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Item 9A. Controls and Procedures

2025-02-14 compared with 2024-02-20 · 663 added, 535 removed, 1403 unchanged (46% of the section changed)

15 unchanged sentences

Based on those criteria and management’s assessment, with the participation of our Chief Executive Officer and Chief Financial Officer, we conclude that, as of December 31, 2024, our internal control over financial reporting was effective.

Tabl e of Contents

The effectiveness of our internal control over financial reporting as of December 31, 2024, has been audited by Deloitte & Touche LLP, our independent registered public accounting firm who also audited our Consolidated Financial Statements;

their attestation report on the effectiveness of our internal control over financial reporting appears on page F-4.

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Other Information.

13 unchanged sentences

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Exhibits, Financial Statement Schedules.

Exhibits and Financial Statement Schedules.

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

34 unchanged sentences

DEF 14A A 4/13/22

B read Financial Holdings, Inc.

2024 Omnibus Incentive Plan.

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

9 unchanged sentences

2022 Omnibus Incentive Plan.

*^+10.10

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

2022 Omnibus Incentive Plan.

10.10 2/20/24

Form of Time-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2024 Omnibus Incentive Plan .

Form of Performance-Based Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2024 Omnibus Incentive Plan .

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

9 unchanged sentences

2022 Omnibus Incentive Plan.

10.14 2/20/24

Form of Non-employee Director Restricted Stock Unit Award Agreement under the Bread Financial Holdings, Inc.

2024 Omnibus Incentive Plan.

(a) Bread Financial Holdings, Inc.

11 unchanged sentences

8-K 4.6 8/31/01

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

2 unchanged sentences

8-K 4.1 4/5/05

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

16 unchanged sentences

8-K 4.2 6/16/20

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

8-K 4.1 10/30/20

Thirteenth Amendment to Second Amended and Restated Pooling and Servicing Agreement, dated as of April 26, 2024, among WFN Credit Company, LLC, as transferor, Comenity Bank, as servicer, and U.S.

Bank National Association, as trustee.

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

8-K 4.7 8/31/01

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

14 unchanged sentences

8-K 4.2 10/31/07

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

4 unchanged sentences

8-K 4.1 6/15/11

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

2 unchanged sentences

8-K 4.4 7/8/16

(d) Eleventh Amendment to the Transfer and Servicing Agreement, dated as of April 26, 2024, among Comenity Bank, WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust.

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

10 unchanged sentences

8-K 4.3 6/16/20

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

(d) Fifth Amendment to Receivables Purchase Agreement, dated as of April 26, 2024, between Comenity Bank and WFN Credit Company, LLC.

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

8 unchanged sentences

8-K 4.3 6/15/07

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

(d) Supplemental Indenture No.

13 unchanged sentences

8-K 4.1 6/16/20

(d) Supplemental Indenture No.

8 to Master Indenture, dated as of April 26, 2024, between World Financial Network Credit Card Master Note Trust and U.S.

Bank National Association.

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

1 unchanged sentence

8-K 4.1 5/28/21

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

8 unchanged sentences

Bank National Association.

Second Amendment to Series 2023-A Indenture Supplement, dated as of April 26, 2024, between World Financial Network Credit Card Master Note Trust and U.S.

Bank National Association.

Series 2024-A Indenture Supplement, dated as of May 15, 2024, between World Financial Network Credit Card Master Note Trust and U.S.

Bank National Association.

Series 2024-B Indenture Supplement, dated as of August 13, 2024, between World Financial Network Credit Card Master Note Trust and U.S.

Bank National Association.

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

2 unchanged sentences

8-K 4.2 5/28/21

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

2 unchanged sentences

8-K 4.1 7/31/09

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

10-D 99.2 6/15/22

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

8-K 99.1 8/4/22

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

8-K 99.1 9/7/22

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

8-K 99.1 10/12/22

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

8-K 99.1 11/2/22

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

8-K 99.1 12/1/22

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

8-K 99.1 1/12/23

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

8-K 99.1 2/2/23

(d) First Amendment to Fourth Amended and Restated Service Agreement dated as of February 28, 2023, between Comenity Servicing LLC and Comenity Bank.

(d) Eighth Addendum to Appendix A of Fourth Amended and Restated Service Agreement dated as of February 28, 2023, between Comenity Servicing LLC and Comenity Bank.

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

(d) Sixth Amended and Restated Service Agreement, dated as of January 1, 2025, by and between Comenity Bank and Comenity Servicing LLC.

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1 unchanged sentence

Filer Description Form Exhibit Filing Date

(d) Tenth Addendum to Appendix A of Fourth Amended and Restated Service Agreement dated as of April 30, 2023, between Comenity Servicing LLC and Comenity Bank.

(d) Eleventh Addendum to Appendix A of Fourth Amended and Restated Service Agreement dated as of June 30, 2023, between Comenity Servicing LLC and Comenity Bank.

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

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

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

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

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

(d) Seventeenth Addendum to Appendix A of Fourth Amended and Restated Service Agreement dated as of November 1, 2023, between Comenity Servicing LLC and Comenity Bank.

99.2 11/15/23

(d) Second Amendment to Fourth Amended and Restated Service Agreement dated as of November 30, 2023, between Comenity Servicing LLC and Comenity Bank.

(d) Eighteenth Addendum to Appendix A of Fourth Amended and Restated Service Agreement dated as of November 30, 2023, between Comenity Servicing LLC and Comenity Bank.

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

(d) Twentieth Addendum to Appendix A of Fourth Amended and Restated Service Agreement dated as of January 31, 2024, between Comenity Servicing LLC and Comenity Bank.

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

8-K 10.1 7/8/16

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Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

19 unchanged sentences

10-Q 10.9 5/7/10

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

2 unchanged sentences

10-K 10.94 2/27/17

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

11 unchanged sentences

10-Q 10.11 8/9/10

Amendment No.

2 to Receivables Purchase Agreement, dated as of December 12, 2024, between World Financial Capital Bank and World Financial Capital Credit Company, LLC.

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

3 unchanged sentences

10-Q 10.12 8/9/10

Amendment No.

2 to Transfer and Servicing Agreement, dated as of December 12, 2024, among World Financial Capital Credit Company, LLC, World Financial Capital Bank and World Financial Capital Master Note Trust.

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

1 unchanged sentence

10-K 10.104 2/27/18

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

Supplemental Indenture No.

4 to Master Indenture, dated as of December 12, 2024, between World Financial Capital Master Note Trust and U.S.

Bank National Association.

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

10.98 2/28/23

Amendment No.

1 to Receivables Purchase Agreement, dated as of December 20, 2024, between Comenity Capital Bank and Comenity Capital Credit Company, LLC.

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

10.99 2/28/23

Amendment No.

1 to Transfer Agreement, dated as of December 20, 2024, between Comenity Capital Credit Company, LLC and Comenity Capital Asset Securitization Trust.

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

2 unchanged sentences

10.101 2/28/23

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Incorporated by Reference

Filer Description Form Exhibit Filing Date

Supplemental Indenture No.

1 to Master Indenture, dated as of December 20, 2024, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

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

6 unchanged sentences

10-K 10.110 2/26/19

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

11 unchanged sentences

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

10.127 2/20/24

Tenth Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of December 22, 2023, between World Financial Network Credit Card Master Note Trust and U.S.

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

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

10.128 2/20/24

Eleventh Amendment to Fourth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of April 26, 2024, between World Financial Network Credit Card Master Note Trust and U.S.

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

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

6 unchanged sentences

10-K 10.115 2/26/19

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Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

4 unchanged sentences

10-K 10.124 2/26/21

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

10-K 10.102 2/27/17

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

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

10-Q 10.5 11/8/17

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

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

10-Q 10.3 11/6/18

Third Amendment to Fifth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of April 25, 2023, between World Financial Capital Master Note Trust and U.S.

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

(a) Sixth Amended and Restated Series 2009-VFN Indenture Supplement, dated as of December 12, 2024, between World Financial Capital Master Note Trust and Deutsche Bank Trust Company Americas.

(a) Series 2023-VFN1 Indenture Supplement, dated as of September 29, 2023, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

10.138 2/20/24

First Amendment and Consent to Series 2023-VFN1 Indenture Supplement, dated as of February 21, 2024, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

Second Amendment to Series 2023-VFN1 Indenture Supplement, dated as of December 20, 2024, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

Series 2024-VFN1 Indenture Supplement, dated as of February 21, 2024, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

First Amendment to Series 2024-VFN1 Indenture Supplement, dated as of December 20, 2024, between Comenity Capital Asset Securitization Trust and U.S.

Bank Trust Company, National Association.

(a) Credit Agreement, dated as of June 7, 2023, by and among Bread Financial Holdings, Inc., the subsidiary guarantors parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and other financial institutions as lenders.

8-K 10.2 6/13/23

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

8-K 4.1 9/23/20

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

10-Q 10.5 11/3/21

Amendment No.

1 to Credit Agreement, dated as of October 18, 2024, by and among Bread Financial Holdings, Inc., as borrower, and certain of its subsidiaries as guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent and various other lenders.

10.1 10/21/24

Indenture, dated as of June 13, 2023, among Bread Financial Holdings, Inc., certain of its subsidiaries as guarantors and U.S.

2 unchanged sentences

Bank Trust Company, National Association, as trustee (including the form of the Company’s 9.750% Convertible Senior Note due March 15, 2029).

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Incorporated by Reference

Filer Description Form Exhibit Filing Date

B read Financial Holdings, Inc.

Insider Trading Policy .

*21 (a) Subsidiaries of the Registrant

8 unchanged sentences

pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.

B read Financial Holdings, Inc.

Compensation Recoupment Policy effective Octob er 2, 2023.

Bread Financial Holdings, Inc.

Compensation Recoupment Policy .

*101 (a) The following financial information from Bread Financial Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, formatted in Inline XBRL:

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

Tabl e of Contents

Incorporated by Reference

Filer Description Form Exhibit Filing Date

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

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

13 unchanged sentences

Tabl e of Contents

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS

BREAD FINANCIAL HOLDINGS, INC.

7 unchanged sentences

Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

Notes to audited Consolidated Financial Statements

Notes to the audited Consolidated Financial Statements

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3 unchanged sentences

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

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related Consolidated Statements of Income, Comprehensive income, Stockholders’ equity, and Cash flows for each of the three years in the period ended December 31, 2023 (collectively referred to as the "financial statements").

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related Consolidated Statements of Income, Comprehensive Income, Stockholders’ Equity, and Cash Flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

17 unchanged sentences

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

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

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

The estimate of the Allowance for credit losses for credit card loans includes an estimate for uncollectible principal as well as unpaid interest and fees.

4 unchanged sentences

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

In estimating its Allowance for credit losses for credit card loans, management utilizes modeling and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors.

This modeling utilizes historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships, to determine expected credit performance.

In estimating its Allowance for credit losses for credit card loans, management uses modeling and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors.

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

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

5 unchanged sentences

• We evaluated whether the method (including the model), data, and significant assumptions are appropriate in the context of the applicable financial reporting framework.

• We tested the completeness and accuracy of the historical data used in management’s modeling.

• We tested the completeness and accuracy of the historical data used in management’s models.

• With assistance from credit modeling specialists, we evaluated whether the model is suitable for determining the estimate, which included understanding the model methodology and logic, whether the selected method for estimating credit losses is appropriate and whether the significant assumptions were reasonable.

66 unchanged sentences

Income from continuing operations 279 737 224

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

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

( 2 ) ( 19 ) ( 1 )

Net income $ 277 $ 718 $ 223

Basic income per share

Basic income per share (Note 21)

Income from continuing operations $ 5.63 $ 14.79 $ 4.48

(Loss) income from discontinued operations $ ( 0.40 ) $ ( 0.01 ) $ 0.07

Loss from discontinued operations $ ( 0.05 ) $ ( 0.40 ) $ ( 0.01 )

Net income per share $ 5.58 $ 14.39 $ 4.47

Diluted income per share

Diluted income per share (Note 21)

Income from continuing operations $ 5.54 $ 14.74 $ 4.47

(Loss) income from discontinued operations $ ( 0.40 ) $ ( 0.01 ) $ 0.07

Loss from discontinued operations $ ( 0.05 ) $ ( 0.40 ) $ ( 0.01 )

Net income per share $ 5.49 $ 14.34 $ 4.46

Weighted average common shares outstanding

Weighted average common shares outstanding (Note 21)

Basic 49.6 49.8 49.9

Diluted 50.4 50.0 50.0

___________________________________________________________

(1) Includes amounts that related to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019.

For additional information refer to Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the audited Consolidated Financial Statements.

See Notes to audited Consolidated Financial Statements.

For additional information refer to Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies” to the audited Consolidated Financial Statements.

See Notes to the audited Consolidated Financial Statements.

BREAD FINANCIAL HOLDINGS, INC.

3 unchanged sentences

Net income $ 277 $ 718 $ 223

Other comprehensive income (loss)

Unrealized gain (loss) on available-for-sale debt securities 2 ( 25 ) ( 24 )

Tax benefits — 6 2

Unrealized gain (loss) on available-for-sale debt securities, net of tax 2 ( 19 ) ( 22 )

Unrealized gain on cash flow hedges — — 1

Tax benefits — — —

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

Unrealized gain on net investment hedge — — 20

Tax expense — — ( 13 )

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

Foreign currency translation adjustments (inclusive of deconsolidation of $ 54 million for the year ended December 31, 2021, related to the disposition of business)

Other comprehensive income (loss), net of tax 2 ( 19 ) 3

Other comprehensive (loss) income

Unrealized (loss) gain on available-for-sale debt securities ( 4 ) 2 ( 25 )

Tax benefit 1 — 6

Unrealized (loss) gain on available-for-sale debt securities, net of tax ( 3 ) 2 ( 19 )

Other comprehensive (loss) income, net of tax ( 3 ) 2 ( 19 )

Total comprehensive income, net of tax $ 274 $ 720 $ 204

See Notes to audited Consolidated Financial Statements.

See Notes to the audited Consolidated Financial Statements.

BREAD FINANCIAL HOLDINGS, INC.

10 unchanged sentences

Investments (Fair value:

2023, $ 217 ;

2022, $ 221 )

Property and equipment (less accumulated depreciation and amortization:

2023, $ 343 ;

2022, $ 287 )

2024 and 2023, $ 217 )

Property and equipment, net

Goodwill and intangible assets, net 746 762

18 unchanged sentences

Total liabilities and stockholders’ equity $ 22,891 $ 23,141

See Notes to audited Consolidated Financial Statements.

See Notes to the audited Consolidated Financial Statements.

BREAD FINANCIAL HOLDINGS, INC.

1 unchanged sentence

Common Stock Additional

Capital Treasury

Stock Retained Earnings (Accumulated

Capital Retained Earnings (Accumulated

Deficit) Accumulated

4 unchanged sentences

Net income — — — 223 — 223

Other comprehensive income — — — — — 3 3

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

Stock-based compensation — — 33 — — 33

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

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

— — — ( 43 ) — ( 43 )

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

Spinoff of Loyalty Ventures Inc.

— — — — ( 225 ) — ( 225 )

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

1 unchanged sentence

Net income — — — 718 — 718

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

Other comprehensive income — — — — 2 2

Stock-based compensation — — 44 — — 44

Capped call transactions for convertible senior notes due 2028, net of tax — — ( 30 ) — — ( 30 )

Repurchase of common stock ( 0.9 ) — ( 35 ) — — ( 35 )

3 unchanged sentences

Balance as of December 31, 2023 49.3 $ 1 $ 2,169 $ 767 $ ( 19 ) $ 2,918

Cumulative effect of change in accounting principle (1)

— — — ( 1 ) — —

Net income — — — 277 — 277

Other comprehensive income — — — — — 2 2

Other comprehensive loss — — — — ( 3 ) ( 3 )

Stock-based compensation — — 54 — — 54

Capped call transactions for convertible senior notes due 2028, net of tax — — ( 30 ) — — — ( 30 )

Repurchase of common stock ( 0.9 ) — ( 35 ) — — — ( 35 )

Repurchases of common stock ( 1.0 ) — ( 55 ) — — ( 55 )

Repurchases of Convertible Notes — — ( 88 ) — — ( 88 )

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

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Balance as of December 31, 2024 49.1 $ 1 $ 2,073 $ 999 $ ( 22 ) $ 3,051

See Notes to audited Consolidated Financial Statements

__________________________________

(1) Represents the cumulative effect, net of tax, of adopting the proportional amortization method of accounting for our tax credit investment.

For additional information refer to Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies” to the audited Consolidated Financial Statements.

See Notes to the audited Consolidated Financial Statements

BREAD FINANCIAL HOLDINGS, INC.

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Gain on portfolio sale ( 11 ) ( 230 ) —

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

Loss on debt extinguishment and repurchased Convertible Notes 117 7 —

Change in other operating assets and liabilities

Change in other assets 42 28 ( 134 )

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Change in credit card and other loans ( 840 ) ( 1,154 ) ( 3,222 )

Change in redemption settlement assets — — ( 113 )

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

Proceeds from sale of credit card loan portfolios 101 2,499 —

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Other, including capital expenditures ( 36 ) ( 48 ) ( 72 )

Net cash provided by (used in) investing activities 788 ( 5,111 ) ( 1,691 )

Net cash (used in) provided by investing activities ( 1,169 ) 788 ( 5,111 )

CASH FLOWS FROM FINANCING ACTIVITIES

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Net (decrease) increase in deposits ( 541 ) ( 209 ) 2,778

Debt proceeds from spinoff of Loyalty Ventures Inc.

Transfers to Loyalty Ventures Inc.

related to spinoff — — ( 127 )

Payment of deferred financing costs ( 15 ) ( 63 ) ( 13 )

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

See Notes to audited Consolidated Financial Statements.

See Notes to the audited Consolidated Financial Statements.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

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

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

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

We also offer direct-to-consumer solutions that give customers more access, choice and freedom through our branded Bread 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, home goods, technology and electronics and the industry in which we first began, specialty apparel.

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

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

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.

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We offer our credit products through our insured depository institution subsidiaries, Comenity Bank and Comenity Capital Bank, which together are referred to herein as the “Banks”.

In December 2020 we acquired Lon Inc., known at the time as Bread, which has been fully integrated into our ongoing business strategy and operations.

Effective March 23, 2022, we changed our corporate name to Bread Financial Holdings, Inc.

from Alliance Data Systems Corporation, and on April 4, 2022, we changed our ticker to “BFH” from “ADS” on the NYSE.

Neither the name change nor the NYSE ticker change affected our legal entity structure, nor did either change have an impact on our audited Consolidated Financial Statements.

BASIS OF PRESENTATION

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

Beginning in the year ended December 31, 2021, as a result of the spinoff of our LoyaltyOne segment and its classification as discontinued operations, we adjusted the presentation of our audited Consolidated Financial Statements from our historical approach under Securities and Exchange Commission (SEC) Regulation S-X Article 5, which is broadly applicable to all “commercial and industrial companies”, to Article 9, which is applicable to “bank holding companies” (BHCs).

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

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

The audited Consolidated Financial Statements also include amounts that relate to the previously disclosed discontinued operations associated with the spinoff of our former LoyaltyOne segment in 2021 and the sale of our former Epsilon segment in 2019.

Such amounts have been classified within Discontinued operations and primarily relate to the after-tax impact of contractual indemnification and tax-related matters.

For additional information about the adjusted presentation of our audited Consolidated Financial Statements and our previously disclosed discontinued operations please refer to Note

For additional information about our previously disclosed discontinued operations please refer to Note 22, “Discontinued Operations and Bank Holding Company Financial Presentation” to the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

22, “Discontinued Operations and Bank Holding Company Presentation” in our Annual Report on Form 10-K for the year ended December 31, 2021.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES

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Leases Note 8 Leases

Derivatives Note 12 Derivatives and Hedging Activities

Stock Compensation Expense Note 19 Stockholders' Equity

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Earnings Per Share Note 21 Earnings Per Share

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Principles of Consolidation

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

We are the primary beneficiary of our securitization trusts (the Trusts) and therefore consolidate these Trusts within our audited Consolidated Financial Statements.

We are the primary beneficiary of our master securitization trusts and therefore consolidate these securitization trusts within our audited Consolidated Financial Statements.

In cases where we do not have a controlling financial interest, but we are able to exert significant influence over the operating and financial decisions of the entity, we account for such investments under the equity method.

All intercompany transactions have been eliminated.

Segment Reporting

We operate as a single reportable segment, where we manage our business and assess financial performance on a consolidated basis.

Our single reportable segment's primary source of revenue is 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.

Our primary expense is Provision for credit losses driven by Net principal losses from our various credit card and other loan products.

Our key metrics include the growth in and yield on our credit card and other loan portfolios, Net interest margin, operating leverage and Efficiency ratio, our various capital ratios, and credit-related ratios such as our Delinquency rate, Net principal loss rate and Reserve rate.

Our Chief Operating Decision Maker (CODM) regularly receives and reviews consolidated operating results and uses our key metrics to evaluate the performance of the Company, focusing primarily on Income from continuing operations before income taxes from the Consolidated Statements of Income, to make decisions regarding the allocation of resources and assessment of performance.

The function of CODM is performed by our President and Chief Executive Officer.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Amounts Based on Estimates and Judgments

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

Interest and fees continue to accrue on all accounts, except in limited circumstances, until the account balance and all related interest and fees are paid, or charged-off which happens in the month during which an account becomes 180 days past due for credit card loans or 120 days past due for other loans, which consist primarily of buy now, pay later (BNPL) products such as installment loans and our “split-pay” offerings.

Interest and fees continue to accrue on all accounts, except in limited circumstances, until the account balance and all related interest and fees are paid or charged-off, which happens in the month during which an account becomes 180 days past due for credit card loans or 120 days past due for other loans, which consist primarily of our pay-over-time products, which include installment loans and “split-pay” offerings.

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

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

Direct loan origination costs on Credit card and other loans are deferred and amortized on a straight-line basis over a one-year period for credit card loans, or for other loans, over the life of the loan;

and are recorded as a reduction of Interest and fees on loans.

As of December 31, 2024 and 2023, the remaining unamortized deferred direct loan origination costs were $ 45 million and $ 60 million, respectively, and included in Total credit card and other loans.

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Costs of cardholder reward arrangements are recognized when the rewards are earned by the cardholders and are generally classified as a reduction of revenue with the related liability included in Other liabilities on the Consolidated Balance Sheets.

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

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.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Other non-interest income:

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Amortization of contract costs recorded as a reduction of Interchange revenue, net of retailer share arrangements, was $ 51 million, $ 59 million and $ 72 million for the years ended December 31, 2024, 2023 and 2022, respectively;

amortization of contract costs recorded across various Non-interest expense categories totaled $ 12 million, $ 12 million and $ 11 million for those same years, respectively.

amortization of contract costs recorded across various Non-interest expense categories totaled $ 12 million in each of those same years.

As of December 31, 2024 and 2023, the remaining unamortized contract costs were $ 228 million and $ 285 million, respectively, and are included in Other assets on the Consolidated Balance Sheets.

We perform an impairment assessment when events or changes in circumstances indicate that the carrying amount of our contract costs may not be recoverable.

Our impairment assessment for certain of our deferred contract costs resulted in a $ 7 million impairment charge which has been recognized in Other non-interest expenses in our Consolidated Statements of Income for the year ended December 31, 2023.

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

No impairment charges were recognized during either of the years ended

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

December 31, 2024 or 2022.

However, for the year ended December 31, 2023 we recognized a $ 7 million impairment charge in Other non-interest expenses in our Consolidated Statements of Income for certain of our deferred contract costs.

Interest expense:

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Cash and cash equivalents:

Includes cash and due from banks, interest-bearing cash balances such as those invested in money market funds, as well as other highly liquid short-term investments with an original maturity of three months or less, and restricted cash.

As of December 31, 2024 and 2023, respectively, cash and due from banks was $ 330 million and $ 410 million, interest-bearing cash balances were $ 3.1 billion and $ 2.9 billion, and short-term investments were $ 272 million and $ 250 million.

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

Restricted cash totaled $ 26 million and $ 36 million as of December 31, 2023 and 2022, respectively.

Derivative financial instruments:

From time to time, we use derivative financial instruments to manage our exposure to various financial risks;

we do not trade or speculate in derivatives.

Subject to the criteria set forth in GAAP, we will either designate our derivatives in hedging relationships, or as economic hedges should the criteria in GAAP not be met.

Our derivative financial instruments were insignificant to the audited Consolidated Financial Statements for the periods presented.

Restricted cash primarily includes cash restricted for principal and interest repayments of debt issued by our consolidated VIEs, as well as other restricted amounts including cash pledged to collateralize our derivative contracts.

Restricted cash is recorded in Other assets on the Consolidated Balance Sheets and totaled $ 35 million and $ 26 million as of December 31, 2024 and 2023, respectively.

Property and equipment :

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depreciation begins once the asset is placed in service and is also recognized on a straight-line basis.

Our furniture and equipment is depreciated over the estimated useful lives of the assets , which range from less than one year to 11 years, while leasehold improvements are depreciated over the lesser of the remaining terms of the respective leases, or the economic lives of the improvements, and range from less than one year to 24 years.

Depreciation expense, including

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

purchased software, totaled $ 19 million, $ 19 million and $ 26 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Our furniture and equipment is depreciated over the estimated useful lives of the assets , which range from less than one year to 10 years, while leasehold improvements are depreciated over the lesser of the remaining terms of the respective leases, or the useful lives of the improvements, and range from less than one year to 20 years.

Depreciation expense, including purchased software, totaled $ 20 million, $ 19 million and $ 19 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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

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

As of and for the year ended December 31, 2023, our five largest credit card programs accounted for approximately 47 % of our Total net interest and non-interest income excluding the gain on sale and 37 % of our End-of-period credit card and other loans.

As of and for the year ended December 31, 2024, our five largest credit card programs (based on Total net interest and non-interest income) accounted for approximately 48 % of our Total net interest and non-interest income excluding the gain on sale and 38 % of our End-of-period credit card and other loans.

In particular, our programs with (alphabetically) Signet Jewelers, Ulta Beauty and Victoria’s Secret & Co.

and its retail affiliates each accounted for more than 10% of our Total net interest and non-interest income for the year ended December 31, 2023.

and its retail affiliates, each accounted for 10% or more of our Total net interest and

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

non-interest income for the year ended December 31, 2024.

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

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

For the year ended December 31, 2022, BJ’s branded co-brand accounts generated approximately 10 % of our Total net interest and non-interest income, and BJ’s branded co-brand accounts were responsible for approximately 11 % of our Total credit card and other loans as of December 31, 2022.

RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING STANDARDS

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

Specifically, the new guidance eliminates the previous recognition and measurement guidance for troubled debt restructurings while enhancing the disclosure requirements for certain loan modifications and write-offs.

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

In March 2023, the FASB issued new accounting guidance expanding the election to apply the proportional amortization method of accounting to tax credit investments beyond low-income-housing tax credit investments, when certain conditions are met.

Effective January 1, 2024 we adopted the guidance;

the accounting policy election from which did not have a significant impact on our results of operations, financial position, regulatory risk-based capital, or on our operational processes, controls and governance in support of the new guidance.

In November 2023, the FASB issued new segment reporting guidance that will be effective beginning with segment disclosures for our Annual Report on Form 10-K for the year ending December 31, 2024, and effective for interim reporting periods beginning in 2025.

Early adoption is permitted;

although, we do not plan to early adopt.

The new guidance requires interim and annual disclosure of significant segment expense categories and amounts that are regularly provided to the chief operating decision maker, as well as disclosure of the aggregate amount and description of other segment items beyond significant segment expenses.

The guidance will result in expanded disclosures for our single reportable segment but is not expected to have a significant impact on our financial reporting, or on our operational processes, controls and governance in support of the new guidance.

In December 2023, the Financial Accounting Standards Board (FASB) issued new income tax disclosure guidance, with the biggest changes impacting disclosures provided on an annual basis, that will be effective beginning with our income tax disclosures for our Annual Report on Form 10-K for the year ending December 31, 2025.

Early adoption is permitted;

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

although, we do not plan to early adopt.

The new guidance requires greater disaggregation of rate reconciliation and income taxes paid information, as well as other changes intended to enhance the transparency and decision-usefulness of income tax disclosures.

The new guidance will require enhancements to our income tax disclosures but is not expected to have a significant impact on our financial reporting, or on our operational processes, controls and governance in support of the new guidance.

Accounting Standards Recently Adopted

Standard Guidance Timing and Financial Statement Impact

Investments – Equity Method and Joint Ventures:

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

Issued March 2023

Expands the election to apply the proportional amortization method of accounting to tax credit investments beyond low-income-housing tax credit investments, when certain conditions are met.

Adopted under the modified retrospective method on January 1, 2024, which resulted in an insignificant decrease to retained earnings.

Adoption did not have a significant impact on our results of operations, financial position, regulatory risk-based capital, or on our operational processes, controls and governance in support of the new guidance.

Segment Reporting:

Improvements to Reportable Segment Disclosures

Issued November 2023

Requires interim and annual disclosure of significant segment expense categories and amounts that are regularly provided to the CODM, as well as disclosure of the aggregate amount and description of other segment items beyond significant segment expenses.

Adopted effective with this report.

Adoption did not significantly impact our disclosures for our single reportable segment, our financial reporting, or our operational processes, controls, and governance in support of the new guidance.

Accounting Standards Recently Issued but Not Yet Adopted

Standard Guidance Timing and Financial Statement Impact

Income Taxes:

Improvements to Income Tax Disclosures

Issued December 2023

Requires greater disaggregation of rate reconciliation and income taxes paid information, as well as other changes intended to enhance the transparency and decision-usefulness of income tax disclosures.

Effective beginning with our Annual Report on Form 10-K for the year ending December 31, 2025.

Early adoption is permitted, although we did not early adopt.

Adoption will require enhancements to our income tax disclosures but is not expected to have a significant impact on our financial reporting, or on our operational processes, controls and governance in support of the new guidance.

Debt – Debt with Conversion and Other Options:

Induced Conversions of Convertible Debt Instruments

Issued November 2024

Improves the relevance and consistency in application of the induced conversion guidance for (a) convertible debt instruments with cash conversion features and (b) debt instruments that are not currently convertible.

Effective January 1, 2026.

Early adoption is permitted, although we do not plan to early adopt.

Adoption is not expected to have a significant impact on our financial reporting as the new guidance aligns with our recent accounting for the repurchases of certain of our Convertible Senior Notes due 2028.

Additionally, adoption is not expected to have a significant impact on our operational processes, controls and governance in support of the new guidance.

Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures:

Disaggregation of Income Statement Expenses

Issued November 2024

Requires disaggregated disclosure of certain income statement expenses on the face of the Consolidated Statements of Income, and further disaggregation of certain expense captions into specified categories in disclosures within the notes to the Consolidated Financial Statements.

Effective beginning with our Annual Report on Form 10-K for the year ending December 31, 2027, and effective for interim reporting periods beginning in 2028.

Early adoption is permitted, although we do not plan to early adopt.

Adoption is not expected to have a significant impact on our financial reporting, or on our operational processes, controls and governance in support of the new guidance.

CREDIT CARD AND OTHER LOANS

Our payment and lending solutions result in the origination of Credit card and other loans, which are recorded at the time a borrower enters into a point-of-sale transaction with a merchant.

Credit card loans represent revolving lines of credit and have a range of terms that include credit limits, interest rates and fees, which can be revised over time based on new information about the cardholder, in accordance with applicable regulations and the governing terms and conditions.

Credit card loans represent revolving lines of credit and

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

have a range of terms that include credit limits, interest rates and fees, which can be revised over time based on new information about the cardholder, in accordance with applicable regulations and the governing terms and conditions.

Cardholders choosing to make a payment of less than the full balance due, instead of paying in full, are subject to finance charges and are required to make monthly payments based on pre-established amounts.

Other loans, which consist primarily of BNPL products such as installment loans and our “split-pay” offerings, have a range of fixed terms such as interest rates, fees and repayment periods, and borrowers are required to make pre-established monthly payments over the term of the loan in accordance with the applicable terms and conditions.

Other loans, which consist primarily of our pay-over-time products, which include installment loans and “split-pay” offerings, have a range of fixed terms such as interest rates, fees and repayment periods, and borrowers are required to make pre-established monthly payments over the term of the loan in accordance with the applicable terms and conditions.

Credit card and other loans include principal and any related accrued interest and fees and are presented on the Consolidated Balance Sheets net of the Allowance for credit losses.

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We generally classify our Credit card and other loans as held for investment.

We sell a majority of our Credit card loans originated by Comenity Bank (CB) and by Comenity Capital Bank (CCB), which together are referred to herein as the “Banks”, to certain of our master trusts (the Trusts), which are consolidated VIEs, and therefore these loans are restricted for securitization investors.

We sell a majority of our credit card loans originated by Comenity Bank (CB) and by Comenity Capital Bank (CCB), to certain of our master securitization trusts (the Trusts), which are consolidated VIEs, and therefore these loans are restricted for securitization investors.

All new originations of Credit card and other loans are determined to be held for investment at origination because we have the intent and ability to hold them for the foreseeable future.

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From time to time certain credit card loans are classified as held for sale, as determined on a brand partner portfolio basis.

We carry held for sale assets at the lower of aggregate cost or fair value and continue to recognize finance charges on an accrual basis.

We carry held for sale loans at the lower of aggregate cost or fair value and continue to recognize finance charges on an accrual basis.

Cash flows associated with Credit card and other loans originated or purchased for investment are classified as Cash flows from investing activities, regardless of any subsequent change in intent and ability.

The following table presents Credit card and other loans, as of December 31:

The following table provides Credit card and other loans, as of December 31:

Credit card loans $ 18,586 $ 18,999

BNPL and other loans 334 300

Other loans 310 334

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

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__________________________________

(1) Includes $ 12.8 billion and $ 15.4 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of December 31, 2023 and December 31, 2022, respectively.

(2) Includes $ 371 million and $ 307 million, of accrued interest and fees that have not yet been billed to cardholders as of December 31, 2023 and December 31, 2022, respectively.

(1) Includes $ 12.4 billion and $ 12.8 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of December 31, 2024 and 2023, respectively.

(2) Includes $ 378 million and $ 371 million of accrued interest and fees that have not yet been billed to cardholders as of December 31, 2024 and 2023, respectively.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Credit Card and Other Loans Aging

The following table presents the delinquency trends of our Credit card and other loans portfolio based on the amortized cost:

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

Aging Analysis of Delinquent Amortized Cost

Credit Card and Other Loans (1)

31 to 60 days

delinquent 61 to 90 days

delinquent 91 or more days delinquent Total

delinquent Current Total

As of December 31, 2023 $ 422 $ 323 $ 809 $ 1,554 $ 17,373 $ 18,927

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

31 to 60 Days Past Due 61 to 90 Days Past Due 91 or more Days Past Due Total Total

Current Total

December 31, 2024 $ 369 $ 288 $ 730 $ 1,387 $ 17,105 $ 18,492

December 31, 2023 $ 422 $ 323 $ 809 $ 1,554 $ 17,373 $ 18,927

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

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

As permitted by GAAP, the primary difference between the amortized cost basis included in the table above and the carrying value of our Credit card and other loans relates to the exclusion of unbilled finance charges and fees from the amortized cost basis.

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When it comes to our Credit card and other loans portfolio, we closely monitor Delinquency rates and Net principal loss rates, which reflect, among other factors, our underwriting, the inherent credit risk in our portfolio and the success of our collection and recovery efforts.

These rates also reflect, more broadly, the general macroeconomic conditions, including the effects of persistent inflation and high interest rates.

Our Delinquency and Net principal loss rates are also impacted by the magnitude of our Credit card and other loans portfolio, which serves as the denominator in the calculation of these rates.

Accordingly, changes in the magnitude of our portfolio (whether due to credit tightening, acquisitions or dispositions of portfolios or otherwise) may cause movements in our Delinquency and Net principal loss rates that are not necessarily indicative of the underlying credit quality of the overall portfolio.

These rates also reflect, more broadly, the general macroeconomic conditions, including the compounding effect of persistent inflation relative to wage growth, and higher interest rates.

Our Delinquency and Net principal loss rates are also impacted by the size of our Credit card and other loans portfolio, which serves as the denominator in the calculation of these rates.

Accordingly, changes in the size of our portfolio (whether due to credit tightening, acquisitions or dispositions of portfolios or otherwise) may cause movements in our Delinquency and Net principal loss rates that are not necessarily indicative of the underlying credit quality of the overall portfolio.

Delinquencies:

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

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

As of December 31, 2023 and December 31, 2022, our Delinquency rates were 6.5 % and 5.5 %, respectively.

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

As of December 31, 2024 and 2023, our Delinquency rates were 5.9 % and 6.5 %, respectively.

Net Principal Losses:

Our net principal losses include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and third-party fraud losses (including synthetic fraud).

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

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

Credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due.

BNPL loans such as our installment loans and our “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due.

However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for Credit card loans and 120 days past due for BNPL loans.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Our credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due.

Our pay-over-time products, which include installment loans and “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due.

However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for credit card loans and 120 days past due for installment loans and “split-pay” offerings.

We record the actual losses for unpaid interest and fees as a reduction to Interest and fees on loans, which were $ 1,027 million, $ 954 million and $ 651 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The Net principal loss rate is calculated by dividing net principal losses for the period by the Average credit card and other loans for the same period.

Average credit card and other loans represent the average balance of the loans at the beginning and end of each month, averaged over the periods indicated.

Beginning in January 2024, we revised the calculation of Average credit card and other loans to more closely align with industry practice by incorporating an average daily balance.

Prior to 2024, Average credit card and other loans represent the average balance of the loans at the beginning and end of each month, averaged over the periods indicated.

For the years ended December 31, 2024 and 2023, our Net principal loss rates were 8.2 % and 7.5 %, respectively.

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

The table below excludes less than 0.1 % and approximately 0.6 % of the total credit card loans balance as of December 31, 2023 and 2022, respectively, representing those customer accounts for which a Vantage credit score is not available.

The table below excludes less than 0.1 % of the total credit card loans balance as of both December 31, 2024 and 2023, representing those customer accounts for which a Vantage credit score is not available.

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

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Credit card loans 58 % 27 % 15 % 57 % 27 % 16 %

As part of our credit risk management activities for our BNPL loans portfolio, we also assess overall credit quality by reviewing information from credit bureaus.

In this case we utilize Fair Isaac Corporation (FICO) credit scores to assist in our assessment of credit quality.

The amortized cost basis of BNPL loans totaled $ 317 million and $ 299 million as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, approximately 82 % of these loans were originated with customers with FICO scores of 661 or above, and correspondingly approximately 18 % of these loans were originated with customers with FICO scores below 661.

As part of our credit risk management activities for our Other loans portfolio, we also assess overall credit quality by reviewing information from credit bureaus.

We have historically utilized Fair Isaac Corporation (FICO) credit scores to assist in our assessment of the credit quality for our Other loans portfolio, but in early 2024 we completed a transition to Vantage scoring.

The scoring scale produced by both FICO and Vantage is similar in that scores of 600 or less are considered weaker scores and as per our categorization method would have the highest credit risk.

The amortized cost basis of Other loans totaled $ 298 million and $ 317 million as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, approximately 84 % of these loans were originated with customers with scores of 661 or above, and correspondingly approximately 16 % of these loans were originated with customers with scores below 661.

Similarly, as of December 31, 2023, approximately 82 % and 18 % of these loans were originated with customers with FICO scores of 661 or above, and below 661, respectively.

Modified Credit Card Loans

Forbearance Programs

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

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

Consumer Relief Programs

As part of our collections strategy, we may offer temporary and short term programs in order to improve the likelihood of collections and meet the needs of our customers.

For example, as a result of hurricanes Helene and Milton in 2024 we froze delinquency progression for cardholders in Federal Emergency Management Agency identified impact zones for one billing cycle.

Our modifications, for customers who have requested assistance and meet certain qualifying requirements, come in the form of reduced payment requirements, interest rate reductions and late fee waivers.

We do not offer programs involving the forgiveness of principal.

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

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

We evaluate our forbearance programs to determine if they represent a more than insignificant delay in payment granted to borrowers experiencing financial difficulty, in which case they would then be considered a Loan Modification.

Loans in these short term programs that are determined to be Loan Modifications, will be included as such in the disclosure below.

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

We evaluate our consumer relief programs to

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determine if they represent a more than insignificant delay in payment granted to borrowers experiencing financial difficulty, in which case they would then be considered a Loan Modification.

Loans in these short term programs that are determined to be Loan Modifications, will be included as such in the disclosure below.

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

In instances where cardholders are experiencing financial difficulty, we may modify our credit card loans with the intention of minimizing losses and improving collectability, while providing cardholders with financial relief;

such credit card loans are classified as Loan Modifications, exclusive of the temporary, short-term forbearance programs described above.

such credit card loans are classified as Loan Modifications, exclusive of the temporary, short-term consumer relief programs described above.

Loan Modifications include concessions consisting primarily of a reduced minimum payment, late fee waiver, and/or an interest rate reduction.

The majority of concessions remain in place for a period no longer than twelve months ;

The majority of concessions remain in place for a period no longer than 12 months;

however, for certain modifications the concessions remain in place through the payoff of the credit card loans if the cardholder complies with the terms of the program.

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

The following table provides information relating to credit card loans to borrowers experiencing financial difficulty that were granted a concession under a Loan Modification program during the year ended December 31:

Account Balances (1)

% of Total Credit Card Loans

Weighted Average Interest Rate Reduction (% points) Account Balances (1)

% of Total Credit Card Loans

Weighted Average Interest Rate Reduction (% points)

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__________________________________

(1) Represents the outstanding balance as of December 31, 2023 of all Loan Modifications undertaken in the past twelve months, for credit card loans that remain in modification programs on December 31, 2023.

The outstanding balance includes principal, accrued interest and fees.

(1) Represents the outstanding balances as of December 31, 2024 and 2023, respectively, of all Loan Modifications undertaken in the past twelve months, for credit card loans that remain in modification programs on December 31, 2024 and 2023, respectively.

The outstanding balances include principal, accrued interest and fees.

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

The following table presents the performance of our credit card loans that were modified on or after January 1, 2023 and remain in a Loan Modification program:

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

Aging Analysis of Delinquent Amortized Cost

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Current Total

As of December 31, 2023 $ 17 $ 16 $ 22 $ 55 $ 214 $ 269

The following table provides additional information regarding credit card Loan Modifications that have subsequently defaulted within 12 months of their modification dates, for the year ended December 31, 2023;

December 31, 2024 $ 21 $ 18 $ 22 $ 61 $ 242 $ 303

December 31, 2023 $ 17 $ 16 $ 22 $ 55 $ 214 $ 269

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The following table provides additional information regarding credit card Loan Modifications that have subsequently defaulted within 12 months of their modification dates for the years ended December 31;

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

Modifications Outstanding

Balance Number of

Modifications Outstanding

(Millions, except for Number of modifications)

Loan Modifications that subsequently defaulted 15,663 $ 29 14,196 $ 23

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Troubled Debt Restructurings (TDRs)

The following table provides information on credit card loans modified as troubled debt restructurings (TDRs) in accordance with the applicable accounting guidance in effect during the periods presented, which was effective prior to our adoption of the new guidance that eliminated TDRs effective January 1, 2023.

Restructurings Pre-modification

Balance Post-modification

(Millions, except for Number of restructurings)

Troubled debt restructurings 149,815 $ 227 $ 227

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

Our impaired credit card loans represented 1 % of total credit card loans as of December 31, 2022.

As of the same date, our recorded investment in impaired credit card loans was $ 257 million, with an associated Allowance for credit losses of $ 70 million.

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

We recognized $ 15 million in interest income associated with credit card loans accounted for as TDRs for the year ended December 31, 2022.

The following table provides additional information regarding credit card loans modified as TDRs that have subsequently defaulted within 12 months of their modification dates, for the year ended December 31, 2022;

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

Restructurings Outstanding

(Millions, except for Number of restructurings)

Troubled debt restructurings that subsequently defaulted 63,726 $ 88

Unfunded Lending Commitments

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Portfolio Sales

As of December 31, 2023 and 2022, there were no credit card loans held for sale and no portfolio sales were made during the year end December 31, 2022.

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

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

We recognized a gain on sale in April 2024 that was subsequently adjusted during the second half of 2024 to recognize an incremental amount due to us under the purchase and sale agreement.

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

Portfolio Acquisitions

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

In October 2022, we acquired the AAA credit card portfolio for cash consideration of $ 1.6 billion, which primarily consisted of $ 1.5 billion of credit card loans, and also included $ 118 million of intangible assets (primarily purchased credit card relationships) and reward liabilities.

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

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

In August 2024, we acquired a credit card loan portfolio for cash consideration of $ 378 million.

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

ALLOWANCE FOR CREDIT LOSSES

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Our estimate under the Current Expected Credit Loss (CECL) approach is significantly influenced by the composition, characteristics and quality of our portfolio of Credit card and other loans, as well as the prevailing economic conditions and forecasts utilized.

The estimate of the Allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees.

The Allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees.

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

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

In estimating our Allowance for credit losses, for each identified segment of loans sharing similar risk characteristics, management uses modeling and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors.

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and supportable forecasts and other relevant factors.

This modeling uses historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships, to determine expected credit performance.

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We use a combination of First In First Out and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) methodologies to model balance paydown.

We measure our Allowance for credit losses on BNPL loans using a statistical model to estimate projected losses over the remaining terms of the loans, inclusive of an assumption for prepayments.

The model is based on the historical statistical

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relationship between loan loss performance and certain macroeconomic data pooled based on credit quality risk score, term of the underlying loans, vintage and geographic location.

As of December 31, 2023 and 2022, the Allowance for credit losses on BNPL loans was $ 32 million and $ 21 million, respectively.

We measure our Allowance for credit losses on Other loans, consisting primarily of our installment loans and “split-pay” offerings, using a statistical model to estimate projected losses over the remaining terms of the loans, inclusive of an assumption for prepayments.

The model is based on the historical statistical relationship between loan loss performance and certain macroeconomic data pooled based on credit quality risk score, term of the underlying loans, vintage and geographic location.

As of December 31, 2024 and 2023, the Allowance for credit losses on Other loans was $ 30 million and $ 32 million, respectively.

Allowance for Credit Losses Rollforward

The following table presents our Allowance for credit losses for our Credit card and other loans.

The amount of the related Allowance for credit losses on BNPL and other loans is insignificant and therefore has been included in the table below.

The amounts presented are for the years ended December 31:

The following table provides our Allowance for credit losses for our Credit card and other loans.

The amount of the related Allowance for credit losses on Other loans is insignificant and therefore has been included in the table below for the periods presented:

2024 2023 2022

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1,397 1,229 1,594

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

Change in the estimate for uncollectible unpaid interest and fees 5 10 10

Net principal losses (2)

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Net principal losses for the years ended December 31, 2023 and 2022 include an adjustment of $ 10 million and $ 5 million, respectively, related to the effects of the purchase of previously written-off accounts that were sold to a third-party debt collection agency;

no such adjustment was made for the year ended December 31, 2021.

For the year ended December 31, 2023, the factors that influenced the decrease in the Allowance for credit losses are lower Credit Card and other loans, primarily driven by the sale of the BJ’s portfolio;

partially offset by higher principal losses and a higher reserve rate due to the compounding effect of persistent inflation relative to wage growth, the increased cost of consumer debt, the possibility of higher unemployment levels and the potential impacts from the resumption of federal student loan payments.

no such adjustment was made in the current period.

For the year ended December 31, 2024, the factors that influenced the decrease in the Allowance for credit losses are lower Credit card and other loans, as well as a modest decrease in the reserve rate over the period.

Overall, our reserve rate is nominally lower, 11.9 % as of December 31, 2024 compared with 12.0 % as of December 31, 2023, reflecting conservative weightings on the economic scenarios in our credit reserve modeling given the wide range of potential 2025

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macroeconomic outcomes, which we intend to maintain until we see sustained improvement in delinquencies and an improved macroeconomic outlook.

SECURITIZATIONS

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The collections on the securitized credit card loans held by the Trusts are available only for payment of those debt securities and notes, or other obligations arising in the securitization transactions.

For our securitized credit card loans, during the initial phase of a securitization reinvestment

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period, we generally retain principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets.

For our securitized credit card loans, during the initial phase of a securitization reinvestment period, we generally retain principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets.

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

We are required to maintain minimum interests in our Trusts ranging from 4 % to 10 % of the securitized credit card loans.

Under the Indentures of each Trust and their Indenture Supplements, we are required to maintain minimum interests in our Trusts ranging from 4 % to 10 % of the securitized credit card loans.

This requirement is met through a transferor’s interest and is supplemented through excess funding deposits which represent cash amounts deposited with the trustee of the securitizations.

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During the years ended December 31, 2024, 2023 and 2022, no such triggering events occurred.

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

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

December 31, 2024 December 31, 2023

Total credit card loans – available to settle obligations of consolidated VIEs $ 12,408 $ 12,844

principal amount of credit card loans 91 days or more past due $ 305 $ 323

2023 2022 2021

Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022

Net principal losses of securitized credit card loans $ 852 $ 801 $ 554

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Investments include investment securities and various other investments primarily held by the Banks for Community Reinvestment Act (CRA) purposes.

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We also have other investments, which primarily include a portfolio of investments in certain limited partnerships and limited liability companies accounted for under the equity method, and therefore are recorded at cost and adjusted each period for our share of the investee’s earnings or losses, less any impairment.

Other investments also include an insignificant tax credit investment where we elected to apply the proportional amortization method of accounting, for which the impacts of both the amortization of the investment and income tax benefits are fully recognized in the Provision for income taxes.

The following table provides a summary of our Investments as of December 31:

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Total Investments $ 266 $ 253

______________________________

(1) As of December 31, 2023, to increase transparency certain types of investments, including our equity method investments, are now separately disclosed within this table;

there was no impact on our audited Consolidated Financial Statements as a result of this separate disclosure.

Prior period amounts above conform with current period presentation.

For AFS debt securities in an unrealized loss position, any estimated credit losses are recognized in the Consolidated Statements of Income by establishing or adjusting an existing Allowance for credit losses for such losses.

We typically invest in highly-rated securities with low probabilities of default and therefore did not have any credit losses for the periods

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We typically invest in highly-rated securities with low probabilities of default;

therefore, we did not have an Allowance for credit losses as of either December 31, 2024 or 2023, and did not recognize any credit losses for the periods presented.

Any unrealized gains, or any portion of an AFS debt security’s non-credit-related unrealized losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax.

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

The table below reflects unrealized gains and losses on AFS debt securities as of December 31, 2023 and December 31, 2022:

The table below provides unrealized gains and losses on AFS debt securities as of December 31:

Cost Unrealized

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Losses Fair Value

Available-for-sale debt securities $ 192 $ — $ ( 21 ) $ 171 $ 175 $ — $ ( 23 ) $ 152

Available-for-sale securities $ 195 $ — $ ( 25 ) $ 170 $ 192 $ — $ ( 21 ) $ 171

Total $ 195 $ — $ ( 25 ) $ 170 $ 192 $ — $ ( 21 ) $ 171

The following tables provide information about AFS debt securities in a gross unrealized loss position and the length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2023 and December 31, 2022:

December 31, 2023

Less than 12 months 12 Months or Greater Total

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Losses Fair Value Unrealized

Available-for-sale debt securities $ 23 $ — $ 141 $ ( 21 ) $ 164 $ ( 21 )

Available-for-sale securities $ 27 $ — $ 140 $ ( 25 ) $ 167 $ ( 25 )

Total $ 27 $ — $ 140 $ ( 25 ) $ 167 $ ( 25 )

December 31, 2022

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Less than 12 months 12 Months or Greater Total

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Losses Fair Value Unrealized

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

Available-for-sale securities $ 23 $ — $ 141 $ ( 21 ) $ 164 $ ( 21 )

Total $ 23 $ — $ 141 $ ( 21 ) $ 164 $ ( 21 )

As of December 31, 2024, our AFS debt securities included mortgage-backed securities, which do not have a single maturity date, with an amortized cost and estimated fair value of $ 167 million and $ 145 million, respectively, and municipal bonds, all of which have a maturity date greater than ten years, with an amortized cost and estimated fair value of $ 28 million and $ 25 million, respectively.

There were no realized gains or losses from the sale of any investments for the years ended December 31, 2023, 2022 and 2021.

There were no realized gains or losses from the sale of any investment securities for the years ended December 31, 2024, 2023 and 2022.

GOODWILL AND INTANGIBLE ASSETS, NET

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Goodwill is not amortized but is tested for impairment at least annually.

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We evaluate goodwill for impairment annually as of July 1, or more frequently if events or circumstances arise that would more likely than not reduce the fair value of our single reporting unit below its carrying value.

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When measuring the fair value we use widely accepted valuation techniques, leveraging a combination of the income approach based on discounted cash flows and the market approach based on valuation multiples.

The key assumptions used to determine the fair value are primarily unobservable inputs (i.e., Level 3 inputs) including internally developed forecasts to estimate future cash flows, growth rates and discount rates, as well as market valuation multiples (for the market approach).

The key assumptions used to determine the fair value are primarily unobservable inputs (i.e., Level 3 inputs as defined under GAAP) including internally developed forecasts to estimate future cash flows, growth rates and discount rates, as well as market valuation multiples (for the market approach).

Estimated cash flows are based on internal forecasts grounded in historical performance and future expectations.

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When using valuation multiples under the market approach, we apply comparable publicly traded companies’ multiples (e.g., price to tangible book value or return on tangible equity) to our reporting unit’s operating results.

For the year ended December 31, 2023, we performed a quantitative assessment in connection with our annual goodwill impairment evaluation and concluded that the fair value of our reporting unit was in excess of its carrying value.

For the years ended December 31, 2024 and 2023, we performed a quantitative assessment in connection with our annual goodwill impairment evaluation and concluded that the fair value of our reporting unit was in excess of its carrying value.

For the year ended December 31, 2022, we performed a qualitative assessment and determined that it was more likely than not that the fair value of our reporting unit exceeded its carrying value.

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No goodwill impairment was recognized during any of those years, and there were no accumulated goodwill impairment losses as of December 31, 2024.

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Intangible Assets, net

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Total intangible assets $ 227 $ ( 115 ) $ 112

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Assets Accumulated Amortization Net Useful Life

Definite-Lived Assets

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

Premium on purchased credit card loan portfolios $ 231 $ ( 108 ) $ 123 5 - 13 years

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Thereafter 11

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

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

Deferred tax asset, net $ 708 $ 629

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Accounts receivable, net (2)

Right-of-use assets - operating 98 88

Right-of-use assets – operating leases 87 98

Restricted cash (3)

Investment in LVI — 6

Total other assets $ 1,403 $ 1,364

______________________________

(1) See Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” for discussion of impairment of certain deferred contract costs.

(1) See Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies” for discussion of impairment of certain deferred contract costs.

(2) Primarily related to federal, state and foreign income tax receivables (including a tax-related receivable in the amount of approximately $ 50 million, net, which we are entitled to receive through LVI), and amounts receivable from various brand partners.

(3) The balance as of December 31, 2022 represents principal accumulation for the repayment of debt issued by consolidated VIEs that matured in 2023.

(3) Restricted cash primarily includes cash restricted for principal and interest repayments of debt issued by our consolidated VIEs, as well as other restricted amounts including cash pledged to collateralize our derivative contracts.

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

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We have various operating leases for facilities and equipment which are recorded as lease-related assets (i.e., right-of-use assets) and liabilities for those leases with terms greater than 12 months.

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As of December 31, 2024 and 2023, the weighted average discount rate applied was 7.0 % and 6.9 %, respectively.

As of December 31, 2023, our leases have remaining lease terms ranging from less than one year , to up to 15 years, some of which may include renewal options;

As of December 31, 2024, our leases have remaining lease terms ranging from one year , to up to 14 years, some of which may include renewal options;

the weighted average remaining lease term was 7.5 years and 8.4 years as of December 31, 2024 and 2023, respectively.

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

lease expense for these leases is recognized on a straight-line basis over the lease term.

lease expense for these leases is recognized on a straight-line basis over the lease terms.

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

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Right-of-use assets obtained in exchange for operating leases – non-cash $ 9 $ 37 $ —

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Future maturities of our operating lease liabilities, by year, were as follows as of December 31, 2024:

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Total present value of minimum lease payments $ 128

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

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(1) The 2025 balance includes $ 3 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit.

As of December 31, 2023 and December 31, 2022, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, per ownership category, were estimated to be $ 509 million ( 4 % of Total deposits) and $ 719 million ( 5 % of Total deposits), respectively.

The measurement of estimated uninsured deposits aligns with regulatory guidelines.

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As of December 31, 2024 and 2023, 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 ( 4 % of Total deposits) and $ 509 million ( 4 % of Total deposits), respectively.

The measurement of estimated uninsured deposits aligns with regulatory guidelines.

BORROWINGS OF LONG-TERM AND OTHER DEBT

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Long-term and other debt:

Revolving line of credit $ — $ — June 2026 (1)

2017 term loans — 556 July 2024 (1)

Convertible senior notes due 2028 316 — June 2028 4.25 %

Senior notes due 2024 — 850 December 2024 4.75 %

Revolving line of credit $ — $ — October 2028 (1)

Senior notes due 2026 100 500 January 2026 7.00 %

Convertible senior notes due 2028 10 316 June 2028 4.25 %

Senior notes due 2029 900 600 March 2029 9.75 %

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Debt issued by consolidated VIEs:

Fixed rate asset-backed term note securities $ 350 $ — May 2026 5.02 %

Conduit asset-backed securities 3,550 6,115 Various – Oct.

Fixed rate asset-backed term note securities $ 1,350 $ 350 Various – May 2026 to Jul.

2027 4.62 % to 5.47 %

Conduit asset-backed securities 3,213 3,550 Various – Feb.

Subtotal 4,563 3,900

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Long-term and Other Debt

Throughout 2023, we engaged in a number of financing transactions, including entering into a new credit agreement, repaying in full and terminating our prior credit agreement, repaying in full and cancelling an existing series of senior notes, repaying in full a term loan, and consummating certain debt capital markets transactions, including an offering of convertible senior notes, a tender offer to repurchase certain outstanding senior notes, an offering of senior notes and an offering of asset-backed term notes through one of our securitization trusts.

In connection with these transactions, during 2023, we reduced our outstanding Parent Company debt by approximately $ 500 million and refinanced our nearer-term debt maturities.

Each of these transactions are described in more detail below.

Throughout 2024, we engaged in a number of financing-related transactions, including offering additional 9.750% Senior Notes due 2029, reducing our Parent Company debt, amending our Revolving Credit Facility to extend the maturity date, entering into separate privately negotiated repurchase agreements with a limited number of holders of our 4.25% Convertible Senior Notes Due 2028, and offering asset-backed term notes through one of our securitization trusts.

Each of these transactions, as well as other matters relating to our liquidity and capital resources during the year, are described in more detail below.

Credit Agreement

In June 2023, we entered into a new credit agreement (the 2023 Credit Agreement) with Parent Company, as borrower, certain of our domestic subsidiaries, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent and lender, and various other financial institutions, as lenders, which provides for a $ 700 million senior unsecured revolving credit facility (the Revolving Credit Facility) and a $ 575 million senior unsecured delayed draw term loan facility (the Term Loan Facility), all on terms and subject to the conditions set forth in the 2023 Credit Agreement.

The 2023 Credit Agreement replaced, in its entirety, our prior credit agreement dated June 14, 2017, as amended (the 2017 Credit Agreement), which

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

In October 2024, we amended our Revolving Credit Facility to extend the maturity date to October 2028, as well as to delete the provisions relating to our prior term loan facility (which was repaid in full and terminated in December

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NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

was repaid in full and terminated in June 2023 in connection with the closing of our offering of convertible notes, described below.

The 2023 Credit Agreement matures on June 13, 2026.

As of December 31, 2023 under the 2023 Credit Agreement, all $ 700 million remained available for future borrowings under the Revolving Credit Facility, and we did not have any term loans outstanding or available for future borrowings under the Term Loan Facility as discussed in further detail below.

The proceeds from the Term Loan Facility were to be used for refinancing existing debt and paying fees, expenses and premiums in connection therewith, while the proceeds from the Revolving Credit Facility may be used for general corporate purposes and working capital needs, including refinancing existing debt, investments, payment of dividends and repurchases of capital stock.

Borrowings under the 2023 Credit Agreement bear interest at an annual rate equal to, at our option, either (a) Term Secured Overnight Financing Rate (SOFR) plus a credit adjustment spread and the applicable margin, (b) Daily Simple SOFR plus a credit adjustment spread and the applicable margin or (c) a base rate set forth in the 2023 Credit Agreement plus the applicable margin, with the applicable margin in each case dependent upon our ratio of (i) consolidated tangible net worth to (ii) consolidated total assets, minus the sum of goodwill and intangible assets, net.

In June 2023, we borrowed $ 300 million under the Term Loan Facility and used those borrowings, together with cash on hand, to repurchase the Senior Notes due 2024 that were tendered in the Tender Offer (as defined below).

In December 2023, we repaid all such borrowings outstanding under the Term Loan Facility with a portion of the net proceeds from our December 2023 offering of 9.750% Senior Notes due 2029 (Senior Notes due 2029) and permanently terminated all commitments under the Term Loan Facility.

See “—9.750% Senior Notes due 2029” below.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2023) and make certain other amendments.

As of December 31, 2024, our Revolving Credit Facility was undrawn and all $ 700 million remained available for future borrowings under the Revolving Credit Facility.

Senior Notes Due 2026, 2028 and 2029

The Senior Notes set forth below are each governed by their respective indentures that include usual and customary negative covenants and events of default.

These Senior Notes are unsecured and are guaranteed on a senior unsecured basis by certain of our existing and future domestic restricted subsidiaries that incur or in any other manner become liable for any debt under our domestic credit facilities, including the 2023 Credit Agreement.

Due December 15, 2024:

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

The Senior Notes due 2024 accrue interest on the outstanding principal amount at the rate of 4.750 % per annum from December 20, 2019, payable semi-annually in arrears, on June 15 and December 15 of each year.

Concurrently with the launch of the convertible notes offering (see further discussion below), we commenced a cash tender offer (the Tender Offer) for any and all of the $ 850 million in aggregate principal amount of our 4.750 % Senior Notes due 2024.

The consideration offered for each $1,000 principal amount of the Senior Notes due 2024 was $ 980 , plus accrued and unpaid interest, for any and all notes validly tendered.

In June 2023, we repurchased and cancelled $ 565 million in aggregate principal amount of Senior Notes due 2024 that were validly tendered in the Tender Offer.

In December 2023, we redeemed the remaining $ 285 million of these notes with a portion of the net proceeds from our December 2023 offering of Senior Notes due 2029, and there were no Senior Notes due 2024 outstanding as of December 31, 2023.

See “—9.750% Senior Notes due 2029” below.

Due January 15, 2026:

The Senior Notes set forth below are each governed by their respective indenture that include usual and customary negative covenants and events of default.

7.000 % Senior Notes due 2026

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

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

In January 2024, we redeemed $ 400 million in aggregate principal among of the Senior Notes due 2026 with the net proceeds from the January 2024 offering of Senior Notes due 2029, together with $ 100 million of cash on hand.

In January 2024, we redeemed $ 400 million in aggregate principal amount of the Senior Notes due 2026 with the net proceeds from the January 2024 offering of Senior Notes due 2029, together with $ 100 million of cash on hand.

See “— 9.750 % Senior Notes due 2029” below.

Further, in January 2025, with cash on hand we redeemed the remaining $ 100 million in aggregate principal amount of our Senior Notes due 2026.

4.25 % Convertible Senior Notes Due 2028

In June 2023, we issued and sold $ 316 million aggregate principal amount of 4.25 % Convertible Senior Notes due 2028 (the Convertible Notes).

The Convertible Notes bear interest at an annual rate of 4.25 %, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2023.

The Convertible Notes bear interest at an annual rate of 4.25 %, payable semi-annually in arrears on June 15 and December 15 of each year.

The Convertible Notes mature on June 15, 2028, unless earlier repurchased, redeemed or converted.

We used the net proceeds from the offering of the Convertible Notes to repay in full and terminate the 2017 Credit Agreement.

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NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Convertible Notes are convertible, under certain conditions, until March 15, 2028, and on or after such date without condition, at an initial conversion rate of 26.0247 shares of our common stock per $1,000 principal amount of Convertible Notes, subject to adjustment, which represents a 25 % conversion premium based on the last reported sale price of our common stock of $ 30.74 on June 8, 2023 prior to issuing the Convertible Notes.

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If we experience a fundamental change, as defined in the indenture governing the Convertible Notes, the note holders may require us to purchase for cash all or a portion of their notes, subject to specified exceptions, at a price equal to 100 % of the principal amount of the Convertible Notes plus any accrued and unpaid interest.

In connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call transactions (the Capped Call) with certain financial institution counterparties.

In connection with the issuance of the Convertible Notes, we entered into privately negotiated capped call (Capped Call) transactions with certain financial institution counterparties.

These transactions are expected generally to reduce potential dilution to our common stock upon any conversion of Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of the Convertible Notes, with such reduction and/or offset subject to a cap, based on the cap price.

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the price paid of $ 39 million was recorded in Additional paid-in capital, net of tax, in the Consolidated Balance Sheet.

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NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

In August 2024 we entered into separate, privately-negotiated repurchase agreements with a limited number of Convertible Note holders to repurchase $ 238 million aggregate principal amount of outstanding Convertible Notes (the August Repurchases).

Subsequently, in September and November of 2024, certain holders of Convertible Notes separately approached us to repurchase Convertible Notes, and we entered into additional separate, privately-negotiated repurchase agreements with such holders of Convertible Notes, repurchasing $ 68 million aggregate principal amount of outstanding Convertible Notes (the Subsequent Repurchases and, together with the August Repurchases, the Repurchases).

The final aggregate purchase price, or settlement value, for the Repurchases was $ 486 million, which was funded with cash on hand.

In connection with the Repurchases, we recognized a $ 107 million inducement expense in Other non-interest expenses representing the total settlement value, inclusive of transaction fees, in excess of the total conversion value (calculated in accordance with the indenture governing the Convertible Notes), as well as an $ 88 million reduction in Additional paid-in capital (APIC) related to the total conversion value paid in excess of the carrying value of the Convertible Notes repurchased and a deferred tax impact.

Prior to the repurchases of Convertible Notes described above, the embedded conversion feature within the Convertible Notes was both, considered indexed to the Company’s own equity, and met the equity classification conditions;

therefore it did not require accounting as a derivative under GAAP.

Upon entering into the repurchase agreements that themselves required cash settlement of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes, the embedded conversion feature for those particular Convertible Notes no longer met the equity classification conditions;

therefore requiring bifurcation and derivative accounting.

Of the total $ 107 million recognized in Other non-interest expenses, $ 53 million represented the mark-to-market on the embedded conversion features over the measurement period from the date the repurchase agreements were executed until settlement thereof.

These fair value adjustments were determined using the daily volume-weighted average price per share of Parent Company’s common stock over the measurement period.

As all of the repurchases were negotiated and settled during the second half of 2024, there were no embedded conversion features requiring bifurcation and derivative accounting as of December 31, 2024.

Following the settlement of these repurchases, $ 10 million of Convertible Notes remained outstanding as of December 31, 2024.

For these Convertible Notes, the embedded conversion feature is both, considered indexed to the Company’s own equity, and meets the equity classification conditions;

therefore not requiring derivative accounting.

We may, from time to time, seek to retire or repurchase our remaining outstanding Convertible Notes through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.

During the fourth quarter of 2024, the Convertible Notes became convertible at the option of the holders (and the Convertible Notes have remained convertible during the first quarter of 2025) due to the last reported sales price per share of Parent Company’s common stock having exceeded 130 % of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding quarter (i.e., the quarters ended September 30, 2024 and December 31, 2024) (the Common Stock Sale Price Condition).

The Common Stock Sale Price Condition is remeasured each quarter, so the Convertible Notes may continue or cease to be convertible in future quarters depending on the performance of our stock price.

Upon any such conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock (at our election), in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted.

As of the date of this report, we have not received any conversion requests.

All of the Capped Call transactions continue to remain outstanding, notwithstanding the repurchases noted above.

Although we do not trade or speculate in derivatives, we may seek to opportunistically terminate the Capped Call transactions (in full or in part from time to time) or leave the Capped Call transactions outstanding, possibly until maturity, in any such case with the objective of optimizing the shareholder value we receive under these transactions.

9.750 % Senior Notes due 2029

In December 2023, we issued and sold $ 600 million aggregate principal amount of 9.750 % Senior Notes due 2029 (the Senior Notes due 2029).

The Senior Notes due 2029 accrue interest on the outstanding principal amount at the rate of 9.750 % per annum from December 22, 2023, payable semi-annually in arrears, on March 15 and September 15 of each year, beginning on March 15, 2024.

The Senior Notes due 2029 will mature on March 15, 2029, subject to earlier repurchase or redemption.

We used the proceeds of the December 2023 offering of Senior Notes due 2029 to redeem in full the outstanding Senior Notes due 2024 and repay in full the outstanding term loans under the Term Loan Facility of our Credit Agreement.

Subsequent to December 31, 2023, in January 2024 we issued and sold an additional $ 300 million aggregate principal amount of Senior Notes due 2029.

In January 2024, we issued and sold an additional $ 300 million aggregate principal amount of 9.750 % Senior Notes due 2029 (Senior Notes due 2029) at an issue price of 101.00 % of principal plus accrued interest from December 22, 2023.

The Senior Notes due 2029 issued in January 2024 were issued as additional notes under the same indenture pursuant to which the initial $ 600 million of Senior Notes due 2029 were issued in December 2023.

The Senior Notes due 2029 that were issued in both December 2023 and January 2024 constitute a single series of notes and have the same terms, other than the issue date and issue price.

We sold the additional $ 300 million of Senior Notes due 2029 at an issue price of 101.00 % of principal plus accrued interest from December 22, 2023.

The Senior Notes due 2029 accrue interest on the outstanding principal amount at the rate of

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NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

9.750 % per annum from December 22, 2023, payable semi-annually in arrears, on March 15 and September 15 of each year, beginning on March 15, 2024.

The Senior Notes due 2029 will mature on March 15, 2029, unless subject to earlier repurchase or redemption.

We used the proceeds of the January 2024 offering of Senior Notes due 2029, together with $ 100 million of cash on hand, to fund the redemption of $ 400 million in aggregate principal amount of our outstanding 7.000 % Senior Notes due 2026.

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The liabilities of these consolidated VIEs include asset-backed securities for which creditors, or beneficial interest holders, do not have recourse to our general credit.

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NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Fixed Rate Asset-Backed Term Notes

In May 2023, World Financial Network Credit Card Master Note Trust issued $ 399 million of Series 2023-A public term asset-backed notes, which mature in May 2026.

The offering consisted of $ 350 million of Class A notes with a fixed interest rate of 5.02 % per year, $ 31 million of Class M notes with a fixed interest rate of 5.27 % per year, and $ 18 million of zero coupon Class B notes.

The Class M and B notes were retained by us and eliminated from the Consolidated Balance Sheet.

Conduit Facilities

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Borrowings outstanding under each private Conduit Facility bear interest at a margin above SOFR, or the asset-backed commercial paper costs of each individual conduit provider.

As of December 31, 2022, total capacity under our Conduit Facilities was $ 6.5 billion, of which $ 6.1 billion had been drawn down and was included in Debt issued by consolidated variable interest entities (VIEs) in the Consolidated Balance Sheet.

During the twelve months ended December 31, 2023, we renewed lender commitments under our Conduit Facilities, bringing our capacity to $ 5.4 billion, and extended the various maturities to October 2024, February 2025, September 2025 and October 2025.

Specifically, in February 2023, the World Financial Network Credit Card Master Note Trust amended its 2009-VFN Conduit Facility, decreasing the capacity from $ 2.8 billion to $ 2.7 billion and extending the maturity to October 2024.

In December 2023, this facility was again amended extending the maturity to October 2025.

In February 2023, in connection with the sale of the BJ’s portfolio, the World Financial Capital Master Note Trust amended its 2009-VFN Conduit Facility removing the assets related to the BJ’s portfolio.

In April 2023, this facility was again amended decreasing the capacity from $ 2.5 billion to $ 2.3 billion and extending the maturity to February 2025.

In March 2023, CCB repaid the Comenity Capital Asset Securitization Trust’s 2022-VFN Conduit Facility and terminated the related lending commitment, decreasing capacity by $ 1.0 billion.

However, the structure of the applicable Trust did not change, including the Trust assets, providing for the option to pledge those assets in the future, and in September 2023, the Comenity Capital Asset Securitization Trust was amended to include a new credit commitment of $ 250 million with a maturity of September 2025.

In June 2023, the World Financial Network Credit Card Master Trust III amended its 2009-VFC conduit facility, extending a portion of the maturity to October 2023, and another portion of the maturity to October 2024.

In August 2023, this same facility was amended to replace the maturing commitment with a new $ 100 million commitment with a maturity of October 2024.

As of December 31, 2023, total capacity under our Conduit Facilities was $ 5.4 billion, of which $ 3.6 billion had been drawn and included in Debt issued by consolidated VIEs in the Consolidated Balance Sheet.

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

(Millions) December 31, 2023 Commitment December 31, 2024

Conduit Facilities Capacity Drawn (6)

Change Capacity Drawn (6)

Maturity Date (7)

Comenity Bank

WFNMNT 2009-VFN (1)

$ 2,650 $ 2,015 $ — $ 2,650 $ 1,955 October 2025

WFNMT 2009-VFC1 (2)

275 260 ( 275 ) — 141 —

Comenity Capital Bank

WFCMNT 2009-VFN (3)

2,250 1,025 — 2,250 867 February 2025

CCAST 2023-VFN1 (4)

250 250 — 250 250 September 2025

CCAST 2024-VFN1 (5)

— — 200 200 — February 2025

Total $ 5,425 $ 3,550 $ ( 75 ) $ 5,350 $ 3,213

______________________________

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

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

In October 2024, the revolving period of the 2009-VFC1 Conduit expired and the Conduit Facility entered controlled amortization, meaning the period in which principal collections are accumulated to pay down the outstanding principal amount of the notes issued under the Conduit Facility.

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

In February 2025, the 2009-VFN Conduit commitment will be reduced by $ 250 million to $ 2 billion, and the Maturity Date will be extended to February 2026.

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

(5) 2024-VFN1 Conduit issued under CCAST.

In February 2025, the 2024-VFN1 Conduit will be retired pursuant to the terms of a termination, consent and waiver agreement.

(6) Amounts drawn do not include $ 1.1 billion and $ 1.2 billion of debt issued by the Trusts as of December 31, 2024 and 2023, respectively, which were not sold, but were retained by us as a credit enhancement and therefore have been eliminated from the Total.

(7) Maturity Date with respect to conduit borrowings means the date on which the revolving period for the applicable Conduit Facility expires.

The revolving period may be extended or renewed (unless an early amortization event occurs prior to the Maturity Date).

Absent the extension or renewal of the revolving period, the Conduit Facility shall enter controlled amortization on the Maturity Date and may no longer be drawn upon.

Fixed Rate Asset-Backed Term Notes

In May 2024, WFNMNT issued $ 570 million of Series 2024-A public term asset-backed notes, which mature in April 2027.

The offering consisted of $ 500 million of Class A notes with a fixed interest rate of 5.47 % per year, $ 44 million of zero coupon Class M notes, and $ 26 million of zero coupon Class B notes.

The Class M and B notes were retained by us

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NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

and eliminated from the Consolidated Balance Sheet.

In addition, in August 2024 WFNMNT issued $ 500 million of Series 2024-B public term asset-backed notes, which mature in July 2027.

The offering consisted of $ 500 million of Class A notes with a fixed interest rate of 4.62 % per year.

The future principal payments for our Long-term and other debt are as follows, as of December 31, 2024:

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$ 999 $ 4,558 $ 5,557

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NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

OTHER LIABILITIES

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

The following provides a summary of Other liabilities as of December 31:

Accounts payable and other brand partner liabilities $ 326 $ 422

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(1) Primarily related to accrued payroll and benefits, marketing, taxes and professional services expenses.

(2) Primarily comprised of long-term unearned revenue and cardholder liabilities.

(2) Primarily comprised of cardholder rewards liabilities and long-term unearned revenue .

DERIVATIVES AND HEDGING ACTIVITIES

From time to time, we use derivative financial instruments to manage our exposure to various financial risks;

we do not trade or speculate in derivatives.

Subject to the criteria set forth in GAAP, we will either designate our derivatives in qualifying hedging relationships, or as economic hedges should the criteria in GAAP not be met.

All derivatives that we enter into are recognized at fair value in our Consolidated Balance Sheets, where our derivative receivables are included in Other assets and our derivative payables are included in Other liabilities.

As permitted by GAAP, when a legally enforceable master netting agreement exists between us and the derivative counterparty, we present derivative receivables and derivative payables with the same counterparty on a net basis in the Consolidated Balance Sheets, including any related cash collateral receivables and payables.

Risk Management Objectives of Using Derivatives

We enter into derivative transactions to support our overall risk management activities.

Our primary risks stem from the impact on our earnings and economic value of equity due to changes in interest rates, and to a lesser extent, changes in foreign exchange rates.

Beginning in October 2024, we manage our interest rate sensitivity in part by changing the duration

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NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

and re-pricing characteristics of a portion of our variable rate credit card loan portfolio by using interest rate swaps.

We also use foreign currency forwards to limit our earnings and capital exposures to foreign exchange risk by hedging our limited exposures denominated in foreign currencies, in particular, Canadian dollars.

We designate our interest rate swaps as qualifying accounting cash flow hedges, and account for our foreign currency forwards as economic hedges (as the criteria under GAAP for designation have not been met).

See below for additional information on our use of derivatives and how we account for them:

• Cash flow hedges:

We designate derivatives as cash flow hedges when they are used to manage our exposure to variability in cash flows attributable to changes in contractually specified interest rates on our variable-rate credit card loans.

Changes in the fair value of derivatives designated as cash flow hedges are recorded as a component of Accumulated other comprehensive loss.

Those amounts are reclassified into our Consolidated Statements of Income in the same period during which the hedged forecasted interest accruals impact earnings, and are presented in the same line item as the earnings effect of the hedged items (i.e., Interest and fees on loans).

Specifically, we entered into receive-fixed, pay-floating interest rate swaps to modify the interest rate characteristics of designated credit card loans from a floating rate to a fixed rate in order to reduce the impact of changes in forecasted future cash flows due to fluctuations in market interest rates.

As of December 31, 2024, we had outstanding interest rate swaps with a total notional amount of $ 1.5 billion and the maximum period over which forecasted interest accruals were hedged with these interest rate swaps was approximately 1.8 years.

The impacts of our cash flow hedges were insignificant to the Consolidated Financial Statements for the periods presented on both a gross basis and, where applicable, a net basis.

Additionally, within the next 12 months, we expect to reclassify an insignificant loss recognized in Accumulated other comprehensive loss as of December 31, 2024 into our Consolidated Statements of Income.

The actual amount reclassified into earnings may vary due to market conditions and adjustments made as part of our ongoing risk management strategy.

• Economic hedges:

Our economic hedges use derivatives to hedge the risk of changes in foreign currency exchange rates.

Changes in the fair value of derivatives used in economic hedges are recognized in Other non-interest expense in our Consolidated Statements of Income.

As of December 31, 2024 and 2023, we had outstanding foreign currency forwards with a total notional amount of $ 73 million and $ 79 million, respectively.

The impacts of our economic hedges were insignificant to the Consolidated Financial Statements for the periods presented.

The notional amounts disclosed above are not exchanged on our derivatives.

While these notional amounts provide an indication of the volume of our derivative activity, they significantly exceed, in our view, the possible losses that could arise from the associated transactions.

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

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Payment protection products $ 120 $ 132 $ 154

(Loss) income from equity method investment in LVI ( 6 ) ( 44 ) 2

Loss from equity method investment — ( 6 ) ( 44 )

Total other non-interest income $ 144 $ 128 $ 114

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NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table provides the components of Other non-interest expenses for the years ended December 31:

1 unchanged sentence

Professional services and regulatory fees $ 112 $ 128 $ 142

Repurchased Convertible Notes 107 — —

Occupancy expense 22 22 23

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

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NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

active markets, quoted prices for identical or similar assets or liabilities in inactive markets, or inputs other than quoted prices that are observable for the asset or liability.

Inputs that are unobservable (e.g., internally derived assumptions) and reflect an entity’s own estimates about estimates market participants would use in pricing the asset or liability based on the best information available under the circumstances.

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

Inputs that are unobservable (e.g., internally derived assumptions) and reflect an entity’s assumptions about estimates market participants would use in pricing the asset or liability based on the best information available under the circumstances.

In particular, Level 3 inputs and valuation techniques involve judgment and as a result are not necessarily indicative of amounts we would realize in a current market exchange.

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Long-term and other debt 999 1,085 1,394 1,457

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

7 unchanged sentences

Quoted prices of identical or similar investment securities in active markets are used to estimate the fair values (i.e., Level 1 or Level 2 inputs).

Derivative assets and liabilities :

We use derivatives to manage our interest rate and foreign currency risk exposures.

When quoted market prices are available and used to value our derivatives, we classify them as Level 1.

However, the majority of our derivatives do not have readily available quoted market prices.

Therefore, we value most of our derivatives using vendor-based models.

We primarily rely on market observable inputs for these models, including, for example, interest rate yield curves and currency rates.

These inputs can vary depending on the type of derivatives and nature of the underlying rate, price or index upon which the value of the derivative is based.

We typically classify derivatives as Level 2 as significant inputs can be observed in a liquid market and the model itself does not require significant judgment.

Our derivatives are included in Other assets or Other liabilities on the Consolidated Balance Sheets.

The fair value impacts of our derivative assets and liabilities were insignificant to the Consolidated Financial Statements for the periods presented on both a gross basis and, where applicable, a net basis.

Money market and other non-maturity deposits carrying values approximate their fair values because they are short-term in duration and have no defined maturity.

GAAP requires that the fair values of deposit liabilities with no stated maturities equal their carrying values, and does not permit recognition of the inherent funding value of these instruments.

GAAP requires that the fair values of deposit liabilities with no stated maturities equal their carrying values and does not permit recognition of the inherent funding value of the instruments.

Certificates of deposit are recorded at their historical issuance cost on the Consolidated Balance Sheets, adjusted for unamortized fees, with the fair value being estimated based on the currently observable market rates available to us for similar deposits with similar remaining maturities (i.e., Level 2 inputs).

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We record Debt issued by our consolidated VIEs at amortized cost (including unamortized fees, issuance costs, premiums and discounts, where applicable) on the Consolidated Balance Sheets.

Interest payable is included within Other liabilities on the Consolidated Balance Sheets.

Fair value is estimated based on the currently observable market rates available to us for similar debt instruments with similar remaining maturities or quoted market prices for the same transaction (i.e., Level 2 inputs).

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Interest payable is included within Other liabilities on the Consolidated Balance Sheets.

Long-term and other debt:

We record Long-term and other debt at amortized cost (including unamortized fees, issuance costs, premiums and discounts, where applicable) on the Consolidated Balance Sheets.

Interest payable is included within Other liabilities on the Consolidated Balance Sheets.

The fair value is estimated based on the currently observable market rates available to us for similar debt instruments with similar remaining maturities, or quoted market prices for the same transaction (i.e., Level 2 inputs).

Interest payable is included within Other liabilities on the Consolidated Balance Sheets.

Financial Instruments Measured at Fair Value on a Recurring Basis

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Total assets measured at fair value $ 217 $ 47 $ 170 $ —

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Total Level 1 Level 2 Level 3

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These assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances, such as upon impairment.

In particular, for the year ended December 31, 2022, we recognized a $ 44 million write-down of our equity method investment in LVI;

as of December 31, 2022, the carrying amount of our investment was $ 6 million and the fair value was $ 11 million.

For the year ended December 31, 2023 we wrote-off the remaining $ 6 million of our equity method investment in LVI.

As well, see Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” for a discussion of the impairment of certain deferred contract costs.

We did not have any impairments for the year ended December 31, 2024.

For the year ended December 31, 2022, we wrote off $ 44 million of our equity method investment in LVI, with the remaining $ 6 million of our investment written off during the year ended December 31, 2023.

Financial Instruments Disclosed but Not Carried at Fair Value

The following tables summarize our financial assets and financial liabilities that are measured at amortized cost, and not required to be carried at fair value on a recurring basis, as of December 31, 2023 and 2022, respectively.

The fair values of these financial instruments are estimates, and require management’s judgment;

The fair values of financial instruments that are measured at amortized cost are estimates, and require management’s judgment;

therefore, these fair value estimates may not be indicative of future fair values, nor can our fair value be estimated by aggregating all of the amounts presented.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Fair Value Level 1 Level 2 Level 3

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Total $ 18,940 $ — $ 18,940 $ —

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

REGULATORY MATTERS AND CAPITAL ADEQUACY

CB is regulated, supervised and examined by the State of Delaware and the Federal Deposit Insurance Corporation (FDIC).

Our industrial bank, CCB, is regulated, supervised and examined by the State of Utah and the FDIC.

The Consumer Financial Protection Bureau (CFPB) promulgates regulations for the federal consumer financial protection laws and supervises and examines large banks (those with more than $10 billion of total assets) with respect to those laws.

Banks in a multi-bank organization, such as CB and CCB, are subject to supervision and examination by the CFPB with respect to the federal consumer financial protection laws if at least one bank reports total assets over $10 billion for four consecutive quarters.

While the Banks were subject to supervision and examination by the CFPB with respect to the federal consumer financial protection laws between 2016 and 2021, this reverted to the FDIC in 2022.

However, CCB’s total assets then exceeded $10 billion for four consecutive quarters as of September 30, 2022, and both Banks are now again subject to supervision and examination by the CFPB with respect to federal consumer protection laws.

Regulatory Matters

Our business is subject to extensive federal and state laws and regulations, as well as related regulation and supervision, including by the FDIC, CFPB and other federal and state authorities.

Pending and future laws and regulations (federal and state) may adversely impact our business.

Without limiting the foregoing, CB is subject to various regulatory capital requirements administered by the State of Delaware and the FDIC.

CCB is also subject to various regulatory capital requirements administered by the State of Utah and the FDIC.

Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by our regulators.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Banks must meet specific capital guidelines that involve quantitative measures of their assets and liabilities as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by these regulators about components, risk weightings and other factors.

In addition, both Banks are limited in the amounts they can pay as dividends to the Parent Company.

Quantitative measures, established by regulations to ensure capital adequacy, require the Banks to maintain minimum amounts and ratios of Tier 1 capital to average assets, and Common equity tier 1, Tier 1 capital and Total capital, all to risk weighted assets.

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

Although Bread Financial is not a bank holding company as defined, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies.

As of December 31, 2023 the actual capital ratios and minimum ratios for each Bank, as well as Bread Financial, are as follows as of December 31, 2023:

Although Bread Financial is not a bank holding company as defined under the Bank Holding Company Act, we seek to maintain capital levels and ratios in excess of the minimums required for bank holding companies.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

As of December 31, 2024 the actual capital ratios and minimum ratios for each Bank, as well as Bread Financial, are as follows:

Actual Ratio Minimum Ratio for

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__________________________________

(1) The Common equity tier 1 capital ratio represents common equity tier 1 capital divided by total risk-weighted assets.

(2) The Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets.

(3) The Total risk-based capital ratio represents total capital divided by total risk-weighted assets.

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

(1) Common equity tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets.

In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(2) Tier 1 capital ratio represents tier 1 capital divided by total risk-weighted assets.

In the calculation of tier 1 capital, we follow the Basel III Standardized Approach and therefore Total stockholders' equity has been reduced, primarily by Goodwill and intangible assets, net.

(3) Total risk-based capital ratio represents total capital divided by total risk-weighted assets.

In the calculation of total capital, we follow the Basel III Standardized Approach and therefore tier 1 capital has been increased by tier 2 capital, which for us is the allowable portion of the Allowance for credit losses.

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

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

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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.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Servicer continues to take significant steps to strengthen the organization’s IT governance and address the other issues identified in the consent order, working diligently to ensure that all requirements of the consent order are satisfied.

Without limiting the generality of the foregoing, the Servicer has taken steps to address each provision within the consent order and continues to comply with each ongoing requirement.

The Servicer is committed to complying with the longer-term requirements of the consent order, including the enhancement of its compliance management processes and related corporate governance, compliance with the applicable system conversion requirements, and enhanced risk management and reporting.

The Servicer has submitted nearly all of the required deliverables under the consent order to the FDIC for its review and consideration.

The Board of Directors of each of the Banks continue to oversee the Servicer’s compliance with the requirements of the consent order and provide effective challenge to the Servicer’s management toward that end.

On August 22, 2024, each Bank entered into an agreement with the FDIC to pay civil money penalties (CMPs) of $ 1 million per Bank.

The CMPs, which have been paid in full, arose out of the June 2022 transition of our credit card processing services to strategic outsourcing partners and were related to disruptions to the Banks’ customer reward programs and automatic payments following the transition.

These issues were self-identified and remediated timely, and the Banks provided full cooperation with the regulators throughout their examination.

The Banks’ agreements to pay the CMPs did not require admission of wrongdoing, and there are no operational limitations on the Banks or our business associated with the CMPs.

COMMITMENTS AND CONTINGENCIES

Indemnification

On July 1, 2019, we completed the sale of our Epsilon segment to Publicis Groupe S.A.

Under the terms of the agreement governing that transaction, we agreed to indemnify Publicis and its affiliates from and against any losses arising out of or related to a U.S.

Department of Justice (DOJ) investigation.

The DOJ investigation related to third-party marketers who sent, or allegedly sent, deceptive mailings and the provision of data and services to those marketers by Epsilon’s data practice.

Epsilon actively cooperated with the DOJ in connection with the investigation.

On January 19, 2021, Epsilon entered into a deferred prosecution agreement (DPA) with the DOJ to resolve the matters that were the subject of the investigation.

Pursuant to the DPA, Epsilon agreed, among other things, to pay penalties and consumer compensation in the aggregate amount of $ 150 million, to be paid in two equal installments, the first in January 2021 and the second in January 2022.

A $ 150 million loss contingency was recorded as of December 31, 2020.

Pursuant to our contractual indemnification obligation, in January 2021 we paid $ 75 million to Publicis, and in January 2022 we paid the remaining $ 75 million installment to Publicis.

Our indemnification obligation also covers certain ongoing legal, consulting and claims administration fees and expenses incurred in connection with this matter.

Legal Proceedings

From time to time we are subject to various lawsuits, claims, disputes, or potential claims or disputes, and other proceedings, arising in the ordinary course of business that we believe, based on our current knowledge, will not have a material adverse effect on our business, consolidated financial condition or liquidity, including claims and lawsuits alleging breaches of our contractual obligations, arbitrations, class actions and other litigation, arising in connection with our business activities.

However, in light of the uncertainties involved in such matters, including the fact that some pending legal proceedings are at preliminary stages or seek an indeterminate amount of damages, penalties or fines, it is possible that the outcome of legal proceedings could have a material impact on our results of operations.

Certain legal proceedings involving us or our subsidiaries are described further below.

On February 20, 2024, we and our general counsel were named as defendants in an adversary proceeding filed by the liquidating trustee in LVI’s Chapter 11 bankruptcy case in the United States Bankruptcy Court for the Southern District of Texas, captioned Pirinate Consulting Group, LLC v.

Bread Financial Holdings, Inc.

24-03027 (Bankr.

Tex.), alleging actual and constructive fraudulent transfers, among other claims, in connection with our spinoff of LVI.

Also on February 20, 2024, the liquidating trustee filed an action in the United States District Court for the District of Delaware against us, each of the members of our Board of Directors at the time of the spinoff, and certain members of our management team, captioned Pirinate Consulting Group, LLC v.

Bread Financial Holdings, Inc.

24-cv-00226-RGA (D.

Del.), alleging certain breaches of fiduciary duties (and aiding and abetting breaches of fiduciary duties) in connection with the spinoff.

Subsequently, the liquidating trustee voluntarily dismissed without prejudice the complaint in the District of Delaware and commenced on March 20, 2024 a substantially similar action in Delaware Chancery Court, captioned Pirinate Consulting Group, LLC v.

Bread Financial Holdings, Inc.

2024-0277-MTZ (Del.

Ch.), against the same parties and asserting the same claims.

Among other things, in each of the Texas and Delaware actions, the liquidating trustee seeks damages in the amount of approximately $ 750 million plus interest, fees and expenses.

We and certain current and former members of our management team have also been named as defendants in other litigation matters relating to the LVI spinoff.

LoyaltyOne, Co.

(the LVI subsidiary that operated its Canadian AIR MILES business) filed suit against us and our general counsel in the Ontario Superior Court of Justice in Canada on October 18, 2023, in an action captioned LoyaltyOne, Co.

Bread Financial Holdings, Inc.

The lawsuit asserts that our general counsel, in his capacity as a pre-spinoff director of LoyaltyOne, Co., breached various fiduciary duties owed to LoyaltyOne, Co.

in connection with the LVI spinoff and certain other transactions, and that Bread Financial assisted in and benefited from those breaches.

The lawsuit seeks damages in the amount of $ 775 million.

LoyaltyOne, Co.

is also contesting our entitlement to certain potential tax refunds under the tax matters agreement, in proceedings pursuant to the Canadian Companies’ Creditors Arrangement Act in the Commercial List of the Ontario Superior Court of Justice, captioned In re Matter of a Plan of Compromise or Arrangement of LoyaltyOne, Co., Case No.

CV-23-00696017-00CL (the Tax Matters Dispute).

In July 2024, the judge presiding over the Tax Matters Dispute issued an order in our favor, and

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

LoyaltyOne, Co.

has filed a motion for leave to appeal that order, which is pending with Court of Appeal for Ontario as of the date of this report.

Finally, on April 27, 2023, we and certain current and former members of our management team were named as defendants in a putative federal securities class action filed in the United States District Court for the Southern District of Ohio, captioned Newtyn Partners, LP v.

Alliance Data Systems n/k/a Bread Financial Holdings, Inc.

23-cv-1451-EAS (S.D.

Ohio), concerning disclosures made about LVI’s business prior to the spinoff.

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

In all these actions related to the spinoff, we believe the allegations contained in the complaints are without merit and intend to defend the cases.

We cannot predict at this point the length of time that these actions will be ongoing or the liability, if any, which may arise therefrom.

Some matters pending against us specify the damages sought, others seek an unspecified amount of damages or are at very early stages of the legal process.

In matters where the amount of damages claimed against us are stated, the claimed amount may be exaggerated and/or unsupported.

While some matters have not yet progressed sufficiently through discovery or have had development of important factual information and legal issues to enable us to estimate an amount of loss or a range of possible loss, other matters may have progressed sufficiently to enable an estimate of an amount of loss, or a range of possible loss.

We accrue for a loss contingency when it is both probable that a loss has occurred, and the amount of loss can be reasonably estimated;

however, there may be instances in which an exposure to a loss contingency exceeds our accrual.

On a quarterly basis we evaluate developments in the legal proceedings against us that could cause an increase or decrease in the amount of the accrual that has been previously recorded.

EMPLOYEE BENEFIT PLANS

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An employee elects to participate and have contributions deducted through payroll deductions.

The 2015 ESPP also provides for the issuance of any remaining shares available for issuance under our 2005 Employee Stock Purchase Plan, which were 441,327 shares at June 30, 2015.

The 2015 ESPP also provides for the issuance of any remaining shares available for issuance under our 2005 Employee Stock Purchase Plan, which were 441,327 shares as of June 30, 2015.

The 2015 ESPP reserved an additional 1,000,000 shares of our common stock for issuance under the 2015 Plan, bringing the maximum number of shares reserved for issuance under the 2015 ESPP to 1,441,327 shares, subject to adjustment as provided in the 2015 ESPP.

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The Plan is an IRS-approved safe harbor plan design that eliminates the need for most discrimination testing.

Eligible employees can participate in the Plan immediately upon joining the Company and begin receiving Company matching contributions and safe-harbor non-elective contributions.

Eligible employees can participate in the Plan immediately upon joining BFH and begin receiving Company matching contributions and safe-harbor non-elective contributions.

The Plan covers U.S.

employees of Bread Financial Holdings, Inc.

who are at least 18 years old, employees of one of our wholly-owned subsidiaries and any other subsidiary or affiliated organization that adopts the Plan;

employees of the Company and all of its U.S.

employees of BFH who are at least 18 years old, employees of one of our wholly-owned subsidiaries and any other subsidiary or affiliated organization that adopts the Plan;

employees of BFH and all of its U.S.

subsidiaries are currently covered.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The Plan permits eligible employees to make Roth elective deferrals, which are included in the employee’s taxable income at the time of contribution, but not when distributed.

Regular, or Non-Roth elective deferrals made by employees, together with our contributions to the Plan, and income earned on these contributions, are not taxable until withdrawn from the Plan.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

In 2023, we expanded our contributions to the Plan with an automatic annual deposit for eligible employees.

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In addition, we match an employee’s contribution fifty cents-per-dollar, up to six percent of the employee’s eligible annual compensation.

For the years ended December 31, 2023, 2022 and 2021, Company matching contributions were $ 30 million, $ 17 million and $ 15 million, respectively.

Participants in the Plan can direct their contributions and our matching contribution to numerous investment options, including the Company’s common stock.

On July 20, 2001, we registered 1,500,000 shares of our common stock for issuance in accordance with the RSP pursuant to a Registration Statement on Form S-8, File No.

For the years ended December 31, 2024, 2023 and 2022, our matching contributions were $ 29 million, $ 30 million and $ 17 million, respectively.

Participants in the Plan can direct their contributions and our matching contribution to numerous investment options, including our common stock.

On July 20, 2001, we registered 1,500,000 shares of our common stock for issuance in accordance with the Plan pursuant to a Registration Statement on Form S-8, File No.

As of December 31, 2024, 143,633 of such shares remain available for issuance.

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Each participant in the EDCP is 100 % vested in their account, and account balances accrue interest at a rate established and adjusted periodically by the Compensation & Human Capital committee of our Board of Directors.

As of December 31, 2023 and 2022, the Company’s outstanding liability related to the EDCP, which was included in Other liabilities on the Consolidated Balance Sheets, was $ 24 million and $ 20 million, respectively.

As of December 31, 2024 and 2023, our outstanding liability related to the EDCP, which was included in Other liabilities on the Consolidated Balance Sheets, was $ 25 million and $ 24 million, respectively.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Net Unrealized

Gains (Losses) on

AFS Securities Net Unrealized

Cash Flow Hedges Net Unrealized

Net Investment Hedge Foreign Currency

Comprehensive

Balance as of December 31, 2020 $ 23 $ ( 1 ) $ ( 7 ) $ ( 20 ) $ ( 5 )

Changes in other comprehensive (loss) income ( 21 ) 2 — ( 37 ) ( 56 )

Recognition resulting from the spinoff of LoyaltyOne's foreign subsidiaries ( 1 ) ( 1 ) 7 54 59

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

Net Unrealized Gains (Losses) on AFS Securities Foreign Currency Translation Losses Accumulated other comprehensive loss

Balance as of December 31, 2021 $ 1 $ ( 3 ) $ ( 2 )

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Balance as of December 31, 2023 $ ( 16 ) $ ( 3 ) $ ( 19 )

______________________________

(1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates from our former LoyaltyOne segment, which was spun off in November 2021.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

With the spinoff of our former LoyaltyOne segment on November 5, 2021, the $ 7 million net unrealized loss on our net investment hedge related to our net investment in BrandLoyalty was reclassified into net income.

Changes in other comprehensive loss ( 3 ) — ( 3 )

Balance as of December 31, 2024 $ ( 19 ) $ ( 3 ) $ ( 22 )

STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

On July 27, 2023, our Board of Directors approved a stock repurchase program to acquire up to $ 35 million in shares of our outstanding common stock in the open market during the period ended December 31, 2023.

The rationale for this repurchase program, and the amount thereof, was to offset the impact of dilution associated with issuances of employee restricted stock units, with the objective of reducing the Company’s weighted average diluted share count to approximately 50 million shares for the second half of 2023, subject to then current estimates and assumptions applicable as of the date of approval.

During the quarter ended September 30, 2023, under the authorized stock repurchase program, we acquired a total of 0.9 million shares of our common stock for $ 35 million.

On February 21, 2024, our Board of Directors approved a stock repurchase program to acquire up to $ 30 million in shares of our outstanding common stock in the open market during the period ended December 31, 2024.

On December 2, 2024, our Board of Directors approved a $ 25 million increase to this stock repurchase program, increasing the total authorized amount of shares to be repurchased from $ 30 million to $ 55 million during the period ended December 31, 2024.

The rationale for this repurchase program, and the amount thereof, was to offset a portion of the impact of dilution associated with issuances of employee restricted stock units.

During the year ended December 31, 2024, under the authorized stock repurchase program, we acquired a total of 1.0 million shares of our common stock for $ 55 million.

Following their repurchase, these 1.0 million shares ceased to be outstanding shares of common stock and are now treated as authorized but unissued shares of common stock.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Stock Compensation Plans

We have adopted equity compensation plans to advance the interests of the Company by rewarding certain employees for their contributions to the financial success of the Company and thereby motivating them to continue to make such contributions in the future.

We have adopted equity compensation plans to advance the interests of BFH by rewarding certain employees for their contributions to the financial success of BFH and thereby motivating them to continue to make such contributions in the future.

The 2020 Omnibus Incentive Plan (the 2020 Plan) became effective July 1, 2020 and reserved 2,400,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for us or our affiliates, with only employees being eligible to receive incentive stock options.

The 2020 Plan expires on June 30, 2030;

provided that, pursuant to the terms of the 2022 Omnibus Incentive Plan (as defined below), no new grants shall be made under the 2020 Plan.

In March 2022, our Board of Directors adopted the 2022 Omnibus Incentive Plan (the 2022 Plan), which was subsequently approved by our stockholders on May 24, 2022.

The 2022 Plan became effective July 1, 2022 and expires on June 30, 2032.

The 2022 Plan reserves 3,075,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for us or our affiliates, with only employees being eligible to receive incentive stock options.

provided that, pursuant to the terms of the 2022 Omnibus Incentive Plan (as defined below), no new grants are permitted to be made under the 2020 Plan.

The 2022 Omnibus Incentive Plan (the 2022 Plan) became effective July 1, 2022 and reserved 3,075,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for us or our affiliates, with only employees being eligible to receive incentive stock options.

The 2022 Plan expires on June 30, 2032;

provided that, pursuant to the terms of the 2024 Omnibus Incentive Plan (as defined below), no new grants are permitted to be made under the 2022 Plan, and all of the shares that remained available for grant under the 2022 Plan ( 203,687 shares) were rolled over into the 2024 Plan under the terms thereof, together with any shares that may be forfeited under the outstanding

equity awards under the 2022 Plan, as discussed in more detail below.

In April 2024, our Board of Directors adopted the 2024 Omnibus Incentive Plan (the 2024 Plan), which was subsequently approved by our stockholders on May 14, 2024.

The 2024 Plan became effective May 14, 2024 and expires on May 13, 2034.

The 2024 Plan reserves 5,000,000 new shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for us or our affiliates, with only employees being eligible to receive incentive stock options.

In addition, the 2024 Plan (i) permitted us to roll over the shares that remained available for grant under the 2022 Plan at the time the 2024 Plan was approved ( 203,687 shares as of May 14, 2024) and (ii) permits us to roll over and re-issue shares that are forfeited under outstanding equity awards under the 2022 Plan (a total of 2,463,907 shares were subject to outstanding equity awards as of May 14, 2024).

The maximum amount that may be awarded to any independent member of our Board of Directors in any one calendar year may not exceed $ 1 million.

On June 22, 2022, we registered 3,075,000 shares of our common stock for issuance in accordance with the 2022 Plan pursuant to a Registration Statement on Form S-8, File No.

On May 14, 2024 we registered up to an aggregate of 7,667,594 shares of our common stock authorized for issuance in accordance with the 2024 Plan pursuant to a Registration Statement on Form S-8, File No.

Terms of all awards under the 2024 Plan are determined by the Board of Directors or the Compensation & Human Capital Committee of the Board of Directors or its designee at the time of award.

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forfeitures were estimated at 5 % for each of the years ended December 31, 2024, 2023 and 2022.

As of December 31, 2024, there was approximately $ 56 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, stock-based equity awards granted to employees, which is expected to be recognized over a weighted average remaining period of approximatel y 1.9 years.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

As of December 31, 2023, there was approximately $ 51 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, stock-based equity awards granted to employees, which is expected to be recognized over a weighted average remaining period of approximately 2.1 years.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Restricted Stock Unit Awards

1 unchanged sentence

Based Total Weighted

Balance as of January 1, 2021 22,227 221,226 333,814 577,267 $ 103.89

Balance as of December 31, 2021 19,067 91,416 648,952 759,435 $ 89.14

Shares granted — 82,513 766,178 848,691 63.22

2,641 111,542 774,062 888,245 88.18

Shares vested — ( 8,983 ) ( 218,077 ) ( 227,060 ) 78.23

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(1) Shares granted reflect a 100 % target attainment of the respective market-based or performance-based metric.

Shares forfeited include those RSUs forfeited as a result of the Company not meeting the respective market-based or performance-based metric conditions.

(2) Shares granted reflect a November 2021 make-whole equity adjustment to unvested shares due to the reduction in the share value resulting from the spinoff of LVI.

This adjustment increased shares granted by 2,641 shares, 12,659 shares and 96,556 shares for Market-based, Performance-based and Service-based awards, respectively.

These shares were excluded from the weighted average fair value calculation.

Shares forfeited include those RSUs forfeited as a result of BFH not meeting the respective market-based or performance-based metric conditions.

For Service-based and Performance-based awards, the fair value of the RSUs was estimated using our closing share price on the date of grant.

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On January 30, 2025, our Board of Directors declared a quarterly cash dividend of $ 0.21 per share on our common stock, payable on March 21, 2025, to stockholders of record at the close of business on February 14, 2025.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

We file income tax returns in federal, state, local and foreign jurisdictions, as applicable.

2 unchanged sentences

Differences between the audited Consolidated Financial Statements and tax bases of assets and liabilities give rise to deferred tax assets and liabilities, which measure the future tax effects of items recognized in the audited Consolidated Financial Statements.

Changes in deferred income tax assets and liabilities associated with components of Other comprehensive income (loss) are charged or credited directly to Other comprehensive income (loss).

Otherwise, changes in deferred income tax assets and liabilities are included as a component of Provision for income taxes.

Changes in deferred income tax assets and liabilities associated with components of Stockholders’ equity are charged or credited directly to Stockholders’ equity.

Otherwise, changes in deferred income tax assets and

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

liabilities are included as a component of Provision for income taxes.

The effect on deferred income tax assets and liabilities attributable to changes in enacted tax rates is charged or credited to Provision for income taxes in the period of enactment.

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We evaluate our tax positions as new facts and circumstances become available, making adjustments to unrecognized tax benefits as appropriate.

Uncertainties can mean the tax benefits ultimately realized differ from amounts previously recognized, with any differences recorded in Provision for income taxes, along with amounts for estimated interest and penalties related to uncertain tax positions.

The components of our Provision for income taxes included in the Consolidated Statements of Income were as follows for the years ended December 31:

The components of our Income from continuing operations before income taxes and Provision for income taxes included in the Consolidated Statements of Income were as follows for the years ended December 31:

2024 2023 2022

Components of Income from continuing operations before income taxes

Domestic $ 375 $ 964 $ 297

Foreign 6 4 3

Total Income from continuing operations before income taxes $ 381 $ 968 $ 300

Components of Provision for income taxes

Federal $ 156 $ 261 $ 279

State 29 37 41

Foreign 2 1 1

Total current income tax expense 187 299 321

1 unchanged sentence

State ( 10 ) ( 2 ) ( 44 )

Foreign ( 2 ) ( 1 ) ( 1 )

Total deferred income tax benefit ( 85 ) ( 68 ) ( 245 )

1 unchanged sentence

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

A reconciliation of our expected income tax expense computed by applying the federal statutory rate to Income from continuing operations before income taxes, to the recorded Provision for income taxes, is as follows for the years ended December 31:

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State and local income taxes, net of federal benefit 15 27 ( 2 )

Impact of 2017 Tax Reform — — ( 8 )

Non-deductible expenses 29 8 6

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Valuation allowance ( 1 ) ( 5 ) 16

Audit Resolutions ( 20 ) — —

Other ( 1 ) ( 2 ) ( 3 )

Total $ 102 $ 231 $ 76

For the year ended December 31, 2024, the increase in the non-deductible expenses from prior periods is primarily related to the non-deductible portion of our repurchased Convertible Notes transactions.

We also utilized a portion of our capital loss, and therefore released the associated portion of valuation allowance against it.

In addition, our tax expense decreased by approximately $ 20 million as a result of favorable audit resolutions.

For the year ended December 31, 2023, we utilized a portion of our capital loss, and therefore released the associated portion of the valuation allowance against it.

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In addition, we recorded an income tax benefit (deferred tax asset) of approximately $ 8 million related to the initial recognition of the basis difference in an unconsolidated subsidiary, against which we recorded a $ 16 million valuation allowance as of December 31, 2022.

1, originally known as the Tax Cuts and Jobs Act of 2017 (the 2017 Tax Reform) was enacted on December 22, 2017 and permanently reduced the corporate tax rate to 21% from 35%, effective January 1, 2018.

For the year ended December 31, 2021, we recorded an income tax benefit of approximately $ 8 million related to the 2017 Tax Reform rate differential that was released from Other comprehensive income (loss) due to the divestiture of our former LoyaltyOne segment.

On August 16, 2022, the Inflation Reduction Act (the Act) was signed into law in the U.S., which includes a new 15% corporate minimum tax on certain large corporations and a one percent excise tax on stock repurchases made after

December 31, 2022.

Effective January 1, 2023 we adopted the applicable provisions under the Act, which did not have a significant impact on our financial position, results of operations or cash flows, nor did it result in significant changes to the supporting operational processes, controls or governance.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table reflects the significant components of Deferred tax assets and liabilities as of December 31:

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table provides the significant components of Deferred tax assets and liabilities as of December 31:

Deferred tax assets

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Operating lease liabilities 29 34

Depreciation 24 —

Research & development expenses 53 36

Accrued expenses and other 87 79

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tax returns are approximately $ 113 million of U.S.

federal net operating loss carryovers (NOLs), approximately $ 34 million of foreign tax credits, and federal capital losses of approximately $ 51 million to offset capital gains.

federal net operating loss carryovers (NOLs) and federal capital losses of approximately $ 48 million to offset capital gains.

With the exception of NOLs generated after December 31, 2017, these attributes expire at various times through the year 2033.

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With the exception of some state NOLs generated after December 31, 2017, these NOLs, credits and capital losses will expire at various times through the year 2042.

As of December 31, 2024, we have tax credits in foreign jurisdictions of approximately $ 4 million available to offset future tax liabilities.

These credits expire at various times through the year 2039.

As well, in 2024 we recorded a tax expense of approximately $ 7 million in Additional paid-in capital related to the tax impact of the repurchased Convertible Notes, specifically, the write-off of the associated deferred tax asset.

In addition, in 2023 we recorded a tax benefit of approximately $ 9 million in Additional paid-in capital to establish the deferred tax asset associated with the Capped Call transactions, which continue to remain outstanding.

We use the portfolio approach relating to the release of stranded tax effects recorded in Accumulated other comprehensive loss.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table presents changes in unrecognized tax benefits:

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Settlements during the period ( 10 )

Lapses of applicable statutes of limitations ( 20 )

Balance as of December 31, 2023 $ 215

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We have potential cumulative interest and penalties with respect to unrecognized tax benefits of approximately $ 86 million, $ 84 million and $ 74 million as of December 31, 2024, 2023 and 2022, respectively.

for those same years we recorded approximately a $ 9 million expense, $ 1 million benefit and $ 8 million expense, respectively, in Provision for income taxes for potential interest and penalties for unrecognized tax benefits.

For those same years we recorded approximately a $ 2 million expense, $ 9 million expense and $ 1 million benefit, respectively, in Provision for income taxes for potential interest and penalties for unrecognized tax benefits.

As of December 31, 2024, 2023 and 2022, we had unrecognized tax benefits of approximately $ 200 million, $ 226 million and $ 238 million, respectively, that, if recognized, would impact the effective tax rate.

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federal, state and foreign jurisdictions, as applicable.

With some exceptions, the tax returns filed by us are no longer subject to U.S.

federal income tax, and state and local examinations for the years before 2015, or foreign income tax examinations for years before 2018.

federal income tax returns are no longer subject to examination for years before 2015, and with a few exceptions, state and local income tax returns are no longer subject to examination for years before 2015.

Foreign income tax returns are no longer subject to examination for years before 2018.

EARNINGS PER SHARE

Basic earnings (losses) per share (EPS) is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of unvested restricted stock awards or other dilutive securities.

Diluted EPS is based on the weighted average number of common and potentially dilutive common shares (unvested restricted stock awards and other dilutive securities outstanding during the year) pursuant to the Treasury Stock method .

Diluted EPS is based on (i) the weighted average number of common and potentially dilutive common shares (unvested restricted stock awards outstanding during the year), pursuant to the Treasury Stock method, and (ii) the potential conversion of the Convertible Notes, pursuant to the If-converted method.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the years ended December 31:

2 unchanged sentences

Income from continuing operations $ 279 $ 737 $ 224

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

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

( 2 ) ( 19 ) ( 1 )

Net income $ 277 $ 718 $ 223

Weighted average common stock 49.8 49.9 49.7

Weighted average common stock outstanding – basic 49.6 49.8 49.9

Weighted average effect of dilutive securities

net effect of dilutive unvested restricted stock awards (2)

Denominator for diluted calculation 50.0 50.0 50.0

dilutive effect of Convertible Notes (3)(4)

Weighted average common stock outstanding – diluted 50.4 50.0 50.0

Income from continuing operations $ 5.63 $ 14.79 $ 4.48

(Loss) income from discontinued operations $ ( 0.40 ) $ ( 0.01 ) $ 0.07

Loss from discontinued operations $ ( 0.05 ) $ ( 0.40 ) $ ( 0.01 )

Net income per share $ 5.58 $ 14.39 $ 4.47

Income from continuing operations $ 5.54 $ 14.74 $ 4.47

(Loss) income from discontinued operations $ ( 0.40 ) $ ( 0.01 ) $ 0.07

Loss from discontinued operations $ ( 0.05 ) $ ( 0.40 ) $ ( 0.01 )

Net income per share $ 5.49 $ 14.34 $ 4.46

1 unchanged sentence

For additional information refer to Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” to the audited Consolidated Financial Statements.

(2) For the years ended December 31, 2023, 2022 and 2021, approximately 1.2 million, 0.9 million, and 0.1 million restricted stock awards were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive.

For additional information refer to Note 1, “Description of Business, Basis of Presentation and Significant Accounting Policies” to the audited Consolidated Financial Statements.

(2) As the effect would have been anti-dilutive, for the years ended December 31, 2024, 2023 and 2022, approximately 0.6 million, 1.2 million, and 0.9 million, respectively, restricted stock awards were excluded from each calculation of weighted average dilutive common shares.

(3) Holders of the Convertible Notes may convert their notes under certain conditions until March 15, 2028, and on or after such date without condition.

Upon any such conversion, we will repay the aggregate principal amount of the Convertible Notes in cash, and pay or deliver, as the case may be, cash, shares of our common stock or a combination of both (at our election), in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Convertible Notes.

At our option, we may redeem for cash, all or a portion of the Convertible Notes on or after June 21, 2026, and before the 51 st scheduled trading day before the maturity date, but only if the closing price of our common stock reaches specified targets as defined in the indenture governing the Convertible Notes.

We may also, from time to time, retire or purchase all or a portion of the outstanding Convertible Notes through cash purchases or exchanges for other securities, in open market purchases, tender offers, privately negotiated transactions or otherwise.

The conversion feature of the Convertible Notes has a dilutive impact on EPS when the average market price of our common stock for the period exceeds the conversion price of $ 38.43 per share.

With the three months ended June 30, 2024 being the first period in which the average market price of our common stock exceeded the conversion price, a weighted average of the quarterly results from the Dilutive effect of Convertible Notes is computed, and has been reflected in the table above for the year ended December 31, 2024.

(4) In connection with the issuance of the Convertible Notes, we entered into privately negotiated Capped Calls with certain financial institution counterparties.

These transactions are expected generally to reduce potential dilution to our common stock upon any conversion of Convertible Notes and/or offset certain cash payments we may be required to make in excess of the principal amount of the Convertible Notes upon conversion, redemption or repurchase thereof, with such reduction and/or offset subject to a cap of $ 61.48 per share.

Diluted weighted average common stock does not include the impact of the Capped Calls we entered into

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

concurrently with the issuance of the Convertible Notes, as the effect would have been anti-dilutive.

If shares were delivered to us under the Capped Calls, those shares would offset, up to the cap, the dilutive effect of the shares that we would issue upon conversion of the Convertible Notes.

PARENT COMPANY FINANCIAL STATEMENTS

The following Parent Company financial statements are provided in accordance with the rules of the SEC, which require such disclosure when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets.

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Certain of our subsidiaries may be restricted in distributing cash or other assets to the Parent Company, which could be utilized to service our indebtedness.

4 unchanged sentences

Intercompany receivables, net 773 612

Investment in LVI — 6

Other assets 123 147

1 unchanged sentence

Long-term and other debt $ 999 $ 1,394

Intercompany liabilities, net — 86

Other liabilities 62 64

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Income before equity in undistributed net income of subsidiaries 722 977 263

Equity in undistributed net (loss) income of subsidiaries ( 259 ) ( 40 ) 322

Equity in undistributed net loss of subsidiaries ( 445 ) ( 259 ) ( 40 )

Net income $ 277 $ 718 $ 223

BREAD FINANCIAL HOLDINGS, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Parent Company – Condensed Statements of Comprehensive Income

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Net income $ 277 $ 718 $ 223

Other comprehensive income (loss), net of tax — ( 3 ) 7

Other comprehensive loss, net of tax — — ( 3 )

Total comprehensive income, net of tax $ 277 $ 718 $ 220

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Dividends received 910 1,063 383

Purchases of available-for-sale securities — — ( 10 )

Net cash provided by investing activities 910 1,063 383

Cash flows from financing activities:

Debt proceeds from spinoff of LVI — — 750

Borrowings under debt agreements 300 1,401 218

9 unchanged sentences

Cash, cash equivalents and restricted cash at end of year $ 21 $ 2 $ 5

Non-cash financing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2024 include the impact to Additional paid-in capital related to the debt issuance costs from the repurchased Convertible Notes.

Non-cash investing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2023 include a $ 318 million non-cash dividend in the form of an intercompany return of capital from Bread Financial Payments, Inc.

1 unchanged sentence

Non-cash investing and financing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2022 included the dissolution of a subsidiary, ADS Foreign Holdings, Inc.

Non-cash investing and financing activities related to the Parent Company – Condensed Statements of Cash Flows for the year ended December 31, 2021 included our equity method investment in LVI upon spinoff, on November 5, 2021, which totaled $ 48 million.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Bread Financial Holdings, Inc.

6 unchanged sentences

Name Title Date

ANDRETTA President, Chief Executive Officer and Director February 20, 2024

President, Chief Executive Officer and Director February 14, 2025

BEBERMAN Executive Vice President and Chief Financial Officer February 14, 2025

BRYAN CAMPBELL Senior Vice President and Chief Accounting Officer February 20, 2024

BRYAN CAMPBELL

BALLOU Chairman of the Board, Director February 20, 2024

Senior Vice President and Chief Accounting Officer February 14, 2025

Bryan Campbell

Chairman of the Board, Director February 14, 2025

Director February 14, 2025

GERSPACH, JR.

1 unchanged sentence

Gerspach, Jr.

/S/ JOYCE ST.

/S/ PRANITI LAKHWARA

Director February 14, 2025

/S/ RAJESH NATARAJAN Director February 20, 2024

Praniti Lakhwara

/S/ RAJESH NATARAJAN

Director February 14, 2025

Rajesh Natarajan

/S/ JOYCE ST.

Director February 14, 2025

/S/ TIMOTHY J.

THERIAULT Director February 20, 2024

Director February 14, 2025

/S/ LAURIE A.

TUCKER Director February 20, 2024

Director February 14, 2025

/S/ SHAREN J.

TURNEY Director February 20, 2024

Director February 14, 2025

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures