0001101215-23-000081 | 10-Q | XBRL Viewer | Bread Financial Holdings INC

[1]	On November 5, 2021, our former LoyaltyOne segment was spun off into an independent public company, Loyalty Ventures Inc., and therefore is reflected herein as Discontinued Operations.

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES (Tables)

3 Months Ended

Mar. 31, 2023

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

Components of other non-interest income

The following table provides the components of Other non-interest income for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
(Millions)
Payment protection products	$	34	$	38
Loss from equity method investment	(6)		(12)
Other	$	1	$	2
Total other non-interest income	$	29	$	28

Components of other non-interest expenses

The following table provides the components of Other non-interest expenses for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
(Millions)
Professional services and regulatory fees	$	38	$	31
Occupancy expense	5		6
Other (1)	13		20
Total other non-interest expenses	$	56	$	57

__________________________________

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

CREDIT CARD AND OTHER LOANS - Credit Quality on Amortized Cost Basis (Details) - Credit card loans - No Score	Mar. 31, 2023	Dec. 31, 2022
661 or Higher
Financing Receivable, Credit Quality Indicator [Line Items]
Credit card loans	58.00%	62.00%
601 to 660
Financing Receivable, Credit Quality Indicator [Line Items]
Credit card loans	27.00%	26.00%
600 or Lower
Financing Receivable, Credit Quality Indicator [Line Items]
Credit card loans	15.00%	12.00%

INVESTMENT SECURITIES - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Debt Securities, Available-for-Sale [Line Items]
Gains or losses from the sale of AFS securities	$ 0	$ 0
Collateralized Mortgage-Backed Securities
Debt Securities, Available-for-Sale [Line Items]
Available-for-sale, mortgage-backed securities with no stated maturities, amortized cost	177
Available-for-sale, mortgage-backed securities with no stated maturities, fair value	$ 156

INVESTMENT SECURITIES - Continuous Loss Position (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Less than 12 months, Fair Value	$ 44	$ 95
Less than 12 months, Unrealized Losses	(2)	(9)
12 Months or Greater, Fair Value	111	57
12 Months or Greater, Unrealized Losses	(19)	(14)
Fair Value	155	152
Unrealized Losses	$ (21)	$ (23)

Cover - shares	3 Months Ended
Cover - shares	Mar. 31, 2023	Apr. 28, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-15749
Entity Registrant Name	BREAD FINANCIAL HOLDINGS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	31-1429215
Entity Address, Address Line One	3095 Loyalty Circle
Entity Address, City or Town	Columbus
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43219
City Area Code	614
Local Phone Number	729-4000
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	BFH
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		50,119,706
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001101215
Amendment Flag	false

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
ASSETS
Cash and cash equivalents	$ 3,611	$ 3,891
Credit card and other loans
Total credit card and other loans (includes loans available to settle obligations of consolidated variable interest entities March 31, 2023, $12,172; December 31, 2022, $15,383, respectively)	18,060	21,365
Allowance for credit losses	(2,223)	(2,464)
Credit card and other loans, net	15,837	18,901
Investment securities	228	221
Property and equipment, net	180	195
Goodwill and intangible assets, net	790	799
Other assets	1,324	1,400
Total assets	21,970	25,407
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	13,138	13,826
Debt issued by consolidated variable interest entities	3,015	6,115
Long-term and other debt	1,869	1,892
Other liabilities	1,232	1,309
Total liabilities	19,254	23,142
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 50.1 million shares as of March 31, 2023 and 49.9 million shares as of December 31, 2022, respectively.	1	1
Additional paid-in capital	2,197	2,192
Retained earnings	537	93
Accumulated other comprehensive loss	(19)	(21)
Total stockholders’ equity	2,716	2,265
Total liabilities and stockholders’ equity	$ 21,970	$ 25,407

COMMITMENTS AND CONTINGENCIES - Regulatory Matters and Cardholders (Details) $ in Millions			1 Months Ended
	Jan. 19, 2021 USD ($) installment	Dec. 31, 2020 USD ($)	Jan. 31, 2022 USD ($)	Jan. 31, 2021 USD ($)	Mar. 31, 2023
Comenity Bank
Common Equity Tier 1 capital to risk-weighted assets
Common Equity Tier 1 capital ratio, Actual Ratio (as a percent)					0.183
Common Equity Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					4.50%
Common Equity Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					6.50%
Banking Regulation, Risk-Based Information [Abstract]
Tier 1 capital ratio, Actual Ratio (as a percent)					0.183
Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.060
Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					0.080
Total Risk-based capital ratio, Actual Ratio (as a percent)					0.197
Total Risk-based capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.080
Total Risk-based capital ratio, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent)					0.100
Tier 1 capital to average assets
Tier 1 Leverage capital ratio, Actual Ratio (as a percent)					0.157
Tier 1 Leverage capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.040
Tier 1 Leverage capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					0.050
Comenity Capital Bank
Common Equity Tier 1 capital to risk-weighted assets
Common Equity Tier 1 capital ratio, Actual Ratio (as a percent)					0.217
Common Equity Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					4.50%
Common Equity Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					6.50%
Banking Regulation, Risk-Based Information [Abstract]
Tier 1 capital ratio, Actual Ratio (as a percent)					0.217
Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.060
Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					0.080
Total Risk-based capital ratio, Actual Ratio (as a percent)					0.230
Total Risk-based capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.080
Total Risk-based capital ratio, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent)					0.100
Tier 1 capital to average assets
Tier 1 Leverage capital ratio, Actual Ratio (as a percent)					0.164
Tier 1 Leverage capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.040
Tier 1 Leverage capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					0.050
Combined Banks
Common Equity Tier 1 capital to risk-weighted assets
Common Equity Tier 1 capital ratio, Actual Ratio (as a percent)					0.202
Common Equity Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					4.50%
Common Equity Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					6.50%
Banking Regulation, Risk-Based Information [Abstract]
Tier 1 capital ratio, Actual Ratio (as a percent)					0.202
Tier 1 capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.060
Tier 1 capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					0.080
Total Risk-based capital ratio, Actual Ratio (as a percent)					0.216
Total Risk-based capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.080
Total Risk-based capital ratio, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent)					0.100
Tier 1 capital to average assets
Tier 1 Leverage capital ratio, Actual Ratio (as a percent)					0.161
Tier 1 Leverage capital ratio, Minimum Ratio for Capital Adequacy Purposes (as a percent)					0.040
Tier 1 Leverage capital ratio, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent)					0.050
Discontinued Operations, Disposed of by Sale
Contingencies
Loss Contingency, Loss in Period		$ 150
Epsilon \| Discontinued Operations, Disposed of by Sale
Contingencies
Loss contingency, total	$ 150
Number of installment payments \| installment	2
Loss contingency, payment			$ 75	$ 75

FAIR VALUES OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of estimated fair value of Company's financial instruments

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


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
(Millions)
Financial assets
Credit card and other loans, net	$	15,837	$	18,061	$	18,901	$	21,328
Investment securities	228		228		221		221
Financial liabilities
Deposits	13,138		13,015		13,826		13,731
Debt issued by consolidated VIEs	3,015		3,015		6,115		6,115
Long-term and other debt	1,869		1,744		1,892		1,759

Schedule of assets and liabilities carried at fair value measured on recurring basis

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis, categorized by the fair value hierarchy described in the preceding paragraphs:


	March 31, 2023
	Total		Level 1		Level 2		Level 3
(Millions)
Investment securities	$	228	$	45	$	183	$	—
Total assets measured at fair value	$	228	$	45	$	183	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
(Millions)
Investment securities	$	221	$	44	$	177	$	—
Total assets measured at fair value	$	221	$	44	$	177	$	—

Schedule of assets and liabilities disclosed but not carried at fair value

The following tables summarize 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 March 31, 2023 and December 31, 2022, respectively. The fair values of these financial instruments are estimates as of March 31, 2023 and December 31, 2022, and require management’s judgment; therefore, these figures may not be indicative of future fair values, nor can our fair value be estimated by aggregating all of the amounts presented.


	March 31, 2023
	Fair Value		Level 1		Level 2		Level 3
(Millions)
Financial assets
Credit card and other loans, net	$	18,061	$	—	$	—	$	18,061
Total	$	18,061	$	—	$	—	$	18,061

Financial liabilities
Deposits	$	13,015	$	—	$	13,015	$	—
Debt issued by consolidated VIEs	3,015		—		3,015		—
Long-term and other debt	1,744		—		1,744		—
Total	$	17,774	$	—	$	17,774	$	—


	December 31, 2022
	Fair Value		Level 1		Level 2		Level 3
(Millions)
Financial assets
Credit card and other loans, net	$	21,328	$	—	$	—	$	21,328
Total	$	21,328	$	—	$	—	$	21,328

Financial liabilities
Deposits	$	13,731	$	—	$	13,731	$	—
Debt issued by consolidated VIEs	6,115		—		6,115		—
Long-term and other debt	1,759		—		1,759		—
Total	$	21,605	$	—	$	21,605	$	—

FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair Value Level Disclosure (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Assets disclosed at fair value
Investment securities	$ 228	$ 221
Total assets measured at fair value	228	221
Level 1
Assets disclosed at fair value
Investment securities	45	44
Total assets measured at fair value	45	44
Level 2
Assets disclosed at fair value
Investment securities	183	177
Total assets measured at fair value	183	177
Level 3
Assets disclosed at fair value
Investment securities	0	0
Total assets measured at fair value	$ 0	$ 0

ALLOWANCE FOR CREDIT LOSSES - Rollforward (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 2,464,000,000	$ 1,832,000,000
Provision for credit losses	107,000,000	193,000,000
Change in the estimate for uncollectible unpaid interest and fees	5,000,000	0
Net principal charge-off	(353,000,000)	(199,000,000)
Ending balance	2,223,000,000	1,826,000,000
Recovery	92,000,000	43,000,000
Recovery adjustment	$ (10,000,000)
Adjustment related to the effects of the purchase of previously written-off accounts that were sold to a third-party debt collection agency		$ 0

- Definition

Amount of allowance for credit loss on financing receivable. Excludes allowance for financing receivable covered under loss sharing agreement.

