Cover
Cover - shares | 3 Months Ended | |
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 $0.01 per share | |
Trading Symbol | BFH | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 50,119,706 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001101215 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | ||
Interest income | |||
Interest and fees on loans | $ 1,289 | $ 1,066 | |
Interest on cash and investment securities | 46 | 2 | |
Total interest income | 1,335 | 1,068 | |
Interest expense | |||
Interest on deposits | 117 | 34 | |
Interest on borrowings | 101 | 45 | |
Total interest expense | 218 | 79 | |
Net interest income | 1,117 | 989 | |
Non-interest income | |||
Interchange revenue, net of retailer share arrangements | (87) | (96) | |
Gain on portfolio sale | 230 | 0 | |
Other | 29 | 28 | |
Total non-interest income | 172 | (68) | |
Total net interest and non-interest income | 1,289 | 921 | |
Provision for credit losses | 107 | 193 | |
Total net interest and non-interest income, after provision for credit losses | 1,182 | 728 | |
Non-interest expenses | |||
Employee compensation and benefits | 220 | 179 | |
Card and processing expenses | 120 | 82 | |
Information processing and communication | 75 | 56 | |
Marketing expenses | 39 | 31 | |
Depreciation and amortization | 34 | 21 | |
Other | 56 | 57 | |
Total non-interest expenses | 544 | 426 | |
Income from continuing operations before income taxes | 638 | 302 | |
Provision for income taxes | 183 | 91 | |
Income from continuing operations | 455 | 211 | |
Income (loss) from discontinued operations, net of income taxes | [1] | 0 | (1) |
Net income | $ 455 | $ 210 | |
Basic income per share (Note 13) | |||
Income from continuing operations (in dollars per share) | $ 9.10 | $ 4.23 | |
Income (loss) from discontinued operations (in dollars per share) | 0 | (0.01) | |
Net income per share (in dollars per share) | 9.10 | 4.22 | |
Diluted income per share (Note 13) | |||
Income from continuing operations (in dollars per share) | 9.08 | 4.21 | |
Income (loss) from discontinued operations (in dollars per share) | 0 | (0.01) | |
Net income per share (in dollars per share) | $ 9.08 | $ 4.20 | |
Weighted average common shares outstanding (Note 13) | |||
Basic (in shares) | 50 | 49.9 | |
Diluted (in shares) | 50.1 | 50 | |
[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. |
CONDENSED CONSOLIDATED STATEM_2
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 |
CONDENSED CONSOLIDATED BALANCE
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 |
CONDENSED CONSOLIDATED BALANC_2
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 | 200 |
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 |
CONDENSED CONSOLIDATED STATEM_3
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 |
CONSOLIDATED STATEMENTS OF STOC
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) |
CONSOLIDATED STATEMENTS OF ST_2
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 |
DESCRIPTION OF BUSINESS AND BAS
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
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 Cashback TM American Express ® Credit Card and Bread Savings TM products. Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, 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 |
CREDIT CARD AND OTHER LOANS
CREDIT CARD AND OTHER LOANS | 3 Months Ended |
Mar. 31, 2023 | |
Receivables [Abstract] | |
CREDIT CARD AND OTHER LOANS | 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, December 31, (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 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. 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, December 31, 661 or 601 to 600 or 661 or 601 to 600 or 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 Pre-modification Post-modification Number of Pre-modification Post-modification (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 Three Months Ended Number of Outstanding Number of Outstanding (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. |
ALLOWANCE FOR CREDIT LOSSES
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 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 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. 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. |
SECURITIZATIONS
SECURITIZATIONS | 3 Months Ended |
Mar. 31, 2023 | |
SECURITIZATIONS | |
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, December 31, (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 |
INVESTMENT SECURITIES
INVESTMENT SECURITIES | 3 Months Ended |
Mar. 31, 2023 | |
Investments, Debt and Equity Securities [Abstract] | |
INVESTMENT SECURITIES | 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 Unrealized Unrealized Fair Value Amortized Unrealized Unrealized 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 Fair Value Unrealized Fair Value Unrealized (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 Fair Value Unrealized Fair Value Unrealized (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. |
DEPOSITS
DEPOSITS | 3 Months Ended |
Mar. 31, 2023 | |
Other Liabilities Disclosure [Abstract] | |
DEPOSITS | DEPOSITS Deposits were categorized as interest-bearing or non-interest-bearing as follows, as of March 31, 2023 and December 31, 2022: March 31, December 31, (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, December 31, (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. |
OTHER NON-INTEREST INCOME AND O
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 | 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 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 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. |
FAIR VALUES OF FINANCIAL INSTRU
FAIR VALUES OF FINANCIAL INSTRUMENTS | 3 Months Ended |
Mar. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUES OF FINANCIAL INSTRUMENTS | 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 Fair Carrying Fair (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 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 $ — 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 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 Minimum Ratio to be 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 |
CHANGES IN ACCUMULATED OTHER CO
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 | 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 Net Unrealized Net Unrealized Foreign Accumulated (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 Net Unrealized Gains on Cash Flow Hedges Net Unrealized Gains on Net Investment Hedge Foreign Accumulated (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) |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
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. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
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. |
EARNINGS PER SHARE
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. |
DESCRIPTION OF BUSINESS AND B_2
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 |
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: |
CREDIT CARD AND OTHER LOANS (Ta
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, December 31, (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 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 __________________________________ |
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, December 31, 661 or 601 to 600 or 661 or 601 to 600 or 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 Pre-modification Post-modification Number of Pre-modification Post-modification (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 Three Months Ended Number of Outstanding Number of Outstanding (Millions, except for Number of modifications) Loan Modifications that subsequently defaulted 18,663 $ 27 21,653 $ 29 |
ALLOWANCE FOR CREDIT LOSSES (Ta
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 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. |
SECURITIZATIONS (Tables)
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, December 31, (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 |
INVESTMENT SECURITIES (Tables)
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 Unrealized Unrealized Fair Value Amortized Unrealized Unrealized 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 | 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 Fair Value Unrealized Fair Value Unrealized (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 Fair Value Unrealized Fair Value Unrealized (Millions) Available-for-sale securities $ 95 $ (9) $ 57 $ (14) $ 152 $ (23) Total $ 95 $ (9) $ 57 $ (14) $ 152 $ (23) |
DEPOSITS (Tables)
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, December 31, (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, December 31, (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 __________________________________ |
OTHER NON-INTEREST INCOME AND_2
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 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 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. |
FAIR VALUES OF FINANCIAL INST_2
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 Fair Carrying Fair (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 $ — |
COMMITMENTS AND CONTINGENCIES (
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 Minimum Ratio to be 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. |
CHANGES IN ACCUMULATED OTHER _2
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 Net Unrealized Net Unrealized Foreign Accumulated (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 Net Unrealized Gains on Cash Flow Hedges Net Unrealized Gains on Net Investment Hedge Foreign Accumulated (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) |
EARNINGS PER SHARE (Tables)
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 __________________________________ (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. |
CREDIT CARD AND OTHER LOANS - F
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) |
CREDIT CARD AND OTHER LOANS - A
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 |
CREDIT CARD AND OTHER LOANS - N
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% | 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% | 2% | |||
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 - C
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% | 62% |
601 to 660 | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Credit card loans | 27% | 26% |
600 or Lower | ||
Financing Receivable, Credit Quality Indicator [Line Items] | ||
Credit card loans | 15% | 12% |
CREDIT CARD AND OTHER LOANS - T
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 |
ALLOWANCE FOR CREDIT LOSSES - N
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 |
ALLOWANCE FOR CREDIT LOSSES - R
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 |
SECURITIZATIONS (Details)
SECURITIZATIONS (Details) - USD ($) $ in Millions | 3 Months Ended | ||
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% | ||
Maximum | |||
Offsetting Assets [Line Items] | |||
Minimum interests requirement | 10% |
INVESTMENT SECURITIES - Amortiz
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 |
INVESTMENT SECURITIES - Continu
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) |
INVESTMENT SECURITIES - Narrati
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 |
DEPOSITS - Interest and Non-Int
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 |
DEPOSITS - Deposits by Type (De
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 |
DEPOSITS - Maturity of Deposits
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 |
DEPOSITS - Narrative (Details)
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% | 5% |
OTHER NON-INTEREST INCOME AND_3
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 |
FAIR VALUES OF FINANCIAL INST_3
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 |
FAIR VALUES OF FINANCIAL INST_4
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 |
FAIR VALUES OF FINANCIAL INST_5
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 |
FAIR VALUES OF FINANCIAL INST_6
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 |
COMMITMENTS AND CONTINGENCIES -
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 |
CHANGES IN ACCUMULATED OTHER _3
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) |
STOCKHOLDERS' EQUITY (Details)
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% | |
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% |
STOCKHOLDERS' EQUITY - Dividend
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 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate | 28.70% | 30.20% |
EARNINGS PER SHARE (Details)
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] | 0 | (1) |
Net income | $ 455 | $ 210 | |
Denominator: | |||
Basic: Weighted average common stock (in shares) | 50 | 49.9 | |
Net effect of dilutive unvested restricted stock awards (in shares) | 0.1 | 0.1 | |
Denominator for diluted calculation (in shares) | 50.1 | 50 | |
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 | (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 | (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. |