus Incentive Plan.

Form of Non-employee Director Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2020 Omnibus Incentive Plan.

Alliance Data Systems Corporation Non-Employee Director Deferred Compensation Plan.

Form of Alliance Data Systems Associate Confidentiality Agreement.

Form of Alliance Data Systems Corporation Indemnification Agreement for Officers and Directors.

Alliance Data Systems Corporation 2015 Employee Stock Purchase Plan, effective July 1, 2015.

Executive General Release and Enhanced Severance Agreement, dated as of May 11, 2021, by and between ADS Alliance Data Systems, Inc.

and Tim King.

Private Label Credit Card Program Agreement, dated as of June 1, 2018, by and between Victoria’s Secret Stores, LLC, Lone Mountain Factoring, LLC, L Brands Direct Marketing, Inc., L Brands Direct Fulfillment, Inc., Far West Factoring, LLC, Puerto Rico Store Operations LLC, and Comenity Bank.

First Amendment to Private Label Credit Card Program Agreement, dated as of July 1, 2019, by and between Victoria’s Secret Stores, LLC, Lone Mountain Factoring, LLC, L Brands Direct Marketing, Inc., L Brands Direct Fulfillment, Inc., Far West Factoring, LLC, Puerto Rico Store Operations LLC, and Comenity Bank.

Second Amendment to Private Label Credit Card Program Agreement, dated as of October 23, 2020, by and among Victoria’s Secret Stores, LLC, VS Service Company, LLC by change of name and organizational form from L Brands Direct Marketing, Inc., and L Brands Direct Fulfillment, LLC by change of organizational form from L Brands Direct Fulfillment, Inc., and VSPR Store Operations, LLC by change of name from Puerto Rico Store Operations, LLC and Comenity Bank.

Third Amendment to Private Label Credit Card Program Agreement, dated as of August 1, 2021, by and between Victoria’s Secret Stores, LLC, VS Service Company, LLC by change of name and organizational form from L Brands Direct Marketing, Inc., L Brands Direct Fulfillment, LLC by change of organizational form from L Brands Direct Fulfillment, Inc., VSPR Store Operations, LLC by change of name from Puerto Rico Store Operations, LLC, and Comenity Bank.

Second Amended and Restated Pooling and Servicing Agreement, dated as of January 17, 1996 as amended and restated as of September 17, 1999 and August 1, 2001, by and among WFN Credit Company, LLC, World Financial Network National Bank, and BNY Midwest Trust Company.

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

4.1 (a) Specimen Certificate for shares of Common Stock of the Registrant.

10-Q 4.0 8/8/03

*4.2 (a) Description of Registrant’s Common Stock

+10.1 (a) Bread Financial Holdings, Inc.

Executive Deferred Compensation Plan, amended and restated effective January 1, 2018.

8-K 10.1 11/24/17

+10.2 (a) Bread Financial Holdings, Inc.

2010 Omnibus Incentive Plan.

DEF 14A A 4/20/10

+10.3 (a) Bread Financial Holdings, Inc.

2015 Omnibus Incentive Plan.

DEF 14A B 4/20/15

+10.4 (a) Bread Financial Holdings, Inc.

2020 Omnibus Incentive Plan.

DEF 14A A 4/23/20

+10.5 (a) Bread Financial Holdings, Inc.

2022 Omnibus Incentive Plan.

DEF 14A A 4/13/22

+10.6 (a) Form of Time-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2015 Omnibus Incentive Plan.

8-K 10.1 2/20/18

+10.7 (a) Form of Performance-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2015 Omnibus Incentive Plan (2020 grant Strategic)

8-K 10.3 2/20/20

Tabl e of Contents

Incorporated by Reference

Second Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of May 19, 2004, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

Third Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of March 30, 2005, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

Fourth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of June 13, 2007, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

Fifth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of October 26, 2007, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

Sixth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of May 27, 2008, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Trust Company, N.A.

Seventh Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of June 28, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A.

Supplemental Agreement to Second Amended and Restated Pooling and Servicing Agreement, dated as of August 9, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A.

Eighth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 9, 2011, among World Financial Network Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A.

Ninth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of December 1, 2016, among Comenity Bank, WFN Credit Company, LLC, and MUFG Union Bank, N.A.

Tenth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of August 16, 2018, among Comenity Bank, WFN Credit Company, LLC, and MUFG Union Bank, N.A.

Eleventh Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of June 11, 2020, among Comenity Bank, WFN Credit Company, LLC, and MUFG Union Bank, N.A.

Filer Description Form Exhibit Filing Date

+10.8 (a) Form of Time-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2020 Omnibus Incentive Plan.

8-K 10.1 2/18/21

^+10.9 (a) Form of Performance-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2020 Omnibus Incentive Plan.

8-K 10.2 2/18/21

*+10.10 (a) Form of Time-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2022 Omnibus Incentive Plan.

*^+10.11 (a) Form of Performance-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2022 Omnibus Incentive Plan.

+10.12 (a) Form of Non-employee Director Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2010 Omnibus Incentive Plan.

10-K 10.52 2/28/13

+10.13 (a) Form of Non-employee Director Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2015 Omnibus Incentive Plan.

10-Q 10.6 8/7/17

+10.14 (a) Form of Non-employee Director Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2020 Omnibus Incentive Plan.

8-K 10.1 6/15/21

*+10.15 (a) Form of Non-employee Director Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2022 Omnibus Incentive Plan.

+10.16 (a) Bread Financial Holdings, Inc.

Non-Employee Director Deferred Compensation Plan.

8-K 10.1 6/9/06

+10.17 (a) Form of Bread Financial Associate Confidentiality Agreement.

10-K 10.18 2/27/17

+10.18 (a) Form of Bread Financial Holdings, Inc.

Indemnification Agreement for Officers and Directors.

8-K 10.1 6/5/15

+10.19 (a) Bread Financial Holdings, Inc.

Amended and Restated 2015 Employee Stock Purchase Plan, effective March 23, 2022.

DEF 14A C 4/20/15

(c) Second Amended and Restated Pooling and Servicing Agreement, dated as of January 17, 1996 as amended and restated as of September 17, 1999 and August 1, 2001, by and among WFN Credit Company, LLC, World Financial Network National Bank, and BNY Midwest Trust Company.

8-K 4.6 8/31/01

(d) Second Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of May 19, 2004, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

8-K 4.1 8/4/04

(d) Third Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of March 30, 2005, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

8-K 4.1 4/5/05

Tabl e of Contents

Incorporated by Reference

Twelfth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of October 27, 2020, among WFN Credit Company, LLC, as transferor, Comenity Bank, as servicer, and MUFG Union Bank, N.A., as trustee.

Filer Description Form Exhibit Filing Date

(d) Fourth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of June 13, 2007, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

8-K 4.1 6/15/07

(d) Fifth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of October 26, 2007, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company.

8-K 4.1 10/31/07

(d) Sixth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of May 27, 2008, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Trust Company, N.A.

8-K 4.1 5/29/08

(d) Seventh Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of June 28, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A.

8-K 4.2 6/30/10

(d) Supplemental Agreement to Second Amended and Restated Pooling and Servicing Agreement, dated as of August 9, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A.

8-K 4.1 8/12/10

(d) Eighth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 9, 2011, among World Financial Network Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A.

8-K 4.1 11/14/11

(d) Ninth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of December 1, 2016, among Comenity Bank, WFN Credit Company, LLC, and MUFG Union Bank, N.A.

8-K 4.1 12/2/16

(d) Tenth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of August 16, 2018, among Comenity Bank, WFN Credit Company, LLC, and MUFG Union Bank, N.A.

8-K 4.1 8/20/18

(d) Eleventh Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of June 11, 2020, among Comenity Bank, WFN Credit Company, LLC, and MUFG Union Bank, N.A.

8-K 4.2 6/16/20

(c) Twelfth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of October 27, 2020, among WFN Credit Company, LLC, as transferor, Comenity Bank, as servicer, and MUFG Union Bank, N.A., as trustee.

8-K 4.1 10/30/20

Collateral Series Supplement to Second Amended and Restated Pooling and Servicing Agreement, dated as of August 21, 2001, among WFN Credit Company, LLC, World Financial Network National Bank and BNY Midwest Trust Company.

First Amendment to Collateral Series Supplement, dated as of November 7, 2002, among WFN Credit Company, LLC, World Financial Network National Bank and BNY Midwest Trust Company.

Second Amendment to Collateral Series Supplement, dated as of July 6, 2016, among WFN Credit Company, LLC, Comenity Bank and MUFG Union Bank, N.A.

Transfer and Servicing Agreement, dated as of August 1, 2001, between WFN Credit Company, LLC, World Financial Network National Bank, and World Financial Network Credit Card Master Note Trust.

First Amendment to the Transfer and Servicing Agreement, dated as of November 7, 2002, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

Third Amendment to the Transfer and Servicing Agreement, dated as of May 19, 2004, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

Fourth Amendment to the Transfer and Servicing Agreement, dated as of March 30, 2005, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

Fifth Amendment to the Transfer and Servicing Agreement, dated as of June 13, 2007, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

Sixth Amendment to the Transfer and Servicing Agreement, dated as of October 26, 2007, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

Seventh Amendment to Transfer and Servicing Agreement, dated as of June 28, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

8-K 4.7 8/31/01

Tabl e of Contents

Incorporated by Reference

Supplemental Agreement to Transfer and Servicing Agreement, dated as of August 9, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

Eighth Amendment to Transfer and Servicing Agreement, dated as of June 15, 2011, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

Ninth Amendment to Transfer and Servicing Agreement, dated as of November 9, 2011, among World Financial Network Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

Tenth Amendment to the Transfer and Servicing Agreement, dated as of July 6, 2016, among Comenity Bank, WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust.

Receivables Purchase Agreement, dated as of August 1, 2001, between World Financial Network National Bank and WFN Credit Company, LLC.

First Amendment to Receivables Purchase Agreement, dated as of June 28, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

Supplemental Agreement to Receivables Purchase Agreement, dated as of August 9, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

Second Amendment to Receivables Purchase Agreement, dated as of November 9, 2011, between World Financial Network Bank and WFN Credit Company, LLC.

Third Amendment to Receivables Purchase Agreement, dated as of July 6, 2016, between Comenity Bank and WFN Credit Company, LLC.

Fourth Amendment to Receivables Purchase Agreement, dated as of June 11, 2020, between Comenity Bank and WFN Credit Company, LLC.

Master Indenture, dated as of August 1, 2001, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company.

Omnibus Amendment, dated as of March 31, 2003, among WFN Credit Company, LLC, World Financial Network Credit Card Master Trust, World Financial Network National Bank and BNY Midwest Trust Company.

Supplemental Indenture No.

1, dated as of August 13, 2003, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company.

Filer Description Form Exhibit Filing Date

(c) First Amendment to Collateral Series Supplement, dated as of November 7, 2002, among WFN Credit Company, LLC, World Financial Network National Bank and BNY Midwest Trust Company.

8-K 4.3 11/20/02

(d) Second Amendment to Collateral Series Supplement, dated as of July 6, 2016, among WFN Credit Company, LLC, Comenity Bank and MUFG Union Bank, N.A.

8-K 4.1 7/8/16

(c) Transfer and Servicing Agreement, dated as of August 1, 2001, between WFN Credit Company, LLC, World Financial Network National Bank, and World Financial Network Credit Card Master Note Trust.

8-K 4.3 8/31/01

(c) First Amendment to the Transfer and Servicing Agreement, dated as of November 7, 2002, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

8-K 4.2 11/20/02

(d) Third Amendment to the Transfer and Servicing Agreement, dated as of May 19, 2004, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

8-K 4.2 8/4/04

(d) Fourth Amendment to the Transfer and Servicing Agreement, dated as of March 30, 2005, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

8-K 4.2 4/5/05

(d) Fifth Amendment to the Transfer and Servicing Agreement, dated as of June 13, 2007, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

8-K 4.2 6/15/07

(d) Sixth Amendment to the Transfer and Servicing Agreement, dated as of October 26, 2007, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust.

8-K 4.2 10/31/07

(d) S eventh Amendment to Transfer and Servicing Agreement, dated as of June 28, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

8-K 4.4 6/30/10

(d) Supplemental Agreement to Transfer and Servicing Agreement, dated as of August 9, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

8-K 4.3 8/12/10

(d) Eighth Amendment to Transfer and Servicing Agreement, dated as of June 15, 2011, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

8-K 4.1 6/15/11

Tabl e of Contents

Incorporated by Reference

Supplemental Indenture No.

Filer Description Form Exhibit Filing Date

(d) Ninth Amendment to Transfer and Servicing Agreement, dated as of November 9, 2011, among World Financial Network Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust.

8-K 4.3 11/14/11

(d) Tenth Amendment to the Transfer and Servicing Agreement, dated as of July 6, 2016, among Comenity Bank, WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust.

8-K 4.4 7/8/16

(d) Receivables Purchase Agreement, dated as of August 1, 2001, between World Financial Network National Bank and WFN Credit Company, LLC.

8-K 4.8 8/31/01

(d) First Amendment to Receivables Purchase Agreement, dated as of June 28, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

8-K 4.3 6/30/10

(d) Supplemental Agreement to Receivables Purchase Agreement, dated as of August 9, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

8-K 4.2 8/12/10

(d) Second Amendment to Receivables Purchase Agreement, dated as of November 9, 2011, between World Financial Network Bank and WFN Credit Company, LLC.

8-K 4.2 11/14/11

(d) Third Amendment to Receivables Purchase Agreement, dated as of July 6, 2016, between Comenity Bank and WFN Credit Company, LLC.

8-K 4.2 7/8/16

(d) Fourth Amendment to Receivables Purchase Agreement, dated as of June 11, 2020, between Comenity Bank and WFN Credit Company, LLC.

8-K 4.3 6/16/20

(c) Master Indenture, dated as of August 1, 2001, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company.

8-K 4.1 8/31/01

(c) Omnibus Amendment, dated as of March 31, 2003, among WFN Credit Company, LLC, World Financial Network Credit Card Master Trust, World Financial Network National Bank and BNY Midwest Trust Company.

8-K 4 4/22/03

(d) Supplemental Indenture No.

1, dated as of August 13, 2003, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company.

8-K 4.2 8/28/03

(d) Supplemental Indenture No.

2, dated as of June 13, 2007, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company.

Supplemental Indenture No.

8-K 4.3 6/15/07

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

(d) Supplemental Indenture No.

3, dated as of May 27, 2008, between World Financial Network Credit Card Master Note Trust and The Bank of New York Trust Company, N.A.

Supplemental Indenture No.

8-K 4.2 5/29/08

(d) Supplemental Indenture No.

4, dated as of June 28, 2010, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A.

Supplemental Indenture No.

8-K 4.1 6/30/10

(d) Supplemental Indenture No.

5, dated as of February 20, 2013, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A.

Supplemental Indenture No.

8-K 4.2 2/22/13

(d) Supplemental Indenture No.

6 to Master Indenture, dated as of July 6, 2016, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Supplemental Indenture No.

8-K 4.3 7/8/16

(d) Supplemental Indenture No.

7 to Master Indenture, dated as of June 11, 2020, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Omnibus Amendment, dated as of July 10, 2017, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Omnibus Amendment, dated as of June 11, 2020, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Agreement of Resignation, Appointment and Acceptance, dated as of May 25, 2021, by and among WFN Credit Company, LLC, U.S.

8-K 4.1 6/16/20

(d) Agreement of Resignation, Appointment and Acceptance, dated as of May 25, 2021, by and among WFN Credit Company, LLC, U.S.

Bank Trust National Association and Citicorp Trust Delaware, National Association.

Succession Agreement, dated as of June 18, 2021, by and among Comenity Bank, World Financial Network Credit Card Master Note Trust, MUFG Union Bank, N.A.

8-K 4.1 5/28/21

(d) Succession Agreement, dated as of June 18, 2021, by and among Comenity Bank, World Financial Network Credit Card Master Note Trust, MUFG Union Bank, N.A.

Bank National Association.

Succession Agreement, dated as of June 18, 2021, among WFN Credit Company, LLC, MUFG Union Bank, N.A.

8-K 4.1 6/24/21

(d) Succession Agreement, dated as of June 18, 2021, among WFN Credit Company, LLC, MUFG Union Bank, N.A.

Bank National Association.

Series 2019-A Indenture Supplement, dated as of February 20, 2019, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Series 2019-B Indenture Supplement, dated as of June 26, 2019, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Incorporated by Reference

Series 2019-C Indenture Supplement, dated as of September 18, 2019, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A.

Amended and Restated Trust Agreement, dated as of August 1, 2001, between WFN Credit Company, LLC and Chase Manhattan Bank USA, National Association.

First Amendment to Amended and Restated Trust Agreement, dated as of May 25, 2021, between WFN Credit Company, LLC and Citicorp Trust Delaware, National Association.

Administration Agreement, dated as of August 1, 2001, between World Financial Network Credit Card Master Note Trust and World Financial Network National Bank.

First Amendment to Administration Agreement, dated as of July 31, 2009, between World Financial Network Credit Card Master Note Trust and World Financial Network National Bank.

Third Amended and Restated Service Agreement, dated as of April 23, 2019, between Comenity Servicing LLC and Comenity Bank.

First Addendum to Appendix A of Third Amended and Restated Service Agreement, dated as of April 28, 2020, by and between Comenity Servicing LLC and Comenity Bank.

Second Addendum to Appendix A of Third Amended and Restated Service Agreement, dated as of October 16, 2019, between Comenity Servicing LLC and Comenity Bank.

Amendment to Third Amended and Restated Service Agreement, dated as of February 20, 2020, between Comenity Servicing LLC and Comenity Bank.

First Addendum to Appendix A of Third Amended and Restated Service Agreement, as Amended, dated as of April 28, 2020, by and between Comenity Servicing LLC and Comenity Bank.

Second Addendum to Appendix A of Third Amended and Restated Service Agreement, as Amended, dated as of August 26, 2020, between Comenity Servicing LLC and Comenity Bank.

Third Addendum to Appendix A of Third Amended and Restated Service Agreement, as Amended, dated as of January 26, 2021, between Comenity Servicing LLC and Comenity Bank.

Fourth Addendum to Appendix A of Third Amended and Restated Service Agreement, as Amended, dated as of March 31, 2021, between Comenity Servicing LLC and Comenity Bank.

8-K 4.2 6/24/21

(d) Amended and Restated Trust Agreement, dated as of August 1, 2001, between WFN Credit Company, LLC and Chase Manhattan Bank USA, National Association.

8-K 4.4 8/31/01

(d) First Amendment to Amended and Restated Trust Agreement, dated as of May 25, 2021, between WFN Credit Company, LLC and Citicorp Trust Delaware, National Association.

8-K 4.2 5/28/21

(d) Administration Agreement, dated as of August 1, 2001, between World Financial Network Credit Card Master Note Trust and World Financial Network National Bank.

8-K 4.5 8/31/01

(d) First Amendment to Administration Agreement, dated as of July 31, 2009, between World Financial Network Credit Card Master Note Trust and World Financial Network National Bank.

8-K 4.1 7/31/09

(d) Fourth Amended and Restated Service Agreement, dated as of June 1, 2022, by and between Comenity Bank and Comenity Servicing LLC.

10-D 99.2 6/15/22

Tabl e of Contents

Incorporated by Reference

Fifth Addendum to Appendix A and First Addendum to Appendix B of Third Amended and Restated Service Agreement, as Amended, dated as of April 30, 2021, between Comenity Servicing LLC and Comenity Bank.

Sixth Addendum to Appendix A of Third Amended and Restated Service Agreement, as Amended, dated as of August 31, 2021, between Comenity Servicing LLC and Comenity Bank.

Seventh Addendum to Appendix A of Third Amended and Restated Service Agreement, as Amended, dated as of January 1, 2022, between Comenity Servicing LLC and Comenity Bank.

Asset Representations Review Agreement, dated as of July 6, 2016, among Comenity Bank, WFN Credit Company, LLC, World Financial Network Credit Card Master Note Trust and FTI Consulting, Inc.

Receivables Purchase Agreement, dated as of September 28, 2001, between World Financial Network National Bank and WFN Credit Company, LLC.

First Amendment to Receivables Purchase Agreement, dated as of June 24, 2008, between World Financial Network National Bank and WFN Credit Company, LLC.

Second Amendment to Receivables Purchase Agreement, dated as of March 30, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

Supplemental Agreement to Receivables Purchase Agreement, dated as of August 9, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

Third Amendment to Receivables Purchase Agreement, dated as of September 30, 2011, between World Financial Network Bank and WFN Credit Company, LLC.

World Financial Network Credit Card Master Trust III Amended and Restated Pooling and Servicing Agreement, dated as of September 28, 2001, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association.

First Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of April 7, 2004, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association.

Second Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of March 23, 2005, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association

Filer Description Form Exhibit Filing Date

(d) First Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of July 29, 2022, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 8/4/22

(d) Second Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of August 31, 2022, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 9/7/22

(d) Third Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of October 7, 2022, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 10/12/22

(d) Fourth Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of October 31, 2022, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 11/2/22

(d) Fifth Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of November 30, 2022, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 12/1/22

(d) Sixth Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of January 11, 2023, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 1/12/23

(d) Seventh Addendum to Appendix A of Fourth Amended and Restated Service Agreement, dated as of January 31, 2023, between Comenity Servicing LLC and Comenity Bank.

8-K 99.1 2/2/23

(d) Asset Representations Review Agreement, dated as of July 6, 2016, among Comenity Bank, WFN Credit Company, LLC, World Financial Network Credit Card Master Note Trust and FTI Consulting, Inc.

8-K 10.1 7/8/16

10.78 (a) Receivables Purchase Agreement, dated as of September 28, 2001, between World Financial Network National Bank and WFN Credit Company, LLC.

10-Q 10.5 11/7/08

10.79 (a) First Amendment to Receivables Purchase Agreement, dated as of June 24, 2008, between World Financial Network National Bank and WFN Credit Company, LLC.

10-K 10.94 3/2/09

10.80 (a) Second Amendment to Receivables Purchase Agreement, dated as of March 30, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

10-K 10.127 2/28/11

10.81 (a) Supplemental Agreement to Receivables Purchase Agreement, dated as of August 9, 2010, between World Financial Network National Bank and WFN Credit Company, LLC.

10-K 10.128 2/28/11

10.82 (a) Third Amendment to Receivables Purchase Agreement, dated as of September 30, 2011, between World Financial Network Bank and WFN Credit Company, LLC.

10-Q 10.4 11/7/11

Tabl e of Contents

Incorporated by Reference

Third Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of October 26, 2007, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank of California, N.A.

Filer Description Form Exhibit Filing Date

10.83 (a) World Financial Network Credit Card Master Trust III Amended and Restated Pooling and Servicing Agreement, dated as of September 28, 2001, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association.

10-Q 10.6 11/7/08

10.84 (a) First Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of April 7, 2004, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association.

10-Q 10.7 11/7/08

10.85 (a) Second Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of March 23, 2005, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association.

10-Q 10.8 11/7/08

10.86 (a) Third Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of October 26, 2007, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank of California, N.A.

(successor to JPMorgan Chase Bank, N.A.).

Fourth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of March 30, 2010, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank, N.A.

Fifth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of September 30, 2011, among WFN Credit Company, LLC, World Financial Network Bank, and Union Bank, N.A.

Sixth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of December 1, 2016, among WFN Credit Company, LLC, Comenity Bank, and Deutsche Bank Trust Company Americas.

Seventh Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of September 1, 2017, among WFN Credit Company, LLC, Comenity Bank, and U.S.

10-Q 10.9 11/7/08

10.87 (a) Fourth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of March 30, 2010, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank, N.A.

10-Q 10.9 5/7/10

10.88 (a) Fifth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of September 30, 2011, among WFN Credit Company, LLC, World Financial Network Bank, and Union Bank, N.A.

10-Q 10.3 11/7/11

10.89 (a) Sixth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of December 1, 2016, among WFN Credit Company, LLC, Comenity Bank, and Deutsche Bank Trust Company Americas.

10-K 10.94 2/27/17

10.90 (a) Seventh Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of September 1, 2017, among WFN Credit Company, LLC, Comenity Bank, and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Eighth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of November 16, 2020, among WFN Credit Company, LLC, Comenity Bank, and U.S.

10-K 10.96 2/27/18

10.91 (a) Eighth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of November 16, 2020, among WFN Credit Company, LLC, Comenity Bank, and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Supplemental Agreement to Amended and Restated Pooling and Servicing Agreement, dated as of August 9, 2010, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank, N.A.

Receivables Purchase Agreement, dated as of September 29, 2008, between World Financial Capital Bank and World Financial Capital Credit Company, LLC.

Amendment No.

10-K 10.105 2/26/21

10.92 (a) Supplemental Agreement to Amended and Restated Pooling and Servicing Agreement, dated as of August 9, 2010, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank, N.A.

10-K 10.134 2/28/11

10.93 (a) Receivables Purchase Agreement, dated as of September 29, 2008, between World Financial Capital Bank and World Financial Capital Credit Company, LLC.

10-Q 10.3 11/7/08

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

10.94 (a) Amendment No.

1 to Receivables Purchase Agreement, dated as of June 4, 2010, between World Financial Capital Bank and World Financial Capital Credit Company, LLC.

Transfer and Servicing Agreement, dated as of September 29, 2008, among World Financial Capital Credit Company, LLC, World Financial Capital Bank and World Financial Capital Master Note Trust.

Amendment No.

10-Q 10.11 8/9/10

10.95 (a) Transfer and Servicing Agreement, dated as of September 29, 2008, among World Financial Capital Credit Company, LLC, World Financial Capital Bank and World Financial Capital Master Note Trust.

10-Q 10.4 11/7/08

10.96 (a) Amendment No.

1 to Transfer and Servicing Agreement, dated as of June 4, 2010, among World Financial Capital Credit Company, LLC, World Financial Capital Bank and World Financial Capital Master Note Trust.

Master Indenture, dated as of September 29, 2008, between World Financial Capital Master Note Trust and U.S.

10-Q 10.12 8/9/10

10.97 (a) Master Indenture, dated as of September 29, 2008, between World Financial Capital Master Note Trust and U.S.

Bank National Association, together with Supplemental Indenture Nos.

10-K 10.104 2/27/18

*10.98 (a) Receivables Purchase Agreement, dated as of June 17, 2022, between Comenity Capital Bank and Comenity Capital Credit Company, LLC.

*10.99 (a) Transfer Agreement, dated as of June 17, 2022, between Comenity Capital Credit Company, LLC and Comenity Capital Asset Securitization Trust.

*10.100 (a) Servicing Agreement, dated as of June 17, 2022, between Comenity Capital Credit Company, LLC, Comenity Capital Bank and Comenity Capital Asset Securitization Trust.

*10.101 (a) Master Indenture, dated as of June 17, 2022, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

10.102 (a) Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of February 28, 2014, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A.

10-K 10.129 2/27/15

10.103 (a) First Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of July 10, 2017, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-Q 10.8 8/7/17

10.104 (a) Second Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of December 1, 2017, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-K 10.109 2/27/18

10.105 (a) Third Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of May 3, 2018, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-K 10.110 2/26/19

Tabl e of Contents

Incorporated by Reference

Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of February 28, 2014, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A.

First Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of July 10, 2017, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Second Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of December 1, 2017, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Third Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of May 3, 2018, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Fourth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of August 31, 2018, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Fifth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of February 1, 2019, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Sixth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of June 11, 2020, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Seventh Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of September 10, 2020, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

Third Amended and Restated Series 2009-VFC1 Supplement, dated as of April 28, 2017, among WFN Credit Company, LLC, Comenity Bank and Deutsche Bank Trust Company Americas.

First Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of October 19, 2017, among WFN Credit Company, LLC, Comenity Bank and U.S.

Filer Description Form Exhibit Filing Date

10.106 (a) Fourth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of August 31, 2018, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-K 10.111 2/26/19

10.107 (a) Fifth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of February 1, 2019, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-K 10.112 2/26/19

10.108 (a) Sixth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of June 11, 2020, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-K 10.118 2/26/21

10.109 (a) Seventh Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of September 10, 2020, between World Financial Network Credit Card Master Note Trust and MUFG Union Bank, N.A., formerly known as Union Bank, N.A.

10-K 10.119 2/26/21

*10.110 (a) Eighth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of August 1, 2022, between World Financial Network Credit Card Master Note Trust and U.S.

Bank National Association, as successor to MUFG Union Bank, N.A.

10.111 (a) Third Amended and Restated Series 2009-VFC1 Supplement, dated as of April 28, 2017, among WFN Credit Company, LLC, Comenity Bank and Deutsche Bank Trust Company Americas.

10-Q 10.7 8/7/17

10.112 (a) First Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of October 19, 2017, among WFN Credit Company, LLC, Comenity Bank and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Second Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of August 31, 2018, among WFN Credit Company, LLC, Comenity Bank and U.S.

10-Q 10.4 11/8/17

10.113 (a) Second Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of August 31, 2018, among WFN Credit Company, LLC, Comenity Bank and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Incorporated by Reference

Third Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of June 28, 2019, among WFN Credit Company, LLC, Comenity Bank and U.S.

10-K 10.115 2/26/19

10.114 (a) Third Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of June 28, 2019, among WFN Credit Company, LLC, Comenity Bank and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Fourth Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of April 17, 2020, among WFN Credit Company, LLC, Comenity Bank and U.S.

10-K 10.123 2/26/21

10.115 (a) Fourth Amendment to Third Amended and Restated Series 2009-VFC1 Supplement, dated as of April 17, 2020, among WFN Credit Company, LLC, Comenity Bank and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of November 1, 2016, between World Financial Capital Master Note Trust and Deutsche Bank Trust Company Americas.

First Amendment to Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of November 1, 2017, between World Financial Capital Master Note Trust and U.S.

10-K 10.124 2/26/21

10.116 (a) Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of November 1, 2016, between World Financial Capital Master Note Trust and Deutsche Bank Trust Company Americas.

10-K 10.102 2/27/17

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

10.117 (a) First Amendment to Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of November 1, 2017, between World Financial Capital Master Note Trust and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Second Amendment to Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of September 28, 2018, between World Financial Capital Master Note Trust and U.S.

10-Q 10.5 11/8/17

10.118 (a) Second Amendment to Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of September 28, 2018, between World Financial Capital Master Note Trust and U.S.

Bank National Association (successor to Deutsche Bank Trust Company Americas).

Amended and Restated Credit Agreement, dated as of June 14, 2017, by and among Alliance Data Systems Corporation, certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other agents and lenders.

First Amendment to Amended and Restated Credit Agreement and Incremental Amendment, dated as of June 16, 2017, by and among Alliance Data Systems Corporation, and certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other lenders.

Second Amendment to Amended and Restated Credit Agreement, dated as of July 5, 2018, by and among Alliance Data Systems Corporation, and certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other lenders.

Third Amendment to Amended and Restated Credit Agreement, dated as of April 30, 2019, by and among Registrant, and certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other lenders.

Fourth Amendment to Amended and Restated Credit Agreement, dated as of December 20, 2019, by and among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

10-Q 10.3 11/6/18

*10.119 (a) Series 2022-VFN1 Indenture Supplement, dated as of June 17, 2022, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

10.120 (a) Amended and Restated Credit Agreement, dated as of June 14, 2017, by and among Bread Financial Holdings, Inc., certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other agents and lenders.

8-K 10.1 6/19/17

10.121 (a) First Amendment to Amended and Restated Credit Agreement and Incremental Amendment, dated as of June 16, 2017, by and among Bread Financial Holdings, Inc., and certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other lenders.

8-K 10.2 6/19/17

10.122 (a) Second Amendment to Amended and Restated Credit Agreement, dated as of July 5, 2018, by and among Bread Financial Holdings, Inc., and certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other lenders.

10-Q 10.2 8/7/18

10.123 (a) Third Amendment to Amended and Restated Credit Agreement, dated as of April 30, 2019, by and among Registrant, and certain subsidiaries parties thereto, as guarantors, Wells Fargo Bank, National Association, as Administrative Agent, and various other lenders.

10-Q 10.7 5/6/19

10.124 (a) Fourth Amendment to Amended and Restated Credit Agreement, dated as of December 20, 2019, by and among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders .

8-K 10.2 12/23/19

10.125 (a) Fifth Amendment to Amended and Restated Credit Agreement, dated as of February 13, 2020, by and among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

10-K 10.125 2/28/20

10.126 (a) Sixth Amendment to Amended and Restated Credit Agreement, dated as of September 22, 2020, by and among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

8-K 10.2 9/23/20

Tabl e of Contents

Incorporated by Reference

Fifth Amendment to Amended and Restated Credit Agreement, dated as of February 13, 2020, by and among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

Sixth Amendment to Amended and Restated Credit Agreement, dated as of September 22, 2020, by and among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

Seventh Amendment to Amended and Restated Credit Agreement, dated as of July 9, 2021, by and among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

Indenture, dated as of December 20, 2019, among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee (including the form of the Company’s 4.750% Senior Note due December 15, 2024).

First Supplemental Indenture, dated as of August 6, 2021, among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee under the Indenture dated as of December 20, 2019.

Indenture, dated as of September 22, 2020, among Alliance Data Systems Corporation, certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee (including the form of the Company’s 7.000% Senior Note due January 15, 2026).

Separation and Distribution Agreement, dated as of November 3, 2021, by and between Alliance Data Systems Corporation and Loyalty Ventures Inc.

Transition Services Agreement, dated as of November 5, 2021, by and between Alliance Data Systems Corporation and Loyalty Ventures Inc.

Tax Matters Agreement, dated as of November 5, 2021, between Alliance Data Systems Corporation and Loyalty Ventures Inc.

Employee Matters Agreement, dated as of November 5, 2021, by and between Alliance Data Systems Corporation and Loyalty Ventures Inc.

First Amendment to Employee Matters Agreement, dated as of December 6, 2021, by and between Alliance Data Systems Corporation and Loyalty Ventures Inc.

Filer Description Form Exhibit Filing Date

10.127 (a) Seventh Amendment to Amended and Restated Credit Agreement, dated as of July 9, 2021, by and among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders.

8-K 10.1 7/14/21

10.128 (a) Eighth Amendment to Amended and Restated Credit Agreement, dated as of December 13, 2022, by and among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors, Wells Fargo Bank, National Association, as administrative agent, and various other agents and lenders .

8-K 10.1 12/15/22

10.129 (a) Indenture, dated as of December 20, 2019, among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee (including the form of the Company’s 4.750% Senior Note due December 15, 2024).

8-K 4.1 12/23/19

10.130 (a) First Supplemental Indenture, dated as of August 6, 2021, among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee under the Indenture dated as of December 20, 2019.

10-Q 10.4 11/3/21

10.131 (a) Indenture, dated as of September 22, 2020, among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee (including the form of the Company’s 7.000% Senior Note due January 15, 2026).

8-K 4.1 9/23/20

^10.132 (a) First Supplemental Indenture, dated as of August 6, 2021, among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors and MUFG Union Bank, N.A., as trustee under the Indenture dated as of September 22, 2020.

10-Q 10.5 11/3/21

*21 (a) Subsidiaries of the Registrant

*23.1 (a) Consent of Deloitte & Touche LLP

*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.

Tabl e of Contents

Incorporated by Reference

Registration Rights Agreement, dated as of November 5, 2021, by and among Alliance Data Systems Corporation and Loyalty Ventures Inc.

Subsidiaries of the Registrant

Consent of Deloitte & Touche LLP

Certification of Chief Executive Officer of Alliance Data Systems Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

Certification of Chief Financial Officer of Alliance Data Systems Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

Certification of Chief Executive Officer of Alliance Data Systems Corporation 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.

Certification of Chief Financial Officer of Alliance Data Systems Corporation 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.

The following financial information from Alliance Data Systems Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in Inline XBRL:

Filer Description Form Exhibit Filing Date

*101 (a) The following financial information from Bread Financial Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, formatted in Inline XBRL:

(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*104 (a) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________________________

* Filed herewith

** Furnished herewith

+ Management contract, compensatory plan or arrangement

Pursuant to Item 601(b)(10)(iv) of Regulation S-K, certain identified information has been excluded from this exhibit because it is both not material and would likely cause competitive harm to the registrant if publicly disclosed.

Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

Registrant hereby undertakes to furnish supplementally an unredacted copy of the exhibit or a copy of any omitted schedule upon request by the U.S.

Securities and Exchange Commission.

∧ Certain exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

Alliance Data hereby undertakes to furnish supplementally copies of any of the omitted exhibits upon request by the U.S.

Securities and Exchange Commission.

< Pursuant to Item 601 (b)(10)(iv) of Regulation S-K, certain identified information has been excluded from this exhibit because it is both not material and considered confidential non-public personal information.

Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

Registrant hereby undertakes to furnish supplementally an unredacted copy of the exhibit or a copy of any omitted schedule upon request by the U.S.

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) Alliance Data Systems Corporation

(b) WFN Credit Company

(a) Bread Financial Holdings, Inc.

(b) WFN Credit Company, LLC

1 unchanged sentence

Form 10-K Summary.

Tabl e of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

ALLIANCE DATA SYSTEMS CORPORATION

ALLIANCE DATA SYSTEMS CORPORATION AND SUBSIDIARIES

BREAD FINANCIAL HOLDINGS, INC.

Bread Financial Holdings, Inc.

and Subsidiaries

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

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Notes to Consolidated Financial Statements

Tabl e of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Alliance Data Systems Corporation

To the Stockholders and the Board of Directors of Bread Financial Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Alliance Data Systems Corporation and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021 and the related notes listed in the index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying Consolidated Balance Sheets of Bread Financial Holdings, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related Consolidated Statements of Income, Comprehensive income, Stockholders’ equity, and Cash flows for each of the three years in the period ended December 31, 2022 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company adopted ASC 326, Measurement of Credit Losses on Financial Instruments (“CECL”), using the modified retrospective approach on January 1, 2020.

Emphasis of Matter

As discussed in Note 22 to the financial statements, the Company’s financial statements have been presented with its former LoyaltyOne segment as a discontinued operation.

Further, the Company has adjusted the presentation of its Consolidated Financial Statements from its historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.”

Basis for Opinion

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Critical Audit Matter Description

Effective January 1, 2020, the Company adopted ASC 326 on a modified retrospective approach and applied a Current Expected Credit Loss (“CECL”) model to determine its allowance for credit losses.

Under CECL, the allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of its credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions.

The estimate under the CECL model is significantly influenced by the composition, characteristics and quality of the Company’s portfolio of credit card and other loans, as well as the prevailing economic conditions and forecasts utilized.

In estimating its allowance for credit losses, management utilizes various models and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors.

These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships with credit performance.

The Allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of its credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions.

The estimate under the credit reserving methodology referred to as the Current Expected Credit Loss (CECL) model is significantly influenced by the composition, characteristics, and quality of the Company’s 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.

Principal losses for unpaid interest and fees as well as any adjustments to the Allowance associated with unpaid interest and fees are recorded as a reduction to Interest and fees on

Tabl e of Contents

The Allowance is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness.

In estimating its Allowance for credit losses, for each identified group, management utilizes various models and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors.

These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships, to determine expected credit performance.

The Company’s quantitative estimate of expected credit losses under CECL is impacted by certain forecasted economic factors.

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/s/ Deloitte & Touche LLP

Dallas, Texas

Columbus, Ohio

February 28, 2023

We have served as the Company's auditor since 1998.

Tabl e of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Alliance Data Systems Corporation

To the Stockholders and the Board of Directors of Bread Financial Holdings, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Alliance Data Systems Corporation and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have audited the internal control over financial reporting of Bread Financial Holdings, Inc.

and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 25, 2022 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of the Accounting Standards Codification ASC 326, Measurement of Credit Losses on Financial Instruments and an emphasis of matter paragraph regarding the discontinued operations and adjustments related to the presentation of its Consolidated Financial Statements from its historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.”

Basis for Opinion

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/s/ Deloitte & Touche LLP

Dallas, Texas

Columbus, Ohio

February 28, 2023

ALLIANCE DATA SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF INCOM E

Tabl e of Contents

BREAD FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31,

(in millions, except per share amounts)

2022 2021 2020

(Millions, except per share amounts)

Interest income

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Interchange revenue, net of retailer share arrangements ( 469 ) ( 369 ) ( 332 )

Other 114 156 177

Total non-interest income ( 355 ) ( 213 ) ( 155 )

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Depreciation and amortization 113 92 106

Other 227 222 286

Total non-interest expenses 1,932 1,684 1,731

2 unchanged sentences

Income from continuing operations 224 797 208

Income (loss) from discontinued operations, net of income taxes

Basic income per share (Note 20):

(Loss) income from discontinued operations, net of income taxes ( 1 ) 4 6

Net income $ 223 $ 801 $ 214

Basic income per share

Income from continuing operations $ 4.48 $ 16.02 $ 4.36

Income (loss) from discontinued operations

(Loss) income from discontinued operations $ ( 0.01 ) $ 0.07 $ 0.11

Net income per share $ 4.47 $ 16.09 $ 4.47

Diluted income per share (Note 20):

Diluted income per share

Income from continuing operations $ 4.47 $ 15.95 $ 4.35

Income (loss) from discontinued operations

(Loss) income from discontinued operations $ ( 0.01 ) $ 0.07 $ 0.11

Net income per share $ 4.46 $ 16.02 $ 4.46

Weighted average shares (Note 20):

Weighted average common shares outstanding

Basic 49.9 49.7 47.8

Diluted 50.0 50.0 47.9

See Notes to Consolidated Financial Statements.

ALLIANCE DATA SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOM E

Tabl e of Contents

BREAD FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31,

(in millions)

Other comprehensive income (loss):

2022 2021 2020

Net income $ 223 $ 801 $ 214

Other comprehensive (loss) income

Unrealized (loss) gain on available-for-sale securities ( 25 ) ( 24 ) 22

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Unrealized gain (loss) on cash flow hedges — 1 ( 1 )

Tax benefit (expense)

Tax benefit — — —

Unrealized gain (loss) on cash flow hedges, net of tax — 1 ( 1 )

Unrealized gain on net investment hedge — 20 —

Tax expense — ( 13 ) —

Unrealized gain on net investment hedge, net of tax — 7 —

Foreign currency translation adjustments (inclusive of deconsolidation of $ 54 million, $ 4 million and $ 27 million for the years ended December 31, 2021, 2020 and 2019, respectively, related to the disposition of businesses)

Other comprehensive income, net of tax

Foreign currency translation adjustments (inclusive of deconsolidation of $ 54 million and $ 4 million for the years ended December 31, 2021 and 2020, respectively, related to the disposition of businesses)

Other comprehensive (loss) income, net of tax ( 19 ) 3 95

Total comprehensive income, net of tax $ 204 $ 804 $ 309

See Notes to Consolidated Financial Statements.

ALLIANCE DATA SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEET S

(in millions, except per share amounts)

Tabl e of Contents

BREAD FINANCIAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Millions, except per share amounts)

Cash and cash equivalents $ 3,891 $ 3,046

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2021, $ 11,215 )

21,365 17,399

Allowance for credit losses ( 2,464 ) ( 1,832 )

Credit card and other loans, net 18,901 15,567

Available-for-sale securities

Investment securities 221 239

Property and equipment, net 195 215

Goodwill and intangible assets, net 799 687

Assets of discontinued operations

Other assets 1,400 1,992

Total assets $ 25,407 $ 21,746

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits $ 13,826 $ 11,027

Debt issued by consolidated variable interest entities 6,115 5,453

1 unchanged sentence

Other liabilities 1,309 1,194

Liabilities of discontinued operations

Total liabilities 23,142 19,660

3 unchanged sentences

authorized, 200.0 million shares;

issued, 49.9 million and 117.1 million shares at December 31, 2021 and December 31, 2020, respectively

issued, 49.9 million and 49.8 million shares as of December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 2,192 2,174

Treasury stock, at cost, no shares and 67.4 million shares at December 31, 2021 and December 31, 2020, respectively

(Accumulated deficit) retained earnings

Retained earnings (accumulated deficit) 93 ( 87 )

Accumulated other comprehensive loss ( 21 ) ( 2 )

2 unchanged sentences

See Notes to Consolidated Financial Statements.

ALLIANCE DATA SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUIT Y

Preferred Stock

Tabl e of Contents

BREAD FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Additional

Capital Treasury

Stock Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Stockholders’

(in millions)

Shares Amount

January 1, 2020 115.0 $ 1 $ 3,258 $ ( 6,733 ) $ 5,163 $ ( 100 ) $ 1,589

Other comprehensive income

Stock-based compensation

Issuance of preferred stock

Conversion of preferred stock to common stock

Repurchases of common stock

Dividends and dividend equivalent rights declared ($ 2.52 per common share)

Issuance of shares to employees, net of shares withheld for employee taxes

December 31, 2019

Net income — — — — 214 — 214

Cumulative effect of change in accounting principle — Allowance for credit losses — — — — ( 485 ) — ( 485 )

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Dividends and dividend equivalent rights declared ($ 1.26 per common share)

— — — — ( 60 ) — ( 60 )

Issuance of shares to employees, net of shares withheld for employee taxes 0.2 — ( 1 ) — — — ( 1 )

December 31, 2020 117.1 $ 1 $ 3,427 $ ( 6,733 ) $ 4,832 $ ( 5 ) $ 1,522

Net income — — — — 801 — 801

Other comprehensive income — — — — — 3 3

1 unchanged sentence

Dividends and dividend equivalent rights declared ($ 0.84 per common share)

— — — — ( 42 ) — ( 42 )

Retirement of treasury stock ( 67 ) — ( 1,280 ) 6,733 ( 5,453 ) — —

Spinoff of Loyalty Ventures Inc.

— — — — ( 225 ) — ( 225 )

Issuance of shares to employees, net of shares withheld for employee taxes 0.1 — ( 2 ) — — — ( 2 )

December 31, 2021 49.8 $ 1 $ 2,174 $ — $ ( 87 ) $ ( 2 ) $ 2,086

Net income — — — — 223 — 223

Other comprehensive loss — — — — — ( 19 ) ( 19 )

Stock-based compensation — — 33 — — — 33

Repurchase of common stock ( 0.2 ) — ( 12 ) — — — ( 12 )

Dividends and dividend equivalent rights declared ($ 0.84 per common share)

— — — — ( 43 ) — ( 43 )

Issuance of shares to employees, net of shares withheld for employee taxes 0.3 — ( 3 ) — — — ( 3 )

December 31, 2022 49.9 $ 1 $ 2,192 $ — $ 93 $ ( 21 ) $ 2,265

See Notes to Consolidated Financial Statements

ALLIANCE DATA SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW S

Tabl e of Contents

BREAD FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

(in millions)

2022 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 223 $ 801 $ 214

Adjustments to reconcile net income to net cash provided by operating activities

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Amortization of deferred financing costs 24 31 36

Gain on sale of business

Loss on extinguishment of debt

Amortization of deferred origination costs 86 75 74

Asset impairment charges — — 64

Amortization of deferred origination costs and other charges

Other 67 ( 4 ) ( 36 )

Change in other operating assets and liabilities, net of acquisitions and dispositions

5 unchanged sentences

Change in redemption settlement assets — ( 113 ) ( 41 )

Proceeds from sale of business

Payments for acquired businesses, net of cash and restricted cash — ( 75 ) ( 267 )

Proceeds from sale of credit card loan portfolio

Proceeds from sale of credit card loan portfolios — 512 289

Purchase of credit card loan portfolios ( 1,804 ) ( 110 ) —

Capital expenditures ( 68 ) ( 84 ) ( 54 )

Purchases of available-for-sale securities

Maturities of available-for-sale securities

Purchases of investment securities ( 43 ) ( 93 ) ( 40 )

Maturities of investment securities 30 73 77

Other ( 4 ) 4 26

Net cash (used in) provided by investing activities ( 5,111 ) ( 1,691 ) 1,774

8 unchanged sentences

related to spinoff — ( 127 ) —

Payment of debt extinguishment costs

Payment of deferred financing costs ( 13 ) ( 13 ) ( 19 )

Proceeds from issuance of common stock

Dividends paid ( 43 ) ( 42 ) ( 61 )

Purchase of treasury shares

Other ( 15 ) ( 4 ) 4

Net cash provided by (used in) financing activities 3,267 608 ( 4,167 )

1 unchanged sentence

Change in cash, cash equivalents and restricted cash 4 460 ( 495 )

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted cash at end of year

Cash, cash equivalents and restricted cash at beginning of period 3,923 3,463 3,958

Cash, cash equivalents and restricted cash at end of period $ 3,927 $ 3,923 $ 3,463

SUPPLEMENTAL CASH FLOW INFORMATION

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See Notes to Consolidated Financial Statements.

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

DESCRIPTION OF THE BUSINESS

Alliance Data Systems Corporation (ADSC or, including its consolidated subsidiaries and variable interest entities, the Company) is a leading provider of tech-forward payment and lending solutions, serving customers and consumer-based industries in North America.

Through omnichannel touch points and a comprehensive product suite that includes credit products and Bread ® digital payment solutions, the Company helps its partners drive loyalty and growth, while giving customers greater payment choices.

Through its Comenity-branded financial services, it also offers credit and savings products to consumers.

With the spinoff of its LoyaltyOne ® segment in November 2021, classified as discontinued operations herein, the Company operates in one reportable segment.

BASIS OF PRESENTATION

Bread Financial Holdings, Inc.

(BFH) or, including its consolidated subsidiaries and variable interest entities (VIEs), the Company) is a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions.

The Company creates opportunities for its 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, the Company delivers growth for its partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later products such as installment loans and “split-pay” offerings.

The Company also offers direct-to-consumer solutions that give customers more access, choice and freedom through its branded Bread Cashback TM American Express ® Credit Card and Bread Savings TM products .

Effective March 23, 2022, Alliance Data Systems Corporation was renamed Bread Financial Holdings, Inc., and on April 4, 2022, the Company changed its New York Stock Exchange ticker from “ADS” to “BFH”.

Neither the name change nor the ticker change affected the Company’s legal entity structure, nor did either change have an impact on its Consolidated Financial Statements.

The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation.

In particular, as a result of the spinoff of its LoyaltyOne segment as discontinued operations, the Company has adjusted the presentation of its Consolidated Financial Statements from its historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.” While neither the Company nor any of its subsidiaries are considered a “bank” within the meaning of the Bank Holding Company Act, the changes from the historical presentation, to the bank holding company presentation, the most significant of which reflect a reclassification of Interest expense within Net interest income, are intended to reflect the Company’s operations going forward and better align the Company with its peers for comparability purposes.

As noted above, the Company’s Consolidated Financial Statements have been presented with its LoyaltyOne segment as discontinued operations.

See Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation,” for more information.

For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation, in particular, as a result of the spinoff of its LoyaltyOne segment and its classification as discontinued operations, the Company has adjusted the presentation of its Consolidated Financial Statements from its historical approach under Securities and Exchange Commission (SEC) Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies”, to Article 9, which is applicable to “bank holding companies” (BHCs).

While neither the Company nor any of its subsidiaries are considered a “bank” within the meaning of the Bank Holding Company Act, the changes from the historical presentation, to the BHC presentation, the most significant of which reflect a reclassification of Interest expense within Net interest income, are intended to reflect the Company’s operations going forward and better align the Company with its peers for comparability purposes.

For a discussion of the prior period reclassifications, please refer to Note 22, “Discontinued Operations and Bank Holding Company Presentation” in our Annual Report on Form 10-K for the year ended December 31, 2021.

As noted above, the Company’s Consolidated Financial Statements have been presented with its LoyaltyOne segment as discontinued operations, see Note 22, “Discontinued Operations”, for more information.

SIGNIFICANT ACCOUNTING POLICIES

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the table below lists such accounting policies and the related Notes.

The remaining significant accounting policies applied by the Company are included below.

Significant Accounting Policy

Credit Card and Other Loans

Allowance for Credit Losses

Transfers of Financial Assets

Securitizations

Available-for-Sale Securities

Property and Equipment

Property and Equipment, Net

Goodwill and Intangible Assets, Net

Intangible Assets, Net

Goodwill and Intangible Assets, Net

Stock Compensation Expense

Stockholders' Equity

Earnings Per Share

The remaining significant accounting policies applied by the Company are included following the table.

Significant Accounting Policy Note Number Note Title

Credit Card and Other Loans Note 2 Credit Card and Other Loans

Allowance for Credit Losses Note 3 Allowance for Credit Losses

Transfers of Financial Assets Note 4 Securitizations

Investment Securities Note 5 Investment Securities

Property and Equipment Note 6 Property and Equipment, Net

Goodwill Note 7 Goodwill and Intangible Assets, Net

Intangible Assets, Net Note 7 Goodwill and Intangible Assets, Net

Leases Note 9 Leases

Stock Compensation Expense Note 18 Stockholders' Equity

Income Taxes Note 19 Income Taxes

Earnings Per Share Note 20 Earnings Per Share

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of ADSC and all subsidiaries in which the Company has a controlling financial interest.

The accompanying consolidated financial statements include the accounts of BFH and all subsidiaries in which the Company has a controlling financial interest.

For voting interest entities, a controlling financial interest is determined when the Company is able to exercise control over the operating and financial decisions of the investee.

For variable interest entities (VIEs), which are themselves determined based on the amount and characteristics of the equity in the entity, the Company has a controlling financial interest when it is determined to be the primary beneficiary.

The primary beneficiary is the party having both the power to exercise control over the activities that most significantly impact the

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

VIE’s financial performance, as well as the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE.

The Company is the primary beneficiary of its securitization trusts and therefore consolidates these trusts within its Consolidated Financial Statements.

The primary beneficiary is the party having both the power to exercise control over the activities that most significantly impact the VIE’s financial performance, as well as the obligation to absorb the losses of, or the right to receive the benefits from, the VIE that could potentially be significant to that VIE.

The Company is the primary beneficiary of its securitization trusts (the Trusts) and therefore consolidates these Trusts within its Consolidated Financial Statements.

In cases where the Company does not have a controlling financial interest, but is able to exert significant influence over the operating and financial decisions of the entity, the Company accounts for such investments under the equity method.

1 unchanged sentence

Currency Translation

The Company’s monetary assets and liabilities denominated in foreign currencies, for example those of subsidiaries outside the U.S., are translated into U.S.

The Company’s monetary assets and liabilities denominated in foreign currencies, for example those of subsidiaries outside of the United States of America (U.S.), are translated into U.S.

dollars based on the rates of exchange in effect at the end of the reporting period, while non-monetary assets and liabilities are translated based on the rates of exchange in effect as of the date of the transaction giving rise to the asset or liability.

3 unchanged sentences

Gains and losses resulting from transactions in currencies other than the entity’s functional currency are recognized in Other non-interest expenses in the Consolidated Statements of Income, and were insignificant for each of the periods presented.

Historically, the Company’s impacts from foreign currency exchange rate fluctuations were most prevalent within businesses that have been spun off, such as LoyaltyOne, or sold, such as Epsilon, both of which are reflected as discontinued operations herein.

Historically, the Company’s impacts from foreign currency exchange rate fluctuations were most prevalent within businesses that have been spun off, such as LoyaltyOne.

Amounts Based on Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments about future events that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, as well as the reported amounts of income and expenses during the reporting periods.

The most significant of those estimates and judgments relate to the Company’s Allowance for credit losses;

The most significant of those estimates and judgments relate to the Company’s Allowance for credit losses and Provision for income taxes;

actual results could differ.

4 unchanged sentences

Represent revenue earned on customer accounts owned by the Company, and is recognized in the period earned in accordance with the contractual provisions of the credit agreements.

Interest and fees continue to accrue on all accounts, except in limited circumstances, until the account balance and all related interest and fees are paid or charged-off, in the month during which an account becomes 180 days past due for credit card loans or 120 days past due for installment loans.

Charge-offs for unpaid interest and fees, as well as any adjustments to the allowance associated with unpaid interest and fees, are recorded as a reduction of Interest and fees on loans.

Direct loan origination costs on credit card and other loans are deferred and amortized on a straight-line basis over a one-year period for credit card loans, or for installment loans over the life of the loan, and are recorded as a reduction to Interest and fees on loans.

Direct loan origination costs on Credit card and other loans are deferred and amortized on a straight-line basis over a one-year period for credit card loans, or for BNPL loans over the life of the loan, and are recorded as a reduction to Interest and fees on loans.

As of December 31, 2022 and 2021, the remaining unamortized deferred direct loan origination costs were $ 46 million and $ 48 million, respectively, and included in Total credit card and other loans.

Interest on cash and investment securities:

Represents revenue earned on cash and cash equivalents as well as investments in debt and equity securities, and is recognized in the period earned.

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Interest on cash and investment securities:

Represents revenue earned on cash and cash equivalents as well as investments

in debt and equity securities, and is recognized in the period earned.

Interchange revenue, net of retailer share arrangements:

1 unchanged sentence

Revenue earned from merchants, including our brand partners, primarily consists of merchant and interchange fees, which are transaction fees charged to the merchant for the processing of credit card transactions and are recognized at the time the cardholder transaction occurs.

Our credit card program agreements may also provide for royalty payments to our brand partners based on purchased volume, or if certain contractual incentives are met such as if the economic performance of the program exceeds a contractually defined threshold, or payments for new accounts.

Our credit card program agreements may also provide for royalty payments to our brand partners based on purchased volume or if certain contractual incentives are met, such as if the economic performance of the program exceeds a contractually defined threshold, or for payments for new accounts.

These amounts are recorded as a reduction of revenue in the period incurred.

4 unchanged sentences

Such costs are deferred and recognized on a straight-line basis over the term of the related agreement.

Depending on the nature of the contract costs, the amortization is recorded as a reduction to Non-interest income, or a charge to Non-interest expenses, in the Company’s consolidated statements of income.

Amortization of contract costs recorded as a reduction to Interchange revenue, net of retailer share arrangements was $ 64 million, $ 65 million and $ 72 million for the years ended December 31, 2021, 2020 and 2019, respectively;

Depending on the nature of the contract costs, the amortization is recorded as a reduction to Non-interest income, or as a charge to Non-interest expenses, in the Company’s Consolidated Statements of Income.

Amortization of contract costs recorded as a reduction of Interchange revenue, net of retailer share arrangements was $ 72 million, $ 64 million and $ 65 million for the years ended December 31, 2022, 2021 and 2020, respectively;

amortization of contract costs recorded in Non-interest expenses totaled $ 12 million, $ 11 million and $ 12 million for the years ended December 31, 2022, 2021 and 2020, respectively.

1 unchanged sentence

The Company performs an impairment assessment when events or changes in circumstances indicate that the carrying amount of contract costs may not be recoverable.

For the year ended December 31, 2020, due to the global COVID-19 pandemic and resulting retail store closures and significant declines in credit sales, the Company recognized an impairment charge of $ 38 million in Non-interest expenses in its Consolidated Statement of Income.

For the year ended December 31, 2020, due to the COVID-19 pandemic and resulting retail store closures and significant declines in credit sales, the Company recognized an impairment charge of $ 38 million in Non-interest expenses in its Consolidated Statement of Income.

No impairment charges were recognized in either of the years ended December 31, 2022 or 2021.

2 unchanged sentences

As of December 31, 2022 and 2021, cash and due from banks was $ 288 million and $ 251 million, respectively, interest-bearing cash balances were $ 3.5 billion and $ 2.7 billion, respectively, and short-term investments were $ 130 million and $ 80 million, respectively.

Restricted cash primarily represents cash restricted for principal and interest repayments of debt issued by consolidated VIE securitization trusts, and is recorded in Other assets on the Consolidated Balance Sheets.

Restricted cash totaled $ 877 million and $ 323 million at December 31, 2021 and 2020, respectively.

Restricted cash primarily represents cash restricted for principal and interest repayments of debt issued by consolidated VIEs, and is recorded in Other assets on the Consolidated Balance Sheets.

Restricted cash totaled $ 36 million and $ 877 million as of December 31, 2022 and 2021, respectively.

Derivative Financial Instruments

2 unchanged sentences

Subject to the criteria set forth in GAAP, the Company will either designate its derivative financial instruments in hedging relationships, or as economic hedges should the criteria in GAAP not be met.

For those derivatives designated in hedging relationships, changes in their fair values, excluding any ineffective portions, are recorded in Accumulated other comprehensive income, net of income taxes, until the hedged transactions affect net income;

the ineffective portions of the derivative financial instruments are recognized through net income.

For those derivatives not designated in hedging relationships, or economic hedges, changes in their fair values are recognized in the Consolidated Statements of Income as they occur.

ALLIANCE DATA SYSTEMS CORPORATION

The Company’s derivative financial instruments were insignificant to the Consolidated Financial Statements for the periods presented.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Company’s derivative financial instruments were immaterial to the Consolidated Financial Statements for the periods presented.

With the spinoff of its LoyaltyOne segment in November 2021, the Company does not hold any derivative financial instruments as of December 31, 2021.

CONCENTRATIONS

We depend on a limited number of large partner relationships for a significant portion of our revenue.

The business generated through our 10 largest partners represented approximately 59 % and 65 %, respectively, of our Total net interest and non-interest income during the years ended December 31, 2021 and 2020.

Business generated through our relationship with Victoria’s Secret & Co.

and its retail affiliates represented approximately 13 % and 14 % of our Total net interest and non-interest income during these same respective periods.

We previously announced the non-renewal of our contract with BJ’s Wholesale Club (BJ’s).

For the year ended December 31, 2021, BJ’s branded co-brand accounts generated approximately 8 % of our Total net interest and non-interest income.

As of December 31, 2021, BJ’s branded co-brand accounts were responsible for approximately 11 % of our Total credit card and other loans.

The Company depends on a limited number of large partner relationships for a significant portion of its revenue.

As of and for the year ended December 31, 2022, the Company’s five largest credit card programs accounted for approximately 47 % of its Total net interest and non-interest income and 41 % of its End-of-period credit card and other loans.

In particular, the Company’s programs with (alphabetically) Ulta Beauty and Victoria’s Secret & Co.

and its retail affiliates each accounted for more than 10% of its Total net interest and non-interest income for the year ended December 31, 2022.

A decrease in business from, or the loss of, any of the Company’s significant partners for any reason, could have a material adverse effect on its business.

The Company previously announced the non-renewal of its contract with BJ’s Wholesale Club (BJ’s) and the sale of the BJ’s portfolio, which closed in late February 2023.

For the year ended December 31, 2022, BJ’s branded co-brand accounts generated approximately 10 % of the Company’s Total net interest and non-interest income.

As of December 31, 2022, BJ’s branded co-brand accounts were responsible for approximately 11 % of the Company’s Total credit card and other loans.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022.

This ASU is elective and is effective upon issuance for all entities, and the adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements.

RECENTLY ADOPTED ACCOUNTING STANDARDS

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminated certain exceptions within Accounting Standards Codification (ASC) 740, “Income Taxes,” and clarified certain aspects of ASC 740 to promote consistency among reporting entities.

Most amendments within the standard were required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company’s adoption of this standard on January 1, 2021 did not have a material impact on its financial position, results of operations or cash flows, and there were no significant changes to accounting policies, business processes or internal controls as a result of adopting the standard.

Effective January 1, 2020, the Company adopted the new credit reserving methodology referred to as Current Expected Credit Loss (CECL), following a modified retrospective transition which resulted in an increase to the Allowance for credit losses of $ 644 million, an increase to net deferred tax assets of $ 159 million, with the offset to the opening balance of Retained earnings, net of income taxes, of $ 485 million.

Under the CECL methodology, the Company utilizes a financial instrument impairment model to establish an allowance based on expected losses over the estimated life of the exposure, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information.

This approach differs from the Company’s historic model prior to January 1, 2020, which was based on an incurred loss approach.

Although there were no significant changes to the Company’s accounting systems or internal controls as a result of adopting the standard, the Company modified certain of its existing controls and added new controls around its loss forecasting models.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On September 28, 2020, the Company acquired 3.5 million preferred Series D Shares of Lon Inc., a Delaware corporation (Bread), for approximately $ 25 million, which represented an approximate 6 % ownership interest in Bread.

On December 3, 2020, the Company acquired the remaining interest in Bread, and accordingly its approximate 6 % interest was remeasured at fair value;

no gain or loss was recognized on the remeasurement.

Consideration for the 100 % ownership of Bread consisted of cash of $ 275 million, equity of $ 149 million with the issuance of 1.9 million shares of the Company’s common stock, and deferred cash consideration of approximately $ 75 million paid in December 2021.

Consideration, net of cash and restricted cash acquired, was $ 491 million.

The following table summarizes the allocation of the consideration and the respective fair values of the assets acquired and liabilities assumed in the transaction, net of cash and restricted cash acquired, as of December 3, 2020 (in millions):

Installment loans

Developed technology

Right of use assets - operating

Deferred tax asset, net

Intangible assets

Total assets acquired

Accounts payable

Accrued expenses

Operating lease liabilities

Debt issued by consolidated variable interest entities

Total liabilities assumed

Net assets acquired, net of cash and restricted cash

The goodwill resulting from the acquisition was not deductible for tax purposes.

Bread utilized certain statutory trusts to securitize its installment loans.

As part of the acquisition, the Company acquired $ 112 million of installment loans restricted for securitization investors.

In addition, the Company assumed two warehouse facilities totaling $ 96 million utilized to fund securitized loans, which were amended in December 2020 and repaid in full in August 2021.

See Note 11, “Borrowings of Long-term and Other Debt,” for more information.

In March 2022, the Financial Accounting Standards Board issued new accounting and disclosure guidance for troubled debt restructurings effective January 1, 2023, with early adoption permitted.

Specifically, the new guidance eliminates the previous recognition and measurement guidance for troubled debt restructurings while enhancing the disclosure requirements for certain loan modifications, including requiring disclosure of gross principal losses by year of loan origination.

Effective January 1, 2023, the Company adopted the guidance, with no significant impact on its financial position, results of operations and regulatory risk-based capital, or anticipated impacts on its operational processes, controls and governance in support of the new guidance.

CREDIT CARD AND OTHER LOANS

The Company’s payment and lending solutions result in the generation of credit card and other loans, which are recorded at the time a cardholder enters into a point-of-sale transaction with a merchant.

The Company’s payment and lending solutions result in the generation 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 amounts due 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 revolve their amounts 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 are primarily installment loans offered to our customers, 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.

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 again are BNPL products such as installment loans and the Company’s “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 are presented on the Consolidated Balance Sheets net of the Allowance for credit losses, and include principal and any related accrued interest and fees.

1 unchanged sentence

an Allowance for credit losses is established for uncollectable interest and fees.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the most part, the Company classifies its credit card and other loans as held for investment.

The Company sells a majority of its credit card loans originated by Comenity Bank and by Comenity Capital Bank, which together are referred to herein as the “Banks,” to securitization master trusts, which are themselves consolidated VIEs, and therefore these loans are restricted for securitization investors.

Primarily, the Company classifies its Credit card and other loans as held for investment.

The Company sells a majority of its credit card loans originated by Comenity Bank (CB) and by Comenity Capital Bank (CCB), which together are referred to herein as the “Banks”, to the Trusts, which are themselves 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 the Company has the intent and ability to hold them for the foreseeable future.

7 unchanged sentences

The Company carries these assets at the lower of aggregate cost or fair value, and continues 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.

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.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Company’s Credit card and other loans were as follows, as of December 31:

(in millions)

Credit card loans $ 21,065 $ 17,217

Installment loans

Installment or other loans 300 182

Total credit card and other loans (1)(2)

21,365 17,399

Allowance for credit losses ( 2,464 ) ( 1,832 )

Credit card and other loans, net $ 18,901 $ 15,567

(1) Includes $ 11.2 billion of credit card and other loans available to settle obligations of consolidated VIEs as of both December 31, 2021 and 2020, respectively.

______________________________

Includes $ 15.4 billion and $ 11.2 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of December 31, 2022 and 2021, respectively.

Includes $ 307 million and $ 224 million, of accrued interest and fees that have not yet been billed to cardholders as of December 31, 2022 and 2021, respectively.

1 unchanged sentence

An account is contractually delinquent if the Company does not receive the minimum payment due by the specified due date.

The Company’s 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, which is typically at 180 days past due for credit card loans and 120 days past due for installment loans.

The Company’s 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;

This collection scoring algorithm then recommends a strategy for collecting on the past due account, including a contact schedule and collections priority.

If, after exhausting all in-house collection efforts, the Company is unable to make a collection it may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table presents the delinquency trends on the Company’s credit card and other loans portfolio based on the principal balances outstanding as of December 31, and excludes amounts that have not yet been billed to cardholders:

based upon the level of risk indicated, a collection strategy is deployed.

If after exhausting all in-house collection efforts the Company is unable to collect on the account, it may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances.

The following table presents the delinquency trends on the Company’s Credit card and other loans portfolio based on the amortized cost:

Aging Analysis of Delinquent Amortized Cost

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31 to 60 days

61 to 90 days

91 or more days delinquent

(in millions)

delinquent 61 to 90 days

delinquent 91 or more days delinquent Total

delinquent Current Total

As of December 31, 2022 $ 444 $ 296 $ 732 $ 1,472 $ 19,559 $ 21,031

As of December 31, 2021 $ 262 $ 186 $ 401 $ 849 $ 16,284 $ 17,133

(1) Installment loan delinquencies have been included with credit card loan delinquencies in the table above, as amounts were insignificant at each period presented.

______________________________

(1) BNPL loan 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 Company excludes unbilled finance charges and fees from its amortized cost basis of Credit card and other loans.

As of December 31, 2022 and 2021, again, accrued interest and fees that have not yet been billed to cardholders were $ 307 million and $ 224 million, respectively, included in Credit card and other loans on the Consolidated Balance Sheets.

From time to time the Company may re-age cardholders’ accounts, which is intended to assist 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 charge-offs.

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.

For the years ended December 31, 2021, 2020 and 2019, the Company’s re-aged accounts represented 1.7 %, 2.8 % and 2.4 %, respectively, of total credit card and other loans.

For the years ended December 31, 2022, 2021 and 2020, the Company’s re-aged accounts as a percentage of total Credit card and other loans represented 1.4 %, 1.7 % and 2.8 %, respectively.

The Company’s re-aging practices comply with regulatory guidelines.

Net Principal Charge-offs

The Company’s net charge-offs include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and fraud losses.

Charged-off interest and fees reduce Interest and fees on loans, while fraud losses are recorded in Card and processing expenses.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Net Principal Losses

The Company’s 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 (including synthetic fraud) 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.

Installment loans, 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 in each month subsequent to 60 days after the receipt of notification of the bankruptcy or death, but in any case not later than 180 days past due.

The Company records the actual charge-offs for unpaid interest and fees as a reduction to Interest and fees on loans, which were $ 456 million, $ 717 million and $ 809 million for the years ended December 31, 2021, 2020 and 2019, respectively.

BNPL loans, 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 in each month subsequent to 60 days after the receipt of notification of the bankruptcy or death, but in any case not later than 180 days past due for credit card loans and 120 days past due for BNPL loans.

The Company records the actual losses for unpaid interest and fees as a reduction to Interest and fees on loans, which were $ 651 million, $ 456 million and $ 717 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Modified Credit Card Loans

Forbearance Programs

In response to the global COVID-19 pandemic, the Company offered forbearance programs, which provided for short-term modifications in the form of payment deferrals and late fee waivers to borrowers who were current as of their most recent billing cycle, prior to the announcement of the forbearance programs.

As of December 31, 2021 and 2020, the amount of credit card loans in these forbearance programs was approximately $ 86 million and $ 157 million, respectively.

Additionally, the Company instituted two short-term forbearance programs with durations of three and six months , which provide concessions consisting primarily of a reduced minimum payment and an interest rate reduction, the balances of which were $ 12 million and $ 67 million as of December 31, 2021 and 2020, respectively.

As a result of legislation enacted by the United States that provided companies with the option to temporarily suspend (a) certain requirements under GAAP for loan modifications directly related to the global COVID-19 pandemic that would otherwise be treated as troubled debt restructurings (TDRs) and (b) any determination that a loan modified as a result of the pandemic is a TDR, these short-term modifications offered by the Company are not considered TDRs.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

As part of the Company’s collections strategy, the Company may offer temporary, short term (six-months or less) forbearance programs in order to improve the likelihood of collections and meet the needs of the Company’s customers.

The Company’s modifications for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced or deferred payment requirements, interest rate reductions and late fee waivers.

The Company does not offer programs involving the forgiveness of principal.

These temporary loan modifications may assist in cases where the Company believes the customer will recover from the short-term hardship and resume scheduled payments.

Under these forbearance modification programs, those accounts receiving relief may not advance to the next delinquency cycle, including to charge-off, in the same time frame that would have occurred had the relief not been granted.

The Company evaluates its forbearance modification programs to determine if they represent a more than insignificant delay in payment, in which case they would then be considered a troubled debt restructuring (TDR).

Loans in these short term programs that are determined to be TDR’s, will be included as such in the disclosures below.

Credit Card Loans Modified as TDRs

1 unchanged sentence

In instances where cardholders are experiencing financial difficulty, the Company may modify its 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 TDRs, exclusive of forbearance programs described above.

Modifications, including for temporary hardship and permanent workout programs, include concessions consisting primarily of a reduced minimum payment and an interest rate reduction.

such credit card loans are classified as TDRs, exclusive of the forbearance programs described above.

Modifications, including for temporary hardship and permanent workout programs, include concessions consisting primarily of a reduced minimum payment, late fee waiver, and an interest rate reduction.

The temporary programs’ concessions remain in place for a period no longer than twelve months, while the permanent programs remain in place through the payoff of the credit card loans if the cardholder complies with the terms of the program.

Additionally, the Company instituted two temporary hardship programs with durations of three and six months with similar terms to our short-term forbearance programs described above.

As of December 31, 2021 and 2020, the outstanding balance of credit card loans in these two short-term temporary hardship programs treated as troubled debt restructurings totaled approximately $ 9 million and $ 40 million, respectively.

TDR 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 the Company’s temporary hardship and permanent 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.

TDRs are collectively evaluated for impairment on a pooled basis.

In measuring the appropriate allowance for credit losses, these modified credit card loans are included in the general pool of credit card loans, with the allowance determined under a contingent loss model.

The Company’s impaired credit card loans represented less than 3 % of total credit card loans as of December 31, 2021 and 2020, respectively.

TDRs are collectively evaluated for impairment on a pooled basis in measuring the appropriate Allowance for credit losses.

The Company’s impaired credit card loans represented 1 % and 2 % of total credit card loans for year ended December 31, 2022 and 2021, respectively.

As of those same dates, the Company’s recorded investment in impaired credit card loans was $ 257 million and $ 281 million, respectively, with an associated Allowance for credit losses of $ 70 million and $ 81 million, respectively.

The average recorded investment in impaired credit card loans was $ 383 million and $ 412 million for the years ended December 31, 2021 and 2020, respectively.

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

The Company recognized $ 26 million, $ 30 million and $ 23 million for the years ended December 31, 2021, 2020 and 2019, respectively, in interest income associated with credit card loans in modification programs, during the period that such loans were impaired.

The average recorded investment in impaired credit card loans was $ 257 million and $ 383 million for the year ended December 31, 2022 and 2021, respectively.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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 modification programs.

The Company recognized $ 15 million, $ 26 million and $ 30 million for the year ended December 31, 2022, 2021 and 2020, respectively, in interest income associated with credit card loans in modification programs, during the period that such loans were impaired.

The following table provides additional information regarding credit card loans modified as TDRs for the years ended December 31:

Restructurings

(Dollars in millions)

Restructurings Pre-

Balance Post-

Balance Number of

Restructurings Pre-

Balance Post-

(Millions, except for Number of restructurings)

Troubled debt restructurings 149,815 $ 227 $ 227 171,993 $ 254 $ 254

1 unchanged sentence

the probability of default is factored into the Allowance for credit losses:

Restructurings

(Dollars in millions)

Restructurings Outstanding

Balance Number of

Restructurings Outstanding

(Millions, except for Number of restructurings)

Troubled debt restructurings that subsequently defaulted 63,726 $ 88 114,531 $ 154

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Credit Quality

8 unchanged sentences

In certain limited circumstances there are customer accounts for which a Vantage score is not available and the Company uses alternative sources to assess credit risk and predict behavior.

The table below excludes 0.1 % of our total credit card loans balance at each of December 31, 2021 and 2020, representing those customer accounts for which a Vantage credit score is not available.

The table below excludes 0.6 % and 0.1 % of the total credit card loans balance as of December 31, 2022 and 2021, respectively, representing those customer accounts for which a Vantage credit score is not available.

The following table reflects the distribution of the Company’s credit card loans by Vantage score as of December 31:

Higher 601 to

Credit card loans 62 % 26 % 12 % 62 % 26 % 12 %

The Company’s credit card loans are revolving as they do not have stated maturities, and therefore are exempted from certain vintage disclosures otherwise required under GAAP.

Installment Loans

The amortized cost basis of the Company’s installment loans totaled $ 182 million and $ 118 million as of December 31, 2021 and 2020, respectively.

As of December 31, 2021, approximately 84 % of these loans were originated by customers with Fair Isaac Corporation (FICO) scores of 660 or above, and approximately 16 % of these loans were originated by customers with FICO scores below 660.

The amortized cost basis of the Company’s BNPL loans totaled $ 299 million and $ 182 million as of December 31, 2022 and 2021, respectively.

As of December 31, 2022, approximately 86 % of these loans were originated with customers with Fair Isaac Corporation (FICO) scores of 660 or above, and correspondingly approximately 14 % of these loans were

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

originated with customers with FICO scores below 660.

Similarly, as of December 31, 2021, approximately 84 % and 16 % of these loans were originated by customers with FICO scores of 660 or above, and below 660, respectively.

Unfunded Loan Commitments

The Company is active in originating private label and co-brand credit cards in the United States.

The Company is active in originating private label and co-brand credit cards in the U.S.

The Company manages potential credit risk in its 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.

Cardholders reside throughout the United States and are not significantly concentrated in any one area.

Cardholders reside throughout the U.S.

and are not significantly concentrated in any one geographic area.

The Company manages its potential risk in credit commitments by limiting the total amount of credit, both by individual customer and in total, by monitoring the size and maturity of its portfolios and applying consistent underwriting standards.

The Company has the unilateral ability to cancel or reduce unused credit card lines at any time.

Unused credit card lines available to cardholders totaled approximately $ 112 billion and $ 108 billion at December 31, 2021 and 2020, respectively.

While these amounts represented the total available unused credit card lines, the Company has not experienced and does not anticipate that all cardholders will access their entire available line at any given point in time.

Unused credit card lines available to cardholders totaled approximately $ 128 billion and $ 112 billion as of December 31, 2022 and 2021, respectively.

While this amount represented the total available unused credit card lines, the Company has not experienced and does not anticipate that all cardholders will access their entire available line at any given point in time.

Portfolio Sales

As of December 31, 2021 and 2020, there were no credit card loans held for sale.

During the years ended December 31, 2021 and 2020, the Company sold credit card loan portfolios for cash consideration of approximately $ 512 million

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

and $ 289 million, respectively, and recognized associated gains of approximately $ 10 million and $ 20 million, respectively, which were recorded in Other non-interest income in the Consolidated Statements of Income.

Also during the year ended December 31, 2020, the Company recorded $ 8 million in portfolio valuation adjustments, which are reflected in Non-interest expenses, and as of September 2020, one of the Company’s credit card loan portfolios totaling approximately $ 82 million was transferred from held for sale to held for investment, and was included in Total credit card and other loans as of December 31, 2020.

No such valuation adjustments or transfers occurred in 2021.

In August 2021, the Company sold a credit card portfolio for cash consideration of approximately $ 512 million and recognized a gain of approximately $ 10 million on the transaction, which was recorded in Other non-interest income.

As of December 31, 2022 and December 31, 2021, there were no credit card loans held for sale and no portfolio sales were made during the year end December 31, 2022.

The Company previously announced the non-renewal of its contract with BJ’s and the sale of the BJ’s portfolio, which closed in late February 2023, for a total preliminary purchase price of approximately $ 2.5 billion on a loan portfolio of approximately $ 2.3 billion, subject to customary purchase price adjustments.

Portfolio Acquisitions

During the year ended December 31, 2021, the Company acquired three credit card loan portfolios for aggregate cash consideration of approximately $ 110 million, which consisted of approximately $ 106 million of credit card loans and $ 4 million of purchased credit card relationships intangible assets.

No portfolio acquisitions were made during the year ended December 31, 2020.

In April 2022, the Company acquired a credit card portfolio for cash consideration of approximately $ 249 million, which primarily consisted of credit card loans, and also included intangible assets (primarily purchased credit card relationships) and rewards liabilities.

For Consolidated Financial Statement disclosure purposes, allocation of the purchase price to the credit card loans and intangible assets acquired is not significant.

In October 2022, the Company acquired the AAA credit card portfolio for cash consideration of approximately $ 1.6 billion, which primarily consisted of $ 1.5 billion of credit card loans, and also included $ 118 million of intangible assets (primarily purchased credit card relationships) and reward liabilities, and is subject to customary purchase price adjustments.

ALLOWANCE FOR CREDIT LOSSES

Effective January 1, 2020, the Company adopted the CECL model on a modified retrospective approach and applied a CECL model to determine its allowance for credit losses.

Reserves for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative information continues to be reported in accordance with the incurred loss methodology in effect for prior periods.

The Allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of its Credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions.

The estimate under the credit reserving methodology referred to as the Current Expected Credit Loss (CECL) model is significantly influenced by the composition, characteristics and quality of the Company’s 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.

Charge-offs of principal amounts, net of recoveries are deducted from the allowance.

Charge-offs for unpaid interest and fees as well as any adjustments to the allowance associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans.

Principal losses, net of recoveries are deducted from the Allowance.

Principal losses for unpaid interest and fees as well as any adjustments to the Allowance associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans.

The Allowance is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness.

These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships with credit performance.

These models utilize historical data and applicable macroeconomic variables with statistical analysis and

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

behavioral relationships, to determine expected credit performance.

The Company’s quantitative estimate of expected credit losses under CECL is impacted by certain forecasted economic factors.

1 unchanged sentence

In addition to the quantitative estimate of expected credit losses, the Company also incorporates qualitative adjustments for certain factors such as Company-specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the Allowance for credit losses reflects the Company’s best estimate of current expected credit losses.

As permitted by GAAP, the Company excludes unbilled finance charges from its amortized cost basis of credit card and other loans.

As of December 31, 2021 and 2020, unbilled finance charges were $ 224 million and $ 219 million, respectively, and included in Credit card and other loans on the Consolidated Balance Sheets.

Credit Card Loans

The Company uses a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics.

As part of its CECL implementation, the Company evaluated multiple risk characteristics of its credit card loans portfolio, and determined delinquency status and credit quality to be the most significant characteristics for estimating expected credit losses.

To estimate its allowance for credit losses, the Company segregates its credit card loans into four groups with similar risk characteristics, on the basis of delinquency status and credit quality risk score.

These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Company has evaluated multiple risk characteristics across its credit card loans portfolio, and determined delinquency status and credit quality to be the most significant characteristics for estimating expected credit losses.

To estimate its Allowance for credit losses, the Company segments its 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 the Company’s credit card loans, payments were applied to the measurement date balance with no payments allocated to future purchase activity.

The Company uses a combination of First In First Out (FIFO) and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) methodology to model balance paydown.

The Company’s groups of pooled financial assets with similar risk characteristics and their estimated life is as follows:

Estimated Life

Group A (Current, risk score - high)

Group B (Current, risk score - low)

Group C (Delinquent, risk score - high)

Group D (Delinquent, risk score - low)

Installment Loans

The allowance for credit losses for installment loans utilizes a migration model over the remaining life of the loans.

The model segmented accounts based on three attributes:

delinquency, risk score and remaining term.

As of December 31, 2021 and 2020, the allowance for credit losses related to installment loans was $ 14 million and $ 6 million, respectively.

The Company uses 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.

The Company measures its 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 December 31, 2022 and 2021, the Allowance for credit losses on BNPL loans was $ 21 million and $ 14 million, respectively.

Allowance for Credit Losses Rollforward

The following table presents the Company’s Allowance for credit losses for its Credit card and other loans.

With the acquisition of Bread in December 2020, the Company acquired certain installment loans which represented a separate portfolio segment;

With the acquisition of Lon, Inc.

in December 2020, the Company acquired certain BNPL loans which represented a separate portfolio segment;

the amount of the related Allowance for credit losses was insignificant and therefore has been included in the table below.

The amounts presented are for the years ended December 31:

(in millions)

2022 2021 2020

Beginning balance (1)

$ 1,832 $ 2,008 $ 1,815

Provision for credit losses (2)

1,594 544 1,266

Change in estimate for uncollectible unpaid interest and fees 10 — 10

Net principal charge-offs (2)

Net principal losses (3)

( 972 ) ( 720 ) ( 1,083 )

Ending balance $ 2,464 $ 1,832 $ 2,008

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

(2) Principal charge-offs are presented net of recoveries of $ 163 million, $ 205 million and $ 234 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(3) Includes an increase of $ 644 million as of January 1, 2020, related to the adoption of the CECL methodology.

During the year ended December 31, 2021, the decrease in the allowance for credit losses was due to improved credit performance, lower net charge-offs and improving macroeconomic variables.

In addition, improvements in customer payment behavior, which include the effects of government stimulus actions, have contributed to a reduction in credit card and other loans, as well as delinquencies, which also contributed to the reduction in the allowance for credit losses.

During the year ended December 31, 2020, the increase in the allowance for credit losses was due to a $ 644 million cumulative-effect adjustment for the adoption of the CECL methodology as well as deterioration of the macroeconomic outlook due to the global COVID-19 pandemic.

ALLIANCE DATA SYSTEMS CORPORATION

______________________________

(1) The 2020 Beginning balance includes an increase of $ 644 million as of January 1, 2020, related to the adoption of the CECL methodology.

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

(3) Net principal losses are presented net of recoveries of $ 187 million, $ 163 million and $ 205 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Net principal losses for the year ended December 31, 2022 include a $ 5 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 comparative periods.

For the year ended December 31, 2022, the factors that influenced the increase in the Allowance for credit losses are a higher End-of-period credit card and other loan balance, a higher reserve rate due to economic scenario weightings in the

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Company’s credit reserve modeling as a result of weakening in macroeconomic indicators, elevated inflation, and the increased cost of overall consumer debt .

SECURITIZATIONS

2 unchanged sentences

Transfers of financial assets that are not accounted for as a sale are treated as a financing.

The Company regularly securitizes the majority of its credit card loans through the transfer of those loans to one of its master trusts (the Trusts).

The Company regularly securitizes the majority of its credit card loans through the transfer of those loans to one of its Trusts.

The Company performs the decision making for the Trusts, as well as servicing the cardholder accounts that generate the credit card loans held by the Trusts.

In its capacity as a servicer, the Company administers the loans, collects payments and charges-off uncollectible balances.

Servicing fees are earned by a subsidiary of ADSC, which are eliminated in consolidation.

The Trusts are VIEs because they have insufficient equity at risk to finance their activities – being the issuance of debt securities and notes, collateralized by the underlying credit card loans.

Servicing fees are earned by a subsidiary of the Company, which are eliminated in consolidation.

The Trusts are consolidated VIEs because they have insufficient equity at risk to finance their activities – being the issuance of debt securities and notes, collateralized by the underlying credit card loans.

Because the Company performs the decision making and servicing for the Trusts, it has the power to direct the activities that most significantly impact the Trusts’ economic performance (the collection of the underlying credit card loans).

11 unchanged sentences

During the years ended December 31, 2022, 2021 and 2020, no such triggering events occurred.

The following tables provide the total securitized credit card loans and related delinquencies as of December 31, and net principal charge-offs of securitized credit card loans for the years ended December 31:

(in millions)

The following tables provide the total securitized credit card loans and related delinquencies as of December 31, and net principal losses of securitized credit card loans for the years ended December 31:

Total credit card loans – available to settle obligations of consolidated VIEs $ 15,383 $ 11,215

principal amount of credit card loans 91 days or more past due $ 307 $ 159

(in millions)

Net charge-offs of securitized principal

ALLIANCE DATA SYSTEMS CORPORATION

2022 2021 2020

Net principal losses of securitized credit card loans $ 554 $ 453 $ 756

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

AVAILABLE-FOR-SALE SECURITIES

The Company’s available-for-sale (AFS) securities consist of available-for-sale debt securities, equity securities, U.S.

Treasury bonds and mutual funds.

These investments are carried at fair value on the Consolidated Balance Sheets within Other assets.

INVESTMENT SECURITIES

The Company’s investment securities consist of available-for-sale (AFS) securities, which are debt securities and mutual funds.

The Company also holds equity securities within its investment securities portfolio.

Collectively, these investments are carried at fair value on the Consolidated Balance Sheets within Investment securities.

For any AFS debt securities in an unrealized loss position, the CECL methodology requires estimation of the lifetime expected credit losses which then would be recognized in the Consolidated Statements of Income by establishing, or adjusting an existing allowance for those credit losses.

3 unchanged sentences

Gains and losses on investments in equity securities are recorded in Other non-interest expenses in the Consolidated Statements of Income.

Realized gains and losses are recognized upon disposition of the securities, using the specific identification method.

The table below reflects unrealized gains and losses as of December 31:

(in millions)

Realized gains and losses are recognized upon disposition of the investment securities, using the specific identification method.

The table below reflects unrealized gains and losses as of December 31, 2022 and December 31, 2021, respectively:

Cost Unrealized

Gains Unrealized

Losses Fair Value Amortized

Cost Unrealized

Gains Unrealized

Losses Fair Value

Available-for-sale securities $ 175 $ — $ ( 23 ) $ 152 $ 173 $ 4 $ ( 2 ) $ 175

The following table provides information about the Company’s AFS debt securities with gross unrealized losses, as of December 31, 2021, and the length of time such individual securities have been in a continuous unrealized loss position.

The gross unrealized losses were insignificant on AFS debt securities as of December 31, 2020.

Less than 12 months

12 Months or Greater

(in millions)

Equity securities $ 69 $ — $ — $ 69 $ 64 $ — $ — $ 64

Total $ 244 $ — $ ( 23 ) $ 221 $ 237 $ 4 $ ( 2 ) $ 239

The following tables provide information about the Company’s AFS debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2022 and December 31, 2021, respectively:

December 31, 2022

Less than 12 months 12 Months or Greater Total

Fair Value Unrealized

Losses Fair Value Unrealized

Available-for-sale securities $ 95 $ ( 9 ) $ 57 $ ( 14 ) $ 152 $ ( 23 )

At December 31, 2021, the amortized cost and estimated fair value of the Company’s AFS securities by contractual maturity, are as follows:

(in millions)

Due in one year or less (1)

Due after one year through five years

Due after five years through ten years

Due after ten years

(1) Includes mutual funds, which do not have a stated maturity.

There were no realized gains or losses from the sale of any AFS securities for the years ended December 31, 2021, 2020 and 2019.

ALLIANCE DATA SYSTEMS CORPORATION

Total $ 95 $ ( 9 ) $ 57 $ ( 14 ) $ 152 $ ( 23 )

December 31, 2021

Less than 12 months 12 Months or Greater Total

Fair Value Unrealized

Losses Fair Value Unrealized

Available-for-sale securities $ 57 $ ( 1 ) $ 15 $ ( 1 ) $ 72 $ ( 2 )

Total $ 57 $ ( 1 ) $ 15 $ ( 1 ) $ 72 $ ( 2 )

As of December 31, 2022, the amortized cost and estimated fair value of the Company’s AFS debt securities, which are mortgage-backed securities with no stated maturities, was $ 175 million and $ 152 million, respectively.

There were no realized gains or losses from the sale of any investment securities for the years ended December 31, 2022, 2021 and 2020.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

4 unchanged sentences

As of December 31, 2022, the Company’s furniture and equipment has remaining estimated useful lives ranging from less than one year to 10 years.

Leasehold improvements are depreciated over the lesser of the remaining terms of the respective leases, or the economic lives of the improvements, and range from less than one year to 17 years , at December 31, 2021.

Costs associated with the acquisition or development of internal-use software are also capitalized and recorded in Property and equipment, net.

Once the internal-use software is ready for its intended use, the cost is amortized on a straight-line basis over the software’s estimated useful life.

As of December 31, 2021, the Company’s internal-use software has remaining estimated useful lives ranging from less than one year to four years .

As of December 31, 2022, the Company’s internal-use software has remaining estimated useful lives ranging from less than one year to 10 years.

The Company reviews long-lived assets and asset groups for impairment whenever events or circumstances indicate their carrying amounts may not be recoverable.

An impairment is recognized if the carrying amount is not recoverable and exceeds the asset or asset group’s fair value.

With the Bread acquisition on December 3, 2020, the Company acquired $ 91 million of developed technology recorded in Property and equipment, net, which is being amortized over a 5 year life;

the Company also impaired $ 4 million in capitalized software with the acquisition, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020.

Also during the fourth quarter of 2020, the Company determined it would reduce its real estate footprint and cease use of certain properties with the intent to sublease, triggering an impairment analysis of certain property and equipment.

As a result of the analysis, the Company recorded asset impairment charges of $ 3 million and accelerated depreciation expense of $ 25 million, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020.

Property and equipment consist of the following as of December 31:

(in millions)

Property and equipment consists of the following as of December 31:

Internal-use computer software and development $ 305 $ 263

2 unchanged sentences

Construction in progress 9 25

Total 482 471

Accumulated depreciation and amortization ( 287 ) ( 256 )

Property and equipment, net

Property and equipment $ 195 $ 215

Depreciation expense totaled $ 19 million, $ 26 million and $ 57 million for the years ended December 31, 2022, 2021 and 2020, respectively, and includes purchased software.

4 unchanged sentences

No goodwill impairment has been recognized during any of the years ended December 31, 2022, 2021, or 2020.

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020, respectively, were as follows (in millions):

Balance at December 31, 2019

The changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021, respectively, were as follows:

Balance as of December 31, 2020 $ 634

Goodwill acquired during the period —

Balance at December 31, 2020

Balance as of December 31, 2021 $ 634

Goodwill acquired during the period —

Balance at December 31, 2021

(1) Fully related to the acquisition of Bread in December 2020.

Balance as of December 31, 2022 $ 634

______________________________

There were no accumulated goodwill impairment losses as of both December 31, 2022 and 2021.

7 unchanged sentences

Intangible assets consist of the following as of December 31:

(in millions)

Assets Accumulated Amortization Net Useful Life

Definite-Lived Assets

Customer contracts and lists

Premium on purchased credit card loan portfolios

Non-compete agreements

Customer contracts and lists $ 9 $ ( 6 ) $ 3 3 years

Premium on purchased credit card loan portfolios $ 230 $ ( 73 ) $ 157 4 - 13 years

Non-compete agreements $ 2 $ ( 1 ) $ 1 5 years

$ 241 $ ( 80 ) $ 161

Indefinite-Lived Assets

Indefinite life

Tradename $ 4 $ — $ 4 Indefinite life

Total intangible assets $ 245 $ ( 80 ) $ 165

(in millions)

Assets Accumulated Amortization Net Useful Life

Definite-Lived Assets

Customer contracts and lists

Premium on purchased credit card loan portfolios

Non-compete agreements

Customer contracts and lists $ 9 $ ( 3 ) $ 6 3 years

Premium on purchased credit card loan portfolios 133 ( 89 ) 44 1 - 13 years

Non-compete agreements 2 — 2 5 years

$ 144 $ ( 92 ) $ 52

Indefinite-Lived Assets

Indefinite life

Tradename 1 — 1 Indefinite life

Total intangible assets $ 145 $ ( 92 ) $ 53

With the Bread acquisition on December 3, 2020, the Company acquired $ 11 million of intangible assets, consisting of customer relationships of $ 9 million and a non-compete agreement of $ 2 million that are being amortized over weighted average lives of 3.0 years and 5.0 years, respectively.

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Amortization expense related to intangible assets was approximately $ 26 million, $ 29 million and $ 34 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows for the years ending December 31 (in millions):

The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows for the years ending December 31:

Thereafter 22

The following is a summary of Other assets as of December 31:

(in millions)

Restricted cash (1)

Deferred contract costs

Deferred tax asset, net $ 552 $ 302

Deferred contract costs 344 364

Accounts receivable, net (1)

Right-of-use assets - operating 88 97

Investment in LVI

Restricted cash (2)

Investment in Loyalty Ventures Inc.

Total other assets $ 1,400 $ 1,992

(1) Represents principal accumulation for the repayment of debt issued by consolidated variable interest entities that matures in 2022 or that matured in 2021, at December 31, 2021 and 2020, respectively.

(2) Primarily related to amounts receivable from brand partners, which are recorded at the invoiced amount and do not bear interest.

______________________________

(1) Primarily related to federal, state and foreign income tax receivables (including a tax-related receivable in the amount of $ 49 million, net, which the Company is entitled to receive through LVI), and amounts receivable from various brand partners.

(2) The balance as of December 31, 2021 represents principal accumulation for the repayment of debt issued by consolidated VIEs that matured in 2022.

(3) Primarily comprised of prepaid expenses and non-income-based tax receivables.

3 unchanged sentences

Right-of-use assets are recognized as of the lease commencement date at amounts equal to the respective lease liabilities, adjusted for any prepaid lease payments, initial direct costs and lease incentives.

The Company’s lease liabilities are recognized at the present value of the contractual fixed lease payments discounted using the Company’s incremental borrowing rate, as the rate implicit in the lease is typically not readily determinable, as of the lease commencement date or upon modification of the lease.

The Company’s lease liabilities are recognized as of the lease commencement date, or upon modification of the lease, at the present value of the contractual fixed lease payments, discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is typically not readily determinable.

Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

As of December 31, 2021, the Company’s leases have remaining lease terms ranging from less than one year , up to 17 years , some of which may include renewal options.

As of both December 31, 2022 and 2021, the weighted average discount rate applied by the Company was 5.8 %.

As of December 31, 2022, the Company’s leases have remaining lease terms ranging from less than one year , up to 16 years, some of which may include renewal options, while the weighted average remaining lease term was 8.8 years and 9.8 years

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

as of December 31, 2022 and 2021, respectively.

Leases with an initial term of 12 months or less are not recognized on the Consolidated Balance Sheets;

1 unchanged sentence

As with other long-lived assets, right-of-use assets are reviewed for impairment whenever events and circumstances indicate their carrying amounts may not be recoverable.

In the fourth quarter of 2020, the Company performed an impairment assessment for its right-of-use assets associated with its locations where it ceased use with the intent to

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

As a result, the Company recorded an asset impairment charge of $ 18 million, which is included in Non-interest expenses in the Consolidated Statements of Income for the year ended December 31, 2020.

The components of lease expense were as follows for the years ended December 31:

(in millions)

2022 2021 2020

Operating lease cost $ 17 $ 23 $ 25

2 unchanged sentences

Sublease income ( 7 ) ( 5 ) ( 1 )

The table below reflects other lease-related information as of December 31:

Weighted-average remaining lease term (in years):

Operating leases

Weighted-average discount rate:

Operating leases

Total $ 13 $ 20 $ 27

Supplemental lease-related cash flow information was as follows for the years ended December 31:

(in millions)

2022 2021 2020

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating leases $ — $ 5 $ 1

Maturities of the Company’s lease liabilities by year were as follows as of December 31, 2021 (in millions):

Future, maturities of the Company’s lease liabilities, by year, were as follows as of December 31, 2022:

Thereafter 70

Total undiscounted lease liabilities 162

1 unchanged sentence

Total present value of minimum lease payments $ 126

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Deposits were categorized as interest-bearing or non-interest-bearing as follows, as of December 31:

Interest-bearing $ 13,787 $ 11,027

Non-interest-bearing (including cardholder credit balances) 39 —

Total deposits $ 13,826 $ 11,027

Deposits by deposit type were as follows as of December 31:

Savings accounts

Direct-to-consumer (retail) $ 2,782 $ 1,713

Wholesale 3,954 3,873

Certificates of deposit

Direct-to-consumer (retail) 2,684 1,467

Wholesale 4,367 3,974

Cardholder credit balances 39 —

Total deposits $ 13,826 $ 11,027

The scheduled maturities of certificates of deposit were as follows as of December 31, 2022:

Total certificates of deposit $ 7,051

__________________________________

The 2023 balance includes $ 9 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit.

As of December 31, 2022 and December 31, 2021 , certificates of deposit that exceeded applicable FDIC insurance limits, which are generally $250,000 or more, in the aggregate, were $ 822 million and $ 500 million, respectively.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

BORROWINGS OF LONG-TERM AND OTHER DEBT

Long-term and other debt consisted of the following as of December 31:

Contractual Maturities

Interest Rates

(Dollars in millions)

Description 2022 2021 Contractual Maturities Interest Rates

(Millions, except percentages)

Long-term and other debt:

Revolving line of credit

Senior notes due 2024

December 2024

Senior notes due 2026

Revolving line of credit $ — $ — July 2024 (1)

Term loans 556 658 July 2024 (2)

Senior notes due 2024 850 850 December 2024 4.750 %

Senior notes due 2026 500 500 January 2026 7.000 %

Subtotal 1,906 2,008

Unamortized debt issuance costs 14 22

Total long-term and other debt $ 1,892 $ 1,986

Certificates of deposit

Various – Jan 2022 to Dec 2026

0.20 % to 3.75 %

Money market and other non-maturity deposits

Unamortized debt issuance costs

Total deposits

Debt issued by consolidated VIEs:

Fixed rate asset-backed term note securities $ — $ 1,572

Various – Feb 2022 to Sep 2022

2.21 % to 3.61 %

Conduit asset-backed securities

Various – Aug 2022 to Oct 2023

Secured loan facility

Conduit asset-backed securities 6,115 3,883 Various – Jun 2023 to Oct 2023 (3)

Subtotal 6,115 5,455

Unamortized debt issuance costs — 2

1 unchanged sentence

Total borrowings of long-term and other debt $ 8,007 $ 7,439

(1) The interest rate is based upon LIBOR plus an applicable margin.

(2) The interest rate is based upon LIBOR plus an applicable margin.

The weighted average interest rate for the term loans was 1.85 % and 1.90 % at December 31, 2021 and 2020, respectively.

(3) The interest rates are based on the Federal Funds rate plus an applicable margin.

At December 31, 2021, the interest rates ranged from 0.05 % to 3.50 % .

At December 31, 2020, the interest rates ranged from 0.38 % to 3.50 % .

(4) The interest rate is based upon LIBOR or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin.

At December 31, 2021, the interest rates ranged from 0.89 % to 0.96 % .

At December 31, 2020, the interest rates ranged from 1.39 % to 1.89 % .

______________________________

The interest rate in 2022 is based upon the Secured Overnight Financing Rate (SOFR) plus an applicable margin.

The interest rate in 2021 is based upon the London Interbank Offered Rate (LIBOR) plus an applicable margin.

The interest rate in 2022 is based upon SOFR plus an applicable margin.

The interest rate in 2021 is based upon LIBOR plus an applicable margin.

The weighted average interest rate for the term loans was 3.24 % and 1.85 % as of December 31, 2022 and 2021, respectively.

The interest rate in 2022 is based upon SOFR, or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin.

The interest rate in 2021 is based upon LIBOR, or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin.

As of December 31, 2022, the interest rates ranged from 5.08 % to 5.93 %.

As of December 31, 2021, the interest rates ranged from 0.89 % to 0.96 %.

Certain of the Company’s long-term debt agreements contain various restrictive financial and non-financial covenants.

If the Company does not satisfy these covenants, the maturity of amounts outstanding may be accelerated and become payable.

The Company was in compliance with all such covenants at December 31, 2021.

If the Company does not comply with these covenants, the maturity of amounts outstanding may be accelerated and become payable and the associated commitments may be terminated.

As of December 31, 2022, the Company was in compliance with all such covenants.

Long-term and Other Debt

Credit Agreement

The Company, as borrower, and certain of its wholly owned subsidiaries, as guarantors, are party to a credit agreement with various agents and lenders dated June 14, 2017, as amended (the credit agreement).

At December 31, 2021, the credit agreement had $ 658 million aggregate principal amount of term loans outstanding (the term loans) and provided for a $ 750 million revolving credit facility (the revolving line of credit) which was undrawn as of December 31, 2021.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Company, as borrower, and certain of its non-Bank wholly-owned subsidiaries, as guarantors, are party to a Credit Agreement with various agents and lenders dated June 14, 2017, as amended (the Credit Agreement).

As of December 31, 2022, the Credit Agreement had $ 556 million aggregate principal amount of term loans outstanding (the term loans) and provided for a $ 750 million revolving credit facility (the revolving line of credit) which was undrawn as of December 31, 2022.

The Credit Agreement matures on July 1, 2024.

The Credit Agreement contains the usual and customary negative and affirmative covenants, including, but not limited to, restrictions on the Company’s ability and in certain instances, its subsidiaries’ ability to consolidate or merge;

5 unchanged sentences

The negative covenants are subject to certain exceptions as specified in the Credit Agreement.

The credit agreement also requires the Company to comply with certain financial covenants and includes customary events of default.

In July 2021, the Company amended its credit agreement to, among other things, (i) provide consent by the lenders to the spinoff or sale of our LoyaltyOne segment, (ii) extend the maturity date of the revolving loans and approximately 86 % of the term loans from December 31, 2022 to July 1, 2024, (iii) revise the method of determining interest rates and commitment fees to be charged in connection with the loans, (iv) modify the financial and operational covenants and certain other provisions in the credit agreement to reflect our business and operations after giving effect to the LoyaltyOne spinoff, including a financial covenant that Comenity Bank and Comenity Capital Bank each maintain a common equity tier 1 capital ratio of at least 11 % at all times there are term loans outstanding (or at least 10 % if no term loans are outstanding), (v) require a prepayment of certain of the loans in an amount equal to the net proceeds from the LoyaltyOne spinoff or sale, including any net proceeds from debt that is distributed to us minus, in the case of the first transaction associated with the divestiture of the LoyaltyOne spinoff or sale, $ 25 million and (vi) add Lon Inc.

and Lon Operations LLC acquired in our acquisition of Bread as additional guarantors.

Following our receipt of $ 750 million in connection with the spinoff of our former LoyaltyOne segment in November 2021, we used $ 725 million of such amount to repay term loans under our credit agreement, as required by the July 2021 amendment, and used the remaining $ 25 million to make our scheduled fourth quarter amortization payment with respect to such loans.

As of December 31, 2021, the Company had $ 658 million aggregate principal amount of term loans outstanding with $ 750 million total availability under the revolving line of credit.

The Credit Agreement also requires the Company to comply with certain financial covenants and

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

includes customary events of default.

The Credit Agreement was amended in December 2022 to index borrowings SOFR, with the discontinuation of LIBOR.

SOFR is based on short-term repurchase agreements that are backed by Treasury securities.

Senior Notes Due 2024 and 2026

1 unchanged sentence

These Senior Notes are unsecured and are guaranteed on a senior unsecured basis by certain of the Company’s existing and future domestic restricted subsidiaries that incurs or in any other manner becomes liable for any debt under the Company’s domestic credit facilities, including the Credit Agreement.

Due December 15, 2024:

In December 2019, the Company issued and sold $ 850 million aggregate principal amount of 4.750 % Senior Notes due December 15, 2024 (the Senior Notes due 2024).

1 unchanged sentence

The Senior Notes due 2024 will mature on December 15, 2024, subject to earlier repurchase or redemption.

Due January 15, 2026:

In September 2020, the Company issued and sold $ 500 million aggregate principal amount of 7.000 % Senior Notes due January 15, 2026 (the Senior Notes due 2026).

1 unchanged sentence

The Senior Notes due 2026 will mature on January 15, 2026, subject to earlier repurchase or redemption.

The Company uses a variety of deposit products to finance its operating activities, including funding for its non-securitized credit card and other loans, and fund securitization enhancement requirements for the Banks.

The Company offers both direct-to-consumer retail deposit products as well as deposits sourced through contractual arrangements with various financial counterparties.

Direct-to-consumer retail deposits comprised approximately $ 3.2 billion and $ 1.7 billion of total deposits outstanding at December 31, 2021 and 2020, respectively.

Other third-party sourced deposits (often referred to as wholesale deposits) comprised approximately $ 7.8 billion and $ 8.1 billion of total deposits outstanding at December 31, 2021 and 2020, respectively.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Banks issue certificates of deposit in denominations of at least $ 1,000 , across various maturities ranging between January 2022 and December 2026.

As of December 31, 2021, the effective annual interest rates on the certificates of deposit ranged from 0.20 % to 3.75 %, with a weighted average interest rate of 1.91 %;

as of December 31, 2020, the effective annual interest rates ranged from 0.15 % to 3.75 %, with a weighted average interest rate of 2.58 %.

Interest is paid monthly and at maturity, depending on the certificate of deposit.

The Banks also offer various non-maturity deposits;

these deposits are redeemable on demand by the customer and, as such, have no scheduled maturity dates.

As of December 31, 2021, the effective annual interest rates on such deposits ranged from 0.05 % to 3.50 %, with a weighted average interest rate of 0.68 %;

as of December 31, 2020, the effective annual interest rates ranged from 0.38 % to 3.50 %, with a weighted average interest rate of 1.00 %.

Interest is paid either monthly or at maturity.

Debt Issued by Consolidated VIEs

4 unchanged sentences

Asset-Backed Term Notes

For the year ended December 31, 2021, no asset-backed term notes were issued, and $ 2.1 billion of asset-backed term notes matured and were repaid, of which $ 281 million were previously retained by us and therefore eliminated from the Consolidated Balance Sheets.

As of December 31, 2021, the Company collected $ 846 million of principal payments made by its credit cardholders during the accumulation period for the repayment of the $ 563 million Series 2019-A notes, which matured and were repaid in February 2022, the $ 399 million Series 2019-B notes, which mature in June 2022, and the $ 684 million Series 2019-C notes, which mature in September 2022.

The cash is restricted to the securitization investors and is reflected in Other assets in the Consolidated Balance Sheet as of December 31, 2021.

For the year ended December 31, 2022, no asset-backed term notes were issued, and $ 1.6 billion of asset-backed term notes matured and were repaid, of which $ 74 million were previously retained by the Company and therefore eliminated from the Consolidated Balance Sheets.

Conduit Facilities

The Company maintained committed syndicated bank Conduit Facilities to support the funding of its credit card loans for its Trusts.

Borrowings outstanding under each facility bear interest at a margin above LIBOR or the asset-backed commercial paper costs of each individual conduit provider.

During the year ended December 31, 2021, the Company obtained increased lender commitments under its conduit facilities of $ 1.3 billion and extended the respective maturities to August 2022 and October 2023.

Total capacity under the conduit facilities was $ 4.5 billion, of which $ 3.9 billion had been drawn and was included in Debt issued by consolidated variable interest entities on the Consolidated Balance Sheets.

Secured Loan Facility

At December 31, 2020, the Company had a secured loan facility related to the acquisition of Bread, with an outstanding balance of $ 86 million that was set to mature in November 2022, with prepayment permitted.

In August 2021, the Company repaid this outstanding secured loan facility in full.

ALLIANCE DATA SYSTEMS CORPORATION

Borrowings outstanding under each private Conduit Facility bear interest at a margin above SOFR, or the asset-backed commercial paper costs of each individual conduit provider.

During the year ended December 31, 2022, the Company obtained increased lender commitments under its Conduit Facilities of $ 2.1 billion and extended the various maturities to June 2023 and July 2023.

Specifically, in April 2022, the World Financial Network Credit Card Master Trust III amended its 2009-VFC Conduit Facility, increasing the capacity from $ 225 million to $ 275 million and extending the maturity to July 2023.

In addition, in April 2022, the World Financial Capital Master Note Trust amended its 2009-VFN Conduit Facility, increasing the capacity from $ 1.5 billion to $ 2.5 billion and extending the maturity to July 2023.

In June 2022, the Comenity Capital Asset Securitization Trust was formed for the purpose of funding a portfolio acquisition completed in October 2022.

The capacity was negotiated to be $ 1.0 billion and the maturity was set as June 2023.

As of December 31, 2022, total capacity under the Conduit Facilities was $ 6.5 billion, of which $ 6.1 billion had been drawn.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The future principal payments for the Company’s long-term and other debt are as follows, as of December 31, 2022:

Debt Issued by

(in millions)

Year Long-Term and Other Debt Debt Issued by Consolidated VIEs Total

2023 $ 152 $ 6,115 $ 6,267

2024 1,254 — 1,254

2026 500 — 500

Thereafter — — —

Total maturities 1,906 6,115 8,021

Unamortized debt issuance costs ( 14 ) — ( 14 )

$ 1,892 $ 6,115 $ 8,007

OTHER LIABILITIES

The following is a summary of Other liabilities as of December 31:

(in millions)

Accounts payable and other brand partner liabilities $ 398 $ 291

Accrued liabilities (1)

Operating lease liabilities

Long-term tax reserves 306 313

Operating lease liabilities 126 140

Total other liabilities $ 1,309 $ 1,194

______________________________

(1) Primarily related to accrued payroll and benefits, marketing, taxes and professional services expenses.

2 unchanged sentences

The following table provides the components of Other non-interest income for the years ended December 31:

(in millions)

2022 2021 2020

Payment protection products $ 154 $ 141 $ 156

Gain on portfolio and other sales

Loss from equity method investment ( 44 ) 2 —

Other 4 13 21

Total other non-interest income $ 114 $ 156 $ 177

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table provides the components of Other non-interest expenses for the years ended December 31:

(in millions)

2022 2021 2020

Professional services and regulatory fees $ 142 $ 136 $ 114

Asset impairment charges — — 64

Portfolio valuation adjustments (to reflect the lower of cost or market)

Loss on extinguishment of debt

Total other non-interest expenses

Total other non-interest expense $ 227 $ 222 $ 286

______________________________

Primarily related to occupancy expense and non-income based taxes.

8 unchanged sentences

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 quarterly.

The Company monitors the market conditions and evaluates the fair value hierarchy levels quarterly.

For the years ended December 31, 2022 and 2021, there were no transfers into or out of Level 3, and no transfers between Levels 1 and 2.

The following table summarizes the carrying values and fair values of the Company’s financial assets and financial liabilities as of December 31:

(in millions)

Value Carrying

Financial assets

Credit card and other loans, net $ 18,901 $ 21,328 $ 15,567 $ 17,989

Available-for-sale securities

Investment securities 221 221 239 239

Financial liabilities

Debt issued by consolidated variable interest entities

Deposits 13,826 13,731 11,027 11,135

Debt issued by consolidated VIEs 6,115 6,115 5,453 5,467

Long-term and other debt 1,892 1,759 1,986 2,053

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

Credit card and other loans, net:

The Company’s Credit card and other loans are recorded at historical cost, less an allowance for credit losses, on the Consolidated Balance Sheets.

The Company’s Credit card and other loans are recorded at historical cost, less the Allowance for credit losses, on the Consolidated Balance Sheets.

In estimating the fair values, the Company uses 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.

1 unchanged sentence

economic value attributable to future loans generated by the cardholder accounts is not included in the fair values.

Available-for-sale securities:

AFS securities consist of available-for-sale debt securities, equity securities, U.S.

Treasury bonds and mutual funds, and are recorded at fair value on the Consolidated Balance Sheets.

Investment securities:

Investment securities consist of AFS securities, which are debt securities and mutual funds, as well as equity securities, 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).

11 unchanged sentences

The following tables summarize the Company’s financial assets and financial liabilities measured at fair value on a recurring basis, categorized by the fair value hierarchy described in the preceding paragraphs, as of December 31:

(in millions)

Available-for-sale securities

Total Level 1 Level 2 Level 3

Investment securities $ 221 $ 44 $ 177 $ —

Total assets measured at fair value $ 221 $ 44 $ 177 $ —

(in millions)

Available-for-sale securities

Total Level 1 Level 2 Level 3

Investment securities $ 239 $ 48 $ 191 $ —

Total assets measured at fair value $ 239 $ 48 $ 191 $ —

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Financial Instruments Disclosed but Not Carried at Fair Value

2 unchanged sentences

therefore, these figures may not be indicative of future fair values, nor can the fair value of the Company be estimated by aggregating all of the amounts presented.

(in millions)

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Fair Value Level 1 Level 2 Level 3

Financial assets:

Credit card and other loans, net $ 21,328 $ — $ — $ 21,328

Total $ 21,328 $ — $ — $ 21,328

Financial liabilities:

Deposits $ 13,731 $ — $ 13,731 $ —

Debt issued by consolidated VIEs 6,115 — 6,115 —

Long-term and other debt 1,759 — 1,759 —

(in millions)

Total $ 21,605 $ — $ 21,605 $ —

Fair Value Level 1 Level 2 Level 3

Financial assets:

Credit card and other loans, net $ 17,989 $ — $ — $ 17,989

Total $ 17,989 $ — $ — $ 17,989

Financial liabilities:

Deposits $ 11,135 $ — $ 11,135 $ —

Debt issued by consolidated VIEs 5,467 — 5,467 —

Long-term and other debt 2,053 — 2,053 —

Total $ 18,655 $ — $ 18,655 $ —

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

1 unchanged sentence

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.

For the year ended December 31, 2022, the Company recognized a write-down of its equity method investment in LVI of $ 44 million;

as of December 31, 2022, the carrying amount of its investment was $ 6 million and the fair value was $ 11 million.

The Company did no t have any impairments for the year ended December 31, 2021.

For the year ended December 31, 2020, the Company recorded asset impairment charges of $ 64 million related to certain deferred contract costs, fixed assets and right-of-use assets.

The fair values were determined by using discounted cash flow models over the estimated life of each asset;

the principal assumptions used were forecasted future cash flows and the discount rate, which are considered Level 3 inputs.

See Note 7, “Property and Equipment, Net,” and Note 10, “Leases,” for more information regarding asset impairments.

For the year ended December 31, 2019, as part of restructuring and other charges, the Company recorded asset impairments of $ 52 million.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

COMMITMENTS AND CONTINGENCIES

Regulatory Matters

Comenity Bank is regulated, supervised and examined by the State of Delaware and the Federal Deposit Insurance Corporation (FDIC).

The Company’s industrial bank, Comenity Capital Bank, is regulated, supervised and examined by the State of Utah and the FDIC.

While neither of our Banks is currently subject to regular examinations by the CFPB due to each Bank’s total assets not having exceeded $10 billion for four consecutive quarters, we have in the past been, and may in the future become, subject to supervision and examination by the CFPB with respect to federal consumer protection laws.

Quantitative measures established by regulations to ensure capital adequacy require Comenity Bank and Comenity Capital Bank to maintain minimum amounts and ratios of Tier 1 capital to average assets, 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 Comenity Bank’s and/or Comenity Capital Bank’s operating activities, as well as those of the Company.

CB is regulated, supervised and examined by the State of Delaware and the Federal Deposit Insurance Corporation (FDIC).

The Company’s industrial bank, CCB, is regulated, supervised and examined by the State of Utah and the FDIC.

The Consumer Financial Protection Bureau (CFPB) promulgates regulations for the federal consumer financial protection laws and supervises and examines large banks (those with more than $10 billion of total assets) with respect to those laws.

Banks in a multi-bank organization, such as CB and CCB, are subject to supervision and examination by the CFPB with respect to the federal consumer financial protection laws if at least one bank reports total assets over $10 billion for four consecutive quarters.

While the Banks were subject to supervision and examination by the CFPB with respect to the federal consumer financial protection laws between 2016 and 2021, this reverted to the FDIC in 2022.

However, CCB’s total assets then exceeded $10 billion for four consecutive quarters as of September 30, 2022, and both Banks are now again subject to supervision and examination by the CFPB with respect to federal consumer protection laws.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Quantitative measures established by regulations to ensure capital adequacy require CB and CCB to maintain minimum amounts and ratios of Tier 1 capital to average assets, 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 those of the Company.

Based on these regulations, as of December 31, 2022 and 2021, 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 actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of December 31, 2021, are as follows:

Minimum Ratio to be

Minimum Ratio for

Well Capitalized under

The Banks are considered well capitalized and seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer.

The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, are as follows as of December 31, 2022:

Ratio Minimum Ratio for

Capital Adequacy

Purposes Minimum Ratio to be

Well Capitalized under

Prompt Corrective

1 unchanged sentence

Comenity Bank

Tier 1 capital to average assets (1)

Common Equity Tier 1 capital to risk-weighted assets (2)

Tier 1 capital to risk-weighted assets (3)

Total capital to risk-weighted assets (4)

Common Equity Tier 1 capital ratio (1)

18.4 % 4.5 % 6.5 %

Tier 1 capital ratio (2)

Total Risk-based capital ratio (3)

19.7 8.0 10.0

Tier 1 Leverage capital ratio (4)

Comenity Capital Bank

Tier 1 capital to average assets (1)

Common Equity Tier 1 capital to risk-weighted assets (2)

Tier 1 capital to risk-weighted assets (3)

Total capital to risk-weighted assets (4)

Common Equity Tier 1 capital ratio (1)

16.1 % 4.5 % 6.5 %

Tier 1 capital ratio (2)

Total Risk-based capital ratio (3)

17.4 8.0 10.0

Tier 1 Leverage capital ratio (4)

Combined Banks

Tier 1 capital to average assets (1)

Common Equity Tier 1 capital to risk-weighted assets (2)

Tier 1 capital to risk-weighted assets (3)

Total capital to risk-weighted assets (4)

(1) Tier 1 capital to average assets ratio represents tier 1 capital divided by total assets for leverage ratio.

(2) Common Equity Tier 1 capital to risk-weighted assets ratio represents common equity tier 1 capital divided by total risk-weighted assets.

(3) Tier 1 capital to risk-weighted assets ratio represents tier 1 capital divided by total risk-weighted assets.

(4) Total capital to risk-weighted assets ratio represents total capital divided by total risk-weighted assets.

On September 10, 2019, Comenity Capital Bank submitted a bank merger application to the FDIC seeking the FDIC’s approval to merge Comenity Bank with and into Comenity Capital Bank as the surviving bank entity.

On the same date, Comenity Capital Bank and Comenity Bank each submitted counterpart bank merger applications to the Utah Department of Financial Institutions and the Delaware Office of the State Bank Commissioner, respectively, in connection with the proposed merger.

On April 20, 2021, Comenity Capital Bank withdrew its bank merger application

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

with the FDIC.

On May 3, 2021, each of Comenity Capital Bank and Comenity Bank similarly withdrew their counterpart bank merger applications in Utah and Delaware, respectively.

Common Equity Tier 1 capital ratio (1)

17.0 % 4.5 % 6.5 %

Tier 1 capital ratio (2)

Total Risk-based capital ratio (3)

18.3 8.0 10.0

Tier 1 Leverage capital ratio (4)

(1) The Common Equity Tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets.

(2) The Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets.

(3) The Total Risk-based capital ratio represents total capital divided by total risk-weighted assets.

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

Indemnification

On July 1, 2019, the Company completed the sale of its Epsilon segment to Publicis Groupe S.A.

Under the terms of the agreement governing that transaction, the Company agreed to indemnify Publicis and its affiliates from and against any losses arising out of or related to a United States Department of Justice (DOJ) investigation.

Under the terms of the agreement governing that transaction, the Company agreed to indemnify Publicis and its affiliates from and against any losses arising out of or related to a U.S.

Department of Justice (DOJ) investigation.

The DOJ investigation related to third-party marketers who sent, or allegedly sent, deceptive mailings and the provision of data and services to those marketers by Epsilon’s data practice.

3 unchanged sentences

A $ 150 million loss contingency was recorded as of December 31, 2020.

The Company paid $ 75 million to Publicis pursuant to its contractual indemnification obligation in January 2021.

As of December 31, 2021, the Company had $ 75 million included in Accrued expenses in its Consolidated Balance Sheets.

In January 2022, the Company paid the second remaining $ 75 million installment to Publicis pursuant to its contractual indemnification obligation.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

its contractual indemnification obligation, in January 2021 the Company paid $ 75 million to Publicis, and in January 2022 the Company paid the remaining $ 75 million installment to Publicis.

Legal Proceedings

From time to time the Company is involved in various claims and lawsuits arising in the ordinary course of business that it believes will not have a material effect on its consolidated financial condition or liquidity, including claims and lawsuits alleging breaches of the Company’s contractual obligations.

From time to time the Company is involved in various claims and lawsuits and other proceedings, arising in the ordinary course of business that it believes will not have a material adverse effect on its business, consolidated financial condition or liquidity, including claims and lawsuits alleging breaches of the Company’s contractual obligations, arbitrations, class actions and other litigation, arising in connection with its business activities.

The Company is also involved, from time to time, in reviews, investigations, subpoenas, supervisory actions and other proceedings (both formal and informal) by governmental agencies regarding its business, which could subject the Company to significant fines, penalties, obligations to change its business practices, significant restrictions on its 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 the Company’s reputation.

EMPLOYEE BENEFIT PLANS

11 unchanged sentences

Since its adoption on July 1, 2015, 672,776 shares of common stock have been issued, with 768,551 shares available for issuance under the 2015 ESPP.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

401(k) Retirement Savings Plan

The Alliance Data Systems 401(k) and Retirement Savings Plan (the RSP) is a defined contribution plan that is qualified under Section 401(k) of the Internal Revenue Code of 1986.

The Bread Financial Holdings, Inc.

401(k) and Retirement Savings Plan (the RSP) is a defined contribution plan that is qualified under Section 401(k) of the Internal Revenue Code of 1986.

The Company amended the RSP effective December 3, 2020.

3 unchanged sentences

The RSP covers U.S.

employees of Alliance Data Systems, Inc.

employees of Bread Financial Holdings, Inc.

who are at least 18 years old, one of the Company’s wholly-owned subsidiaries, and any other subsidiary or affiliated organization that adopts the RSP;

6 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, Company matching contributions were $ 17 million, $ 15 million and $ 16 million, respectively.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Participants in the RSP can direct their contributions and the Company’s matching contribution to numerous investment options, including the Company’s common stock.

5 unchanged sentences

Deferrals under the EDCP are unfunded and subject to the claims of the Company’s creditors.

Each participant in the EDCP is 100 % vested in their account, and account balances accrue interest at a rate established and adjusted periodically by the Compensation and Human Capital committee of the Company’s Board of Directors.

Each participant in the EDCP is 100 % vested in their account, and account balances accrue interest at a rate established and adjusted periodically by the Compensation & Human Capital committee of the Company’s Board of Directors.

As of December 31, 2022 and 2021, the Company’s outstanding liability related to the EDCP, which was included in Other liabilities on the Consolidated Balance Sheets, was $ 20 million and $ 18 million, respectively.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows:

Foreign Currency

Net Unrealized

Gains (Losses) on

(Losses) Gains on

Gains (Losses) on

AFS Securities Net Unrealized

Cash Flow Hedges Net Unrealized

Net Investment Hedge Foreign Currency

Comprehensive

AFS Securities

Cash Flow Hedges

Net Investment Hedge

(Losses) Gains (1)

(in millions)

Balance as of January 1, 2020 $ 2 $ — $ ( 7 ) $ ( 95 ) $ ( 100 )

Changes in other comprehensive income (loss) 21 ( 1 ) — 71 91

Recognition resulting from the sale of Epsilon's foreign subsidiaries

Balance at December 31, 2019

Changes in other comprehensive income (loss)

Recognition resulting from the sale of Precima's foreign subsidiaries — — — 4 4

Balance at December 31, 2020

Changes in other comprehensive income (loss)

Balance as of December 31, 2020 $ 23 $ ( 1 ) $ ( 7 ) $ ( 20 ) $ ( 5 )

Changes in other comprehensive (loss) income ( 21 ) 2 — ( 37 ) ( 56 )

Recognition resulting from the spinoff of LoyaltyOne's foreign subsidiaries ( 1 ) ( 1 ) 7 54 59

Balance at December 31, 2021

(1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates from the Company’s LoyaltyOne segment, which was spun off in November 2021.

With the spinoff of the Company’s LoyaltyOne segment on November 5, 2021, the $ 7 million net unrealized loss on its net investment hedge related to its net investment in BrandLoyalty was reclassified into net income.

Balance as of December 31, 2021 $ 1 $ — $ — $ ( 3 ) $ ( 2 )

Changes in other comprehensive (loss) income ( 19 ) — — — ( 19 )

Balance as of December 31, 2022 $ ( 18 ) $ — $ — $ ( 3 ) $ ( 21 )

______________________________

(1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates from the Company’s former LoyaltyOne segment, which was spun off in November 2021.

With the spinoff of the Company’s former LoyaltyOne segment on November 5, 2021, the $ 7 million net unrealized loss on its net investment hedge related to its net investment in BrandLoyalty was reclassified into net income.

Upon the sale of Precima on January 10, 2020, $ 4 million of accumulated foreign currency translation adjustments attributable to Precima’s foreign subsidiaries sold were reclassified from Accumulated other comprehensive loss and included in the calculation of the gain on the sale of Precima.

Upon the sale of Epsilon on July 1, 2019, $ 27 million of accumulated foreign currency translation adjustments attributable to Epsilon’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the loss on the sale of the Epsilon segment.

Other reclassifications from accumulated other comprehensive loss into net income for each of the periods presented were not material.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

During the years ended December 31, 2021 and 2020, the Company did no t repurchase any shares of its common stock.

During the year ended December 31, 2019, the Company repurchased approximately 6.3 million shares of its common stock for an aggregate amount of $ 976 million.

The stock repurchase program expired on June 30, 2020, and $ 348 million of this program expired unused.

On February 28, 2022, the Company’s Board of Directors approved a stock repurchase program to acquire up to 200,000 shares of the Company’s outstanding common stock in the open market during the one-year period ending on February 28, 2023.

As of March 31, 2022, the Company had repurchased all 200,000 shares of its common stock available under this program for an aggregate of $ 12 million.

Following their repurchase, these 200,000 shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock.

Stock Compensation Plans

The Company has adopted equity compensation plans to advance the interests of the Company by rewarding certain employees for their contributions to the financial success of the Company and thereby motivating them to continue to make such contributions in the future.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The 2015 Omnibus Incentive Plan became effective July 1, 2015 and reserved 5,100,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants who performed services for the Company or its affiliates, with only employees eligible to receive incentive stock options.

The 2015 Omnibus Incentive Plan expired on June 30, 2020.

In March 2020, the Company’s Board of Directors adopted the 2020 Omnibus Incentive Plan (the 2020 Plan), which was subsequently approved by the Company’s stockholders on June 9, 2020.

The 2015 Omnibus Incentive Plan (the 2015 Plan) became effective July 1, 2015, subsequently expired on June 30, 2020, and reserved 5,100,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants who performed services for the Company or its affiliates, with only employees eligible to receive incentive stock options.

The 2020 Omnibus Incentive Plan (the 2020 Plan) became effective July 1, 2020 and reserved 2,400,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for the Company or its affiliates, with only employees being eligible to receive incentive stock options.

The 2020 Plan expires on June 30, 2030;

provided that, pursuant to the terms of the 2022 Plan (as defined below), no new grants shall be made under the 2020 Plan.

In March 2022, the Company’s Board of Directors adopted the 2022 Omnibus Incentive Plan (the 2022 Plan), which was subsequently approved by the Company’s stockholders on May 24, 2022.

The 2022 Plan became effective July 1, 2022 and expires on June 30, 2032.

5 unchanged sentences

Stock-based compensation expense is measured at the grant date of the award, based on the fair value of the award, and is recognized ratably over the requisite service period.

Stock-based compensation expense recognized in Employee benefits and compensation expense in the Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019 was $ 25 million, $ 15 million and $ 18 million, respectively, with corresponding income tax benefits of $ 4 million, $ 3 million and $ 3 million, respectively.

Stock-based compensation expense related to discontinued operations for the years ended December 31, 2021, 2020 and 2019 was $ 4 million, $ 6 million and $ 37 million, respectively.

Stock-based compensation expense recognized in Employee compensation and benefits expense in the Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 was $ 32 million, $ 25 million and $ 15 million, respectively, with corresponding income tax benefits of $ 5 million, $ 4 million and $ 3 million, respectively.

As the amount of stock-based compensation expense recognized is based on awards ultimately expected to vest, the amount recognized in the Company’s Consolidated Statements of Income has been reduced for estimated forfeitures.

1 unchanged sentence

forfeitures were estimated at 5 % for each of the years ended December 31, 2022, 2021 and 2020.

As of December 31, 2021, there was approximately $ 35 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, stock-based equity awards granted to employees, which is expected to be recognized over a weighted average remaining period of approximately 1.8 years.

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

As of December 31, 2022, there was approximately $ 55 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, stock-based equity awards granted to employees, which is expected to be recognized over a weighted average remaining period of approximately 2.2 years.

Restricted Stock Unit Awards

The following table summarizes RSUs activity under the Company’s equity compensation plans:

Balance at January 1, 2019

Based Total Weighted

Balance as of January 1, 2020 24,288 230,272 258,572 513,132 $ 172.06

Shares granted 20,770 219,186 241,610 481,566 89.11

1 unchanged sentence

Shares forfeited ( 22,831 ) ( 186,135 ) ( 38,447 ) ( 247,413 ) 166.93

Balance at December 31, 2019

Balance as of December 31, 2020 22,227 221,226 333,814 577,267 $ 103.89

Shares granted (2)

2,641 111,542 774,062 888,245 88.18

Shares vested — ( 24,677 ) ( 167,723 ) ( 192,400 ) 118.78

Shares forfeited ( 5,801 ) ( 216,675 ) ( 291,201 ) ( 513,677 ) 93.16

Balance at December 31, 2020

Balance as of December 31, 2021 19,067 91,416 648,952 759,435 $ 89.14

Shares granted — 82,513 766,178 848,691 63.22

1 unchanged sentence

Shares forfeited ( 19,067 ) — ( 89,390 ) ( 108,457 ) 65.83

Balance at December 31, 2021

Balance as of December 31, 2022 — 164,946 1,107,663 1,272,609 $ 68.86

Outstanding and Expected to Vest 1,238,212 $ 69.17

______________________________

Shares granted reflect a 100 % target attainment of the respective market-based or performance-based metric.

Shares forfeited include those restricted stock units forfeited as a result of the Company not meeting the respective market-based or performance-based metric conditions.

(2) Shares granted reflect a November 2021 make-whole equity adjustment to unvested shares due to the reduction in the Company’s share value resulting from the spinoff of Loyalty Ventures Inc.

Shares granted reflect a November 2021 make-whole equity adjustment to unvested shares due to the reduction in the Company’s share value resulting from the spinoff of LVI.

This adjustment increased shares granted by 2,641 shares, 12,659 shares and 96,556 shares for market-based, performance-based and service-based awards, respectively.

2 unchanged sentences

Service-based RSUs typically vest ratably over a three year period.

Performance-based RSUs typically vest ratably over a three year period if specified performance measures tied to the Company’s financial performance are met.

For the performance-based RSUs awarded in 2021, the pre-defined vesting criteria typically permit a range from 0 % to 170 % to be earned.

Performance-based RSUs typically cliff vest at the end of three years , if specified performance measures tied to the Company’s financial performance are met, which are measured annually over the three year period.

For the performance-based RSUs awarded in 2022 and 2021, the pre-defined 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.

1 unchanged sentence

As of December 31, 2022, the aggregate intrinsic value of RSUs outstanding and expected to vest was $ 47 million.

For the year ended December 31, 2021, the Company declared cash dividends of $ 0.84 per share for a total of $ 42 million, and paid cash dividends and dividend equivalents totaling $ 42 million.

For the year ended December 31, 2020, the Company declared cash dividends of $ 1.26 per share for a total of $ 60 million, and paid cash dividends and dividend equivalents totaling $ 61 million.

For the year ended December 31, 2019, the Company declared cash dividends of $ 2.52 per share for a total of $ 127 million, and paid cash dividends and dividend equivalents totaling $ 127 million.

For the years ended December 31, 2022, 2021 and 2020, the Company paid $ 43 million, $ 42 million and $ 61 million, respectively, in dividends to its shareholders of common stock.

On January 26, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.21 per share on its common stock, payable on March 17, 2023, to stockholders of record at the close of business on February 10, 2023.

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

4 unchanged sentences

Income taxes reported in earnings also include deferred income tax provisions and provisions for uncertain tax positions.

The components of the Company’s Provision for income taxes for the years ended December 31 included in the Consolidated Statements of Income were are as follows:

(in millions)

Differences between the Consolidated Financial Statements and tax bases of assets and liabilities give rise to deferred tax assets and liabilities, which measure the future tax effects of items recognized in the Consolidated Financial Statements.

Changes in deferred income tax assets and liabilities associated with components of Other comprehensive (loss) income are charged or credited directly to Other comprehensive (loss) income.

Otherwise, changes in deferred income tax assets and liabilities are included as a component of Provision for income taxes.

The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to Provision for income taxes in the period of enactment.

Deferred tax assets require certain estimates and judgments in order to determine whether it is more likely than not that all or a portion of the benefit of a deferred tax asset will not be realized.

In evaluating the Company’s deferred tax assets on a quarterly basis as new facts and circumstances emerge, the Company analyzes and estimates the impact of future taxable income, reversing temporary differences and available tax planning strategies.

Uncertainties can lead to changes in the ultimate realization of deferred tax assets.

A liability for unrecognized tax benefits, representing the difference between a tax position taken or expected to be taken in a tax return and the benefit recognized in the Consolidated Financial Statements, inherently requires estimates and judgments.

A tax position is recognized only when it is more likely than not to be sustained, based purely on its technical merits after examination by the relevant taxing authority, and the amount recognized is the benefit the Company believes is more likely than not to be realized upon ultimate settlement.

The Company evaluates its tax positions as new facts and circumstances become available, making adjustments to unrecognized tax benefits as appropriate.

Uncertainties can mean the tax benefits ultimately realized differ from amounts previously recognized, with any differences recorded in Provision for income taxes, along with amounts for estimated interest and penalties related to uncertain tax positions.

The components of the Company’s Provision for income taxes included in the Consolidated Statements of Income were as follows for the years ended December 31:

2022 2021 2020

Federal $ 280 $ 218 $ 228

State 41 49 36

Total current income tax expense 321 267 264

Federal ( 201 ) ( 13 ) ( 143 )

State ( 44 ) ( 7 ) ( 28 )

Total deferred income tax benefit ( 245 ) ( 20 ) ( 171 )

Total Provision for income taxes $ 76 $ 247 $ 93

A reconciliation of the Company’s expected income tax expense computed by applying the federal statutory rate to income from continuing operations before income taxes to the recorded Provision for income taxes for the years ended December 31 is as follows:

(in millions)

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

A reconciliation of the Company’s expected income tax expense computed by applying the federal statutory rate to income from continuing operations before income taxes, to the recorded Provision for income taxes, is as follows for the years ended December 31:

2022 2021 2020

Expected expense at statutory rate $ 63 $ 219 $ 63

Increase (decrease) in income taxes resulting from:

(Decrease) increase in income taxes resulting from:

State and local income taxes, net of federal benefit ( 2 ) 33 6

2 unchanged sentences

IRC Section 199, net of tax reserves 4 — 12

Changes in deferred income tax assets and liabilities associated with components of other comprehensive income are charged or credited directly to other comprehensive income.

Otherwise, changes in deferred income tax assets and liabilities are included as a component of income tax expense.

The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment.

ALLIANCE DATA SYSTEMS CORPORATION

Basis difference in unconsolidated subsidiaries ( 8 ) — —

Valuation allowance 16 — —

Other ( 3 ) ( 1 ) 8

Total $ 76 $ 247 $ 93

For the year ended December 31, 2022, the Company increased its reserve for Internal Revenue Code (IRC) Section 199 deductions by approximately $ 4 million as a result of an unfavorable court ruling.

In addition, the Company recorded an income tax benefit (deferred tax asset) of approximately $ 8 million related to the initial recognition of the basis difference in an unconsolidated subsidiary, against which the Company recorded a $ 16 million valuation allowance as of December 31, 2022.

1, originally known as the Tax Cuts and Jobs Act of 2017 (the 2017 Tax Reform) was enacted on December 22, 2017 and permanently reduced the corporate tax rate to 21% from 35%, effective January 1, 2018.

For the year ended December 31, 2021, the Company recorded an income tax benefit of approximately $ 8 million related to the 2017 Tax Reform rate differential that was released from Other comprehensive (loss) income due to the divestiture of the Company’s former LoyaltyOne segment.

For the year ended December 31, 2020, the Company recorded an income tax benefit of approximately $ 2 million related to the rate benefit for a capital loss that will be carried back to a year preceding the 2017 Tax Reform rate reduction.

The Company is currently under audit with the Internal Revenue Service and as a result of the preliminary audit findings, the Company increased its reserve for IRC Section 199 deductions by $ 12 million during the year ended December 31, 2020.

On August 16, 2022, the Inflation Reduction Act (the Act) was signed into law in the U.S., which includes a new 15 percent corporate minimum tax on certain large corporations and a one percent excise tax on stock repurchases made after December 31, 2022.

The Company does not anticipate the Act will have a significant impact on its financial position, results of operations or cash flows, nor does it expect significant changes to operational processes, controls or governance as a result of the Act.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Deferred tax assets require certain estimates and judgments in order to determine whether it is more likely than not that all or a portion of the benefit of a deferred tax asset will not be realized.

Uncertainties can lead to changes in the ultimate realization of deferred tax assets.

A tax position is recognized only when it is more likely than not to be sustained, based purely on its technical merits after examination by the taxing authority, and the amount recognized is the benefit the Company believes is more likely than not to be realized upon ultimate settlement.

The Company evaluates its tax positions as new facts and circumstances become available, making adjustments to unrecognized tax benefits as appropriate.

The following table reflects the significant components of Deferred tax assets and liabilities as of December 31:

(in millions)

Deferred tax assets

9 unchanged sentences

Deferred income $ 148 $ 221

Depreciation 7 28

Right of use assets 20 22

3 unchanged sentences

Amounts recognized on the Consolidated Balance Sheets:

At December 31, 2021, included in the Company’s U.S.

Other assets $ 552 $ 302

As of December 31, 2022, included in the Company’s U.S.

tax returns are approximately $ 124 million of U.S.

1 unchanged sentence

With the exception of NOLs generated after December 31, 2017, these attributes expire at various times through the year 2037.

As well, as of December 31, 2021, the Company has state income tax NOLs of approximately $ 231 million and state credits of approximately $ 3 million, both available to offset future state taxable income, and state capital losses of approximately $ 7 million to offset capital gains.

As of December 31, 2022, the Company has state NOLs of approximately $ 231 million and state credits of approximately $ 2 million, both available to offset future state taxable income, and state capital losses of approximately $ 7 million to offset capital gains.

The state NOLs, credits and capital losses will expire at various times through the year 2040.

The Company uses the portfolio approach relating to the release of stranded tax effects recorded in Accumulated other comprehensive loss.

Under the portfolio approach, the net unrealized gains or losses recorded in accumulated other comprehensive loss would be eliminated only on the date the entire portfolio of available-for-sale securities is sold or otherwise disposed of.

ALLIANCE DATA SYSTEMS CORPORATION

Under the portfolio approach, the net unrealized gains or losses recorded in Accumulated other comprehensive loss would be eliminated only on the date the entire portfolio of Available-for-sale investment securities is sold or otherwise disposed of.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1, originally known as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Reform”) was enacted on December 22, 2017 and permanently reduced the corporate tax rate to 21 % from 35 %, effective January 1, 2018.

For the year ended December 31, 2021, the Company recorded an income tax benefit of approximately $ 8 million related to the 2017 Tax Reform rate differential that was released from Other comprehensive income due to the divestiture of the LoyaltyOne segment.

The Company is currently under audit with the Internal Revenue Service for years 2012-2018.

For years 2012-2014, the audit is limited in scope to research and development tax credits and IRC Section 199 deductions claimed on amended returns.

As a result of the preliminary audit findings, the Company increased its reserve for IRC Section 199 deductions by $ 12 million during the year ended December 31, 2020.

For the year ended December 31, 2019, the Company recorded an income tax benefit of approximately $ 30 million related to a decrease in unrecognized tax benefits as a result of a tax accounting method change required by the 2017 Tax Reform.

The following table presents changes in unrecognized tax benefits (in millions):

Balance at January 1, 2019

The following table presents changes in unrecognized tax benefits:

Balance as of January 1, 2020 $ 215

Increases related to prior years’ tax positions 59

3 unchanged sentences

Lapses of applicable statutes of limitation ( 2 )

Balance at December 31, 2019

Balance as of December 31, 2020 $ 255

Increases related to prior years’ tax positions 1

2 unchanged sentences

Settlements during the period ( 8 )

Lapses of applicable statutes of limitation

Balance at December 31, 2020

Balance as of December 31, 2021 $ 247

Increases related to prior years’ tax positions 8

2 unchanged sentences

Settlements during the period ( 2 )

Balance at December 31, 2021

Balance as of December 31, 2022 $ 242

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in Provision for income taxes.

The Company has potential cumulative interest and penalties with respect to unrecognized tax benefits of approximately $ 76 million, $ 69 million and $ 60 million at December 31, 2021, 2020 and 2019, respectively.

For the years ended December 31, 2021, 2020 and 2019, the Company recorded approximately $ 8 million, $ 9 million and $ 2 million, respectively, in Provision for income taxes for potential interest and penalties for unrecognized tax benefits.

At December 31, 2021, 2020 and 2019, the Company had unrecognized tax benefits of approximately $ 241 million, $ 243 million and $ 198 million, respectively, that, if recognized, would impact the effective tax rate.

The Company has potential cumulative interest and penalties with respect to unrecognized tax benefits of approximately $ 74 million, $ 76 million and $ 69 million as of December 31, 2022, 2021 and 2020, respectively.

For the years ended December 31, 2022, 2021 and 2020, the Company recorded approximately a $ 1 million benefit and $ 8 million and $ 9 million expense, respectively, in Provision for income taxes for potential interest and penalties for unrecognized tax benefits.

As of December 31, 2022, 2021 and 2020, the Company had unrecognized tax benefits of approximately $ 238 million, $ 241 million and $ 243 million, respectively, that, if recognized, would impact the effective tax rate.

The Company does not anticipate a significant change to the total amount of unrecognized tax benefits over the next twelve months.

The Company files income tax returns in the U.S.

federal jurisdiction and in many state and foreign jurisdictions, as applicable.

The Company files income tax returns in U.S.

federal, state and foreign jurisdictions, as applicable.

With some exceptions, the tax returns filed by the Company are no longer subject to U.S.

federal income tax, and state and local examinations for the years before 2015, or foreign income tax examinations for years before 2018.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

EARNINGS PER SHARE

1 unchanged sentence

Diluted EPS is based on the weighted average number of common and potentially dilutive common shares (dilutive stock options, unvested restricted stock awards and other dilutive securities outstanding during the year) pursuant to the Treasury Stock method .

For periods with participating securities, in this case 2019, the Company computes EPS using the two-class method, which is an allocation of earnings between the holders of common stock and a company’s participating security holders that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the years ended December 31:

(in millions, except per share amounts)

Income from continuing operations

Dividends declared on preferred stock

Allocation of undistributed earnings

Income from continuing operations

Income (loss) from discontinued operations, net of income taxes

Weighted average shares

Continuing operations

Discontinued operations

Diluted EPS (1) :

2022 2021 2020

(Millions, except per share amounts)

Income from continuing operations $ 224 $ 797 $ 208

Income (loss) from discontinued operations, net of income taxes

Weighted average shares from Basic EPS above

(Loss) income from discontinued operations, net of income taxes ( 1 ) 4 6

Net income $ 223 $ 801 $ 214

Weighted average common stock 49.9 49.7 47.8

Weighted average effect of dilutive securities

Shares from assumed conversion of preferred stock

Net effect of dilutive unvested restricted stock awards (1)

Denominator for diluted calculation 50.0 50.0 47.9

Continuing operations

Discontinued operations

(1) Computed using the if-converted method, as the result was more dilutive.

Income from continuing operations $ 4.48 $ 16.02 $ 4.36

(Loss) income from discontinued operations, net of income taxes $ ( 0.01 ) $ 0.07 $ 0.11

Net income $ 4.47 $ 16.09 $ 4.47

Income from continuing operations $ 4.47 $ 15.95 $ 4.35

(Loss) income from discontinued operations, net of income taxes $ ( 0.01 ) $ 0.07 $ 0.11

Net income $ 4.46 $ 16.02 $ 4.46

______________________________

(1) For the years ended December 31, 2022, 2021 and 2020, an insignificant amount of restricted stock awards were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On April 25, 2019, the Company entered into an exchange agreement with ValueAct Holdings, L.P.

pursuant to which ValueAct exchanged an aggregate of 1,500,000 shares of the Company’s common stock for an aggregate of 150,000 shares of Series A Non-Voting Convertible Preferred Stock (preferred stock).

In October 2019, ValueAct converted all 150,000 shares of preferred stock back to common stock.

SUPPLEMENTAL CASH FLOW INFORMATION

1 unchanged sentence

The following table provides a reconciliation of cash and cash equivalents to the total of the amounts reported in the Consolidated Statements of Cash Flows as of December 31:

(in millions)

Cash and Cash Equivalents $ 3,891 $ 3,046

Restricted Cash included within Other Assets 36 877

Cash, cash equivalents and restricted cash included within Assets of discontinued operations

Total cash, cash equivalents and restricted cash $ 3,927 $ 3,923

Non-cash investing and financing activities for the year ended December 31, 2021 included the Company’s equity method investment in Loyalty Ventures Inc.

upon spinoff, which totaled $ 48 million on November 5, 2021, and the Company’s retirement of its outstanding treasury stock in July 2021.

For more information, see Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation,” and Note 18, “Stockholders’ Equity.”

Non-cash investing and financing activities for the year ended December 31, 2020 included $ 75 million of deferred consideration and the issuance of approximately 1.9 million shares of the Company’s common stock as non-cash consideration in the acquisition of Bread on December 3, 2020.

For more information, see Note 2, “Acquisitions.”

DISCONTINUED OPERATIONS AND BANK HOLDING COMPANY FINANCIAL PRESENTATION

DISCONTINUED OPERATIONS

On November 5, 2021, the separation of Loyalty Ventures Inc.

(Loyalty Ventures) from the Company was completed after market close (the Separation).

The Separation of Loyalty Ventures, which comprised the LoyaltyOne segment and has been classified as discontinued operations, was achieved through the Company’s distribution of 81 % of the shares of Loyalty Ventures common stock to holders of ADS common stock as of the close of business on the record date of October 27, 2021.

ADS stockholders of record received one share of Loyalty Ventures common stock for every two and a half shares of ADS common stock.

Following this distribution, Loyalty Ventures became an independent, publicly-traded company, in which the Company has retained a 19 % ownership interest.

As part of the plan regarding the Separation, the Company received distributions from Loyalty Ventures prior to the effectiveness of the Separation in the aggregate amount of $ 750 million, of which $ 725 million was used by the Company to repay certain term loans as required under the Company’s credit agreement and $ 25 million was used by the Company to make scheduled amortization payments for the fourth quarter of 2021 with respect to such term loans.

See Note 11, “Borrowings of Long-term and Other Debt,” for further discussion on the Company’s outstanding long-term debt.

The Company accounts for its 19 % ownership interest in Loyalty Ventures following the equity method of accounting.

As of December 31, 2021, the carrying amount of the Company’s ownership interest in Loyalty Ventures, which investment totaled was $ 50 million, and is included in Other assets in the Consolidated Balance Sheet, while earnings (losses), which were immaterial for the period, are recorded in Other non-interest income in the Consolidated Statements of Income.

ALLIANCE DATA SYSTEMS CORPORATION

Non-cash investing and financing activities for the year ended December 31, 2021 included the Company’s equity method investment in LVI upon spinoff, on November 5, 2021, which totaled $ 48 million, and the Company’s retirement of its outstanding treasury stock in July 2021.

For more information, see Note 22, “Discontinued Operations”, and Note 18, “Stockholders’ Equity”, respectively.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table summarizes the results of operations of the Company’s former LoyaltyOne segment, direct costs identifiable to the LoyaltyOne segment, and the allocation of interest expense on corporate debt, for the years ended December 31:

(in millions)

DISCONTINUED OPERATIONS

On November 5, 2021, the separation of LVI from the Company was completed after market close (the Separation).

The Separation, which has been classified as discontinued operations, was achieved through the Company’s distribution of 81 % of the shares of LVI common stock to holders of the Company’s common stock as of the close of business on the record date of October 27, 2021.

The Company’s stockholders of record received one share of LVI common stock for every two and a half shares of the Company’s common stock.

Following this distribution, LVI became an independent, publicly-traded company, in which the Company has retained a 19 % ownership interest.

The Company accounts for its 19 % ownership interest in LVI following the equity method of accounting.

As of December 31, 2022, the carrying amount of the Company’s ownership interest in LVI, which totaled $ 6 million, is included in Other assets in the Consolidated Balance Sheets, while earnings (losses) are recorded in Other non-interest income in the Consolidated Statements of Income.

The following table summarizes the results of operations of the Company’s former LoyaltyOne segment, direct costs identifiable to the former LoyaltyOne segment, and the allocation of interest expense on corporate debt, for the years ended December 31:

2022 2021 2020

Total interest income $ — $ 1 $ 1

6 unchanged sentences

Income from discontinued operations, net of income taxes $ ( 1 ) $ 9 $ 87

(1) As described above, the Company’s credit agreement, as amended, required a $ 725 million prepayment of term loans in conjunction with the LoyaltyOne spinoff.

______________________________

The Company’s Credit Agreement, as amended, required a $ 725 million prepayment of term loans in conjunction with the LoyaltyOne spinoff.

As a result, the interest expense reflected above is the allocation to discontinued operations of interest on the basis of this $ 725 million mandatory prepayment.

The following table summarizes the assets and liabilities of the Company’s former LoyaltyOne segment as of December 31:

(in millions)

Cash and cash equivalents

Accounts receivable, net

Redemption settlement assets, restricted

Property and equipment, net

Total assets of discontinued operations

Accounts payable

Accrued expenses

Deferred revenue

Other liabilities

Total liabilities of discontinued operations

The following table summarizes the depreciation and amortization, and capital expenditures of the Company’s former LoyaltyOne segment for the years ended December 31:

(in millions)

Depreciation and amortization

Capital expenditures

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Effective April 12, 2019, the Company entered into a definitive agreement to sell its Epsilon segment to Publicis Groupe S.A.

for $ 4 billion in cash, subject to certain specified adjustments.

Beginning in the first quarter of 2019, Epsilon met the criteria for classification as discontinued operations.

The sale of Epsilon was completed on July 1, 2019, and the pre-tax gain is shown in the table below (in millions).

Consideration received (1)

Net carrying value of assets and liabilities (including other comprehensive income)

Pre-tax gain on deconsolidation

(1) Consideration as defined included cash associated with the sold Epsilon entities, which was $ 42.2 million.

The Company recorded transaction costs of approximately $ 79 million for the year ended December 31, 2019 and recorded an after-tax loss on sale of $ 252 million, which is included in Loss from discontinued operations, net of taxes.

Following the sale of Epsilon, the Company has continued its existing contractual relationships with Epsilon for digital marketing services.

The following table summarizes the results of operations of the Company’s former Epsilon segment, direct costs identifiable to the Epsilon segment, and the allocation of interest expense on corporate debt, for the years ended December 31:

(in millions)

Total interest income

Total interest expense (1)

Net interest income

Total non-interest income

Total non-interest expenses

(Loss) income before (benefit) provision for income taxes

(Benefit) provision for income taxes

(Loss) income from discontinued operations, net of income taxes

(1) The Company’s credit agreement, as amended, required a $ 500 million payment of the revolving credit facility and the redemption of all of the Company’s outstanding senior notes.

As a result, the interest expense reflected above is the allocation to discontinued operations of interest on the basis of this $ 500 million mandatory repayment and redemption of its $ 2 billion in senior notes outstanding.

For the year ended December 31, 2021, loss from discontinued operations reflects a tax liability associated with indemnification issues with the purchaser.

For the year ended December 31, 2020, loss from discontinued operations reflects a loss contingency associated with indemnification issues with the purchaser.

For the year ended December 31, 2019, loss from discontinued operations reflects the results of operations of the Company’s former Epsilon segment, direct costs identifiable to the Epsilon segment including a loss contingency associated with indemnification issues with the purchaser and the allocation of interest expense on corporate debt.

See Note 15, “Commitments and Contingencies,” for additional information with respect to the loss contingency.

The following table summarizes the depreciation and amortization, and capital expenditures of the Company’s former Epsilon segment for the years ended December 31:

(in millions)

2022 2021 2020

Depreciation and amortization $ — $ 31 $ 78

Capital expenditures $ — $ 15 $ 24

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

BANK HOLDING COMPANY FINANCIAL PRESENTATION

As a result of the Separation and consequential classification of LoyaltyOne as discontinued operations, the Company has adjusted the presentation of its Consolidated Financial Statements from the Company’s historical approach under SEC Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies,” to Article 9, which is applicable to “bank holding companies.” While neither the Company nor any of its subsidiaries are considered a “bank” within the meaning of the Bank Holding Company Act, the changes from the historical presentation, to the bank holding company presentation, the most significant of which reflect a reclassification of Interest expense within Net interest income, are intended to reflect the Company’s operations going forward and better align the Company with its peers for comparability purposes.

The Separation and associated reporting changes applied herein also results in the Company reflecting one reportable operating segment.

The following tables reflect a reconciliation from the Company’s historical approach to the presentation of its Consolidated Statements of Income to the Company’s bank holding company presentation for the years ended December 31, 2020 and 2019.

The “Adjustments for Discontinued Operations” column reflects the removal of the operations of Loyalty Ventures and is derived from the LoyaltyOne reportable operating segment, presented in the corresponding Annual Report on Form 10-K, adjusted to reflect directly attributable costs and allocations previously held in the Corporate segment, such as transaction costs, hedging costs, and interest on term loans required to be repaid as a result of the Separation.

The “Adjustments for Bank Holding Company Presentation” column reflects the changes, due to the removal of the operations of Loyalty Ventures, in the presentation of the Company’s historic Consolidated Statements of Income from commercial and industrial company presentation to the bank holding company presentation.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Year Ended December 31, 2020

Historical as Reported

Adjustments for Discontinued Operations

As Adjusted for Discontinued Operations

Adjustments for Bank Holding Company Presentation

Per Consolidated Statements of Income

(in millions)

Redemption, net

Finance charges, net

Interest and fees on loans

Interest on cash and investment securities

Total interest income*

Interest expense

Interest on deposits

Interest on borrowings

Total interest expense

Net interest income*

Non-interest income

Interchange revenue, net of retailer share arrangements

Total non-interest income

Total net interest and non-interest income*

Provision for credit losses

Total net interest and non-interest income, after provision for credit losses*

Operating expenses

Cost of operations (exclusive of depreciation and amortization disclosed separately below)

General and administrative

Depreciation and other amortization

Amortization of purchased intangibles

Non-interest expenses

Employee compensation and benefits

Card and processing expenses

Information processing and communication

Marketing expense

Depreciation and amortization

Total non-interest expenses*

Operating income

Interest expense

Securitization funding costs

Interest expense on deposits

Interest expense on long-term and other debt, net

Total interest expense, net

Income from continuing operations before income taxes

Provision for income taxes

Income from continuing operations

(Loss) income from discontinued operations, net of income taxes

* Caption total not historically provided.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Year Ended December 31, 2019

Historical as Reported

Adjustments for Discontinued Operations

As Adjusted for Discontinued Operations

Adjustments for Bank Holding Company Presentation

Per Consolidated Statements of Income

(in millions)

Redemption, net

Finance charges, net

Interest and fees on loans

Interest on cash and investment securities

Total interest income*

Interest expense

Interest on deposits

Interest on borrowings

Total interest expense

Net interest income*

Non-interest income

Interchange revenue, net of retailer share arrangements

Total non-interest income

Total net interest and non-interest income*

Provision for credit losses

Total net interest and non-interest income, after provision for credit losses*

Operating expenses

Cost of operations (exclusive of depreciation and amortization disclosed separately below)

General and administrative

Depreciation and other amortization

Amortization of purchased intangibles

Loss on extinguishment of debt

Non-interest expenses

Employee compensation and benefits

Card and processing expenses

Information processing and communication

Marketing expense

Depreciation and amortization

Total non-interest expenses*

Operating income

Interest expense

Securitization funding costs

Interest expense on deposits

Interest expense on long-term and other debt, net

Total interest expense, net

Income from continuing operations before income taxes

Provision for income taxes

Income from continuing operations

(Loss) income from discontinued operations, net of income taxes

* Caption total not historically provided.

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(1) The following tables provide a net interest income reconciliation of interest income previously reported in Finance charges, net revenue, and represents interest income and interest expense previously reported in Total interest expense, net.

For the Year Ended December 31, 2020

Finance charges, net

Securitization funding costs

Interest expense on deposits

Interest expense on long-term and other debt, net

(in millions)

Interest income

Interest and fees on loans

Interest on cash and investment securities

Interest expense

Interest on deposits

Interest on borrowings

Net interest income

For the Year Ended December 31, 2019

Finance charges, net

Securitization funding costs

Interest expense on deposits

Interest expense on long-term and other debt, net

(in millions)

Interest income

Interest and fees on loans

Interest on cash and investment securities

Interest expense

Interest on deposits

Interest on borrowings

Net interest income

(2) The following tables provide a non-interest income reconciliation of servicing fees previously reported in Services revenue, and the gain/loss on portfolio and other sales previously reported in Cost of operations expense.

For the Year Ended December 31, 2020

Cost of operations

(in millions)

Non-interest income

Interchange revenue, net of retailer share arrangements

Payment protection products

Gain on portfolio and other sales

Total non-interest income

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Year Ended December 31, 2019

Cost of operations

(in millions)

Non-interest income

Interchange revenue, net of retailer share arrangements

Payment protection products

Gain on portfolio and other sales

Total non-interest income

(3) The following tables provide a reconciliation of further detailed expense line items previously reported in Cost of operations expense, General and administrative expense, Depreciation and other amortization, Amortization of purchased intangibles, and Loss on extinguishment of debt.

For the Year Ended December 31, 2020

Cost of operations expense

General and administrative expense

Depreciation and other amortization

Amortization of purchased intangibles

(in millions)

Non-interest expenses

Employee compensation and benefits

Card and processing expenses

Information processing and communication

Marketing expense

Depreciation and amortization

Total non-interest expenses

Gain on portfolio and other sales (non-interest income)

For the Year Ended December 31, 2019

Cost of operations expense

General and administrative expense

Depreciation and other amortization

Amortization of purchased intangibles

Loss on extinguishment of debt

(in millions)

Non-interest expenses

Employee compensation and benefits

Card and processing expenses

Information processing and communication

Marketing expense

Depreciation and amortization

Total non-interest expenses

Gain on portfolio and other sales (non-interest income)

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The adjustments to the presentation of the Consolidated Statements of Comprehensive Income, Consolidated Balance Sheets, Consolidated Statements of Stockholders' Equity and Consolidated Statements of Cash Flows, from the Company's historical approach under SEC Regulation S-X Article 5, to Article 9, were insignificant.

The Company did not have any assets or liabilities of its former LoyaltyOne segment as of December 31, 2022 or 2021.

PARENT COMPANY FINANCIAL STATEMENTS

The following ADSC financial statements are provided in accordance with the rules of the Securities and Exchange Commission, which require such disclosure when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets.

Certain of the Company’s subsidiaries may be restricted in distributing cash or other assets to ADSC, which could be utilized to service its indebtedness.

The following BFH financial statements are provided in accordance with the rules of the SEC, which require such disclosure when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

of the Company’s subsidiaries may be restricted in distributing cash or other assets to BFH, which could be utilized to service its indebtedness.

The stand-alone parent-only financial statements are presented below.

Parent Company – Condensed Balance Sheets

(in millions)

Cash and cash equivalents $ 5 $ —

Investment in subsidiaries 4,159 4,446

Investment in Loyalty Ventures

Investment in LVI 6 50

Other assets 119 123

Total assets $ 4,289 $ 4,619

Long-term and other debt $ 1,892 $ 1,985

6 unchanged sentences

Years Ended December 31,

(in millions)

2022 2021 2020

Total interest income $ 11 $ 12 $ 13

2 unchanged sentences

Dividends from subsidiaries 382 535 256

Loss from equity method investment ( 44 ) — —

Total net interest and non-interest income 242 444 159

Total non-interest expenses 1 1 1

Income before income taxes and equity in undistributed net income (loss) of subsidiaries

Income before income taxes and equity in undistributed net income of subsidiaries 241 443 158

Benefit for income taxes 22 36 21

Income before equity in undistributed net income (loss) of subsidiaries

Equity in undistributed net income (loss) of subsidiaries

Income before equity in undistributed net income of subsidiaries 263 479 179

Equity in undistributed net (loss) income of subsidiaries ( 40 ) 322 35

Net income $ 223 $ 801 $ 214

Parent Company – Condensed Statements of Comprehensive Income

Years Ended December 31,

(in millions)

Other comprehensive income, net of tax

2022 2021 2020

Net income $ 223 $ 801 $ 214

Other comprehensive (loss) income, net of tax ( 3 ) 7 —

Total comprehensive income, net of tax $ 220 $ 808 $ 214

ALLIANCE DATA SYSTEMS CORPORATION

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

Years Ended December 31,

(in millions)

2022 2021 2020

Net cash used in operating activities $ ( 219 ) $ ( 398 ) $ ( 138 )

1 unchanged sentence

Investment in subsidiaries — — ( 3 )

Proceeds from sale of business

Dividends received 383 533 256

2 unchanged sentences

Financing activities:

Debt proceeds from spinoff of Loyalty Ventures Inc.

Debt proceeds from spinoff of LVI — 750 —

Borrowings under debt agreements 218 38 1,276

Repayments of borrowings ( 319 ) ( 864 ) ( 1,320 )

Payment of debt extinguishment costs

Payment of deferred financing costs — ( 4 ) ( 9 )

Purchase of treasury shares

Dividends paid ( 43 ) ( 42 ) ( 61 )

Proceeds from issuance of common stock

Other ( 15 ) ( 3 ) ( 1 )

Net cash used in financing activities ( 159 ) ( 125 ) ( 115 )

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of year $ 5 $ — $ —

Non-cash investing and financing activities for the year ended December 31, 2021 included the Company’s equity method investment in Loyalty Ventures Inc.

upon spinoff, which totaled $ 48 million on November 5, 2021.

Non-cash investing and financing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2020, included the issuance of approximately 1.9 million shares of the Company’s common stock as non-cash consideration in the acquisition of Bread on December 3, 2020.

For more information, see Note 2, “Acquisitions.”

Non-cash investing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2019, included a $ 3 billion non-cash dividend in the form of an intercompany return of capital from ADS Alliance Data Systems, Inc.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Alliance Data Systems Corporation has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

ALLIANCE DATA SYSTEMS CORPORATION

Non-cash investing and financing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2022 included the dissolution of a subsidiary, ADS Foreign Holdings, Inc.

on December 3, 2020.

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 Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Bread Financial Holdings, Inc.

President and Chief Executive Officer

February 28, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Alliance Data Systems Corporation and in the capacities and on the dates indicated.

President, Chief Executive

February 25, 2022

Officer and Director

Executive Vice President and

February 25, 2022

Chief Financial Officer

BRYAN CAMPBELL

Senior Vice President and

February 25, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Bread Financial Holdings, Inc.

and in the capacities and on the dates indicated.

Name Title Date

ANDRETTA President, Chief Executive Officer and Director February 28, 2023

BEBERMAN Executive Vice President and Chief Financial Officer February 28, 2023

BRYAN CAMPBELL Senior Vice President and Chief Accounting Officer February 28, 2023

Bryan Campbell

Chief Accounting Officer

Chairman of the Board, Director

February 25, 2022

BALLOU Chairman of the Board, Director February 28, 2023

GERSPACH, JR.

February 25, 2022

Director February 28, 2023

Gerspach, Jr.

February 25, 2022

/S/ RAJESH NATARAJAN

February 25, 2022

KIMBROUGH Director February 28, 2023

/S/ RAJESH NATARAJAN Director February 28, 2023

Rajesh Natarajan

/S/ TIMOTHY J.

February 25, 2022

THERIAULT Director February 28, 2023

/S/ LAURIE A.

February 25, 2022

TUCKER Director February 28, 2023

/S/ SHAREN J.

February 25, 2022

TURNEY Director February 28, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures