What changed in this filing

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Item 1. Business

2025-02-14 compared with 2024-02-20 · 279 added, 242 removed, 280 unchanged (65% of the section changed)

We are a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions.

We create opportunities for our customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences.

Driven by a digital-first approach, data insights and white-label technology, we deliver growth for our partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later (BNPL) products such as installment loans and our “split-pay” offerings.

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

Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).

Our partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which we first began, specialty apparel.

We are a tech-forward financial services company that provides simple, personalized payment, lending, and saving solutions to millions of U.S.

Our payment solutions, including Bread Financial general purpose credit cards and savings products, empower our customers and their passions for a better life.

Additionally, we deliver growth for some of the most recognized brands in travel & entertainment, health & beauty, jewelry and specialty apparel through our private label and co-brand credit cards and pay-over-time products providing choice and value to our shared customers.

Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, Hard Rock International, the NFL, Saks Fifth Avenue, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).

Our partner base is well diversified across a broad range of industries and retail verticals, including travel and entertainment, health and beauty, jewelry, sporting goods, technology and electronics, home goods and the industry in which we first began, specialty apparel.

We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers).

The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships.

The breadth and quality of our product and service offerings, coupled with our customer-centric approach, have enabled us to establish and maintain long-standing partner relationships.

We operate our business through a single reportable segment, with our primary source of revenue being from Interest and fees on loans from our various credit card and other loan products, and to a lesser extent from contractual relationships with our brand partners.

We continue to make strategic investments in digital and technology, including cloud capabilities, emerging technologies and automation, and data and analytics, all the while enhancing our governance and control over the availability, quality and security of our data.

These strategic investments are in addition to ongoing investments in support of delivering world class customer experiences across all channels and investing in the talent needed to improve our competitive position and drive ongoing responsible growth.

We believe that our digital and technology investments have and will continue to promote new account originations, brand and customer engagement, improved customer experience and operating efficiencies, making it easier for customers to finance purchases and make payments wherever they occur— online, in store and in-app.

With our range of offerings, we provide relevant products across consumer segments, including Gen Z and Millennials who we believe are more likely to be drawn to cash flow management products such as BNPL, while Gen X and Baby Boomers generally gravitate toward rewards and the convenience of a private label or co-brand card.

In addition, we continue to develop and scale our direct-to-consumer lending and payment products for new and existing customers, including through our proprietary credit cards and Bread Savings TM products.

We also continue to diversify and optimize our portfolio, prioritizing our investment in strong and profitable partners, industries and affinity brands, while also continuing to develop our Bread Pay TM products and exploring various strategic business opportunities adjacent to our core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.

With our range of offerings, we provide relevant products across consumer segments, including Gen Z and Millennials who we believe are more likely to be drawn to cash flow management products such as our pay-over-time installment loans and “split-pay” offerings, while Gen X and Baby Boomers generally gravitate toward rewards and the convenience of a private label or co-brand credit card.

In addition, we continue to develop and scale our direct-to-consumer lending, payment and saving products for new and existing customers, including through our proprietary credit cards and Bread Savings products.

We also continue to diversify and optimize our portfolio, prioritizing our investment in strong and profitable partners, industries and affinity brands, while continuing to develop our Bread Pay products, which are our installment loans and “split-pay” offerings, and exploring various strategic business opportunities adjacent to our core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.

As of December 31, 2024, we had $17.4 billion in principal on our Credit card and other loans from approximately 38 million open and outstanding accounts, with an average balance for the year ended December 31, 2024 of $975 for accounts with outstanding balances.

We proactively manage our credit risk to strengthen our balance sheet and ensure we are appropriately compensated for the risks we take.

We closely monitor our projected returns with the goal of generating risk adjusted margins above our peers.

Since 2020 (when our current Chief Executive Officer joined the Company), we have reduced our Parent Company debt levels by approximately $1.7 billion as of December 31, 2023;

Since December 31, 2021, we have significantly strengthened our capital levels and balance sheet;

reduced our Parent Company debt levels by approximately 50%;

refinanced and extended our near-term debt maturities;

significantly strengthened our capital levels and balance sheet;

diversified our funding mix;

and diversified our product mix through growth of our co-brand credit card programs, the introduction of new proprietary cards and the launch of Bread Pay TM product offerings.

Below are our guiding principles and steps we have taken that we believe have improved our financial strength and resiliency and positioned us for long-term success:

increased our tangible book value per common share, a non-GAAP financial measure (as defined and reconciled below) by a compound annual growth rate of approximately 19%;

and diversified our product mix through growth of our co-brand credit card programs, the introduction of new proprietary credit cards and the expansion of our Bread Pay product offerings.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” and “—Table 6:

Reconciliation of GAAP to Non-GAAP Financial Measures.”

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(i) private label and co-brand credit card programs with retailers and other brand partners;

(ii) direct-to-consumer credit cards (DTC or retail);

(iii) Bread Pay TM products;

and (iv) Bread Savings TM products.

(ii) direct-to-consumer (DTC) credit cards;

(iii) Bread Pay products;

and (iv) Bread Savings products.

These product offerings are not exclusive, and, where appropriate, we seek to introduce partners and customers to our other product offerings.

Private Label and Co-Brand Credit Card Lending

Our core business, historically, has been working with many of the country’s best-known brands and retailers (who we call our partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs.

Our core business is working with many of the country’s best-known brands and retailers (who we call our partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs.

In these programs, we (through our Banks) are the credit card issuer and lender to our partners’ customers, and we also service the loans and provide a variety of other related services, which are described in more detail below.

Our private label and co-brand partner base, with approximately 100 brands and numerous online merchants, consists of many large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret.

Our partners benefit from customer insights and analytics, with each of our branded credit card programs tailored to our partner’s brand and their unique customers.

Our private label and co-brand program agreements with our brand partners are generally long-term, exclusive contracts, with terms typically ranging from 5 to 10 years.

As of December 31, 2023, our top five partner contracts (based on end-of-period loan balances) are secured through 2028, and more than 85% of our loan portfolio is secured through 2025.

Private label credit cards are partner-branded credit cards used by consumers exclusively for the purchase of goods and services from that particular partner.

Credit under a private label credit card typically is extended either on standard terms, which means accounts are assessed periodic interest charges using an agreed non-promotional fixed and/or variable interest rate, or pursuant to a promotional financing offer, involving deferred interest, reduced interest or no interest during a set promotional period (typically between six and 60 months).

We typically do not charge interchange or other fees to our partners when customers use private label credit cards to purchase our partners’ goods and services through our payment system.

Our private label credit card loan balances are typically smaller, with an average customer balance of approximately $700;

although, we do offer “big ticket” financing and financing for medical and dental procedures with certain private label brand partners, which often involves larger amounts.

Relative to our co-brand loan portfolio, our private label loan portfolio generally has higher revenue yields, and our private label customers generally have lower credit lines and lower credit scores.

As well, our private label credit card customers are generally more likely to be delinquent in their payments, have accounts with higher APRs and have more late fees assessed.

We typically do not charge interchange or other fees to our partners when customers use our private label credit cards to purchase our partners’ goods and services.

Our private label credit card loan balances are typically smaller, with an average outstanding account balance for the year ended December 31, 2024 of $738;

although, we do offer “big ticket” financing and financing for medical and dental procedures with certain private label brand partners, which often involve larger amounts.

Relative to our co-brand loan portfolio, our private label loan portfolio generally has higher revenue yields.

In addition, our private label customers generally have lower credit scores and therefore lower credit lines, and are generally more likely to be delinquent in their payments, have accounts with higher APRs and have more late fees assessed.

Our co-brand credit cards are general purpose credit cards that can be used to purchase goods and services from the applicable partner, as well as any other retailers wherever cards from the named card network are accepted.

We currently issue co-brand credit cards for use on the MasterCard and Visa networks (our DTC general purpose credit cards use the American Express network, as described further below).

Credit extended under our co-brand credit cards is typically on standard terms only.

Charges made using a co-brand credit card, particularly charges made outside of the co-brand partner, generate interchange income for us.

Relative to our private label loan portfolio, our co-brand loan portfolio generally has

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Our co-brand credit cards are general purpose credit cards that can be used to purchase goods and services from the applicable partner, as well as other retailers wherever cards from those card networks are accepted.

We currently issue co-brand credit cards for use on the MasterCard and Visa networks.

Credit extended under our co-brand credit cards typically is extended on standard terms only.

Charges made using a co-brand credit card, particularly charges made outside of that co-brand partner, generate interchange income for us.

Relative to our private label loan portfolio, our co-brand loan portfolio generally has lower revenue yields, and our co-brand customers generally have higher credit lines and higher credit scores, with the majority of our co-brand customers having a Vantage score in excess of 660.

For the year ended December 31, 2023, customer spending on our co-brand credit cards comprised approximately 50% of our credit sales (as compared to 37% for the year ended December 31, 2019, the last fiscal year prior to our current Chief Executive Officer joining the Company), which we believe enables us to capture incremental and non-discretionary sales as consumer spending patterns shift in response to evolving economic conditions.

lower revenue yields.

In addition, our co-brand customers generally have higher credit scores and therefore higher credit lines, with the majority of our co-brand customers having a Vantage score in excess of 660.

Our average outstanding co-brand credit card account balance for the year ended December 31, 2024 was $1,840.

For the year ended December 31, 2024, customer spending on our co-brand credit cards comprised approximately 50% of our credit sales, which we believe enables us to capture incremental and non-discretionary sales as consumer spending patterns shift in response to evolving economic conditions.

We offer deferred interest rate, as well as low or no interest rate promotional financing to customers in certain of our brand partner programs.

In both our private label and co-brand partner relationships, we receive a merchant discount fee from our partners to compensate us for all or part of the foregone interest income associated with promotional financing.

The terms of these promotions vary by partner, but generally the longer the deferred interest, reduced interest or interest-free period, the greater the partner’s merchant discount.

Some offers permit customers to pay for a purchase in equal monthly payments with no interest or at a reduced interest rate, rather than deferring or delaying interest charges.

Our credit card program agreements typically provide for royalty payments, or retailer share arrangements, 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.

Some offers permit customers to pay for a purchase in equal monthly payments with no interest or at a reduced interest rate over a specified period of time, rather than deferring or delaying interest charges.

As well, in 2024 we began charging an initial fee to customers entering into promotional plan financing arrangements, for certain of our brand partner programs.

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

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

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Our program agreements also typically provide that the parties will develop the terms of the rewards program linked to the use of our product (such as opportunities to receive double rewards points for purchases made on a product), along with the allocation of costs related to the rewards program.

More broadly, the credit card programs we operate typically provide reward points, which are redeemable for a variety of products or awards, or merchandise discounts earned by the customer having achieved a pre-set spending level.

More broadly, the credit card programs we operate typically provide rewards points, which are redeemable for a variety of products or awards, or merchandise discounts earned by the customer having achieved a preset spending level.

Other programs may include cash back rewards or statement credits.

The rewards can be mailed to the cardholder, accessed digitally, or may be immediately redeemable at the partner’s retail location.

Costs of cardholder reward arrangements are recognized when the rewards are earned by the cardholders and are generally recorded as a reduction of revenue.

As a general matter, the financial terms and conditions governing our private label and co-brand credit card products vary by program and product type and change over time, although we seek to standardize the non-financial provisions consistently across all products.

Costs of cardholder rewards arrangements are recognized when the rewards are earned by the cardholders and are generally recorded as a reduction of revenue.

As a general matter, the financial terms and conditions governing our private label and co-brand credit card products vary by program and product type and may change over time;

although, we seek to standardize the non-financial provisions consistently across all products.

The terms and conditions of all of our credit card products are governed by a cardholder agreement and applicable laws and regulations.

We assign each card account a credit limit when the account is initially opened by the customer.

We assign each credit card account a credit limit when the account is initially opened by the customer.

Thereafter, we may increase or decrease individual credit limits from time to time, at our sole discretion, based primarily on our evaluation of the customer’s creditworthiness and ability to pay.

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Cash advances are not subject to an interest grace period, and some credit card programs do not provide an interest grace period for promotional purchases.

Typically, each customer with an outstanding amount due on their credit card account must make a minimum payment each month;

In addition to periodic interest charges, we may impose other charges and fees on credit card accounts, including, as applicable and provided in the cardholder agreement, late fees where a customer has not paid at least the minimum payment due by the required due date, as well as paper statement fees which, in 2024 for selected brand partner programs, we began to charge on certain credit card accounts receiving monthly paper statements.

Typically, each customer with an outstanding amount due on his or her credit card account must make a minimum payment each month;

a customer may pay the total amount due at any time without penalty.

We also may enter into arrangements with delinquent customers to extend or otherwise change payment schedules and to waive interest charges and/or fees;

We also may enter into arrangements with delinquent customers to modify their payments and/or waive or reduce interest charges and/or fees;

we do not offer programs involving the forgiveness of principal.

We make it easier for customers to make payments by offering recurring automatic payment functionality on all cardholder accounts and other electronic payments methods.

As of December 31, 2023 we had $17.9 billion in principal on credit card loans from approximately 39 million active accounts, with an average balance for the year ended December 31, 2023 of approximately $900 for accounts with outstanding balances.

We make it easier for customers to make payments by offering recurring automatic payment functionality and other electronic payments methods on all cardholder accounts.

Direct-to-Consumer Credit Cards

In the second quarter of 2022, we launched our branded Bread Cashback TM credit card, which is a DTC, general purpose cashback credit card, and is an important product for us to capture incremental, non-discretionary spend and build and retain customer relationships.

As a DTC product, our Bread Cashback TM credit card and other proprietary cards we may issue are not dependent upon the performance of our brand partners or impacted by any partner revenue-sharing obligations.

We believe that our Bread Cashback TM credit card will continue to increase our total addressable market,

In 2022, we launched our branded Bread Cashback American Express Credit Card, which is a DTC, general purpose cashback credit card.

Our DTC credit cards are an important component of our overall product offerings and allow for us to capture incremental, non-discretionary spend and build and retain customer relationships.

As a DTC product, our Bread Cashback credit card and other proprietary credit cards we may issue are not dependent upon the performance of our brand partners or impacted by any partner revenue-sharing obligations.

We believe that our Bread Cashback credit card will continue to increase our total addressable market, including within the Millennial and Gen Z populations, offering unlimited 2% cashback, no annual fee, no foreign transaction fees, premium protection benefits, American Express lifestyle

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including within the Millennial and Gen Z populations, offering unlimited 2% cashback, no annual fee, no foreign transaction fees, premium protection benefits, American Express ® lifestyle benefits and instant mobile acquisition and wallet provisioning.

In addition, in the fourth quarter of 2023, we introduced our newest DTC general purpose credit card, the Bread Rewards TM American Express ® Credit Card, and successfully converted approximately 570,000 existing cardholders from our legacy Comenity-branded general purpose cash-back credit card to this new card.

We expect that our Bread Rewards TM credit card, which offers 3% rewards points on gas station, grocery store, dining and utility purchases, among other benefits, will be available to the public during the first half of 2024.

benefits and instant mobile acquisition and wallet provisioning.

In addition, in the fourth quarter of 2023, we introduced our newest DTC general purpose credit card, the Bread Rewards American Express Credit Card, which offers 3% rewards points on gas station, grocery store, dining and utility purchases, among other benefits.

We currently issue our DTC credit cards on the American Express network.

Bread Pay TM is our BNPL payment technology solution, which includes both our installment loan and “split-pay” offerings, as described in more detail below.

Through Bread Pay TM , we offer an omnichannel solution for more than 1,100 SMB retailers and merchants, and we continue to explore and pursue growth opportunities in various business adjacencies, including through the integration of our suite of products (primarily Bread Pay TM installment loans) into third-party platforms to gain efficient distribution of our lending solutions.

We believe the expansion of our Bread Pay TM products is an attractive growth opportunity for us due to, in part, the Bread Pay TM loan portfolio not generally having exposure to potential regulatory actions placing limits on credit card late fees.

Our Bread Pay TM offerings and on-boarding capabilities enhance our growth prospects across the industries in which we lend and increase the addressable market of our Bread Pay TM partners.

Bread Pay TM also offers our existing private label and co-brand credit card partners a broader digital product suite and additional white-label product solutions for those customers preferring a “closed-end” payment option (i.e., a non-revolving loan with fixed repayment terms).

Our average outstanding DTC credit card account balance for the year ended December 31, 2024 was $2,317.

Bread Pay is our payment technology solution for our pay-over-time products, which includes both our installment loan and “split-pay” offerings, as described in more detail below.

Through Bread Pay, we offer an omnichannel solution for more than 1,300 SMB retailers and merchants, and we continue to explore and pursue growth opportunities in various business adjacencies, including through the integration of our suite of products (primarily Bread Pay installment loans) into third-party platforms to gain efficient distribution of our lending solutions.

We believe the expansion of our Bread Pay products is an attractive growth opportunity for us;

our Bread Pay offerings and on-boarding capabilities enhance our growth prospects across the industries in which we lend and increase the addressable market of our Bread Pay partners.

Bread Pay also offers our existing private label and co-brand credit card partners a broader digital product suite and additional white-label product solutions for those customers preferring a non-revolving loan with fixed repayment terms such as our installment loans and “split-pay” offerings.

We offer a flexible platform and robust suite of application programming interfaces (APIs) that allow merchants and partners to seamlessly integrate online point-of-sale financing and other digital payment products.

During 2023, we migrated our Bread Pay TM partners from our legacy platform to our new Bread Pay TM 2.0 platform.

Our Bread Pay TM installment loans are closed-end credit accounts where the customer pays down the outstanding balance in monthly installments, typically over a 3 to 48 month period.

Our Bread Pay installment loans are fixed extensions of credit where the customer pays down the outstanding balance in monthly installments, typically over a 3 to 48 month period.

The terms of our installment loans are governed by customer agreements and applicable laws and regulations.

Installment loans are generally assessed interest charges using fixed interest rates.

We do not currently impose other charges or fees on loan accounts, such as late fees, where a customer has not made the required payment by the required due date, or returned payment fees.

Our “split-pay” loans are short-term, interest-free financing, to be repaid by the customer in four equal installments, with the first payment due at the time of purchase and the remaining three payments due in subsequent two-week intervals.

Historically we have not imposed other charges or fees, such as late fees, where a customer has not made the required payment by the required due date, or returned payment fees.

Our Bread Pay “split-pay” loans are short-term, interest-free financing, to be repaid by the customer in four equal installments, with the first payment due at the time of purchase and the remaining three payments due in subsequent two-week intervals.

The terms of our split-pay loans are governed by customer agreements and applicable laws and regulations.

We do not currently impose charges or fees on these split-pay loan accounts either, whether that be late fees or returned payment fees.

Bread Savings TM

Bread Savings TM refers to our DTC, or retail, deposit products, primarily in the form of certificates of deposit and savings accounts.

Our Bread Savings TM products support loan growth and improve our funding mix, making us less reliant on other sources of wholesale funding.

Historically we have not imposed charges or fees, whether that be late fees or returned payment fees.

Bread Savings

Bread Savings refers to our DTC, or retail, deposit products, primarily in the form of certificates of deposit and high-yield savings accounts, including traditional and Roth Individual Retirement Accounts.

Our Bread Savings products support loan growth and improve our funding mix, making us less reliant on other sources of wholesale funding.

In recent years, retail deposits have become an increasingly important source of funds for us, growing 19% from $6.5 billion as of December 31, 2023 to $7.7 billion as of December 31, 2024.

As of December 31, 2023, retail deposits represented 34% of our total funding sources, and more than 90% of our deposits were estimated to be FDIC-insured (i.e.

below applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank), measured based on regulatory guidelines.

Our online Bread Savings TM platform is scalable allowing us to expand without having to rely on a traditional “brick and mortar” branch network.

We continue to focus on growing our Bread Savings TM operations and believe we are well-positioned to continue to benefit from the consumer-driven shift from branch banking to direct-banking.

As of December 31, 2024, average retail deposits represented 43% of our total funding sources and as of that same date, deposits that exceeded applicable Federal Deposit Insurance Corporation (FDIC) insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $574 million, or 4% of Total deposits.

The measurement of estimated uninsured deposits aligns with regulatory guidelines.

Our online Bread Savings platform is scalable, allowing us to expand without having to rely on a traditional “brick and mortar” branch network.

We continue to focus on growing our Bread Savings operations and believe we are well-positioned to continue to benefit from the consumer-driven shift from branch banking to direct banking.

We seek to differentiate our deposit product offerings from our competitors on the basis of rates we pay on deposits, the quality of our customer service and the competitiveness of our digital banking capabilities.

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Services Supporting our Primary Product Offerings

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(i) risk management, account origination and funding services;

(ii) loan processing and servicing;

(iii) marketing, and data and analytics;

and (iv) our digital and mobile capabilities.

(ii) credit card and other loan processing and servicing;

(iii) fraud prevention;

(iv) marketing, and data and analytics;

and (v) our digital and mobile capabilities.

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Risk Management, Account Origination and Funding Services.

We provide risk management solutions, account origination and funding services for our private label and co-brand credit card programs, as well as our Bread Pay TM partnerships.

We provide risk management solutions, account origination and funding services for our private label and co-brand credit card programs, as well as our Bread Pay partnerships.

We process millions of credit card applications each year using automated proprietary scoring technology and verification procedures to make responsible risk-based underwriting and origination decisions when approving new accounts and establishing credit limits.

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This information helps us segment new and existing customers into narrower risk ranges, allowing us to better evaluate individual credit risk.

As macroeconomic conditions have weakened over recent years, we have continued to enhance our credit risk management, including through stronger underwriting resulting from enhanced technology, monitoring, and data, prudent and proactive credit line management, and well-established risk appetite metrics, and we are proactively applying our recession readiness playbook.

Loan Processing and Servicing .

We manage and service the loans we originate for our private label and co-brand credit card programs, as well as our DTC credit cards and Bread Pay TM products.

As macroeconomic conditions have changed in recent years, we have continued to enhance our credit risk management, including through stronger underwriting resulting from enhanced technology, monitoring, and data, prudent and proactive credit line management (as part of our recession readiness playbook), and well-established risk appetite metrics.

Credit Card and Other Loan Processing and Servicing .

We manage and service the accounts we originate for our private label and co-brand credit card programs, as well as our DTC credit cards and Bread Pay products.

In 2022, we completed the transition of our credit card processing services to Fiserv, a leading global provider of outsourced payments and financial services technology solutions;

this transition enables improved speed to market, including the ability to quickly and seamlessly add new products and capabilities that benefit our partners and cardholders.

It has also strengthened our ability to ensure we are operating on a compliant core platform, and enabled efficient integration of digital technology, while supporting our data and analytics capabilities and improving operational efficiencies.

See also “—Technology/Systems” below for additional information regarding our approach toward the systems and technologies that we use in the operation of our business.

It has also strengthened our ability to ensure we are operating on a compliant core platform, and enables efficient integration of digital technology, while supporting our data and analytics capabilities and improving operational efficiencies.

See also “—Technology/Systems” below for additional information regarding our approach toward the systems and technologies we use in the operation of our business.

Our customer care operations are influenced by our retail heritage, and we view every customer touch point as an opportunity to provide an exceptional experience.

Our customer care operations offer omnichannel servicing, including phone, mail, fax, email, text, smartphone application and web.

We provide focused training programs in all areas to achieve the highest possible customer service standards and customer experience, and monitor our performance by conducting surveys with our partners and our customers.

In 2023, for the eighteenth consecutive time, we were certified by BenchmarkPortal as a Center of Excellence for the quality of our operations, the most prestigious customer care industry ranking attainable.

Our customer care operations offer omnichannel servicing, including through phone, mail, email, text, smartphone application and the web.

We blend domestic and off-shore locations as an important part of our servicing strategy, to maintain service availability beyond typical work hours in the United States and to optimize our cost structure.

We provide focused training programs in all areas to achieve the highest possible customer service standards and customer experience and monitor our performance by conducting surveys with our partners and our customers, including the recent development of an AI-powered knowledge management solution for our customer care associates.

In 2024, for the nineteenth consecutive time, we were certified by BenchmarkPortal as a Center of Excellence for the quality of our operations, the most prestigious customer care industry ranking attainable.

Founded by Purdue University in 1995, BenchmarkPortal is a global leader of best practices for customer care centers.

We blend domestic and off-shore locations as an important part of our servicing strategy, to maintain service availability beyond normal work hours in the United States and to optimize our cost structure.

Marketing, and Data & Analytics .

Fraud Prevention.

We monitor our customers’ accounts to help prevent, detect, investigate and resolve fraud across the various products we offer.

We employ a variety of fraud mitigation controls during the lifecycle of accounts, including capabilities related to account acquisition, transaction processing and account management.

We use proprietary custom fraud models developed by our data scientists, together with externally-sourced scores and solutions used across the industry, to seek to identify fraud and protect our stakeholders, including our customers and brand partners.

We leverage device intelligence technology to risk-assess digital applications and online servicing channels, and we subject monetary transactions to authorization and approval scrutiny through a variety of techniques designed to help identify and halt fraudulent transactions, including machine-learning models, rules-based decision-making logic, report analysis, data integrity checks and manual account reviews.

We have a cross-functional team of risk, fraud and security professionals that regularly evaluate our fraud-prevention capabilities and emerging industry trends and solutions.

Marketing, and Data and Analytics .

Through our integrated marketing services, we design and implement strategies that assist our partners in acquiring, retaining and expanding customer engagement to drive a more loyal, frequent shopper that increases customer lifetime value.

Our programs capture transaction data that we analyze to better understand consumer behavior, which we use to increase the effectiveness of our partners’ marketing activities.

Through our data and analytics capabilities, including machine learning and artificial intelligence, we focus on data insights that drive actionable strategies and enhance revenue growth and customer retention.

We use multi-channel marketing communication tools, including in-store, web, permission-based email, permission-based mobile messaging and direct mail to engage customers in the channel of their choice.

Through our data and analytics capabilities, including the use of machine learning and artificial intelligence (AI) technology, we focus on data insights that drive actionable strategies and enhance revenue growth and customer retention.

Digital and Mobile Capabilities .

We are constantly seeking to improve our digital and mobile capabilities, in order to support and enhance our product offerings, drive growth for our brand partners and improve the customer experience.

We seek to provide a seamless, personalized digital and mobile experience that is responsive to our customers’ evolving expectations, while also providing the data and tools necessary to proactively identify and address future customer needs.

During 2023, we made significant improvements to our digital and mobile capabilities, including API enhancements, enriched software development kits, virtual card commercialization and our new Bread Financial mobile app, which we launched to Bread Cashback TM credit card customers in the fourth quarter of 2023, and will roll out to brand partner customers starting in the first quarter of 2024.

We are continually seeking to enhance customers’ self-service capabilities in our digital channels, which allows customers to address their own needs when and how they want, while also generating efficiencies for us over time by reducing the cost to serve our customers.

In addition, through our Enhanced Digital Suite, a group of marketing and credit application features, we help our brand partners capitalize on online trends by bringing through more qualified applicants, a higher credit sales conversion rate and a higher average purchase value.

We seek to provide a seamless, personalized digital and mobile experience that is responsive to our customers’ evolving expectations.

Recent improvements to our digital and mobile capabilities include API enhancements, enriched software development kits, virtual card commercialization, and our new Bread Financial mobile app which we launched to Bread

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Digital Suite includes a unified software development kit that provides access to our broad suite of products;

Cashback American Express Credit Card customers in the fourth quarter of 2023, then throughout 2024 began to roll out to brand partner customers along with all Bread Rewards American Express Credit Card customers, and in 2025 we will complete the full rollout to all remaining credit card customers.

We are continually seeking to enhance customers’ self-service capabilities in our digital channels, which allows customers to address their needs when and how they want, while also generating efficiencies for us over time by reducing the costs to serve our customers.

Enhanced Digital Suite includes a unified software development kit that provides access to our broad suite of products;

it also promotes credit payment options, relevant to the customer, earlier in the shopping experience.

The credit application is simple and easy, offers prefilled fields and pre-screens customers in real-time, allowing for immediate credit approval without leaving the brand partner’s site.

Across all of our product offerings, we remain focused on creating an exceptional digital and mobile experience for our customers, which we believe will improve our competitive position and drive future growth.

Across all product offerings, we remain focused on creating an exceptional digital and mobile experience for our customers, which we believe improves our competitive position and drive future growth.

For additional information relating to our business, business strategy and products and services, see “Item 7.

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Technology/Systems

We leverage information and technology to help achieve our business objectives and to develop and deliver products and services that satisfy our brand partners’ and customers’ needs.

A key part of our strategic focus is the development and use of efficient, flexible computer and operational systems, such as cloud technology, to support complex marketing and account management strategies, the servicing of our customers, and the development and scaling of new and diversified products.

We leverage information and technology to help achieve our business objectives and to develop and deliver products and services that satisfy our brand partners’ and customers’ needs, all while seeking to enhance our governance and control over the availability, quality and security of our data.

A key part of our strategic focus is the development and use of resilient, efficient and flexible computer and operational systems to deliver growth for our brand partners, support sophisticated marketing and account management strategies, service our customers, and develop and scale new and diversified products.

We believe the continued development and integration of these systems is an important part of our efforts to reduce costs, improve quality and security, and provide faster, more flexible technology services.

Consequently, we continuously review capabilities and develop or acquire systems, processes and competencies to meet our unique business requirements.

Consequently, we continuously review capabilities and develop or acquire systems, processes and competencies to meet our unique business requirements, including strategic investments in cloud capabilities, machine learning and AI, emerging technologies and automation, and data and analytics.

As part of our continuous efforts to review and improve our technologies, we may either develop such capabilities internally or use third-party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both.

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Microsoft and Amazon Web Services, Inc.

for our cloud infrastructure and Fiserv for credit card processing services.

for our cloud infrastructure and Fiserv for our credit card processing services.

We are committed to safeguarding our customers’ and our own information and technology, implementing backup and recovery systems, and generally require the same of our third-party service providers.

We take measures that mitigate against known attacks and use internal and external resources to scan for vulnerabilities in platforms, systems, and applications necessary for delivering our products and services.

We cannot guarantee, however, that our cybersecurity risk management program and processes, or those of our third-party providers, including our policies, controls or procedures, will be fully implemented, adhered to, or effective in protecting both our customers’ and our own information and technology from cyberattacks.

For a discussion of the risks associated with our use of technology systems, see “Part I—Item 1A.

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Risk Factors – Risk Management – Operational Risk”.

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Protection of Intellectual Property and Other Proprietary Rights

We rely on a combination of patents, copyrights, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information and technology used in our business.

We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our technology, documentation and other proprietary information.

Despite the efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our products or technology that we consider proprietary and third parties may attempt to develop similar technology independently.

We rely on a combination of patents, copyrights, trademarks, and trade secrets (and corresponding laws relating to such intellectual property), confidentiality procedures, contractual provisions, and other similar measures to protect our technology and proprietary information used in our business.

We generally enter into confidentiality agreements with our employees, consultants and third-party business partners to protect our proprietary information.

We control access to and distribution of our technology and its related documentation and other proprietary information through licenses and contractual restrictions.

Despite our efforts to protect our technology and proprietary rights, unauthorized parties may attempt to copy or otherwise obtain the use of our technology that we consider proprietary, and third parties may attempt to develop similar technology independently.

We have a number of domestic and foreign patents and pending patent applications.

We pursue registration and protection of our trademarks primarily in the United States;

although, we also have either registered trademarks or applications pending for certain marks in other countries.

No individual patent or license is material to us or our business.

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We pursue protection of our trademarks through registration, primarily in the United States, although we also have either registered trademarks or applications pending for certain marks in other countries.

We maintain a trade secret program for certain proprietary intellectual property for which we choose not to seek patent or copyright protection.

No individual patent, copyright, or trademark is material to us or our business.

The markets for our products and services are highly competitive, continuously changing, highly innovative, and subject to regulatory scrutiny and oversight.

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Some of our current and potential competitors may be larger than we are, have larger customer bases, greater brand recognition, longer operating histories, a dominant or more secure position, broader geographic scope, volume, scale, resources, and market share than we do, or offer products and services that we do not offer.

Other competitors are smaller or younger companies that may be more agile in responding quickly to regulatory and technological changes.

Other competitors may be smaller or younger companies that are more agile in responding quickly to regulatory and technological changes.

Many of the areas in which we compete evolve rapidly with innovative and disruptive technologies, emerging competitors, business alliances, shifting consumer habits and user needs, price sensitivity on the part of merchants and consumers, and frequent introductions of new products and services.

The consumer credit and payments industry is highly competitive and we face an increasingly dynamic industry as emerging technologies enter the marketplace.

In competing to acquire and retain the business of brand partners and customers, our primary competition is with other financial institutions whose marketing focus has been on developing credit card programs with attractive value propositions and consequentially large revolving balances.

These competitors further drive their businesses by cross-selling their other financial products to their cardholders.

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We have a long history of effectively analyzing transaction data we obtain through partner loyalty programs and managing our lending programs, including customer specific transaction data and overall consumer spending patterns, to develop and implement successful marketing strategies for our partners.

As a form of payment, our customers have numerous consumer credit and other payment options available to them, and our products compete with cash, checks, electronic bank transfers, debit cards, general purpose credit cards (including Visa, MasterCard, American Express and Discover Card), various forms of consumer installment loans and split-pay products, other private label card brands, prepaid cards, digital wallets and mobile payment solutions, and other tools that simplify and personalize shopping experiences for consumers and merchants.

As a form of payment, our customers have numerous consumer credit and other payment options available to them, and our products compete with cash, checks, electronic bank transfers, debit cards, general purpose credit cards (including those on the Visa, MasterCard, American Express and Discover Card networks), various forms of consumer installment loans and split-pay products, other private label credit card brands, prepaid cards, digital wallets and mobile payment solutions, and other tools that simplify and personalize shopping experiences for consumers and merchants.

Among other factors, our products compete with these other forms of payment on the basis of interest rates and fees, credit limits, reward programs and other product features.

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In our retail deposits business, we have acquisition and servicing capabilities similar to other direct-banking competitors.

We compete for deposits with traditional banks, and in seeking to grow our Bread Savings TM platform, we compete with other banks that have direct-banking models similar to ours.

We compete for deposits with traditional banks, and in seeking to grow our Bread Savings platform, we compete with other banks that have direct-banking models similar to ours.

Competition among direct banks is intense because online banking provides customers the ability to quickly and easily deposit and withdraw funds, and open and close accounts in favor of products and services offered by competitors.

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Supervision and Regulation

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Federal and state laws and regulations extensively regulate the operations of the Banks.

This regulatory framework is intended to protect individual consumers, depositors, the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC) and the U.S.

This regulatory framework is intended to protect individual consumers, depositors, the Deposit Insurance Fund (DIF) of the FDIC and the U.S.

banking system as a whole, rather than for the protection of stockholders and creditors.

Set forth below is a summary of the significant laws and regulations applicable to each of CB and CCB.

The description that follows is qualified in its entirety by reference to the full text of the statutes, regulations, and policies that are described.

Such statutes, regulations, and policies are subject to ongoing review by Congress, state legislatures, and federal and state regulatory agencies.

A change in any of the statutes, regulations, or regulatory policies applicable to CB and/or CCB, or in the leadership or direction of our regulators, could have a material effect on our operations or financial condition.

Further, the scope of regulation and the intensity of supervision will likely remain high in the current regulatory environment.

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The description that follows is qualified in its entirety by reference to the full text of the statutes, regulations, and supervisory policies that are described.

Such statutes, regulations, and supervisory policies are subject to ongoing review by Congress, state legislatures, and federal and state regulatory agencies.

A change in any of the statutes, regulations, or supervisory policies applicable to CB and/or CCB, or in the leadership or direction of our regulators, could have a material effect on our operations or financial condition.

Further, while the new Presidential Administration and the congressional majorities in the U.S.

Senate and House of Representatives support reducing the regulatory burden, the scope of regulation and the intensity of supervision will likely remain uncertain in the current regulatory and political environments.

CB is a Delaware-chartered bank operating as a credit card bank under a Competitive Equality Banking Act (CEBA) exemption from the definition of “bank” under the Bank Holding Company Act (BHC Act).

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CB is subject to prudential regulation, supervision and examination by the Delaware Office of the State Bank Commissioner, as its chartering authority, and the FDIC as its primary federal regulator.

CB’s deposits are insured by the DIF of the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations.

CB’s deposits are insured by the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations.

CB is not a member of the Federal Reserve System.

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As an industrial bank, CCB is exempt from the definition of “bank” under the BHC Act.

CCB is subject to prudential regulation, supervision and examination by the Utah Department of Financial Institutions, as its chartering authority, and the FDIC as its primary federal regulator.

CCB’s deposits are insured by the DIF of the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations.

CCB is subject to prudential regulation, supervision and examination by the Utah Department of Financial Institutions (UDFI), as its chartering authority, and the FDIC as its primary federal regulator.

CCB’s deposits are insured by the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations.

CCB is not a member of the Federal Reserve System.

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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.

The CFPB has broad rulemaking authority that has impacted, and is expected to continue impacting, the Banks’ operations, including with respect to credit card late fees and other amounts that we may charge.

For example, the CFPB’s rulemaking authority may allow it to change regulations adopted in the past by other regulators including regulations issued under the Truth in Lending Act by the Board of Governors of the Federal Reserve System (Federal Reserve Board).

In February 2023, the CFPB published a proposed rule with request for public comment that would:

(i) decrease the safe harbor dollar amount for credit card late fees to $8 and eliminate a higher safe harbor dollar amount for subsequent late payments;

(ii) eliminate the annual inflation adjustments that currently exist for the late fee safe harbor dollar amounts;

and (iii) require that late fees not exceed 25% of the consumer’s required minimum payment.

The “safe harbor” dollar amounts referenced in the CFPB’s proposed rulemaking refer to the amounts that credit card issuers may charge as late fees under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act).

Under the CARD Act, as implemented, these safe harbor amounts have been subject to annual adjustment based on changes in the consumer price index, and the safe harbor amounts are currently set at $30 for an initial late fee and $41 for subsequent late fees in one of the next six billing cycles.

Accordingly, the proposed $8 safe harbor amount on late fees (and proposed elimination of the annual inflation-based adjustment thereto) would represent a significant decrease from the current safe harbor amounts.

In addition, while not a part of the proposed rule, the CFPB sought comment on whether late fees should be prohibited if the applicable payment is made within 15 days of the due date and whether, as a condition to utilizing the safe harbor, credit card issuers should be required to offer automatic payment options and/or provide certain notifications of upcoming payment due dates.

In anticipation of the CFPB publishing its final rule, we are proactively implementing our plans intended to address the potential changes in regulation, which if left unmitigated would have a significant impact on our business.

We are engaged with our brand partners regarding necessary mitigating actions and expect to implement many of these actions prior to the final rule becoming effective.

Additionally, we continue to strategically diversify our business to be less reliant on late fees with the growth of our co-brand and proprietary products and our improved credit profile.

We expect the rule to be challenged in court.

Additional discussion regarding the CFPB’s proposed rulemaking can be found in “Risk Factors —Legal, Regulatory and Compliance Risks ” and “Management’s Discussion & Analysis — Business Environment” below.

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More generally, the CFPB’s ability to rescind, modify or interpret past regulatory guidance could reduce fee income, increase our compliance costs and litigation exposure.

Further, the CFPB has broad authority to enforce the prohibitions of “unfair, deceptive or abusive” acts or practices regardless of which agency supervises the Banks.

The CFPB has taken enforcement action against other credit card issuers and financial services companies.

Evolution of these standards could result in changes to pricing, practices, procedures and other activities relating to our credit card accounts in ways that could reduce the associated return from those accounts and potentially impact business growth plans.

While the CFPB has taken public positions on certain matters, it is unclear what additional changes may be promulgated by the CFPB and what effect, if any, such changes would have on our credit accounts.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( Dodd-Frank Act) authorizes certain state officials to enforce regulations issued by the CFPB and to enforce the Dodd- Frank Act’s general prohibition against unfair, deceptive or abusive practices.

To the extent that states enact requirements that differ from federal standards or courts adopt interpretations of federal consumer laws that differ from those adopted by the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currency (collectively, the Federal Banking Agencies), we may be required to alter products or services offered in some jurisdictions or cease offering products, which will increase compliance costs and reduce our ability to offer the same products and services to consumers nationwide.

On November 20, 2023, following the consent of the Board of Managers of Comenity Servicing LLC (the Servicer), the FDIC issued a consent order to the Servicer.

The Servicer is not one of our Bank subsidiaries, but is our wholly-owned subsidiary that services substantially all of our loans.

The consent order arose out of the June 2022 transition of our credit card processing services to strategic outsourcing partners and addresses certain shortcomings in the Servicer’s information technology (IT) systems development, project management, business continuity management, cloud operations, and third-party oversight.

The Servicer entered into the consent order for the purpose of resolving these matters without admitting or denying any violations of law or regulation set forth in the order.

The Servicer has taken significant steps to strengthen the organization’s IT governance and address the other issues identified in the consent order, and we are committed to ensuring that all of the requirements of the consent order are met.

The consent order does not contain any monetary penalties or fines.

Regulation of Bread Financial Holdings, Inc.

Because neither CB nor CCB is considered a “bank” within the meaning of the BHC Act, Bread Financial Holdings, Inc.

is not a bank holding company (BHC) subject to regulation thereunder.

If any of our entities became subject to regulation as a BHC, among other things, Bread Financial Holdings, Inc.

and our non-bank subsidiaries would be subject to regulation, supervision and examination by the Federal Reserve Board and our operations would be limited to certain activities that are closely related to banking or financial services in nature.

Because neither CB nor CCB is considered a “bank” within the meaning of the BHC Act, the Parent Company is not a bank holding company (BHC) subject to regulation thereunder.

If any of our entities became subject to regulation as a BHC, among other things, BFH and our non-bank subsidiaries would be subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (Federal Reserve Board) and our operations would be limited to activities that are closely related to banking.

If the Parent Company were to qualify as a financial holding company (FHC), operations could include those activities that are financial in nature.

However, under Section 616 of the Dodd-Frank Act, any company that directly or indirectly controls an insured depository institution is required to serve as a source of financial strength to its subsidiary institution and may not conduct its operations in an unsafe or unsound manner.

This doctrine is commonly known as the “Source of Strength” doctrine.

As such a company, this means that Bread Financial Holdings, Inc.

must stand ready to use available resources to provide adequate capital funds to the Banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional funding resources to support the Banks.

This support may be required at times when Bread Financial Holdings, Inc.

might otherwise have determined not to provide it or when doing so is not otherwise in the interests of Bread Financial Holdings, Inc.

or its stockholders or creditors.

Bread Financial Holdings, Inc.’s failure to meet its obligation to serve as a source of strength to the Banks would generally be considered to be an unsafe and unsound banking practice.

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doctrine is commonly known as the “Source of Strength” doctrine.

As such a company, this means that BFH must stand ready to use available resources to provide adequate capital funds to the Banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional funding resources to support the Banks.

This support may be required at times when BFH might otherwise have determined not to provide it or when doing so is not otherwise in the interests of BFH or its stockholders or creditors.

BFH’s failure to meet its obligation to serve as a source of strength to the Banks may be considered an unsafe and unsound banking practice.

In that regard, although the Parent Company is not a BHC, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies.

Separately, under Utah state law the Parent Company is subject to examination by the UDFI.

Under that statutory authority, the UDFI subjects the Parent Company to periodic inspections to determine the degree to which it serves as source of financial and managerial strength to CCB, and to understand the business activities conducted outside CCB.

Regulation of the Banks

Federal and state banking laws and regulations govern, among other things, the scope of a bank’s business, the investments a bank may make, the reserves against deposits a bank must maintain, the loans a bank makes and collateral it takes, the activities of a bank with respect to mergers and acquisitions, management practices, and numerous other aspects of our operations.

Examinations by regulators consider not only compliance with applicable laws, regulations, and supervisory policies of the agency, but also capital levels, asset quality, risk management effectiveness, the ability and performance of management and the board of directors, the effectiveness of internal controls, earnings, liquidity, and various other factors.

Following examinations by its bank regulators, the Banks receive supervisory findings and ultimately are assigned supervisory ratings.

Examination reports, supervisory ratings, and other actions under this supervisory framework, which are considered confidential supervisory information, can impact the conduct, growth, and profitability of our operations, possibly to a significant degree.

Regulatory Capital Requirements

The Banks are subject to certain risk-based capital and leverage ratio requirements under the U.S.

Basel III capital rules adopted by the FDIC.

The Banks are subject to certain risk-based capital and leverage ratio requirements under the Basel Committee on Banking Supervision standardized approach for U.S.

banking organizations adopted by the FDIC.

These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act.

These quantitative calculations are minimums, and the FDIC may

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determine that a bank, based on our size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.

Under the U.S.

Basel III capital rules, the Banks’ assets, exposures, and certain off-balance sheet items are subject to risk weights used to determine an institution’s risk-weighted assets, which then are used to determine the minimum capital that CB and CCB should keep as reserves to reduce the risk of insolvency.

These quantitative calculations are minimums, and the FDIC may determine that a bank, based on size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.

Under the Basel III capital rules, the Banks’ assets, exposures, and certain off-balance sheet items are subject to risk weights used to determine CB’s and CCB’s risk-weighted assets, which then are used to determine the minimum capital that CB and CCB should keep as reserves to reduce the risk of insolvency.

These risk-weighted assets are used to calculate the following minimum capital ratios for the Banks:

• Common Equity Tier 1 (CET1) Risk-Based Capital Ratio – the ratio of CET1 capital to risk-weighted assets.

In the calculation of CET1 capital, we follow the Basel III Standardized Approach.

CET1 capital primarily includes common stockholders’ equity subject to certain regulatory adjustments and deductions, including for goodwill and intangible assets, certain deferred tax assets, and accumulated other comprehensive income or loss.

• Tier 1 Risk-Based Capital Ratio – the ratio of Tier 1 capital to risk-weighted assets.

In the calculation of Tier 1 capital, we follow the Basel III Standardized Approach.

Tier 1 capital is primarily comprised of CET1 capital, perpetual preferred stock, and certain qualifying capital instruments.

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• Total Risk-Based Capital Ratio – the ratio of total capital, including CET1 capital, Tier 1 capital, and Tier 2 capital, to risk-weighted assets.

In the calculation of total capital, we follow the Basel III Standardized Approach.

Tier 2 capital primarily includes qualifying subordinated debt and qualifying allowance for credit losses.

The Banks are also subject to the requirements of a fourth ratio, the Leverage ratio, which itself does not incorporate risk-weighted assets:

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• Tier 1 Leverage Ratio – the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets, and certain other deductions).

Basel III capital rules require a minimum CET1 Risk-Based Capital Ratio of 4.5%, a minimum Tier 1 Risk-Based Capital Ratio of 6.0%, and a minimum Total Risk-Based Capital Ratio of 8.0%.

In addition to meeting the minimum capital requirements, under the U.S.

Basel III capital rules, the Banks must also maintain the required 2.5% Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to executive management.

The Basel III capital rules require a minimum CET1 Risk-Based Capital Ratio of 4.5%, a minimum Tier 1 Risk-Based Capital Ratio of 6.0%, and a minimum Total Risk-Based Capital Ratio of 8.0%.

In addition to meeting the minimum capital requirements, under the Basel III capital rules, the Banks must also maintain the required 2.5% Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to executive management.

The Capital Conservation Buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it essentially increases the required minimum risk-based capital ratios.

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Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Banks’ ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications.

As of December 31, 2023, the Banks’ regulatory capital ratios were above the well-capitalized standards and met the Capital Conservation Buffer.

The Banks seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer.

As of December 31, 2024, the Banks’ regulatory capital ratios were above the well-capitalized standards and met the Capital Conservation Buffer.

Bread Financial Holdings, Inc.

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Declaration and payment of cash dividends or repurchases of our common stock depends upon cash dividend payments to Bread Financial Holdings, Inc.

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the Banks, which are our primary source of revenue and cash flow.

by the Banks, which are our primary source of revenue and cash flow.

As state-chartered banks, under Delaware or Utah law, as applicable, the Banks are subject to regulatory restrictions on the payment and amounts of dividends.

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is also subject to their profitability, financial condition, capital expenditures and other cash flow requirements, and any such dividends are also subject to the approval of the Board of Directors of the applicable Bank.

No assurances can be given that the Banks will, in any circumstances, pay dividends to Bread Financial Holdings, Inc.

The payment of dividends by the Banks and Bread Financial Holdings, Inc.

and any repurchases of our common stock may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements.

The Federal Banking Agencies have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice;

The Federal Banking Agencies, being the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board and the FDIC, have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice;

a bank may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized.

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The Federal Banking Agencies have the authority to prohibit banks from paying a dividend if it is deemed that such payment would be an unsafe or unsound practice.

The FDIC also may require its prior consent before a bank pays a dividend that exceeds retained

earnings or comes from the surplus account of common or preferred stock.

Prompt Corrective Action and Safety and Soundness

Under applicable “prompt corrective action” (PCA) statutes and regulations, insured depository institutions, such as the Banks, are placed into one of five capital categories, ranging from “well capitalized” to “critically undercapitalized”.

The PCA statute and regulations provide for progressively more stringent supervisory measures as an institution’s capital category declines.

The PCA statute and regulations provide for progressively more stringent supervisory measures as an institution’s capital

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category declines.

An institution that is not well capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market.

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Federal Reserve Board regulations require insured depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearing and regular checking accounts, as well as cardholder credit balances.

The required cash reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with Federal Reserve Banks;

The required cash reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with the Federal Reserve Banks;

we maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system.

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The annual indexation of the reserve requirement exemption amount and the low reserve tranche for the years 2021-2025 was required by statute, but did not affect depository institutions’ reserve requirements, which remain at zero.

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Federal Deposit Insurance

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The current standard maximum deposit insurance amount is $250,000 per depositor, per insured depository institution, per ownership category, in accordance with applicable FDIC regulations.

The FDIC uses a risk-based assessment system that imposes insurance premiums based on a risk matrix that takes into account an institution’s capital level and supervisory rating.

The base for insurance assessments is the average consolidated total assets less tangible equity capital of an institution.

The FDIC uses a risk-based assessment system that imposes insurance premiums based on a risk matrix that takes into account the risks attributable to different categories and concentrations of an insured depository institution’s assets and liabilities, and supervisory rating.

The base for insurance assessments is the average consolidated total assets less the average tangible equity capital of an institution.

Assessment rates are calculated using formulas that take into account the risk of the institution being assessed.

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Generally, the amount of the cross guaranty liability is equal to the estimated loss to the DIF for the resolution of the affiliated institution(s) in default.

The FDIC’s claim under the cross guaranty provision is superior to claims of shareholders of the insured depository institution or its parent company and to most claims arising out of obligations or liabilities owed to affiliates of the institution, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution.

The FDIC’s claim under the cross guaranty provision is superior to claims of

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shareholders of the insured depository institution or its parent company and to most claims arising out of obligations or liabilities owed to affiliates of the institution, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution.

The FDIC may decline to enforce the cross guaranty provision if it determines that a waiver is in the best interest of the DIF.

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Restrictions on Transactions with Affiliates and Insiders

Sections 23A and 23B of the Federal Reserve Act limit the extent to which the Parent Company and its non-bank affiliates (including non-bank subsidiaries) can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the Banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to the Parent Company or its non-bank affiliates.

“Covered transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets, including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or extension of credit, or the issuance of a guarantee, acceptance, or letter of credit.

Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve Board’s Regulation W limit the extent to which the Parent Company and its non-bank affiliates (including non-bank subsidiaries) can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the Banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to the Parent Company or its non-bank affiliates.

“Covered transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets, including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or extension of credit, a derivative transaction to the extent that the transaction causes the bank to have a credit exposure to the affiliate, or the issuance of a guarantee, acceptance, or letter of credit.

Covered transactions are subject to quantitative and qualitative limits.

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The Banks are also prohibited from purchasing low-quality assets from the Parent Company or any non-bank affiliates.

The Banks are also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the implementing Regulation O as applied to the Banks.

The Banks are also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the Federal Reserve Board's implementing Regulation O as made applicable to the Banks by the regulations of the FDIC.

These provisions impose limitations on loans and extensions of credit by the Banks to their executive officers, directors and principal stockholders and their related interests, as well as those of the Banks’ affiliates.

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Regulation O also imposes certain recordkeeping and reporting requirements.

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Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as Bread Financial Holdings, Inc.

and the Banks, from (i) engaging in proprietary trading and (ii) investing in or sponsoring covered funds, subject to certain limited exceptions.

Under the Volcker Rule, the term covered funds is defined as any issuer that would be an investment company under the Investment Company Act but for the exemption in section 3(c)(1) or 3(c)(7) of that Act, which includes collateralized loan obligation securities and collateralized debt obligation securities.

There are also several exemptions from the definition of covered funds, including, among other things, loan securitization, joint ventures, certain types of foreign funds, entities issuing asset-backed commercial paper, and registered investment companies.

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Incentive Compensation

The Federal Banking Agencies have issued comprehensive guidance intended to ensure that the incentive compensation

policies of banking organizations do not undermine the safety and soundness of those organizations by encouraging

excessive risk-taking.

The incentive compensation guidance sets expectations for banking organizations concerning their

incentive compensation arrangements and related risk management, control and governance processes.

The incentive

compensation guidance, which covers all employees that have the ability to materially affect the risk profile of an

organization, either individually or as part of a group, is based upon three primary principles:

(i) balanced risk-taking

(ii) compatibility with effective controls and risk management;

and (iii) strong corporate governance.

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deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings,

which can affect its ability to make acquisitions or take other actions.

In addition, under the incentive compensation

guidance, a banking organization’s federal supervisor may initiate enforcement action if the organization’s incentive

compensation arrangements pose a risk to the safety and soundness of the organization.

Further, the Basel III capital rules

limit discretionary bonus payments to bank executives if the institution’s regulatory capital ratios fail to exceed certain

The Dodd-Frank Act requires the Federal Banking Agencies and the Securities and Exchange Commission (SEC) to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Banks, that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits resulting from inappropriate risk taking, as these actions could lead to material financial loss to the entity.

The Federal Banking Agencies and the SEC most recently proposed such regulations in 2016, but the regulations have not yet been finalized.

The Federal Banking Agencies, apart from the Federal Reserve Board, and the SEC most recently proposed such regulations in 2024, but the regulations have not yet been finalized.

If the regulations are adopted in the form initially proposed, the manner in which executive compensation is structured will be restricted.

The Dodd-Frank Act also requires publicly traded companies to give stockholders a non-binding vote on executive compensation at least every three years and on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions.

Bread Financial Holdings, Inc.

has held our “say-on-pay” vote annually.

We have held our “say-on-pay” vote annually.

USA PATRIOT Act

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law enforcement agencies.

Financial institutions also are required to respond to requests for information from Federal Banking Agencies and law enforcement agencies.

Financial institutions are also required to respond to requests for information from Federal Banking Agencies and law enforcement agencies.

Information sharing among financial institutions for the above purposes is encouraged by an exemption granted to complying financial institutions from the privacy provisions of the Gramm-Leach-Bliley Act (GLBA) and other privacy laws.

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The Federal Banking Agencies and the Secretary of the Treasury have adopted regulations to implement several of these provisions.

All financial institutions also are required to establish internal anti-money laundering programs.

Furthermore, financial institutions are required to establish internal anti-money laundering programs.

These programs must include policies, procedures, processes and other internal controls designed to monitor, identify, manage and mitigate the risk of money laundering or terrorist financing posed by a financial institution’s products, services, customers and geographic locale.

These controls include procedures and processes to detect and report suspicious transactions, perform customer due diligence, respond to requests from law enforcement, identify and verify a legal entity customer’s beneficial owner(s) at the time a new account is opened and to understand the nature and purpose of the customer relationship, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments.

These programs are coordinated by a compliance officer, undergo annual independent audits to assess effectiveness, and require training of employees.

The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by a financial institution to engage in a merger transaction under the Bank Merger Act.

The Banks have in place a Bank Secrecy Act and USA PATRIOT Act compliance program and engage in very few transactions of any kind with foreign financial institutions or foreign persons.

Failure to comply with these regulations may result in fines, penalties, lawsuits, regulatory sanctions, reputational damage, or restrictions on business.

Our Banks have in place a Bank Secrecy Act and USA PATRIOT Act compliance program and engage in very few transactions of any kind with foreign financial institutions or foreign persons.

Office of Foreign Assets Control Regulations

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jurisdiction (including property in the possession or control of U.S.

Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the Office of Foreign Assets Control.

Failure to comply with these sanctions could have serious legal and reputational consequences.

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assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the Office of Foreign Assets Control.

Failure to comply with these sanctions could have serious legal and reputational consequences.

Third-Party Risk Management

The FDIC, along with the other Federal Banking Agencies, issued final guidance on managing risks associated with third-party relationships.

The guidance states that sound third-party risk management takes into account the level of risk, complexity, and size of the bank and the nature of the third-party relationship.

In July 2024, the Federal Banking Agencies released a joint statement on banks’ arrangements with third parties to deliver bank deposit products and services.

The joint statement cautions that operational and compliance risks arise when banks hand over substantial control of key functions to a third-party.

Banks can manage risk through policies and procedures governing organizational structures, lines of reporting, expertise and staffing, internal controls and audit functions.

Banks can also conduct risk assessments to assess controls for mitigating risk relating to specific third-party arrangements, engage in due diligence of third-party relationships, set appropriate contractual relationships, and establish monitoring routines to identify risks.

Identity Theft

The FDIC issued final rules and guidelines implementing the provisions of the Fair Credit Reporting Act (FCRA), as amended by the Dodd-Frank Act, that require insured state nonmenber banks, such as the Banks, to establish programs to address risks of identity theft.

The FDIC issued final rules and guidelines implementing the provisions of the Fair Credit Reporting Act (FCRA), as amended by the Dodd-Frank Act, that require insured state nonmember banks, such as the Banks, to establish programs to address risks of identity theft.

The rules require financial institutions and creditors to develop and implement a written identity theft prevention program that is designed to detect, prevent, and mitigate identity theft in connection with certain existing accounts or the opening of new accounts.

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The Banks implemented an ID Theft Prevention Program, approved by their Boards of Directors, in compliance with these requirements.

In October 2024, the CFPB finalized a rule implementing a section of the Dodd-Frank Act, which requires certain entities, including the Banks, to, among other things, make available to a consumer, upon request, information in its control or possession concerning the consumer financial product or service that the consumer obtained from that entity.

The final rule also requires data providers holding a consumer account, such as the Banks, to establish a developer interface satisfying certain data security specifications and other standards, through which the data provider can receive requests for, and provide specific types of data covered by the rule in electronic, usable form to authorized third parties, including data aggregators.

Under the final rule, data providers are prohibited from charging consumers or third parties fees for processing these consumer data requests.

The final rule also places certain data security, authorization, and other obligations on third parties accessing covered data from data providers, which could include the Banks when acting in certain capacities.

The final rule also requires third parties to limit their collection, use, and retention of the data received to only what is reasonably necessary to provide the consumers’ requested product or service.

In October 2024, industry trade associations filed a lawsuit against the CFPB alleging the agency exceeded its statutory authority and asking the court to vacate the rule.

As of the date of this report, the District Court for the Eastern District of Kentucky has not issued a ruling on the matter.

Community Reinvestment Act

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In October 2023, the Federal Banking Agencies issued a final rule overhauling the process and substantive tests used by the agencies to assess a bank’s record of meeting the credit needs of its community.

In February 2024, industry trade associations filed a lawsuit against the Federal Banking Agencies alleging the agencies exceeded their statutory authority and asking the court to vacate the final rule.

In February 2024, industry trade associations filed a lawsuit against the Federal Banking Agencies alleging the agencies exceeded their statutory authority

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and asking the court to vacate the final rule.

In March 2024, the District Court for the Northern District of Texas enjoined the Federal Banking Agencies from enforcing the final rule, and the previous CRA rule continues to apply.

Consumer Protection Regulation and Supervision

We are subject to the federal consumer financial protection laws implemented by the CFPB.

We are subject to the federal consumer financial protection laws implemented by the CFPB, as well as by other federal agencies including the FDIC and Federal Trade Commission.

The CFPB has broad rulemaking authority that has impacted, and may continue to impact, the Banks’ operations, including with respect to credit card late fees and other amounts that we may charge.

For example, the CFPB’s rulemaking authority may allow it to change regulations adopted in the past by other regulators, including regulations issued under the Truth in Lending Act by the Federal Reserve Board.

We are also subject to certain state consumer protection laws, and state attorneys general and other state officials are empowered to enforce certain federal consumer protection laws and regulations.

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Each Bank has in place an effective compliance management system to comply with these laws and regulations.

In March 2024 the CFPB published a final rule that would significantly reduce the safe harbor amount for late fees that credit card issuers are authorized to charge.

As of the date of this report, the rule is subject to an injunction issued by the United States District Court for the Northern District of Texas.

For a detailed discussion regarding the status of the CFPB’s late fee rule, and the risks associated with the rule, see “Risk Factors—Legal, Regulatory and Compliance Risks” and “Management’s Discussion & Analysis—Business Environment” below.

More generally, the CFPB’s ability to rescind, modify or interpret past regulatory guidance could reduce fee income, and increase our compliance costs and litigation exposure.

Further, the CFPB has broad authority to enforce the prohibitions of “unfair, deceptive or abusive” acts or practices regardless of which agency supervises the Banks.

The CFPB has taken enforcement action against other credit card issuers and financial services companies.

With the recent change in Presidential Administration and the current congressional majorities in the U.S.

Senate and House of Representatives, the scope of regulation by the CFPB and other federal agencies remains uncertain.

Most recently, in February 2025, the acting director of the CFPB directed the CFPB’s staff to cease all supervision and examination activity and stakeholder engagement, stop all work on proposed rulemaking, suspend the effective dates of any finalized but not yet effective rules, and halt other actions relating to investigations, enforcement and litigation.

The extent to which these recent or other future developments will ultimately impact the CFPB’s regulation of our business, including the CFPB’s credit card late fee rule and the associated litigation, remains uncertain.

Privacy, Information Security and Data Protection

We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification.

For example, in the United States, we are subject to the GLBA and implementing regulations and guidance.

For example, we are subject to the GLBA and implementing regulations and guidance in the United States.

Among other things, the GLBA:

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In 2018, the State of California enacted the California Consumer Privacy Act (CCPA), which was modified in 2020 through a voter referendum adopting the California Privacy Rights Act (CPRA).

The CCPA/CPRA requires covered businesses to comply with requirements that give consumers the right to know what information is being collected from them and whether such information is sold or disclosed to third parties.

The CCPA/CPRA requires covered businesses to comply with requirements that give consumers the right to know what information is being collected from

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them and whether such information is sold or disclosed to third parties.

The statute also allows consumers to access, delete, correct, and prevent the sale and sharing of personal information that has been collected by covered businesses in certain circumstances.

The CCPA/CPRA does not apply to personal information collected, processed, sold, or disclosed pursuant to the GLBA or the California Financial Information Privacy Act.

We are a covered business under the CCPA, which

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became effective on January 1, 2020 and under the CPRA which became effective on January 1, 2023.

We are compliant with both the CCPA and the CPRA.

We are a covered business under the CCPA, which became effective on January 1, 2020 and under the CPRA which became effective on January 1, 2023.

The enactment of the CCPA has prompted a wave of legislative developments in other states, which has created a patchwork of overlapping but different state laws, certain of which include exemptions for GLBA-regulated entities and/or personal information.

Similar privacy laws also have been proposed in other states and at the federal level.

Federal and state laws also require us to respond appropriately to data security breaches.

A final rule issued by the Federal Reserve, OCC, and FDIC, which became effective in May 2022, requires banking organizations to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.

We continue to monitor, and have a program in place to comply with, applicable privacy, information security and data protection requirements imposed by federal, state, and foreign laws.

The SEC has also adopted rules on Cybersecurity Risk Management, Strategy, Governance and Incident Disclosure, which, among other things, require the filing of a Current Report on Form 8-K following certain cybersecurity incidents.

We continue to monitor, and have a program in place designed to comply with, applicable privacy, information security and data protection requirements imposed by federal, state, and foreign laws.

However, if we experience a significant cybersecurity incident or our regulators deem our information security controls to be inadequate, we could be subject to supervisory criticism or penalties, and/or suffer reputational harm.

For further discussion of privacy, data protection and cybersecurity, and related risks for our business, see “Part I—Item 1A.

Risk Factors” under the headings “Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use Personal Information, and any actual or perceived failure to comply with any of these new or existing laws could adversely affect our business, results of operations, or financial condition”, “If we, our third-party providers, or brand partners fail to safeguard our confidential information and/or experience a data security incident, there may be damage to our brand and reputation, material financial penalties and legal claims, which could materially adversely affect our business, results of operations, and financial condition”, and “Business interruptions, including loss of data center capacity, interruption due to cyber-attacks, loss of network connectivity or inability to utilize proprietary software of third-party vendors, could affect our ability to timely meet the needs of our partners and customers and harm our business” and “Part I—Item 1C.

Cybersecurity”.

Human Capital

Providing a meaningful value proposition for our associates is a top priority for us.

We seek to enhance our associate value proposition continuously to ensure that we offer competitive rewards, career opportunities and workplace conditions, which we believe will allow us to attract and retain a highly qualified and motivated workforce.

Providing a meaningful value proposition for our associates is one of our top priorities.

We seek to enhance our associate value proposition continuously to ensure that we offer competitive rewards, career opportunities and workplace conditions, which we believe enables us to attract and retain a highly qualified and motivated workforce.

As of December 31, 2024, we employed approximately 6,000 associates worldwide, with the majority concentrated in the United States.

Attracting, developing and retaining top talent is critical to our business.

In making these employment-related decisions, we comply with all applicable laws.

We promote an inclusive, engaged culture that empowers associates through opportunities to grow, develop and lead.

Our associates have been, and will remain, the backbone of our business, and we take a holistic approach to our associates’ experiences, recognizing that an engaged workforce drives our long-term growth and sustainability.

Our Board of Directors and Compensation & Human Capital Committee provide the important oversight of our human capital management strategy, including diversity, equity, inclusion and belonging (DEI+B) efforts, which are led by our Head of Diversity and Inclusion.

Our Compensation & Human Capital Committee and our full Board of Directors receive regular updates from senior management and third-party consultants on human capital trends and developments, and other key human capital matters that drive our ongoing success and performance.

Associate Health and Well-Being

Associate health and well-being remains a top human capital priority, and we are committed to providing our associates with competitive total compensation, benefits and wellness resources.

Our associates continue to value flexible remote work policies that allow them to find a balance of office-work time and remote-work time.

Approximately 98% of our United States workforce works on a hybrid office/remote schedule.

We intend to continue these flexible work arrangements, seeking to take advantage of the engagement and productivity benefits associated with increased flexibility, as well as opportunities for connectedness and social interaction.

Other associate well-being resources include mental health awareness and counselling support, financial education and wellness courses, a variety of fitness and meditation classes, a well-being cost reimbursement program and other benefits to promote mental and physical health supportive of holistic well-being.

During 2023, we further improved the competitiveness of our associate benefit offerings in various ways, including:

(i) enhancements to our Bread Financial 401(k) Plan with options for associates who may otherwise be unable to save for retirement, including providing additional compensation equal to 3% of eligible pay each year into all eligible associates’ 401(k) accounts;

(ii) improvements to our work location and work-at-home associate policies;

and (iii) the addition of two new benefits to support student loan assistance and comprehensive financial wellness support.

Our Board of Directors and Compensation & Human Capital Committee provide important oversight of our human capital management strategy, and receive regular updates from senior management and third-party consultants on human capital trends and developments and other key human capital matters that drive our ongoing success and performance.

Associate Benefits and Well-Being

Associate well-being remains a top human capital priority, and we are committed to providing our associates with competitive total compensation, benefits and wellness resources.

Our associates continue to value flexible hybrid work policies that allow them to balance office work and remote work time.

Nearly 9 out of 10 associates view our flexible work arrangements as a competitive advantage relative to other potential employment opportunities.

We intend to continue flexible work arrangements, seeking to take advantage of the engagement and productivity benefits associated with increased flexibility, as well as opportunities for connectedness and social interaction.

Other associate well-being resources include mental health awareness and counseling support, financial education and wellness courses, a variety of fitness and meditation classes, a well-being cost reimbursement program and other benefits to promote mental and physical health.

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During 2024, we further improved the competitiveness of our associate benefit offerings in various ways, including (i) depositing 3% “free money” (i.e., 3% of annual pay) into all eligible associates’ Bread Financial 401(k) Plan, including those associates that do not make any voluntary contributions;

(ii) increasing the number of free therapy sessions for associates and their immediate family members;

and (iii) adding other new life-event benefits to help new parents.

Associate Experience and Engagement

Delivering an exceptional experience for our customers relies on our ability to cultivate an engaging and rewarding experience for our associates.

Delivering an exceptional customer experience relies on our ability to cultivate an engaging and rewarding experience for our associates.

We maintained high levels of associate engagement and retention in 2024 and were successful with talent acquisition in key areas.

As discussed further below, in 2023 we continued to focus on developing our internal talent to increase lateral movement across the organization, with 28% of the 723 new jobs posted in 2023 being ultimately filled by internal candidates.

As discussed further below, in 2024 we continued to focus on developing our internal talent through opportunities to learn new skills and make lateral moves across the organization.

We continue to listen to and act on feedback from our associates, including through our annual Associate Experience Survey and other more frequent surveys and communications.

Each year after the results of the annual Associate Experience Survey have been tabulated, our senior management presents those results to our Compensation & Human Capital Committee and our Board of Directors, including discussion regarding trends observed and actions to be taken in response to the results.

Input from our Board helps inform our human capital strategies and objectives going forward;

our global themes for 2024 include providing career opportunities to our internal talent pool, optimizing teamwork and collaboration across a geographically diverse workforce, and focus on clear communication of business and organizational changes in a dynamic environment.

Input from our Board of Directors helps inform our human capital strategies and objectives going forward;

our global themes for 2024 included expanding growth options within the Company and fostering collaboration to meet our BFH goals and objectives.

Workforce Readiness, Growth and Advancement

As part of our broader multi-year business transformation, our “work environment of the future” steering committee, comprised of senior human resources, technology and operations management, continued to mature and execute human capital-intensive strategies to ensure workforce readiness, growth and advancement.

During the year we completed our third-annual, six-month apprenticeship program, which created a feeder pipeline from roles in our Care Centers to other non-Care Center opportunities across the organization, with 28 U.S.

associates (or 90% of program participants) transitioning to new roles at the conclusion of their apprenticeships.

In a competitive environment where companies must offer an associate value proposition that addresses the needs of a multigenerational workforce, we have developed and implemented strategies focused on human capital to ensure workforce readiness, growth and advancement.

We offer a broad suite of workforce mobility programs as a focused effort to help attract new talent and those entering the workforce, develop our talent through stretch projects and skill development, hone leadership skills to further careers, and rotate associates across the business, broadening their expertise and abilities.

During the year, we continued to offer and expand our suite of mobility programs including our six-month apprenticeship program, which creates a feeder pipeline for multiple areas across the organization, typically from Care Center positions to non-Care Center positions.

Robust training and development remains central to our human capital strategy.

In 2022 we expanded our training programs to include a more advanced mentorship program that matches associates with internal mentors who help further their unique career journeys and development needs.

That program was so well received that, in 2023, we replicated its framework for a mentorship program for new associates to aid them in learning the business and building a work network, and we introduced a new Business Resource Group (BRG) specifically for new associates.

Another program within our suite of workforce mobility programs is our RISE Program.

This program is tailored to our Care Center associates and provides a track for those associates to remain in the Care Center but work through their career journeys and become leaders within their respective teams.

In addition to career-oriented training and development, we require annual associate training to ensure ongoing adherence to responsible business practices and ethical conduct, and all associates must certify annually that they have read and will adhere to our Code of Ethics.

Diversity, Equity, Inclusion and Belonging

We are committed to creating an inclusive culture that attracts and values diversity of thought, experience, background, skills and ideas, driving a sense of belonging.

Over the past few years, we have renewed and accelerated our actions and activities in support of DEI+B, including through the establishment of an associate-led DEI+B Council and DEI+B Office.

We now have nine BRGs, made up of over 1,300 associate members.

The evolution of our BRGs have driven 28 professional and personal development programs and grew our associate engagement in our wellness programs by 16%.

Our DEI+B strategy is embedded into our overall governance process and business model, demonstrating our elevated commitment and accountability to this imperative.

The strategy describes what we seek to accomplish and how we will measure progress across four focus areas:

(i) Workforce - creating pathways for hiring, development and promotions that map to market availability;

(ii) Workplace - promoting an inclusive, engaged culture that drives a sense of belonging and empowers associates through opportunities to grow, develop and lead;

(iii) Marketplace - infusing DEI+B into our growth strategy, product delivery, customer experience and supply chain;

and (iv) Community - building strategic partnerships that empower our communities, advance business priorities and drive associate engagement.

As of December 31, 2023, approximately 63% of our total workforce and 44% of our senior leaders were female, while approximately 44% of our total workforce and 15% of our senior leaders were minorities.

Environmental, Social & Governance Strategy

We are committed to sustainability, including integrating Environmental, Social & Governance (ESG) principles into our business strategy in ways that optimize opportunities to make positive impacts while advancing long-term financial and reputational goals.

We prioritize initiatives that empower our communities, preserve our planet and promote diversity, equity and inclusion, as well as increased transparency in our disclosures.

We continue to advance the integration of ESG into our overall governance and risk management practices.

Additional information regarding our responsible business practices can be found in our annual sustainability and TCFD (Taskforce on Climate-Related Financial Disclosures)

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reports, which are published on our corporate website at:

Inclusive Culture

We are committed to creating an inclusive culture that attracts and values diversity of thought, experience, background, skills and ideas, driving our associates’ sense of belonging.

Over the past few years, we have advanced our actions and activities in support of creating a more inclusive work environment, including the maturation of our associate programs and our nine Business Resource Groups, which are open to all associates and that nearly 1,400 unique associates have voluntarily joined.

Based on our annual Associate Experience Survey, 83% of our associates feel a sense of belonging and 92% believe Bread Financial is committed to a diverse and inclusive work culture.

Sustainability Strategy

We are a financial services company dedicated to empowering our customers and optimizing opportunities to create value for all our stakeholders, while advancing long-term financial and reputational goals.

We prioritize initiatives that strengthen our communities, reduce our environmental impact, promote inclusion and build financial confidence.

We continue to advance the integration of environmental and social factors into our overall governance, risk management and reporting practices in ways that increase transparency and enhance the quality of our disclosures.

Additional information regarding our sustainability strategy and responsible business practices can be found in our annual sustainability report published on our website at:

https://investor.breadfinancial.com/sustainability/.

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Please also see “Human Capital” above.

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Other Information

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These documents are posted to our website as soon as reasonably practicable after we have filed or furnished these documents with the SEC.

We post our Audit Committee, Risk & Technology Committee, Compensation & Human Capital Committee and Nominating and Corporate Governance Committee charters, our corporate governance guidelines, and our code of ethics, code of ethics for senior financial officers, and code of ethics for Board members on our website.

We post our Audit Committee, Risk & Technology Committee, Compensation & Human Capital Committee and Nominating & Corporate Governance Committee charters, our corporate governance guidelines, and our code of ethics, code of ethics for senior financial officers, and code of ethics for Board members on our website.

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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 1. Business