Slide 1: Bread Financial Third Quarter 2022 Results
Bread Financial Third Quarter 2022 Results October 27, 2022 Ralph Andretta President & CEO Perry Beberman EVP & CFO
Slide 2: Forward-Looking Statements
Forward-Looking Statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward- looking statements give our expectations or forecasts of future events and can generally be ide
Slide 3: Key Highlights
Key Highlights Quality growth with strong core performance trends Growth continues to accelerate as average and end-of-period loans increased 14% and 16%, respectively, versus 3Q21 Revenue growth of 15% and improved Net interest margin Pretax pre-provision earnings* up 17% versus 3Q21; 6th consecuti
Slide 4: Business Development Highlights
Business Development Highlights New & Renewed Brand Partners Select New Bread Pay Partners 125+ integrated merchants New Innovative Bread Pay In-Store Technology Solutions Enables virtual card for a frictionless Sales finance lending platform providing consumer and merchant experience distribution i
Slide 5: Third Quarter 2022 Financial Highlights
Third Quarter 2022 Financial Highlights $979 million $134 million $2.69 Revenue Net Income Diluted EPS • Credit sales of $7.7 billion up 4% in 3Q22 versus 3Q21 • Third quarter average loans of $17.6 billion were up 14% versus 3Q21 • Revenue increased 15% versus 3Q21, while total non-interest expense
Slide 6: Financial Results – Continuing Operations
Financial Results – Continuing Operations ($ in millions, except per share) 3Q22 3Q21 $ Chg % Chg YTD ‘22 YTD ’21 $ Chg %Chg Total interest income $1,218 $994 $224 23 % $3,359 $2,851 $508 18 % Total interest expense 133 91 42 47 308 298 10 3 PPNR Growth* Net interest income 1,085 903 182 20 3,051 2,
Slide 7: Net Interest Margin
Net Interest Margin Interest-Earning Asset Yields & Mix Interest-Bearing Liability Costs & Funding Mix Loan yield Avg. earning asset yield Net interest margin Cost of total interest-bearing liabilities Cost of deposits 7.0% 27.2% 25.6% 25.2% 25.6% 25.0% 23.9% 24.1% 23.8% 23.9% 5.0% 22.3% 2.8% 20.9%
Slide 8: Credit Quality and Allowance
Credit Quality and Allowance Delinquency Rates Net Loss Rates 5 year Max rate: 6.0% 5 year Max rate: 7.6% (1) 5.7% 5 year Avg rate: ~5% 6.0% 5 year Avg rate: ~6% 4.4% 4.1% 4.4% (2) 3.8% 3.8% 3.9% 5.0% 5.1% 5.6% 4.7% 5.8% 4.8% 5.0% (3) 3.3% 4.4% 5 year Min rate: 3.3% 5 year Min rate: 3.9% 3.9% 3Q20 4
Slide 9: 2022 Financial Outlook
2022 Financial Outlook Full Year 2021 Full Year 2022 Commentary Actuals Outlook • Continued sales growth and net partner additions driving sustainable, profitable growth Average loans Up low • Expect the year-end loan balance to be between $21 and $22 billion as a result of successful $15,656 millio
Slide 10: Strengthened Financial Resilience
Strengthened Financial Resilience Transforming our Company to deliver sustainable, profitable growth with an expectation to outperform historic loss levels Strong corporate governance Improved balance sheet strength and funding mix Capital ratios Proactive risk Loan loss reserve Reduced debt Increas
Slide 11: Appendix
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Slide 12: Average Loans and Credit Sales
Average Loans and Credit Sales $30.0 50% 11% 14% $25.0 1% 2% 5% -5% -12% -13% -14% 0% $20.0 -50% $17.6 $16.7 $17.0 $15.0 $15.8 $15.8 $16.1 $15.3 $15.3 $15.5 -100% $10.0 $8.8 ($ in billions) $7.7 $8.1 $7.7 $7.4 $7.4 $6.9 -150% $5.0 $6.2 $6.0 $0.0 -200% 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Ave
Slide 13: Total Non-Interest Expenses
Total Non-Interest Expenses 3Q22 vs. 3Q21 Change in Non-Interest Expenses Total Non-Interest Expenses Employee comp. & benefits: $34 20% +10% Card and processing: 2% $1 $1,383 Info. processing & comm.: $21 39% $1,256 +13% Marketing: $9 24% $486 Depreciation & amortization: $6 29% $431 Other: (22)% $
Slide 14: Capital and Liquidity
Capital and Liquidity Tangible Common Equity/ Tangible Assets Ratio(1) Parent Level: +0.8% • Liquidity as of September 30, 2022, of $0.9 billion, consisting of cash on hand plus revolver capacity 8.0% Bank Level (Banks Combined): • As of September 30, 2022, the banks finished the quarter with $3.5 b
Slide 15: Summary Financial Highlights
Summary Financial Highlights Continuing Operations 3Q22 vs 2Q22 vs YTD ’22 vs 3Q22 3Q21 2Q22 YTD ’22 YTD ’21 ($ in millions) 3Q21 1Q22 YTD ’21 Credit sales $7,689 $7,380 4% $8,140 (6)% $22,716 $20,825 9% Average credit card and other loans $17,598 $15,471 14% $17,003 3% $17,084 $15,512 10% End-of-pe
Slide 16: Summary Financial Highlights
Summary Financial Highlights Continuing Operations ($ in millions) 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 YTD ‘21 YTD ’22 Credit sales $6,152 $7,657 $6,043 $7,401 $7,380 $8,778 $6,887 $8,140 $7,689 $20,825 $22,716 Year-over-year change (21)% (18)% (1)% 54% 20% 15% 14% 10% 4% 22% 9% Average cre
Slide 17: Financial Results
Financial Results Continuing Operations ($ in millions, except per share) 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 YTD ’21 YTD ‘22 Total interest income $915 $950 $942 $915 $994 $1,017 $1,068 $1,073 $1,218 $2,851 $3,359 Total interest expense 114 112 107 100 91 84 79 95 133 298 308 Net interest
Slide 18: Net Interest Margin
Net Interest Margin 3Q22 YTD 2022 Interest Income / Average Yield / Interest Income / Average Yield / ($ in millions) Average Balance Average Balance Expense Rate Expense Rate Cash and investment securities $4,235 $23 2.2% $4,001 $34 1.1% Credit card and other loans 17,598 1,195 27.2% 17,084 3,325 2
Slide 19: Financial Results
Financial Results ($ in millions, except per share amounts) 3Q22 3Q21 $ Chg % Chg YTD ’22 YTD ’21 $ Chg % Chg Income from continuing operations, net of taxes $134 $206 $(72) (35) % $358 $737 $(379) (51) % (Loss) income from discontinued operations, net of taxes 0 18 (18) nm (1) 46 (47) nm Net income
Slide 20: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures ($ in millions) 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 YTD ’21 YTD ‘22 Pretax pre-provision earnings (PPNR) Income before income taxes $162 $129 $367 $354 $259 $65 $302 $16 $189 $980 $508 Provision for credit losses 207 153 33 (14) 161 363
Slide 21: Credit Quality Trends
Credit Quality Trends Delinquency Rates 5.9% 5.8% 6.0% (1) 5 year Max rate: 6.0% 5.7% 5.2% 5.2% 5 year Avg rate: ~5% 4.4% 4.1% 3.8% 3.8% 3.9% 4.7% 4.3% 4.4% 3.3% 5 year Min rate: 3.3% 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Net Loss Rates 7.6% 5 year Max rate: 7.6%