+ References + Details

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

3 Months Ended

Mar. 31, 2023

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES

The following table provides the components of Other non-interest income for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
(Millions)
Payment protection products	$	34	$	38
Loss from equity method investment	(6)		(12)
Other	$	1	$	2
Total other non-interest income	$	29	$	28

The following table provides the components of Other non-interest expenses for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
(Millions)
Professional services and regulatory fees	$	38	$	31
Occupancy expense	5		6
Other (1)	13		20
Total other non-interest expenses	$	56	$	57

__________________________________

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

EARNINGS PER SHARE (Details) - USD ($)
$ / shares in Units, shares in Millions, $ in Millions

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Numerator:

Income from continuing operations

$ 455

$ 211

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

^[1]

(1)

Net income

$ 455

$ 210

Denominator:

Basic: Weighted average common stock (in shares)

50.0

49.9

Net effect of dilutive unvested restricted stock awards (in shares)

0.1

Denominator for diluted calculation (in shares)

50.1

50.0

Basic EPS

Income from continuing operations (in dollars per share)

$ 9.10

$ 4.23

(Loss) income from discontinued operations, net of income taxes (in dollars per share)

(0.01)

Net income per share (in dollars per share)

9.10

4.22

Diluted EPS

Income from continuing operations (in dollars per share)

9.08

4.21

(Loss) income from discontinued operations, net of income taxes (in dollars per share)

(0.01)

Net income per share (in dollars per share)

$ 9.08

$ 4.20

[1]	On November 5, 2021, our former LoyaltyOne segment was spun off into an independent public company, Loyalty Ventures Inc., and therefore is reflected herein as Discontinued Operations.

ALLOWANCE FOR CREDIT LOSSES (Tables)

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

Allowance for loan loss

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 loans is insignificant and therefore has been included in the table below:


	Three Months Ended March 31,
	2023		2022
(Millions)
Beginning balance	$	2,464	$	1,832

Provision for credit losses (1)	107		193
Change in the estimate for uncollectible unpaid interest and fees	5		—
Net principal losses (2)	(353)		(199)
Ending balance	$	2,223	$	1,826

__________________________________

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

(2)Net principal losses are presented net of recoveries of $92 million and $43 million for the three months ended March 31, 2023 and 2022, respectively. Net principal losses for the three months ended March 31, 2023 include a $10 million adjustment related to the effects of the purchase of previously written-off accounts that were sold to a third-party debt collection agency; no such adjustment was made in the comparative period.

CREDIT CARD AND OTHER LOANS (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Schedule of components of credit card and other loans

The following table presents Credit card and other loans, as of March 31, 2023 and December 31, 2022, respectively:


	March 31, 2023		December 31, 2022
(Millions)
Credit card loans	$	17,757	$	21,065
BNPL (other) loans	303		300
Total credit card and other loans (1)(2)	18,060		21,365
Less: Allowance for credit losses	(2,223)		(2,464)
Credit card and other loans, net	$	15,837	$	18,901

__________________________________

(1)Includes $12.2 billion and $15.4 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of March 31, 2023 and December 31, 2022, respectively.

(2)Includes $301 million and $307 million, of accrued interest and fees that have not yet been billed to cardholders as of March 31, 2023 and December 31, 2022, respectively.

Schedule of aging analysis of total credit card and other loans portfolio at amortized cost

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


	Aging Analysis of Delinquent Amortized Cost Credit Card and Other Loans (1)
	31 to 60 Days Past Due		61 to 90 Days Past Due		91 or more Days Past Due		Total		Total Current		Total
(Millions)
As of March 31, 2023	$	316	$	270	$	702	$	1,288	$	16,445	$	17,733

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

__________________________________

(1)BNPL loan delinquencies have been included with credit card loan delinquencies in the table above, as amounts were insignificant as of each period presented. As permitted by GAAP, we exclude unbilled finance charges and fees from our amortized cost basis of Credit card and other loans. As of March 31, 2023 and December 31, 2022, accrued interest and fees that have not yet been billed to cardholders were $301 million and $307 million, respectively, included in Credit card and other loans on the Consolidated Balance Sheets.

Schedule of composition of obligor credit quality

The following table reflects the distribution of our Credit card loans by Vantage score as of March 31, 2023 and December 31, 2022:


	March 31, 2023						December 31, 2022
	661 or Higher		601 to 660		600 or Lower		661 or Higher		601 to 660		600 or Lower
Credit card loans	58	%	27	%	15	%	62	%	26	%	12	%

Schedule of information on credit card loans that are considered troubled debt restructurings

The following table provides additional information regarding credit card Loan Modifications for the periods specified:


	Three Months Ended March 31, 2023					Three Months Ended March 31, 2022
	Number of Modifications	Pre-modification Outstanding Balance		Post-modification Outstanding Balance		Number of Modifications	Pre-modification Outstanding Balance		Post-modification Outstanding Balance
(Millions, except for Number of Loan Modifications)
Loan Modifications – credit card loans	46,484	$	77	$	77	37,998	$	56	$	56

The following table provides additional information regarding credit card Loan Modifications that have subsequently defaulted within 12 months of their modification dates, for the periods specified; the probability of default is factored into the Allowance for credit losses:


	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
	Number of Modifications	Outstanding Balance		Number of Modifications	Outstanding Balance
(Millions, except for Number of modifications)
Loan Modifications that subsequently defaulted	18,663	$	27	21,653	$	29

INVESTMENT SECURITIES - Amortized Cost (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Amortized Cost	$ 177	$ 175
Unrealized Gains	0	0
Unrealized Losses	(21)	(23)
Fair Value	156	152
Equity Securities, cost	72	69
Equity securities, Unrealized Gains	0	0
Equity securities, Unrealized Loss	0	0
Equity securities, Fair Value	72	69
Available-for-sale and Equity Securities, Amortized Cost	249	244
Available-For-Sale And Equity Securities, Unrealized Gains	0	0
Available-For-Sale And Equity Securities, Unrealized Loss	(21)	(23)
Available-for-sale and Equity Securities, Fair Value	$ 228	$ 221

STOCKHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Stockholders' Equity Note [Abstract]
Shares of company's outstanding common stock authorized to be repurchased	0
Number of shares repurchased	0
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Stock-based compensation expense	$ 9	$ 7
Service-based restricted stock unit awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	1,071,153
Weighted average grant-date fair value (in dollars per share)	$ 40.48
Award vesting period	3 years
Performance-based restricted stock unit awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	175,587
Weighted average grant-date fair value (in dollars per share)	$ 27.76
Performance-based restricted stock unit awards \| Minimum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Percentage of stock units to vest	0.00%
Performance-based restricted stock unit awards \| Maximum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Percentage of stock units to vest	150.00%

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Regulatory Matters

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

Quantitative measures established by regulations to ensure capital adequacy require CB and CCB to maintain minimum amounts and ratios of Tier 1 capital to average assets, Common equity tier 1, Tier 1 capital and Total capital, all to risk weighted assets. Failure to meet these minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions by the Banks’ regulators that if undertaken, could have a direct material effect on CB’s and/or CCB’s operating activities, as well as those of Bread Financial. Based on these regulations, as of March 31, 2023, each Bank met all capital requirements to which it was subject, and maintained capital ratios in excess of the minimums required to qualify as well capitalized. The Banks are considered well capitalized and seek to maintain capital levels and ratios in excess of the minimum regulatory requirements inclusive of the 2.5% Capital Conservation Buffer. The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of March 31, 2023, are as follows:


	Actual Ratio		Minimum Ratio for Capital Adequacy Purposes		Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions
Comenity Bank
Common Equity Tier 1 capital ratio (1)	18.3	%	4.5	%	6.5	%
Tier 1 capital ratio (2)	18.3		6.0		8.0
Total Risk-based capital ratio (3)	19.7		8.0		10.0
Tier 1 Leverage capital ratio (4)	15.7		4.0		5.0

Comenity Capital Bank
Common Equity Tier 1 capital ratio (1)	21.7	%	4.5	%	6.5	%
Tier 1 capital ratio (2)	21.7		6.0		8.0
Total Risk-based capital ratio (3)	23.0		8.0		10.0
Tier 1 Leverage capital ratio (4)	16.4		4.0		5.0

Combined Banks
Common Equity Tier 1 capital ratio (1)	20.2	%	4.5	%	6.5	%
Tier 1 capital ratio (2)	20.2		6.0		8.0
Total Risk-based capital ratio (3)	21.6		8.0		10.0
Tier 1 Leverage capital ratio (4)	16.1		4.0		5.0

__________________________________

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

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

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

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

Indemnification

On July 1, 2019, we completed the sale of Epsilon segment to Publicis Groupe S.A. (Publicis). Under the terms of the agreement governing that transaction, we agreed to indemnify Publicis and our 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. We are also involved, from time to time, in reviews, investigations, subpoenas, supervisory actions and other proceedings (both formal and informal) by governmental agencies regarding our business, which could subject us to significant fines, penalties, obligations to change our business practices, significant restrictions on our existing business or

ability to develop new business, cease-and-desist orders, safety-and-soundness directives or other requirements resulting in increased expenses, diminished income and damage to our reputation.

FAIR VALUES OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

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

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

We monitor the market conditions and evaluate the fair value hierarchy levels quarterly. For the three months ended March 31, 2023 and 2022, there were no transfers into or out of Level 3, and no transfers between Levels 1 and 2.

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


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
(Millions)
Financial assets
Credit card and other loans, net	$	15,837	$	18,061	$	18,901	$	21,328
Investment securities	228		228		221		221
Financial liabilities
Deposits	13,138		13,015		13,826		13,731
Debt issued by consolidated VIEs	3,015		3,015		6,115		6,115
Long-term and other debt	1,869		1,744		1,892		1,759

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

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

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

Deposits: Money market and other non-maturity deposits carrying values approximate their fair values because they are short-term in duration and have no defined maturity. Certificates of deposit are recorded at their historical issuance cost on the Consolidated Balance Sheets, adjusted for unamortized fees, with fair value being estimated based on the currently observable market rates available to us for similar deposits with similar remaining maturities (i.e., Level 2 inputs). Interest payable is included within Other liabilities on the Consolidated Balance Sheets.

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

Long-term and other debt: We record long-term and other debt at historical issuance cost on the Consolidated Balance Sheets, adjusted for unamortized fees, as well as premiums or discounts, as applicable. 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).

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis, categorized by the fair value hierarchy described in the preceding paragraphs:


	March 31, 2023
	Total		Level 1		Level 2		Level 3
(Millions)
Investment securities	$	228	$	45	$	183	$	—
Total assets measured at fair value	$	228	$	45	$	183	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
(Millions)
Investment securities	$	221	$	44	$	177	$	—
Total assets measured at fair value	$	221	$	44	$	177	$	—

Financial Instruments Disclosed but Not Carried at Fair Value


	March 31, 2023
	Fair Value		Level 1		Level 2		Level 3
(Millions)
Financial assets
Credit card and other loans, net	$	18,061	$	—	$	—	$	18,061
Total	$	18,061	$	—	$	—	$	18,061

Financial liabilities
Deposits	$	13,015	$	—	$	13,015	$	—
Debt issued by consolidated VIEs	3,015		—		3,015		—
Long-term and other debt	1,744		—		1,744		—
Total	$	17,774	$	—	$	17,774	$	—


	December 31, 2022
	Fair Value		Level 1		Level 2		Level 3
(Millions)
Financial assets
Credit card and other loans, net	$	21,328	$	—	$	—	$	21,328
Total	$	21,328	$	—	$	—	$	21,328

Financial liabilities
Deposits	$	13,731	$	—	$	13,731	$	—
Debt issued by consolidated VIEs	6,115		—		6,115		—
Long-term and other debt	1,759		—		1,759		—
Total	$	21,605	$	—	$	21,605	$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property and equipment, right-of-use assets, deferred contract assets, goodwill, and intangible assets. These assets are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances, such as upon impairment. We wrote-off the remaining $6 million of our equity method investment in Loyalty Ventures Inc. (LVI) during the three months ended March 31, 2023. We did not have any impairments for the three months ended March 31, 2022.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Balance (in shares) at Dec. 31, 2021		49,900,000
Beginning balance at Dec. 31, 2021	$ 2,086	$ 1	$ 2,174	$ (87)	$ (2)
Increase (Decrease) in Stockholders' Equity
Net income	210			210
Other comprehensive income	(7)				(7)
Stock-based compensation	7		7
Dividends and dividend equivalent rights declared	(10)			(10)
Repurchase of common stock (in shares)		(200,000)
Repurchase of common stock	(12)		(12)
Other (in shares)		100,000
Other	(6)		(6)
Balance (in shares) at Mar. 31, 2022		49,800,000
Ending balance at Mar. 31, 2022	2,268	$ 1	2,163	113	(9)
Balance (in shares) at Dec. 31, 2022		49,900,000
Beginning balance at Dec. 31, 2022	2,265	$ 1	2,192	93	(21)
Increase (Decrease) in Stockholders' Equity
Net income	455			455
Other comprehensive income	2				2
Stock-based compensation	10		10
Dividends and dividend equivalent rights declared	$ (11)			(11)
Repurchase of common stock (in shares)	0
Other (in shares)		200,000
Other	$ (5)		(5)
Balance (in shares) at Mar. 31, 2023		50,100,000
Ending balance at Mar. 31, 2023	$ 2,716	$ 1	$ 2,197	$ 537	$ (19)

COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of actual capital ratios and minimum ratios

The actual capital ratios and minimum ratios for each Bank, as well as the Combined Banks, as of March 31, 2023, are as follows:


	Actual Ratio		Minimum Ratio for Capital Adequacy Purposes		Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions
Comenity Bank
Common Equity Tier 1 capital ratio (1)	18.3	%	4.5	%	6.5	%
Tier 1 capital ratio (2)	18.3		6.0		8.0
Total Risk-based capital ratio (3)	19.7		8.0		10.0
Tier 1 Leverage capital ratio (4)	15.7		4.0		5.0

Comenity Capital Bank
Common Equity Tier 1 capital ratio (1)	21.7	%	4.5	%	6.5	%
Tier 1 capital ratio (2)	21.7		6.0		8.0
Total Risk-based capital ratio (3)	23.0		8.0		10.0
Tier 1 Leverage capital ratio (4)	16.4		4.0		5.0

Combined Banks
Common Equity Tier 1 capital ratio (1)	20.2	%	4.5	%	6.5	%
Tier 1 capital ratio (2)	20.2		6.0		8.0
Total Risk-based capital ratio (3)	21.6		8.0		10.0
Tier 1 Leverage capital ratio (4)	16.1		4.0		5.0

__________________________________

(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.

CREDIT CARD AND OTHER LOANS - Financing Receivable (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Total credit card and other loans	$ 18,060	$ 21,365
Less: Allowance for credit losses	(2,223)	(2,464)	$ (1,826)	$ (1,832)
Credit card and other loans, net	15,837	18,901
Unbilled to cardholders	301	307
Variable Interest Entity, Primary Beneficiary
Financing Receivable, Allowance for Credit Loss [Line Items]
Credit card and loan receivables restricted for securitization investors	12,172	15,383
Credit card loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Total credit card and other loans	17,757	21,065
BNPL (other) loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Total credit card and other loans	303	300
Less: Allowance for credit losses	$ (24)	$ (21)

- Definition

Amount of allowance for credit loss on financing receivable. Excludes allowance for financing receivable covered under loss sharing agreement.

+ References + Details

CREDIT CARD AND OTHER LOANS - Narrative (Details) $ in Millions	1 Months Ended	3 Months Ended
	Feb. 28, 2023 USD ($)	Mar. 31, 2023 USD ($) loan	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($) loan	Dec. 31, 2021 USD ($)
Financing Receivable, Allowance for Credit Loss [Line Items]
Re-aged accounts as percentage of total credit card and loan receivables		2.10%	1.60%
Number of days a loan is contractually past due before resulting in charge-off		30 days
Delinquency rate		5.70%		5.50%
Actual charge-offs for unpaid interest and fees		$ 242	$ 136
Net principal loss rate		7.00%	4.80%
Percentage of financing receivable outstanding		0.10%		0.60%
Total credit card and other loans		$ 17,733		$ 21,031
Allowance for credit loss		2,223	$ 1,826	2,464	$ 1,832
Interest income on modified credit card receivables		4	4
Unused credit card lines available to cardholders		$ 114,000		$ 128,000
Number of credit card portfolios held for sale \| loan		0		0
Proceeds from sale of credit card loan portfolio		$ 2,502	0
Gain on portfolio sale		$ 230	0
Term or Payment Extensions and Repayment Plans
Financing Receivable, Allowance for Credit Loss [Line Items]
Maximum percentage of credit card receivables to total portfolio		2.00%		2.00%
Impaired credit card and loan receivables		$ 283		$ 257
Allowance for credit loss		88		70
Average recorded investment in impaired credit card receivables		268	$ 272
BJs Wholesale Club (BJs)
Financing Receivable, Allowance for Credit Loss [Line Items]
Total credit card and other loans	$ 2,300
Proceeds from sale of credit card loan portfolio	2,500
Gain on portfolio sale	$ 230
BNPL (other) loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Total credit card and other loans		302		299
Allowance for credit loss		$ 24		$ 21
BNPL (other) loans \| FICO Score, From 660 and Above
Financing Receivable, Allowance for Credit Loss [Line Items]
Percentage of total amortized cost basis of revolving loan receivables outstanding		0.85		0.86
BNPL (other) loans \| FICO Score Below 660
Financing Receivable, Allowance for Credit Loss [Line Items]
Percentage of total amortized cost basis of revolving loan receivables outstanding		0.15		0.14
Credit card loans
Financing Receivable, Allowance for Credit Loss [Line Items]
Maximum period of time temporary programs' concessions remain in place		12 months

CREDIT CARD AND OTHER LOANS

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

CREDIT CARD AND OTHER LOANS

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

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

The following table presents Credit card and other loans, as of March 31, 2023 and December 31, 2022, respectively:


	March 31, 2023		December 31, 2022
(Millions)
Credit card loans	$	17,757	$	21,065
BNPL (other) loans	303		300
Total credit card and other loans (1)(2)	18,060		21,365
Less: Allowance for credit losses	(2,223)		(2,464)
Credit card and other loans, net	$	15,837	$	18,901

__________________________________

(1)Includes $12.2 billion and $15.4 billion of Credit card and other loans available to settle obligations of consolidated VIEs as of March 31, 2023 and December 31, 2022, respectively.

(2)Includes $301 million and $307 million, of accrued interest and fees that have not yet been billed to cardholders as of March 31, 2023 and December 31, 2022, respectively.

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:


	Aging Analysis of Delinquent Amortized Cost Credit Card and Other Loans (1)
	31 to 60 Days Past Due		61 to 90 Days Past Due		91 or more Days Past Due		Total		Total Current		Total
(Millions)
As of March 31, 2023	$	316	$	270	$	702	$	1,288	$	16,445	$	17,733

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

__________________________________

From time to time we may re-age cardholders’ accounts, with the intent of assisting delinquent cardholders who have experienced financial difficulties but who demonstrate both an ability and willingness to repay the amounts due; this practice affects credit card loan delinquencies and principal losses. Accounts meeting specific defined criteria are re-aged when the cardholder makes one or more consecutive payments aggregating to a certain pre-defined amount of their account balance. Upon re-aging, the outstanding balance of a delinquent account is returned to current status. For the three months ended March 31, 2023 and 2022, re-aged accounts as a percentage of Total credit card and other loans represented 2.1% and 1.6%, respectively. Our re-aging practices comply with regulatory guidelines.

Credit Quality Indicators for Our Credit Card and Other Loans

Given the nature of our business, the credit quality of our assets, in particular our Credit card and other loans, is a key determinant underlying our ongoing financial performance and overall financial condition. When it comes to our Credit card and other loans portfolio, we closely monitor Delinquency rates and Net principal loss rates which reflect, among other factors, our underwriting, the inherent credit risk in our portfolio, the success of our collection and recovery efforts, and more broadly, the general macroeconomic conditions.

Delinquencies: An account is contractually delinquent if we do not receive the minimum payment due by the specified due date. Our policy is to continue to accrue interest and fee income on all accounts, except in limited circumstances, until the

balance and all related interest and fees are paid or charged-off. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent; based upon the level of risk indicated, a collection strategy is deployed. If after exhausting all in-house collection efforts we are unable to collect on the account, we may engage collection agencies or outside attorneys to continue those efforts, or sell the charged-off balances.

The Delinquency rate is calculated by dividing outstanding principal balances that are contractually delinquent (i.e., balances greater than 30 days past due) as of the end of the period, by the outstanding principal amount of Credit cards and other loans as of the same period-end. As of March 31, 2023 and December 31, 2022, our Delinquency rates were 5.7% and 5.5%, respectively.

Net Principal Losses: Our net principal losses include the principal amount of losses that are deemed uncollectible, less recoveries, and exclude charged-off interest, fees and third-party fraud losses (including synthetic fraud). Charged-off interest and fees reduce Interest and fees on loans while third-party fraud losses are recorded in Card and processing expenses. Credit card loans, including unpaid interest and fees, are generally charged-off in the month during which an account becomes 180 days past due. BNPL loans such as our installment loans and our “split-pay” offerings, including unpaid interest, are generally charged-off when a loan becomes 120 days past due. However, in the case of a customer bankruptcy or death, Credit card and other loans, including unpaid interest and fees, as applicable, are charged-off in each month subsequent to 60 days after receipt of the notification of the bankruptcy or death, but in any case no later than 180 days past due for Credit card loans and 120 days past due for BNPL loans. We record the actual losses for unpaid interest and fees as a reduction to Interest and fees on loans, which were $242 million and $136 million for the three months ended March 31, 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. For the three months ended March 31, 2023 and 2022, our Net principal loss rates were 7.0% and 4.8%, respectively.

Overall Credit Quality: As part of our credit risk management activities for our credit card loans portfolio, we assess overall credit quality by reviewing information from credit bureaus and other sources relating to our cardholders' broader credit performance. We utilize VantageScore (Vantage) credit scores to assist in our assessment of credit quality. Vantage credit scores are obtained at origination of the account and are refreshed monthly thereafter to assist in predicting customer behavior. We categorize these Vantage credit scores into the following three credit score categories: (i) 661 or higher, which are considered the strongest credits and therefore have the lowest credit risk; (ii) 601 to 660, considered to have moderate credit risk; and (iii) 600 or less, which are considered weaker credits and therefore have the highest credit risk. In certain limited circumstances there are customer accounts for which a Vantage score is not available and we use alternative sources to assess credit risk and predict behavior. The table below excludes 0.1% and 0.6% of the total credit card loans balance as of March 31, 2023 and December 31, 2022, respectively, representing those customer accounts for which a Vantage credit score is not available. The following table reflects the distribution of our Credit card loans by Vantage score as of March 31, 2023 and December 31, 2022:


	March 31, 2023						December 31, 2022
	661 or Higher		601 to 660		600 or Lower		661 or Higher		601 to 660		600 or Lower
Credit card loans	58	%	27	%	15	%	62	%	26	%	12	%

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 $302 million and $299 million as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, approximately 85% of these loans were originated with customers with FICO scores of 660 or above, and correspondingly approximately 15% of these loans were

originated by customers with FICO scores below 660. Similarly, as of December 31, 2022, approximately 86% and 14% of these loans were originated by customers with FICO scores of 660 or above, and below 660, 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. 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, in which case they would then be considered a modification of loans to borrowers experiencing financial difficulty (Loan Modifications) Loans in these short term programs that are determined to be Loan Modifications, will be included as such in the disclosures below.

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

We consider impaired loans to be loans for which it is probable that we will be unable to collect all amounts due according to the original contractual terms of the cardholder agreement, including 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 forbearance programs described above. Loan Modifications, including for temporary hardship and permanent workout programs, include concessions consisting primarily of a reduced minimum payment, late fee waiver, and an interest rate reduction. The temporary programs’ concessions remain in place for a period no longer than twelve months, while the permanent programs remain in place through the payoff of the credit card loans if the cardholder complies with the terms of the program.

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

Loan Modifications are collectively evaluated for impairment on a pooled basis in measuring the appropriate Allowance for credit losses. Our impaired credit card loans represented less than 2% of total credit card loans as of both March 31, 2023 and December 31, 2022. As of those same dates, our recorded investment in impaired credit card loans was $283 million and $257 million, respectively, with an associated Allowance for credit losses of $88 million and $70 million, respectively. The average recorded investment in impaired credit card loans was $268 million and $272 million for the three months ended March 31, 2023 and 2022, respectively.

Interest income on these impaired credit card loans is accounted for in the same manner as non-impaired credit card loans, and cash collections are allocated according to the same payment hierarchy methodology applied for credit card loans not in modification programs. We recognized $4 million for both the three months ended March 31, 2023 and 2022, in interest income associated with credit card loans in modification programs, during the period that such loans were impaired.

The following table provides additional information regarding credit card Loan Modifications for the periods specified:


	Three Months Ended March 31, 2023					Three Months Ended March 31, 2022
	Number of Modifications	Pre-modification Outstanding Balance		Post-modification Outstanding Balance		Number of Modifications	Pre-modification Outstanding Balance		Post-modification Outstanding Balance
(Millions, except for Number of Loan Modifications)
Loan Modifications – credit card loans	46,484	$	77	$	77	37,998	$	56	$	56


	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
	Number of Modifications	Outstanding Balance		Number of Modifications	Outstanding Balance
(Millions, except for Number of modifications)
Loan Modifications that subsequently defaulted	18,663	$	27	21,653	$	29

Unfunded Loan Commitments

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

We manage our potential risk in credit commitments by limiting the total amount of credit, both by individual customer and in total, by monitoring the size and maturity of our portfolios and applying consistent underwriting standards. We have the unilateral ability to cancel or reduce unused credit card lines at any time. Unused credit card lines available to cardholders totaled approximately $114 billion and $128 billion as of March 31, 2023 and December 31, 2022, respectively. While this amount represented the total available unused credit card lines, we have not experienced and do not anticipate that all cardholders will access their entire available line at any given point in time.

Portfolio Sales

As of March 31, 2023 and December 31, 2022, there were no credit card loans held for sale.

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

FAIR VALUES OF FINANCIAL INSTRUMENTS - Narrative (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Transfers into or out of Level 3	$ 0	$ 0
Transfers between Levels 1 and 2	0	0
Loyalty Ventures Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity method investment, other than temporary impairment	$ 6,000,000
Asset impairment charges		$ 0

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	$ 2,265	$ 2,086
Changes in other comprehensive income (loss)	2	(7)
Ending balance	2,716	2,268
Accumulated Other Comprehensive Loss
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(21)	(2)
Ending balance	(19)	(9)
Net Unrealized Gains (Losses) on AFS Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(18)	1
Changes in other comprehensive income (loss)	2	(7)
Ending balance	(16)	(6)
Net Unrealized Gains (Losses) on Cash Flow Hedges
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	0	0
Changes in other comprehensive income (loss)	0	0
Ending balance	0	0
Net Unrealized Gains (Losses) on Net Investment Hedge
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	0	0
Changes in other comprehensive income (loss)	0	0
Ending balance	0	0
Foreign Currency Translation Adjustments
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Beginning balance	(3)	(3)
Changes in other comprehensive income (loss)	0	0
Ending balance	$ (3)	$ (3)

- Definition

Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(g)(1)(ii))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 852
-SubTopic 10
-Section 55
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=84165509&loc=d3e56426-112766

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
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-URI https://asc.fasb.org/extlink&oid=120391452&loc=d3e13212-122682

Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
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-Section 50
-Paragraph 3
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=114001798&loc=d3e33918-111571

+ Details

DEPOSITS - Maturity of Deposits (Details) $ in Millions	Mar. 31, 2023 USD ($)
Other Liabilities [Abstract]
2023	$ 3,247
2024	1,679
2025	613
2026	300
2027	583
Thereafter	82
Total certificates of deposit	6,504
Time deposits, unamortized debt discount	$ 7

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	200.0	200.0
Common stock, issued shares	50.1	49.9
Variable Interest Entity, Primary Beneficiary
Credit card and loan receivables restricted for securitization investors	$ 12,172	$ 15,383

EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHAREBasic earnings (losses) per share (EPS) is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of stock options, unvested restricted stock awards, or other dilutive securities. Diluted EPS is based on the weighted average number of common and potentially dilutive common shares (dilutive stock options, invested restricted stock awards and other dilutive securities outstanding during the year) pursuant to the Treasury Stock method.

The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
(Millions, except per share amounts)
Numerator
Income from continuing operations	$	455	$	211
Income (loss) from discontinued operations, net of income taxes	—		(1)
Net income	$	455	$	210

Denominator
Basic: Weighted average common stock	50.0		49.9
Weighted average effect of dilutive securities
Add: net effect of dilutive unvested restricted stock awards (1)	0.1		0.1
Diluted	50.1		50.0

Basic EPS
Income from continuing operations	$	9.10	$	4.23
Income (loss) from discontinued operations	$	—	$	(0.01)
Net income per share	$	9.10	$	4.22

Diluted EPS
Income from continuing operations	$	9.08	$	4.21
Income (loss) from discontinued operations	$	—	$	(0.01)
Net income per share	$	9.08	$	4.20

__________________________________

(1)For the three months ended March 31, 2023 and 2022, an insignificant amount of restricted stock awards were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive.

INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

Investment securities consist of available-for-sale (AFS) securities, which are debt securities and mutual funds. We also hold equity securities within our investment securities portfolio. Collectively, these investments are carried at fair value on the Consolidated Balance Sheets within Investment securities.

For any AFS debt securities in an unrealized loss position, the CECL methodology requires estimation of the lifetime expected credit losses which then would be recognized in the Consolidated Statements of Income by establishing, or adjusting an existing allowance for those credit losses. We did not have any such credit losses for the periods presented. Any unrealized gains, or any portion of a security’s non-credit-related unrealized losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. We typically invest in highly-rated securities with low probabilities of default.

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

Realized gains and losses are recognized upon disposition of the investment securities, using the specific identification method. The table below reflects unrealized gains and losses as of March 31, 2023 and December 31, 2022, respectively:


	March 31, 2023								December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
(Millions)
Available-for-sale securities	$	177	$	—	$	(21)	$	156	$	175	$	—	$	(23)	$	152
Equity securities	72		—		—		72		69		—		—		69
Total	$	249	$	—	$	(21)	$	228	$	244	$	—	$	(23)	$	221

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


	March 31, 2023
	Less than 12 months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(Millions)
Available-for-sale securities	$	44	$	(2)	$	111	$	(19)	$	155	$	(21)
Total	$	44	$	(2)	$	111	$	(19)	$	155	$	(21)


	December 31, 2022
	Less than 12 months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(Millions)
Available-for-sale securities	$	95	$	(9)	$	57	$	(14)	$	152	$	(23)
Total	$	95	$	(9)	$	57	$	(14)	$	152	$	(23)

As of March 31, 2023, the amortized cost and estimated fair value of AFS debt securities, which are mortgage-backed securities with no stated maturities, was $177 million and $156 million, respectively.

There were no realized gains or losses from the sale of any investment securities for the three months ended March 31, 2023 and 2022.

SECURITIZATIONS (Tables)

3 Months Ended

Mar. 31, 2023

SECURITIZATIONS

Schedule of securitized credit card loans and related delinquencies, and net principal losses

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 specified:


	March 31, 2023		December 31, 2022
(Millions)
Total credit card loans – available to settle obligations of consolidated VIEs	$	12,172	$	15,383
Of which: principal amount of credit card loans 91 days or more past due	$	281	$	307


	Three Months Ended March 31,
	2023		2022
(Millions)
Net principal losses of securitized credit card loans	$	217	$	116

DEPOSITS - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Other Liabilities [Abstract]
Time deposits, at or above FDIC insurance limit	$ 478	$ 719
Time deposits, at or above FDIC insurance limit of total deposits	4.00%	5.00%

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 455	$ 210
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses	107	193
Depreciation and amortization	34	21
Deferred income taxes	(19)	(48)
Non-cash stock compensation	9	7
Amortization of deferred financing costs	7	6
Amortization of deferred origination costs	22	21
Gain on portfolio sale	(230)	0
Change in other operating assets and liabilities
Change in other assets	81	(2)
Change in other liabilities	(77)	73
Other	9	16
Net cash provided by operating activities	398	497
CASH FLOWS FROM INVESTING ACTIVITIES
Change in credit card and other loans	735	339
Proceeds from sale of credit card loan portfolio	2,502	0
Purchase of credit card loan portfolio	(81)	0
Net purchase of investment securities	(4)	(6)
Other, including capital expenditures	(11)	(23)
Net cash provided by investing activities	3,141	310
CASH FLOWS FROM FINANCING ACTIVITIES
Unsecured borrowings under debt agreements	185	175
Repayments/maturities of unsecured borrowings under debt agreements	(210)	(200)
Debt issued by consolidated variable interest entities	325	525
Repayments/maturities of debt issued by consolidated variable interest entities	(3,425)	(1,162)
Net decrease in deposits	(689)	(405)
Dividends paid	(11)	(10)
Other	(9)	(19)
Net cash used in financing activities	(3,834)	(1,096)
Change in cash, cash equivalents and restricted cash	(295)	(289)
Cash, cash equivalents and restricted cash at beginning of period	3,927	3,923
Cash, cash equivalents and restricted cash at end of period	3,632	3,634
Cash and cash equivalents reconciliation
Cash and cash equivalents	3,611	2,930
Restricted cash included within Other assets	21	704
Total cash, cash equivalents and restricted cash	$ 3,632	$ 3,634

OTHER NON-INTEREST INCOME AND OTHER NON-INTEREST EXPENSES (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Other Noninterest Income [Abstract]
Payment protection products	$ 34	$ 38
Loss from equity method investment	(6)	(12)
Other	1	2
Total other non-interest income	29	28
Other Noninterest Expenses [Abstract]
Professional services and regulatory fees	38	31
Occupancy expense	5	6
Other	13	20
Total other non-interest expenses	$ 56	$ 57

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]
Common Stock dividends and dividend equivalent rights declared (in dollars per share)	$ 0.21	$ 0.21

DEPOSITS

3 Months Ended

Mar. 31, 2023

Other Liabilities Disclosure [Abstract]

DEPOSITS

Deposits were categorized as interest-bearing or non-interest-bearing as follows, as of March 31, 2023 and December 31, 2022:


	March 31, 2023		December 31, 2022
(Millions)
Interest-bearing	$	13,102	$	13,787
Non-interest-bearing (including cardholder credit balances)	36		39
Total deposits	$	13,138	$	13,826

Deposits by deposit type as of March 31, 2023 and December 31, 2022 were as follows:


	March 31, 2023		December 31, 2022
(Millions)
Savings accounts
Direct-to-consumer (retail)	$	2,734	$	2,782
Wholesale	3,864		3,954
Certificates of deposit
Direct-to-consumer (retail)	2,896		2,684
Wholesale	3,608		4,367
Cardholder credit balances	36		39
Total deposits	$	13,138	$	13,826

The scheduled maturities of certificates of deposit were as follows as of March 31, 2023:


(Millions)
2023 (1)	$	3,247
2024	1,679
2025	613
2026	300
2027	583
Thereafter	82
Total certificates of deposit	$	6,504

__________________________________

(1)The 2023 balance includes $7 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit.

As of March 31, 2023 and December 31, 2022, deposits that exceeded applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank, were estimated to be $478 million (4% of Total deposits) and $719 million (5% of Total deposits), respectively. The measurement of estimated uninsured deposits aligns with regulatory guidelines.

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

3 Months Ended

Mar. 31, 2023

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows:


Three Months Ended March 31, 2023	Net Unrealized Gains (Losses) on AFS Securities		Net Unrealized Gains (Losses) on Cash Flow Hedges		Net Unrealized Gains (Losses) on Net Investment Hedge		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of January 01, 2023	$	(18)	$	—	$	—	$	(3)	$	(21)
Changes in other comprehensive income	2		—		—		—		2
Balance as of March 31, 2023	$	(16)	$	—	$	—	$	(3)	$	(19)


Three Months Ended March 31, 2022	Net Unrealized Gains (Losses) on AFS Securities		Net Unrealized Gains on Cash Flow Hedges		Net Unrealized Gains on Net Investment Hedge		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of January 01, 2022	$	1	$	—	$	—	$	(3)	$	(2)
Changes in other comprehensive loss	(7)		—		—		—		(7)
Balance as of March 31, 2022	$	(6)	$	—	$	—	$	(3)	$	(9)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 455	$ 210
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale debt securities	3	(9)
Tax (expense) benefit	(1)	2
Unrealized gain (loss) on available-for-sale debt securities, net of tax	2	(7)
Other comprehensive income (loss), net of tax	2	(7)
Total comprehensive income, net of tax	$ 457	$ 203

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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+ Details

- Definition

Amount after tax and reclassification adjustments of other comprehensive income (loss).

+ References

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+ Details

EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted net income per share

The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
	2023		2022
(Millions, except per share amounts)
Numerator
Income from continuing operations	$	455	$	211
Income (loss) from discontinued operations, net of income taxes	—		(1)
Net income	$	455	$	210

Denominator
Basic: Weighted average common stock	50.0		49.9
Weighted average effect of dilutive securities
Add: net effect of dilutive unvested restricted stock awards (1)	0.1		0.1
Diluted	50.1		50.0

Basic EPS
Income from continuing operations	$	9.10	$	4.23
Income (loss) from discontinued operations	$	—	$	(0.01)
Net income per share	$	9.10	$	4.22

Diluted EPS
Income from continuing operations	$	9.08	$	4.21
Income (loss) from discontinued operations	$	—	$	(0.01)
Net income per share	$	9.08	$	4.20

__________________________________

SECURITIZATIONS (Details) - USD ($) $ in Millions	3 Months Ended
SECURITIZATIONS (Details) - USD ($) $ in Millions	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Offsetting Assets [Line Items]
Of which: principal amount of credit card loans 91 days or more past due	$ 281		$ 307
Net principal losses of securitized credit card loans	217	$ 116
Variable Interest Entity, Primary Beneficiary
Offsetting Assets [Line Items]
Total credit card loans - available to settle obligations of consolidated VIEs	$ 12,172		$ 15,383
Minimum
Offsetting Assets [Line Items]
Minimum interests requirement	4.00%
Maximum
Offsetting Assets [Line Items]
Minimum interests requirement	10.00%

DEPOSITS - Interest and Non-Interest Bearing (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Other Liabilities Disclosure [Abstract]
Interest-bearing	$ 13,102	$ 13,787
Non-interest-bearing (including cardholder credit balances)	36	39
Total deposits	$ 13,138	$ 13,826

INVESTMENT SECURITIES (Tables)

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of principal components of other investments, which are carried at fair value

The table below reflects unrealized gains and losses as of March 31, 2023 and December 31, 2022, respectively:


	March 31, 2023								December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
(Millions)
Available-for-sale securities	$	177	$	—	$	(21)	$	156	$	175	$	—	$	(23)	$	152
Equity securities	72		—		—		72		69		—		—		69
Total	$	249	$	—	$	(21)	$	228	$	244	$	—	$	(23)	$	221

Schedule of unrealized losses and fair value for investments that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position


	March 31, 2023
	Less than 12 months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(Millions)
Available-for-sale securities	$	44	$	(2)	$	111	$	(19)	$	155	$	(21)
Total	$	44	$	(2)	$	111	$	(19)	$	155	$	(21)


	December 31, 2022
	Less than 12 months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
(Millions)
Available-for-sale securities	$	95	$	(9)	$	57	$	(14)	$	152	$	(23)
Total	$	95	$	(9)	$	57	$	(14)	$	152	$	(23)

INCOME TAXES (Details)	3 Months Ended
INCOME TAXES (Details)	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Effective tax rate	28.70%	30.20%

STOCKHOLDERS' EQUITY	3 Months Ended
STOCKHOLDERS' EQUITY	Mar. 31, 2023
Stockholders' Equity Note [Abstract]
STOCKHOLDERS' EQUITY	STOCKHOLDERS’ EQUITY Stock Repurchase Programs During the three months ended March 31, 2023, our Board of Directors did not approve any new stock repurchase programs, and, except as disclosed in Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this report, we did not repurchase any shares of outstanding common stock during the period. Stock Compensation Expense During the three months ended March 31, 2023, we awarded 1,071,153 service-based restricted stock units (RSUs) with a weighted average grant date fair value per share of $40.48 as determined on the date of grant. Service-based restricted stock units typically vest ratably over three years provided that the participant is employed by us on each such vesting date. During the three months ended March 31, 2023, we awarded 175,587 performance-based restricted stock units with a fair market value of $27.76. Performance-based RSUs typically cliff vest at the end of three years, if specific performance measures tied to our financial performance are met, which are measured annually over the three year period. For the performance-based RSUs awarded in 2023, the predefined vesting criteria typically permit a range from 0% to 150% to be earned. Accruals of compensation cost for an award with a performance condition are based on the probable outcome of that performance condition. If the performance targets are met, the restrictions will lapse (i.e., the awards will vest) with respect to the entire award on February 17, 2025, provided that the participant is employed by us on the vesting date. For the three months ended March 31, 2023 and 2022, we recognized $9 million and $7 million in stock-based compensation expense, respectively. Dividends During the three months ended March 31, 2023, we paid $11 million in dividends to holders of our common stock. On April 27, 2023, our Board of Directors declared a quarterly cash dividend of $0.21 per share on our common stock, payable on June 16, 2023, to stockholders of record at the close of business on May 12, 2023.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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+ Details

ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

ALLOWANCE FOR CREDIT LOSSES

ALLOWANCE FOR CREDIT LOSSESThe Allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of our Credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions. The estimate under the credit reserving methodology referred to as the Current Expected Credit Loss (CECL) model is significantly influenced by the composition, characteristics and quality of our portfolio of Credit card and other loans, as well as the prevailing economic conditions and forecasts utilized. The estimate of the Allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees. Principal losses, net of recoveries are deducted from the Allowance. Principal losses for unpaid interest and fees as well as any adjustments to the Allowance

associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans. The Allowance is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness.

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

Credit Card Loans

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

BNPL Loans

We measure our Allowance for credit losses on BNPL loans using a statistical model to estimate projected losses over the remaining terms of the loans, inclusive of an assumption for prepayments. The model is based on the historical statistical relationship between loan loss performance and certain macroeconomic data pooled based on credit quality risk score, term of the underlying loans, vintage and geographic location. As of March 31, 2023 and December 31, 2022, the Allowance for credit losses on BNPL loans was $24 million and $21 million, respectively.

Allowance for Credit Losses Rollforward


	Three Months Ended March 31,
	2023		2022
(Millions)
Beginning balance	$	2,464	$	1,832

Provision for credit losses (1)	107		193
Change in the estimate for uncollectible unpaid interest and fees	5		—
Net principal losses (2)	(353)		(199)
Ending balance	$	2,223	$	1,826

__________________________________

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

For the three months ended March 31, 2023, the factors that influenced the increase in the Allowance for credit losses are higher net principal losses and a higher reserve rate due to softening economic indicators including the increased cost of consumer debt, persistent inflation and the possibility of higher unemployment levels.

STOCKHOLDERS' EQUITY - Dividends (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Apr. 27, 2023
Stockholders' Equity Note [Abstract]
Dividends paid	$ 11	$ 10
Subsequent Event
Subsequent Event [Line Items]
Cash dividend (usd per share)			$ 0.21

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Policies)	3 Months Ended
	Mar. 31, 2023
Accounting Policies [Abstract]
BASIS OF PRESENTATION	BASIS OF PRESENTATION These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 28, 2023. If not significantly different, certain note disclosures included therein have been omitted from these unaudited Condensed Consolidated Financial Statements. The unaudited Condensed Consolidated Financial Statements included herein reflect all adjustments, which consist of normal, recurring adjustments that are, in the opinion of management, necessary to state fairly the results for the interim periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates and assumptions reflect the best judgement of management, but actual results could differ. The most significant of those estimates and assumptions relate to the Allowance for credit losses. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries in which we have a controlling financial interest. All intercompany transactions have been eliminated.
RECENTLY ISSUED ACCOUNTING STANDARDS AND RECENTLY ISSUED ACCOUNTING STANDARDS	RECENTLY ADOPTED ACCOUNTING STANDARDS In March 2022, the Financial Accounting Standards Board (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. RECENTLY ISSUED ACCOUNTING STANDARDS The recently issued accounting standards from our standard setters e.g., the FASB, relate to topics that are outside our industry or are otherwise not impactful on our results of operations, financial position, cash flows, or disclosures related thereto.
CREDIT CARD AND OTHER LOANS	Our payment and lending solutions result in the generation of Credit card and other loans, which are recorded at the time a borrower enters into a point-of-sale transaction with a merchant. Credit card loans represent revolving amounts due and have a range of terms that include credit limits, interest rates and fees, which can be revised over time based on new information about the cardholder, in accordance with applicable regulations and the governing terms and conditions. Cardholders choosing to 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 of BNPL products such as installment loans and our “split-pay” offerings, have a range of fixed terms such as interest rates, fees and repayment periods, and borrowers are required to make pre-established monthly payments over the term of the loan in accordance with the applicable terms and conditions. Credit card and other loans are presented on the Consolidated Balance Sheets net of the Allowance for credit losses, and include principal and any related accrued interest and fees. We continue to accrue interest and fee income on all accounts, except in limited circumstances, until the related balance and all related interest and fees are paid or charged-off; an Allowance for credit losses is established for uncollectable interest and fees.Primarily, we 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 themselves consolidated VIEs, and therefore these loans are restricted for securitization investors. All new originations of Credit card and other loans are determined to be held for investment at origination because we have the intent and ability to hold them for the foreseeable future. In determining what constitutes the foreseeable future, we consider the average life and homogenous nature of our Credit card and other loans. In assessing whether our Credit card and other loans continue to be held for investment, we also consider capital levels and scheduled maturities of funding instruments used. The assertion regarding the intent and ability to hold Credit card and other loans for the foreseeable future can be made with a high degree of certainty given the maturity distribution of our direct-to-consumer (retail) deposits and other funding instruments; the demonstrated ability to replace maturing time-based deposits and other borrowings with new deposits or borrowings; and historic payment activity on Credit card and other loans. Due to the homogenous nature of our Credit card loans, amounts are classified as held for investment on a brand partner portfolio basis. From time to time certain Credit card loans are classified as held for sale, as determined on a brand partner basis. We carry these assets at the lower of aggregate cost or fair value, and continue to recognize finance charges on an accrual basis. Cash flows associated with Credit card and other loans originated or purchased for investment are classified as Cash flows from investing activities, regardless of any subsequent change in intent and ability.
ALLOWANCE FOR CREDIT LOSSES	The Allowance for credit losses is an estimate of expected credit losses, measured over the estimated life of our Credit card and other loans that considers forecasts of future economic conditions in addition to information about past events and current conditions. The estimate under the credit reserving methodology referred to as the Current Expected Credit Loss (CECL) model is significantly influenced by the composition, characteristics and quality of our portfolio of Credit card and other loans, as well as the prevailing economic conditions and forecasts utilized. The estimate of the Allowance for credit losses includes an estimate for uncollectible principal as well as unpaid interest and fees. Principal losses, net of recoveries are deducted from the Allowance. Principal losses for unpaid interest and fees as well as any adjustments to the Allowance associated with unpaid interest and fees are recorded as a reduction to Interest and fees on loans. The Allowance is maintained through an adjustment to the Provision for credit losses and is evaluated for appropriateness. In estimating our Allowance for credit losses, for each identified group, management utilizes various models and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors. These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships, to determine expected credit performance. Our quantitative estimate of expected credit losses under CECL is impacted by certain forecasted economic factors. We consider the forecast used to be reasonable and supportable over the estimated life of the Credit card and other loans, with no reversion period. In addition to the quantitative estimate of expected credit losses, we also incorporate qualitative adjustments for certain factors such as Company-specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the Allowance for credit losses reflects our best estimate of current expected credit losses. Credit Card Loans We use a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics. We have evaluated multiple risk characteristics across our credit card loans portfolio, and determined delinquency status and overall credit quality to be the most significant characteristics for estimating expected credit losses. To estimate our Allowance for credit losses, we segment our credit card loans on the basis of delinquency status, credit quality risk score and product. These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances warrant. In determining the estimated life of our Credit card loans, payments were applied to the measurement date balance with no payments allocated to future purchase activity. We use a combination of First In First Out and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) methodologies to model balance paydown.
SECURITIZATIONS	We account for transfers of financial assets as either sales or financings. Transfers of financial assets that are accounted for as sales are removed from the Consolidated Balance Sheets with any realized gain or loss reflected in the Consolidated Statements of Income during the period in which the sale occurs. Transfers of financial assets that are not accounted for as a sale are treated as a financing. We regularly securitize the majority of our credit card loans through the transfer of those loans to one of our Trusts. We perform the decision making for the Trusts, as well as servicing the cardholder accounts that generate the credit card loans held by the Trusts. In our capacity as a servicer, we administer the loans, collects payments and charges-off uncollectible balances. Servicing fees are earned by a subsidiary, which are eliminated in consolidation. The Trusts are consolidated VIEs because they have insufficient equity at risk to finance their activities – the issuance of debt securities and notes, collateralized by the underlying credit card loans. Because we perform the decision making and servicing for the Trusts, it has the power to direct the activities that most significantly impact the Trusts’ economic performance (the collection of the underlying credit card loans). In addition, we hold all of the variable interests in the Trusts, with the exception of the liabilities held by third-parties. These variable interests provide us with the right to receive benefits and the obligation to absorb losses, which could be significant to the Trusts. As a result of these considerations, we are deemed to be the primary beneficiary of the Trusts and therefore consolidates the Trusts. The Trusts issue debt securities and notes, which are non-recourse to us. The collections on the securitized credit card loans held by the Trusts are available only for payment of those debt securities and notes, or other obligations arising in the securitization transactions. For our securitized credit card loans, during the initial phase of a securitization reinvestment period, we generally retain principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets. During the amortization or accumulation period of a securitization, the investors’ share of 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.
INVESTMENT SECURITIES	Investment securities consist of available-for-sale (AFS) securities, which are debt securities and mutual funds. We also hold equity securities within our investment securities portfolio. Collectively, these investments are carried at fair value on the Consolidated Balance Sheets within Investment securities. For any AFS debt securities in an unrealized loss position, the CECL methodology requires estimation of the lifetime expected credit losses which then would be recognized in the Consolidated Statements of Income by establishing, or adjusting an existing allowance for those credit losses. We did not have any such credit losses for the periods presented. Any unrealized gains, or any portion of a security’s non-credit-related unrealized losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax. We typically invest in highly-rated securities with low probabilities of default. Gains and losses on investments in equity securities are recorded in Other non-interest expenses in the Consolidated Statements of Income. Realized gains and losses are recognized upon disposition of the investment securities, using the specific identification method. The table below reflects unrealized gains and losses as of March 31, 2023 and December 31, 2022, respectively:

- Definition

Disclosure of accounting policy for financing receivable.

+ References + Details

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

3 Months Ended

Mar. 31, 2023

Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]

Schedule of changes in each component of accumulated comprehensive income (loss), net of tax effects

The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows:


Three Months Ended March 31, 2023	Net Unrealized Gains (Losses) on AFS Securities		Net Unrealized Gains (Losses) on Cash Flow Hedges		Net Unrealized Gains (Losses) on Net Investment Hedge		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of January 01, 2023	$	(18)	$	—	$	—	$	(3)	$	(21)
Changes in other comprehensive income	2		—		—		—		2
Balance as of March 31, 2023	$	(16)	$	—	$	—	$	(3)	$	(19)


Three Months Ended March 31, 2022	Net Unrealized Gains (Losses) on AFS Securities		Net Unrealized Gains on Cash Flow Hedges		Net Unrealized Gains on Net Investment Hedge		Foreign Currency Translation Adjustments		Accumulated Other Comprehensive Loss
(Millions)
Balance as of January 01, 2022	$	1	$	—	$	—	$	(3)	$	(2)
Changes in other comprehensive loss	(7)		—		—		—		(7)
Balance as of March 31, 2022	$	(6)	$	—	$	—	$	(3)	$	(9)

CREDIT CARD AND OTHER LOANS - Amortized Cost Basis Credit Card and Loan Receivables (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Total credit card and other loans	$ 17,733	$ 21,031
Unbilled to cardholders	301	307
Total
Financing Receivable, Past Due [Line Items]
Total credit card and other loans	1,288	1,472
31 to 60 Days Past Due
Financing Receivable, Past Due [Line Items]
Total credit card and other loans	316	444
61 to 90 Days Past Due
Financing Receivable, Past Due [Line Items]
Total credit card and other loans	270	296
91 or more Days Past Due
Financing Receivable, Past Due [Line Items]
Total credit card and other loans	702	732
Total Current
Financing Receivable, Past Due [Line Items]
Total credit card and other loans	$ 16,445	$ 19,559

- Definition

Amortized cost, before allowance for credit loss, of financing receivable. Excludes financing receivable covered under loss sharing agreement and net investment in lease.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
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-Section 50
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Reference 2: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 326
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-Section 55
-Paragraph 79
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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-Subparagraph (SX 210.5-02(3)(b))
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2009/role/commonPracticeRef
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-Paragraph 1
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
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-Topic 326
-SubTopic 20
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-Paragraph 80
-URI https://asc.fasb.org/extlink&oid=124267575&loc=SL82922355-210448

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher SEC
-Name Regulation S-K (SK)
-Number 229
-Section 1405
-Paragraph (a)
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher SEC
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Reference 10: http://www.xbrl.org/2009/role/commonPracticeRef
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-Name Regulation S-K (SK)
-Number 229
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+ Details

FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair Value of Instruments (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Financial assets
Credit card and other loans, net	$ 18,061	$ 21,328
Investment securities	228	221
Financial liabilities
Deposits	13,015	13,731
Debt issued by consolidated VIEs	3,015	6,115
Carrying Amount
Financial assets
Credit card and other loans, net	15,837	18,901
Investment securities	228	221
Financial liabilities
Deposits	13,138	13,826
Debt issued by consolidated VIEs	3,015	6,115
Long-term and other debt	1,869	1,892
Fair Value
Financial assets
Credit card and other loans, net	18,061	21,328
Investment securities	228	221
Financial liabilities
Deposits	13,015	13,731
Debt issued by consolidated VIEs	3,015	6,115
Long-term and other debt	$ 1,744	$ 1,759

CREDIT CARD AND OTHER LOANS - Troubled Debt Restructurings (Details) - Consumer Portfolio Segment $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) loan	Mar. 31, 2022 USD ($) loan
Troubled debt restructurings
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Modifications \| loan	46,484	37,998
Pre-modification Outstanding Balance	$ 77	$ 56
Post-modification Outstanding Balance	$ 77	$ 56
Loan Modifications that subsequently defaulted
Financing Receivable, Troubled Debt Restructuring [Line Items]
Number of Modifications \| loan	18,663	21,653
Outstanding Balance	$ 27	$ 29

SECURITIZATIONS

3 Months Ended

Mar. 31, 2023

SECURITIZATIONS

SECURITIZATIONS

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

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

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

The Trusts issue debt securities and notes, which are non-recourse to us. The collections on the securitized credit card loans held by the Trusts are available only for payment of those debt securities and notes, or other obligations arising in the securitization transactions. For our securitized credit card loans, during the initial phase of a securitization reinvestment period, we generally retain principal collections in exchange for the transfer of additional credit card loans into the securitized pool of assets. During the amortization or accumulation period of a securitization, the investors’ share of 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. This requirement is met through a transferor’s interest and is supplemented through excess funding deposits which represent cash amounts deposited with the trustee of the securitizations. Cash collateral, restricted deposits are generally released proportionately as investors are repaid. Under the terms of the Trusts, the occurrence of certain triggering events associated with the performance of the securitized credit card loans in each Trust could result in certain required actions, including payment of Trust expenses, the establishment of reserve funds, or early amortization of the debt securities and/or notes, in a worst-case scenario. During the three months ended March 31, 2023 and 2022, no such triggering events occurred.

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 specified:


	March 31, 2023		December 31, 2022
(Millions)
Total credit card loans – available to settle obligations of consolidated VIEs	$	12,172	$	15,383
Of which: principal amount of credit card loans 91 days or more past due	$	281	$	307


	Three Months Ended March 31,
	2023		2022
(Millions)
Net principal losses of securitized credit card loans	$	217	$	116

ALLOWANCE FOR CREDIT LOSSES - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss [Line Items]
Payments allocated to future purchase activity	$ 0
Allowance for credit loss	2,223	$ 2,464	$ 1,826	$ 1,832
BNPL
Financing Receivable, Allowance for Credit Loss [Line Items]
Allowance for credit loss	$ 24	$ 21

- Definition

Amount of allowance for credit loss on financing receivable. Excludes allowance for financing receivable covered under loss sharing agreement.

+ References + Details

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	3 Months Ended
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	Mar. 31, 2023
Accounting Policies [Abstract]
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION	DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION DESCRIPTION OF THE BUSINESS We are a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions. We create opportunities for our customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, we deliver growth for our partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later (BNPL) products such as installment loans and our “split-pay” offerings. We also offer direct-to-consumer solutions that give customers more access, choice and freedom through our branded Bread CashbackTM American Express® Credit Card and Bread SavingsTM products. Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Michaels, 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 specialty apparel, sporting goods, health and beauty, jewelry, home goods and travel and entertainment. We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across 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. Our 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. Throughout these unaudited Condensed Consolidated Financial Statements, unless stated otherwise, the terms “Bread Financial”, the “Company”, “we”, “our” or “us” refer to Bread Financial Holdings, Inc. and our subsidiaries and variable interest entities (VIEs) on a consolidated basis. References to “Parent Company” refer to Bread Financial Holdings, Inc. on a parent-only stand alone basis. In December 2020 we acquired Lon Inc., known at the time as Bread, which subsequent to the acquisition has been fully integrated into our ongoing business strategy and operations. BASIS OF PRESENTATION These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 28, 2023. If not significantly different, certain note disclosures included therein have been omitted from these unaudited Condensed Consolidated Financial Statements. The unaudited Condensed Consolidated Financial Statements included herein reflect all adjustments, which consist of normal, recurring adjustments that are, in the opinion of management, necessary to state fairly the results for the interim periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosures of contingent assets and liabilities. These accounting estimates and assumptions reflect the best judgement of management, but actual results could differ. The most significant of those estimates and assumptions relate to the Allowance for credit losses. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries in which we have a controlling financial interest. All intercompany transactions have been eliminated. RECENTLY ADOPTED ACCOUNTING STANDARDS In March 2022, the Financial Accounting Standards Board (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. RECENTLY ISSUED ACCOUNTING STANDARDS The recently issued accounting standards from our standard setters e.g., the FASB, relate to topics that are outside our industry or are otherwise not impactful on our results of operations, financial position, cash flows, or disclosures related thereto.

DEPOSITS (Tables)

3 Months Ended

Mar. 31, 2023

Other Liabilities Disclosure [Abstract]

Deposit by type

Deposits were categorized as interest-bearing or non-interest-bearing as follows, as of March 31, 2023 and December 31, 2022:


	March 31, 2023		December 31, 2022
(Millions)
Interest-bearing	$	13,102	$	13,787
Non-interest-bearing (including cardholder credit balances)	36		39
Total deposits	$	13,138	$	13,826

Deposits by deposit type as of March 31, 2023 and December 31, 2022 were as follows:


	March 31, 2023		December 31, 2022
(Millions)
Savings accounts
Direct-to-consumer (retail)	$	2,734	$	2,782
Wholesale	3,864		3,954
Certificates of deposit
Direct-to-consumer (retail)	2,896		2,684
Wholesale	3,608		4,367
Cardholder credit balances	36		39
Total deposits	$	13,138	$	13,826

Time deposit maturities

The scheduled maturities of certificates of deposit were as follows as of March 31, 2023:


(Millions)
2023 (1)	$	3,247
2024	1,679
2025	613
2026	300
2027	583
Thereafter	82
Total certificates of deposit	$	6,504

__________________________________

(1)The 2023 balance includes $7 million in unamortized debt issuance costs, which are associated with the entire portfolio of certificates of deposit.

- Definition

Tabular disclosure of type of deposit liability.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher SEC
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Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 5: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 6: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 9: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 13: http://www.xbrl.org/2009/role/commonPracticeRef
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-Paragraph (a)

+ Details

DEPOSITS - Deposits by Type (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Deposit Liability [Line Items]
Certificates of deposit	$ 6,504
Non-interest-bearing (including cardholder credit balances)	36	$ 39
Deposits	13,138	13,826
Direct-to-consumer (retail)
Deposit Liability [Line Items]
Savings accounts	2,734	2,782
Certificates of deposit	2,896	2,684
Wholesale
Deposit Liability [Line Items]
Savings accounts	3,864	3,954
Certificates of deposit	3,608	4,367
Cardholder credit balances
Deposit Liability [Line Items]
Non-interest-bearing (including cardholder credit balances)	$ 36	$ 39

INCOME TAXES	3 Months Ended
INCOME TAXES	Mar. 31, 2023
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES The Provision for income taxes was $183 million and $91 million for the three months ended March 31, 2023 and 2022, respectively; the effective tax rate was 28.7% and 30.2% for the same respective periods. The decrease in the effective tax rate primarily related to flat nondeductible items year-over-year, compared with an increase in Income from continuing operations before income taxes in the current year which was related primarily to the sale of the BJ's portfolio; resulting in an overall increase in the Provision for income taxes. We are under examination by the Internal Revenue Service as well as tax authorities in various states. The tax years under examination and open for examination vary by jurisdiction, but 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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

FAIR VALUES OF FINANCIAL INSTRUMENTS - Assets and Liabilities Not Carried at Fair Value (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Financial assets
Credit card and other loans, net	$ 18,061	$ 21,328
Total assets measured at fair value	18,061	21,328
Financial liabilities
Deposits	13,015	13,731
Debt issued by consolidated VIEs	3,015	6,115
Long-term and other debt	1,744	1,759
Total liabilities measured at fair value	17,774	21,605
Level 1
Financial assets
Credit card and other loans, net	0	0
Total assets measured at fair value	0	0
Financial liabilities
Deposits	0	0
Debt issued by consolidated VIEs	0	0
Long-term and other debt	0	0
Total liabilities measured at fair value	0	0
Level 2
Financial assets
Credit card and other loans, net	0	0
Total assets measured at fair value	0	0
Financial liabilities
Deposits	13,015	13,731
Debt issued by consolidated VIEs	3,015	6,115
Long-term and other debt	1,744	1,759
Total liabilities measured at fair value	17,774	21,605
Level 3
Financial assets
Credit card and other loans, net	18,061	21,328
Total assets measured at fair value	18,061	21,328
Financial liabilities
Deposits	0	0
Debt issued by consolidated VIEs	0	0
Long-term and other debt	0	0
Total liabilities measured at fair value	$ 0	$ 0