Q1 2026 Bread Financial Holdings Inc Earnings Call

April 23, 2026

Operator: Good morning, and welcome to Bread Financial's Q1 2026 earnings conference call. My name is Michelle, and I will be coordinating your call today. At this time, all parties have been placed on a listen-only mode. Following today's presentation, the floor will be open to your questions. To register a question, please press star followed by one. It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial. The floor is yours, sir. Please go ahead.

Operator: Good morning, and welcome to Bread Financial's Q1 2026 Earnings Conference call. My name is Michelle, and I will be coordinating your call today. At this time, all parties have been placed on a listen-only mode. Following today's presentation, the floor will be open to your questions. To register a question, please press star followed by one. It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial. The floor is yours, sir. Please go ahead.

Speaker #1: At this time, all Ralph Andretta, President and Chief Executive Officer and Perry Beberman, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements.

Speaker #1: parties have been placed on a listen-only mode. Following today's presentation, the floor will be open to your questions. To register, a question please press star followed by 11.

Speaker #1: It is now my pleasure to These statements are based on management's current expectations and assumptions and are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC.

Brian Vereb: Thank you. Copies of the slides we will be reviewing and the earnings release can be found on the investor relations section of our website at breadfinancial.com. On the call today, we have Ralph Andretta, President and Chief Executive Officer, and Perry Beberman, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are based on management's current expectations and assumptions and are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. Also on today's call, our speakers will reference certain non-GAAP financial measures which we believe will provide useful information for investors. Reconciliation of those measures to GAAP are included in our quarterly earnings materials posted on our investor relations website.

Speaker #1: Also on today’s call, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. Reconciliations of those measures to GAAP are included in our quarterly earnings materials posted on our investor relations website.

Brian Vereb: With that, I would like to turn the call over to Ralph Andretta.

Ralph Andretta: Thank you, Brian, and good morning to everyone joining the call. Before speaking to our results, as we celebrate 30 years in business and 25 years as a public company in 2026, I want to take a moment to thank our current and former associates. Your commitment to excellence in how we serve both our brand partners and customers is reflective of our enduring value-driven culture. We are extremely proud of our history and the continued transformation of our company. We remain committed to delivering on our brand promise each and every day. Today, Bread Financial reported strong Q1 results, which were underscored by a return to loan growth alongside increasing growth in credit sales and continued improvement in our credit metrics.

History and to continue transformation of our company. We remain committed to delivering on our brand promise each and every day.

Ralph Andretta: Credit sales grew 7% year-over-year in Q1, driven by successful new partner launches across our full product suite and increased shopping activity with our long-standing partners, especially among Gen Z and millennials. Consumers are being thoughtful and budgeting actively amid lower sentiment and confidence in higher fuel costs. In Q1, we saw year-over-year sales growth across a broad set of verticals, including health and beauty, jewelry, and travel and entertainment. Additionally, our expanding home vertical grew nicely in Q1. In the current macroeconomic environment, consumers continue to demonstrate resilience, as highlighted by credit sales growth as well as improving delinquency rates. We will continue to closely monitor and adapt appropriately to consumer spend and payment behaviors. On the new brand partner front, we were excited to launch new credit card relationships with Ford and Ethan Allen in Q1.

Today bread Financial reported, strong first quarter results, which were underscored by a return to loan. Growth alongside increasing growth and credit sales and continued improvement in our credit metrics.

Credit sales, grew 7% year-over-year in the first quarter driven by successful, new partner, launches across our full product suite and increased shopping activity with our long-standing partners, especially among gen Z. And Millennials, consumers are being thoughtful, and budgeting actively amid, lower sentiment and confidence and higher fuel costs. In the quarter, we saw year-over-year sales growth across a broad set of verticals, including Health and Beauty jewelry, and travel and entertainment. Additionally, our expanding home, vertical grew nicely in the quarter and the current macroeconomic environment. Consumers, continue to demonstrate resilience as highlighted by credit sales growth as well. As improving delinquency rates. We will continue to closely Monitor and adapt appropriately to Consumer spend and payment behaviors.

Ralph Andretta: Our long-term agreement with Ford, which has one of the largest dealer networks in the US with nearly 3,000 franchise dealerships, includes co-brand credit card and installment loan programs. Leveraging our deep expertise in the automotive retail landscape, the program will increase customer loyalty by enhancing their car ownership experience through earned rewards and increasing accessibility to subscriptions, parts, and services. The addition of Ethan Allen, America's number one premium furniture retailer with nearly 140 design centers and a significant online presence in the US, strengthens our prominence in the home vertical with flexible financing options. We are also offering Bread Pay installment loans for AAA, Dell, and Ford as we continue to expand this product offering. Additionally, we are pleased to announce the new comprehensive suite of payment options with Academy Sports, including co-brand, private label, and installment loans.

On the new brand partner front, we were excited to launch a new credit card relationship with Ford and Ethan Allen in the quarter. Our long-term agreement with Ford, which has one of the largest dealer networks in the US with nearly 3,000 franchise dealerships, includes co-brand credit card and installment loan programs leveraging our deep expertise in the automotive retail landscape. The program will increase customer loyalty by enhancing their car ownership experience through earned rewards and increasing accessibility to subscriptions, parts, and services.

The addition of Ethan Allen, America's number 1, Premium Furniture retailer with nearly 140 design centers and a significant online presence in the US. Strengthens our prominence in the home vertical with flexible financing options.

Ralph Andretta: Our full product suite, technology advancements, sophisticated underwriting, enhanced loyalty programs, and a differentiated partner model are central to our success in winning new partnerships, retaining and strengthening existing relationships, and driving higher lifetime customer value. Our first quarter financial results highlight our company's strong capital and cash flow generation, earning net income of $181 million, generating revenue growth of 5% year over year, and growing tangible book value per common share by 26% to $61.57. Additionally, during the quarter, we continued to build shareholder value as we retired a total of 3.5 million shares of common stock or 8% of our outstanding shares at year-end 2025. This was a result of both our ongoing stock repurchase activity and the unwind of our capped call transactions. For six consecutive quarters, we have seen improvement in our credit metrics via the year-over-year change in our delinquency and net loss rates.

We are also offering Bread. Pay installment loans for AAA, Dell, and Ford as we continue to expand this product offering. Additionally, we are pleased to announce the new comprehensive suite of payment options with Academy Sports, including co-brand, private label, and installment loans. Our full product suite, technology advancements, sophisticated underwriting, enhanced loyalty programs, and a differentiated partner model are central to our success in winning new partnerships and retaining and strengthening existing relationships, and driving higher lifetime customer value.

A first quarter Financial results. Highlight our company's strong capital and cash flow generation. Earning net income of 181 million generating, Revenue growth of 5% year-over-year, and growing tangible book, value per common share, by 26%, to 6157 additionally, during the quarter, we continue to build shareholder value as we retire. A total of 3.5 million shares of common stock, or 8% of our outstanding shares at year, end 2025

This was a result of both our ongoing stock repurchase activity and the unwind of our cap, call transactions.

Ralph Andretta: We are pleased with this trend and remain confident that this improvement will continue over time. We believe our emphasis on disciplined credit risk management, coupled with product diversification towards co-brand credit cards and installment products, continues to positively impact our risk distribution. Overall, our solid, sustainable results underscore the success of our efforts and emphasis on allocating capital efficiently, growing responsibly, and advancing our operational excellence initiatives. Finally, moving to our investment priorities. We continue to invest in our business to drive growth for both Bread Financial and our partners. These investments include digital and technology advancements across our business, including AI. We are deploying AI responsibly across the enterprise to accelerate operational excellence, which includes increasing productivity and efficiency, driving innovation, and strengthening risk management. Our investments are reinforced by a disciplined value tracking framework, ensuring a strong return on investment.

For 6 consecutive quarters. We have seen improvement in our credit metrics via the year-over-year change in our delinquency and net loss rates. We are pleased with this trend and remain confident that this Improvement will continue. Over time, we believe our emphasis on disciplined credit risk management coupled with product diversification towards co-brand credit cards and installment products continues to positively impact our risk distribution.

Overall, our solid, sustainable results underscore the success of our efforts and emphasis on allocating capital, efficiently growing responsibly, and advancing our operational excellence initiatives. Finally, moving to our investment priorities, we continue to invest in our business to drive growth for both Bread Financial and our partners. These investments include digital and technology advancements across

Ralph Andretta: Supported by technology advancements, strong capital levels, and cash flow generation, we are well-positioned to execute on our capital and growth priorities while delivering sustainable long-term value for our shareholders. We remain confident that we will deliver on our 2026 financial targets, which Perry will discuss in more detail. Now, I will pass it over to Perry.

Across our business, including AI, we are deploying AI responsibly across the enterprise to accelerate operational excellence, which includes increasing productivity and efficiency, driving innovation, and strengthening risk management. Our investments are reinforced by a disciplined value tracking framework, ensuring a strong return on investment.

Perry Beberman: Thank you, Ralph. Slide three highlights our Q1 performance. During the quarter, credit sales of $6.5 billion increased 7% year-over-year, which can be attributed primarily to new partner growth, as well as increased general purpose spending. We are pleased that loan growth has inflected positively, as average loans increased 1% to $18.3 billion. End-of-period loans increased 2% to $18.1 billion. We plan to continue building on this momentum throughout 2026. Direct-to-consumer deposits increased 10% year-over-year to $8.7 billion at quarter end, with our average direct-to-consumer deposits representing 48% of total funding, up from 43% a year ago. Revenue increased $48 million or 5%, primarily reflecting the implementation of pricing changes and lower interest expense, partially offset by lower bill and late fees, and higher retailer share arrangements. In total, we generated net income of $181 million and diluted EPS of $4.15.

Supported by technology and advancements, strong capital levels, and cash flow generation, we are well positioned to execute on our capital and growth priorities, while delivering sustainable, long-term value for our shareholders. We remain confident that we will deliver on our 2026 financial targets, which Perry will discuss in more detail. Now, I will pass it over to Perry.

During the quarter credit sales of 6.5 billion increased 7% year-over-year which can be attributed primarily to new partner growth, as well as increased general purpose spending. We are pleased that loan growth has inflected positively as average loans increased. 1% to 18.3 billion dollars and end of period loans increase 2% to 18.1 billion.

We plan to continue building on this momentum throughout 2026.

Direct to Consumer deposits increased 10% year-over-year to 8.7 billion at quarter, end with our average, direct to Consumer, deposits representing 48% of total funding up from 43% a year ago.

Revenue increased 48 million or 5%, primarily reflecting the implementation of pricing changes and lower interest expense partially offset by lower. Build late fees, and higher retailer share Arrangements.

Perry Beberman: Note that our EPS calculations now reflect dividends paid on preferred equity. Looking at the financials in more detail on Slide 4. Q1 total net interest income increased 6% year-over-year, driven by the gradual build of our pricing changes and lower interest expense. Non-interest income was $13 million, lower year-over-year, driven by higher retailer sharing arrangements, which includes both higher credit sales-related partner payments and increased profit share, driven by improved loan yields and credit losses. Total non-interest expenses decreased $5 million or 1%, reflecting our ongoing expense discipline and a credit received during the quarter. Looking at the expense line item variances, which can be seen in the appendix, employee compensation and benefits costs increased $5 million, primarily due to higher wages related to annual merit increases in incentive compensation.

In total, we generated net, income of $181, million and diluted EPS of $4.15, note that our EPS calculations now, reflect dividends paid on preferred equity.

Looking at this financials in more detail on slide 4, first quarter total, net interest income, increased 6% year-over-year driven by the gradual build of our pricing changes and lower interest expense.

Non-interest income was 13, million lower year-over-year driven by higher retailer, share Arrangements, which includes both higher credit sales related partner payments, and increased profit share driven by improved loan yields and credit losses.

Total non-interest expenses, decreased 5 million of 1%, reflecting our ongoing expense disciplined and a credit received during the quarter.

Perry Beberman: Information processing and communication expenses decreased $5 million, primarily due to lower outsourced data processing costs as a result of a credit received in the quarter. Finally, PPNR was strong as it increased $53 million or 11% year-over-year. This is a result of risk-based pricing discipline, driving higher revenue yield while at the same time delivering sound operating expense management. Turning to Slide 5. Net interest margin of 19.3% increased year-over-year and sequentially as loan yields continue to benefit from the gradual build of pricing changes and funding costs continue to improve. To that end, we are seeing interest expense decrease as our cost of funds benefits from the actions we took last year to reduce our parent senior notes from $900 million to $500 million and reduce the rate paid from 9.75% to 6.75%.

Looking at the expense line item variances, which can be seen in the appendix employee compensation and benefits cost increased 5 million primarily due to higher wages related, to annual, Merit increases in incentive compensation.

Information processing and communication expenses, decreased 5 million primarily due to lower. Outsourced data processing costs as a result of a credit received in the quarter.

Finally, PPNR was strong, as it increased $53 million, or 11% year-over-year. This is a result of risk-based pricing discipline driving higher revenue yield, while at the same time delivering sound operating expense management.

Turning the slide 5.

net interest margin of 19.3% increased year-over-year and sequentially as loan yield continue to benefit from the gradual build of pricing changes and funding costs continue to improve

Perry Beberman: Additionally, during the quarter, we repurchased $50 million of our subordinated debt using excess cash and now have $350 million in principal outstanding. Moving to Slide 6. Our liquidity position remains strong. Total liquid assets and undrawn credit facilities were $6.4 billion at the end of the quarter, representing nearly 29% of total assets. At quarter end, deposits comprised 78% of our total funding, with the majority being FDIC-insured direct-to-consumer deposits. Shifting to capital. We ended the quarter with a CET1 ratio of 13.3%, up 130 basis points compared to last year. As you can see in the upper right table, our CET1 ratio benefited by 340 basis points from core earnings.

To that to that end, we are seeing interest expense decrease as our cost of funds benefits from the actions. We took last year to reduce our parent senior notes from 900 million to 500 million and reduce the rate paid from 9.75% to 6.75% additionally during the quarter. We repurchased 50 million of our subordinated debt using excess cash and now have 350 million in principal outstanding.

Moving to Slide 6, our liquidity position remains strong.

Total liquid assets and undrawn credit facilities were $6.4 billion at the end of the quarter, representing nearly 29% of total assets.

At quarter end, deposits comprise 78% of our total funding, with the majority being FDIC insured, direct-to-consumer deposits.

Perry Beberman: Common stock repurchases and preferred and common stock dividends reduced our capital ratios by 210 basis points, while the impact from costs related to debt repurchases accounted for approximately 40 basis points of impact to CET1 since Q1 2025. Additionally, we are very pleased with the outcome of our cap call transactions, which we retained after fully repurchasing our convertible notes last year. We elected to unwind the cap call in exchange for shares of common stock, and the result of the full unwind was the retirement of 1.5 million shares in the quarter. As of quarter end, our remaining stock repurchase authorization was $690 million. Our share repurchase cadence going forward will be contingent upon capital generation from our business, our growth outlook, incremental investment expectations, and the resulting capital levels against our capital policy targets.

Shifting the capital. We ended the quarter with a CET1 ratio of 13.3%, up 130 basis points compared to last year, as you can see in the upper right table. Our CET1 ratio benefited by 340 basis points from core earnings.

Common stock repurchases, and preferred and common stock dividends reduced our Capital ratios by 210 basis points. While the impact from costs related to debt repurchases accounted for approximately 40 basis points of impact to cet1. Since the first quarter of 2025,

Additionally we are very pleased with the outcome of our cap call transactions which we retained after we fully repurchasing, our convertible notes. Last year, we elected to unwind the cap call in exchange for shares of common stock. And the result of the full unwind was the retirement of 1.5 million shares in the quarter.

Perry Beberman: Additionally, we look to further optimize our capital structure in the future by issuing additional preferred shares. The timing of potential additional preferred share issuances will be predicated based on market conditions. That timing will influence the cadence of subsequent common share repurchases. Finally, looking at the bottom right of the slide, our total loss absorption capacity, comprising total company tangible common equity plus credit reserves, ended the quarter at 25.5% of total loans, demonstrating a strong margin of safety should more adverse economic conditions arise. We have a proven track record of accreting capital and generating strong cash flow and remain well-positioned from a capital, liquidity, and reserve perspective. This provides stability and financial flexibility to successfully navigate an ever-changing economic environment while generating increased value for our shareholders. Moving to credit on Slide 7.

As of quarter end, our remaining stock repurchase authorization was 690 million. Our share repurchase Cadence going forward, will be contingent upon Capital generation from our business. Our growth Outlook incremental investment expectations and the resulting Capital levels against our Capital policy targets.

Our capital structure in the future by issuing additional preferred shares the timing of potential additional. Preferred share issuances will be predicated based on market conditions. That timing will influence the Cadence of subsequent common share repurchases.

Finally, looking at the bottom right of the slide, our total loss absorption capacity. Comprising total company tangible, common Equity, Plus Credit reserves, end of the quarter 25.5% of total loans. Demonstrating a strong margin of safety. Should more adverse economic conditions arise

We have a proven track record of accreting capital and generating strong, cash flow and remain. Well positioned from a capital liquidity and Reserve perspective.

This provides stability and financial flexibility to successfully navigate and ever-changing economic environment, while generating increased value for our shareholders.

Perry Beberman: Our delinquency rate for Q1 was 5.59%, down 34 basis points from last year and down 16 basis points sequentially. Our net loss rate was 7.33%, down 83 basis points from last year and down 10 basis points sequentially. We remain pleased with the ongoing gradual improvement in our credit metrics, which continue to benefit from our prudent credit risk management framework, ongoing product mix shift, and overall consumer resilience. New investors often ask how to think about our portfolio and typical customer. Our typical customer represents a middle-income American. For context, our new customers have an average annual income of around $100,000. As Ralph mentioned, our consumers remain resilient as evidenced by improving credit trends in our monthly external credit performance data, what we are seeing in our internal data, and hearing from customers contacting us that our teams monitor continuously.

Moving to credit on slide 7.

Our delinquency rate for the first quarter was 5.59% down 34 basis points from last year and down 16 basis points sequentially.

Our net loss rate was 7.33% down 83 basis points from last year and down 10 basis points sequentially.

We remain pleased with the ongoing gradual Improvement, our credit metrics which continue to benefit from our prudent. Credit risk management framework ongoing product mix shift and overall consumer resilience

New investors often ask how to think about our portfolio and typical customer our typical customer represents a middle-income American for context our new customers. Have an average annual income of around, a hundred thousand dollars as Ralph mentioned, our consumers remain resilient as evidence by improving credit Trends in our monthly, external credit performance data. What we are seeing in our internal data and hearing from customers contacting us, that our teams monitored continuously,

Perry Beberman: The Q1 reserve rate improved 73 basis points year-over-year to 11.46% due to our improving credit metrics and higher credit quality new vintages, as well as stability in our credit risk distribution, with 64% of cardholders having a greater than 650 prime credit score. Note that per investor requests, we have updated our published credit risk distribution ranges to more closely match peer ranges. Compared to the prior quarter, the reserve rate increased 26 basis points, which was impacted by the seasonal pay-down of holiday-related transactor balances during Q1. We continue to apply prudent weightings on the economic scenarios used in our credit reserve modeling, given the wide range of potential macroeconomic dynamics, including ongoing uncertainty regarding trade policy and global conflicts, and then the downstream impacts on inflation and unemployment. These weightings remained unchanged from the prior quarter.

The first quarter Reserve rate, improves 73, basis points year-over-year to 11.46% due to our improvement credit metrics and higher credit quality, new vintages as well as stability in our credit risk distribution with 64% of card holders, having a greater than 650 Prime credit score.

Note.

That per investor requests. We have updated our published credit risk, distribution ranges to more closely matched. Peer ranges

Compared to the prior quarter, the reserve rate increased 26 basis points which was impacted by the seasonal, pay down of holiday related transactor, balances during the first quarter.

We continue to apply prudent weightings on the economic scenarios used in our credit reserve modeling, given the wide range of potential macroeconomic dynamics, including ongoing uncertainty regarding trade policy and global conflicts, and then the downstream impacts on inflation and unemployment.

These weightings remained unchanged from the prior order.

Perry Beberman: Turning to Slide 8 and our full-year 2026 financial outlook. Our 2026 outlook is unchanged and is based on our strong Q1 business results, continued consumer resilience, inflation remaining above the Federal Reserve target of 2%, and a generally stable labor market. As we mentioned earlier, we're pleased to have reached an inflection point to positive loan growth in Q1. We expect full-year 2026 average credit card and other loan growth to be up low single digits compared to 2025. Growth will continue to be supported by our stable partner base and new business launches, credit sales growth, and continued credit loss rate improvement, partially offset by higher cardholder payment rates. Total revenue growth is anticipated to be up low single digits, largely in line with average loan growth.

During the slide 8 and our full year 2026 Financial Outlook.

Our 2026 Outlook is unchanged and is based on our strong first quarter business results. Continued consumer resilience inflation remaining above the Federal Reserve Target of 2% and they generally stable labor market.

As we mentioned earlier, we're pleased to have reached an inflection point to positive loan. Growth in the first quarter, we expect full year, 2026, average, credit card and other loans, other loan growth to be up low, single digits compared to 2025

Growth will continue to be supported by our stable partner base and new business launches credit sales growth and continued. Credit loss, rate Improvement, partially offset by higher card. Holder payment rates.

Perry Beberman: We anticipate full-year net interest margin to be higher than 2025 as a result of continued benefits, albeit slowing, from implemented pricing changes and improving funding costs. The incremental benefits tied to pricing changes slowed throughout the year as the majority of our portfolio will have repriced. These NIM tailwinds will be partially offset by lower billed late fees from improving delinquency trends, higher payment rates, and a continued shift in risk and product mix. For non-interest income, we expect meaningfully higher retail share arrangements, or RSAs, going forward as a result of both higher credit sales-related partner payments and increased profit share driven by improved loan yields and credit losses. Specifically for Q2, we expect this dynamic to pressure non-interest income up to $40 million compared to Q1 2026.

Total revenue growth is anticipated to be up low, single digits largely in line with average loan growth, we anticipate full year, net interest margin to be higher than 2025, as a result of continued benefits. Albeit slowing from implementing changes in improving funding costs.

The incremental benefits tied to pricing changes, slow throughout the year as the majority of our portfolio will have repriced.

These Nim Tailwind will be, partially offset by lower. Build late, fees from improving delinquency Trends, higher payment, rates and a continued shift in risk and product mix.

For non-interest income. We expect meaningfully higher retail, share arrangements or rsas going forward as a result of both higher credit sales related partner payments, and increased profit, share driven by improved loan yields and credit losses.

Perry Beberman: We manage expense growth based on revenue generation and investment opportunities and expect to deliver positive operating leverage in 2026, excluding the pretax impacts from debt repurchases. We expect Q2 total expenses to be up sequentially from Q1 as we continue to invest in our business to drive growth, build new capabilities for our partners and customers, and deliver future efficiencies. Initial estimates of the Q2 expenses are just under $500 million. Given the ongoing gradual improvement in our credit metrics, we are on track to achieve a net loss rate at the low end of our 7.2% to 7.4% targeted range for 2026. This guidance contemplates stable macroeconomic conditions, continued risk and product mix shifts, and a resilient consumer.

40 million compared to the first quarter of 2026.

We manage expense growth based on revenue, generation and investment opportunities, and expect to deliver positive operating leverage in 2026, excluding the pre-tax impacts from debt repurchases. We expect second-quarter total expenses to be up sequentially from the first quarter, as we continue to invest in our business to drive growth, build new capabilities for our partners and customers, and deliver future efficiencies. Initial estimates of second-quarter expenses are just under $500 million.

Given the ongoing gradual Improvement, our credit metrics, we are on track to achieve a net loss rate at the low end of our 7.2 to 7.4%. Targeted range for 2026.

This guidance contemplates stable, macroeconomic conditions.

Continued risk and product mixed shifts and a resilient consumer.

Perry Beberman: We continue to expect our full-year normalized effective tax rate to be in the range of 25% to 27%, with quarter-to-quarter variability due to the timing of certain discrete items. Our strong results in Q1 2026 are a testament to the successful execution of our company's transformation efforts, the capital generation power of our business model, and our financial resilience due to our relentless and disciplined focus on capital and risk management. We are proving that we will deliver on what we say we will. Our PPNR growth, continued improvement in our credit metrics moving toward our historical loss target, and ongoing capital optimization demonstrate our commitment and path to achieving our longer-term mid-20% ROTCE target in the coming years.

We continue to expect our full year. Normalized effective tax rate to be in the range of 25 to 27%.

With quarter to quarter variability, due to the timing of certain discrete items.

Our strong results in the first quarter of 2026 are Testament to the successful execution of our company's transformation efforts. The capital generation power of our business model and our financial resilience due to our Relentless and disciplined focus on Capital and risk management.

We are proving that we will deliver on what we say. We will

Our pp&r growth continued improvement in our credit metrics, moving toward our historical loss, Target and ongoing Capital optimization, demonstrate our commitment and path to achieving our longer term.

Perry Beberman: In closing, we remain confident in achieving our 2026 outlook and further in our ability to generate attractive returns and increase value for our shareholders throughout the dynamic economic and regulatory environments. Operator, we're now ready to open up the line for questions.

Mid 20%. Roxy Target. In the coming years.

in closing, we remain confident in a 2026 Outlook and further, in our ability to generate attractive returns and increase value for our shareholders throughout,

The dynamic economic and regulatory environments.

Operator. We're now ready to open up the lines for questions.

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star followed by one-one on your telephone keypad. If you change your mind, please press star one one again. When preparing to ask your question, please ensure your phone is unmuted locally. One moment for our first question. Our first question will come from the line of Vincent Caintic with BTIG. Your line is open. Please go ahead.

1 by 1 1, on your telephone keypad. If you change your mind, please press star, 1 1 1. Again, when preparing to ask your question, please ensure your phone is unmuted. Locally 1 moment for our first question.

Vincent Caintic: Hi, good morning. Thanks for taking my questions. First one, kind of a broad question on guidance. Q1 was strong. Revenues grew 5% year over year, and your credit sales were up 7%, and loan growth is nice to see that be positive. I'm a bit surprised to see loan growth and revenue growth guidance low single digits. Just wondering maybe if you can talk about what's baked into guidance and any conservatism there, and how we should kind of expect that cadence of growth to be for the rest of the year. Thank you.

Our first question will come from the line of Vincent kintech with btig. Your line is open, please go ahead.

Hi, good morning, thanks for taking, uh, my questions. Um, first 1 kind of a broad question on on guidance.

Perry Beberman: Yeah, Vincent, thanks for the question. Look, we are really pleased with the first 90 days of results. Our thoughts on guidance is we're off to a really good start, and that gives us a high degree of confidence to share that, and we are able to reaffirm guidance and feel very confident in our ability to achieve the guidance across all the things that you just talked about. With the degree of uncertainty in the macro environment, it feels a little premature to declare victory yet that we can then up it. Again, if the trends continue on into Q2, I think there's some optimism there. Remember, on average loan growth, that's an average. What you're seeing there, we're up almost 2% on ending.

Um, you know, first quarter was strong. Revenues grew 5% year-over-year, and your credit sales were up 7%. And loan growth is nice—good to see that be positive. So, a bit surprised to see, you know, loan growth and revenue growth guidance kind of low single digits. So just wondering maybe if you can talk about what's baked into guidance and any conservatism there, and how we should kind of expect that cadence of growth to be for the rest of the year. Thank you.

Yeah, Vincent. Uh, thanks for the question. Look, we are really pleased with the first 90 days of results. And, you know, our, our thoughts on guidance is, you know, we're off to a really good start and that gives us a high degree of confidence, uh, to share that. And we were able to reaffirm guidance and um feel very confident. Our ability to achieve the guidance across all the things that you just talked about. Um, you know, with the degree of uncertainty in the macro environment, it feels a little premature to the declare Victory yet that we can then up it. Um you know but again if the if the trends continue on into the second quarter or you know I think there's some optimism there but on on the average. Remember on average loan growth that that's an average of what you're seeing where you're working.

Perry Beberman: expect for the year, that will continue to grow throughout the year to get us to that low single digit on average. That's going to build. We expect ending loans to be higher than low single digits.

Perry Beberman: Expect for the year, that will continue to grow throughout the year to get us to that low single digit on average. That's going to build. We expect ending loans to be higher than low single digits.

Almost 2% on ending expect the year that will continue to grow throughout the year to get us to that, uh, that low single digit on average, so that's going to build. Um, but, you know, we expect to, you know, ending loans to be higher than low singles.

Vincent Caintic: Okay, great. That's helpful. Thank you for that. Second question on the share repurchases. Very nice to see the strong quarter and also nice to see the increased authorization. You talked a little bit about it, but if you could maybe help us on how to think about cadence, how much of future share repurchases are based off of having to raise those preferred equities? Any thoughts on kind of long-term CET1 framework? Thank you.

Perry Beberman: Yeah. When you think about the cadence, when we announced the additional share buyback program, we didn't time-bound it, so it's open-ended. The cadence will be informed by first the amount of growth that we have in any particular quarter, making sure that obviously we maintain our capital ratios, that we're supporting the growth first and foremost. Then if we have additional capital at that point, we'll try to return it to keep closer to our capital targets. As the cadence around additional share repurchases beyond that, we've talked before about the opportunity around preferred share issuance, and that will be largely market dependent. It seems like you can't wake up any morning and think you don't know what's going to be the news cycle and what the markets are going to demand.

Okay, great. That's uh, helpful, thank you for that. Um, and then second question on the Sherry purchases, so, very nice to see the strong quarter, and also nice to see the increased authorization. Um, and you talked a little bit about it. But if you could maybe help us on how to think about Cadence, you know, how much of future share purchases are are, are are based off of having to raise those preferred equities and then they need thoughts on um kind of long-term C1 framework. Thank you.

Perry Beberman: Obviously we're actively monitoring those markets, and we'll opportunistically issue, and that would then generate some additional opportunity for capital return should that happen. That's cared for in the overall share authorization. The cadence and the amount that we're able to use this year will somewhat be dependent on obviously earnings generation and the preferred share issuance. As you look longer term, we said during our investor day back in 2024 that we're looking to optimize our capital stack and the preferred issuance is a component of that. Then the new to story would be the Basel III endgame opportunity, should that go into effect. For us, we would look at that as the standardized approach, and that could be an opportunity where if it lowers our risk weighting for our assets, that could free up maybe another 100 basis points of opportunity around capital.

Um the Cadence will be, you know, informed by first the amount of growth that we have in any particular quarter um making sure that you know, obviously we maintain our Capital ratios that we're supporting the growth first and foremost. And then if we have additional Capital at that point, we, you know, we'll, we'll try to return it to keep closer to our Capital targets as um, you know, the Cadence around, um, additional share repurchases beyond that, you know, we've talked before about the opportunity, uh, around preferred share issuance and that will be largely, um, you know, Market dependent, uh, you know, with it seems like you can't wake up any morning and think there's, you don't know what's going to be the news cycle and and what the markets are going to demand. So obviously we're, we're actively monitoring those markets and we'll, we'll opportunistically issue and that would then generate some additional opportunity for, uh, Capital return. Should that happen? So that's cared for in the overall, share authorization. So the Cadence and the amount that we're able,

Perry Beberman: More to come on that. Obviously, everybody's looking at it, and obviously, we're very pleased that the Federal Reserve is thoughtfully looking to simplify in some cases and free up capital for banks. Again, that's in proposal stage, so nothing we can bank on that yet.

The Basel 3 endgame opportunity, you know, should that go into effect and and for us, you know, we would look at that as the standardized approach and, you know, that could be an opportunity where if it lowers? Our risk waiting for our assets, uh, that could free up. Maybe another 100 basis points of opportunity, um, around Capitol, so more to come on, that. Obviously, everybody's looking at it and obviously we're very pleased that the Federal Reserve is, um, you know, thoughtfully looking to simplify in some cases and and free up capital for for banks. But you know, again, that's that's the only proposal stage. So nothing we can Bank on that yet.

Vincent Caintic: Okay, great. Very helpful. Thank you.

Perry Beberman: Thanks, Vincent.

Okay, great. Very helpful. Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Mihir Bhatia with Bank of America. Your line is open. Please go ahead.

Thanks. Thank you. One moment for our next question.

Our next question will come from the line and meet her Patilla with Bank of America. Your line is open, please go ahead.

Natalie Howe: Hey, thanks for taking my question. This is Natalie Howe on for Mihir. Wanted to ask a little bit about how pricing changes are flowing through the model. You talked about how it would be a tailwind through 2027, and you highlighted it as a driver for the quarter. As that flows through, what else are you looking at for the year as levers for NIM stability? And along with that, where are rate cuts or increases fitting into this? Thank you.

Hey, thanks for taking my question. This is Natalie. How on for me here? Um, so I wanted to ask a little bit about how pricing changes are flowing through the model. You talked about how it would be a Tailwind through 2027 and you highlighted it as a driver for the quarter. Um so as that flows through, what else are you looking at for the year as lovers for Nim stability. And along with that we're a rate Cuts increases fitting into this. Thank you.

Perry Beberman: Yeah. When you're talking about pricing changes, that has been a nice, sorry, tailwind for us. Largely, it's working its way through, and so the degree of benefit that we're going to see incrementally throughout the year is going to slow. It'll gradually still be in accretive, but it is slowing. We've got most of the portfolio is repriced, and that's something that's been a tailwind. With net interest margin, as we look outward, I'd like to say it's going to be reasonably stable because we do have some rate cuts still playing in there, and we are slightly asset sensitive at this point. You also have ongoing product mix that will affect NIM. Cash mix will affect NIM. Credit quality, the good and the bad in that, I mean, in that as credit quality improves, you may have some lower top-line APRs.

Yeah, so when you're, when you're talking about pricing changes that has been a nice, sorry, Tailwind for us. Um, you know, largely, it's it's working its way through. And so the the degree of benefit that we're going to see incrementally throughout the year is going to slow, it'll gradually still be in a creative, um, but it is Sloane. So we've got most of the portfolio is repriced, um, and that's something that's been a, a Tailwind, you know, with net interest margin, you know, as we look outward, I like to say, it's going to be reasonably stable because you do have, we do have some, you know,

Perry Beberman: You will have lower reversal issue fees. That's also good, but you also have lower late fees. That's a drag. There are a lot of moving parts in there. On net interest margin as well, you have funding that, with the work that our treasury team has done and that we've done in terms of increasing direct-to-consumer deposits, that's been a positive. There's a lot of moving parts. I think when you think about it's stability, but we're very pleased with where we are. Our philosophy as it comes to underwriting is going to pay for the risk that we take, and making sure that we're appropriately assigning APRs at that time. You can see that with our strong risk-adjusted margin that we have been delivering.

Some great pets, still playing in there and we are slightly asset sensitive. At this point, you also have ongoing product mix, that will affect men, cash, mix will affect them. Um, credit quality, you know, the good and the bad in that. I mean, in that as you know, credit quality improves, you may have some lower Topline aprs. You may also have, you will have lower reversal of issues. That's also good, but you also have lower late fees. That's a drag. So, there's a lot of moving Parts in there, um, on net interest, Mar as well. You have funding that, you know, with the work that our treasury team has done. And that we've done in terms of increasing direct consumer deposits. That's been a positive, um, but there's a lot of moving parts. So, you know, I think we think about it. It's it's stability and um, but we're very pleased with where we are and you know our philosophy as it comes to underwriting is going to paid for the risk that we take uh and making sure that we're properly assess

Assigning aprs at that time. And you can see that with our strong risk adjusted margin that we have been delivering,

Natalie Howe: Got it. Thank you. If I could ask really quickly about travel and entertainment. You said that there was strength there in the quarter, but right now with current fuel prices and sentiment, how durable is that as a driver right now, and how are you guys looking at the rest of the year?

Ralph Andretta: Yeah. This is Ralph. The consumers are being thoughtful on how they spend their money. As gas prices go up, they may decide to pull back on T&E. T&E has been a strong category of us for some time, and we see it being a strong category in the future.

Travel and entertainment, you said that there was strength there in the quarter, but right now, it's a current fuel prices and sentiment. How durable is uh is that as a driver right now? And how are you guys like, looking at the rest of the year?

Yeah, this is Ralph. I, I—you know, the consumers are being thoughtful on how they spend their money. So, you know, as gas prices go up, they may—

Decide to pull back on Tenney, but ten is been a strong category category or for some time we you know, we see it being a strong category in the future.

Natalie Howe: Got it. Thank you.

Got it. Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Bill Ryan with Seaport Research Partners. Your line is open. Please go ahead.

Thank you. And 1 moment for our next question.

Bill Ryan: Hi. Good morning, and thanks for taking my questions. First question is on the loan growth. I know you made some pricing changes, and in terms of how payments are applied, that has led to an increase in the accrued interest and fee component of the portfolio. It was up fairly nicely in Q1. I guess looking forward, how much impact is that going to have on the receivables growth going forward? Is it going to stabilize at some point as a percentage of the portfolio? Or do you still expect that to increase?

Our next question will come from the line of Bill Ryan with C. Port Research Partners. Your line is open. Please go ahead.

Hi, good morning, and thanks for taking my questions. Um, first question is on the loan growth. Um, I know you made some pricing changes and, in terms of how payments are applied, uh, that has led to an increase in the accrued interest and fees component of the portfolio.

Perry Beberman: Yeah, Bill, I appreciate the question. What you're referring to is the change that we had made last year to our minimum payment due payment hierarchy. What we did is we adjusted it to conform with what we were able to do with CARD Act. It just changes the mix a little bit between what portion of interest and fees would be paid versus principal. Maybe you're looking at Trust Data or principal-only data, so that's what influences it. Total loans includes both principal and interest, so there is no effect in total.

Uh, it was you know, fairly nicely in q1. Um, how I I guess looking for uh, how much, uh, impact is that going to have on the receivables growth going forward? Is it going to stabilize at some point as a percentage of the portfolio? Uh, or do you still expect that to increase?

Bill Ryan: Okay. Just one follow-up question related to the NFL portfolio. I know there were some announcements during Q1. Maybe if you could kind of highlight for our investors what those changes were. Are you expecting some acceleration in the portfolio growth? Just give us some highlights of that. Thanks.

Yeah, Bill, I appreciate the question. So, um, what you're referring to is the change that we had made last year to our minimum payment, due payment hierarchy. And, you know, what we did is we adjusted it to conform with what we're able to do with Cardak. So it just changes the mix a little bit between what portion of interest and fees would be paid versus principal. And so maybe you're looking at trust data or principal-only data, so that's what influences. But total loans includes both principal and interest, so there is no effect in total.

Related to the NFL portfolio. I know there were some announcements uh,

Perry Beberman: Yeah. It's Ralph. The announcement was about American Express being now the brand partner for the NFL, and we're thrilled about that because we're partners with both the NFL and American Express. We're still the issuer of the NFL card, so we believe between the NFL, American Express, and us, it's a real touchdown in terms of good for our consumers and good for the fans. We're excited about it. Yet to be determined what we'll do together, but rest assured it'll be a very exciting partnership.

Ralph Andretta: Yeah. It's Ralph. The announcement was about American Express being now the brand partner for the NFL, and we're thrilled about that because we're partners with both the NFL and American Express. We're still the issuer of the NFL card, so we believe between the NFL, American Express, and us, it's a real touchdown in terms of good for our consumers and good for the fans. We're excited about it. Yet to be determined what we'll do together, but rest assured it'll be a very exciting partnership.

During the first quarter uh maybe if you could kind of highlight for our investors, kind of like what those changes were is are you expecting some acceleration in the portfolio growth? Uh just give us some highlights of that. Thanks.

Bill Ryan: Okay. Thank you.

Yeah, it's Rob. I, you know, the, um, the announcement was about an American Express. Bring the now, the, the brand brand partner for the NFL, and we're thrilled about that because we're partners with both, the NFL and American Express, uh, you know, we're still the issue of the NFL cards. So we believe, you know, between the NFL, you know, American Express and us. It's a real touchdown in terms of of good for our consumers and good for for everything, for the, you know, for the fans. So we're excited about it. Uh, you have to be determined what we'll do together but uh, rest assured it, it'll be a very very uh, exciting partnership.

Okay, thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Moshe Orenbuch with TD Cowen. Your line is open. Please go ahead.

Thank you. And one moment for our next question.

Our next question comes from online of motion more and Beck with TD cow in. Your line is open. Please go ahead.

Moshe Orenbuch: Great. Thanks. I was hoping you could kind of talk a little bit about the competitive dynamic in terms of kind of new customers. What's out there, and are there specific verticals of yours that you're thinking about as areas for potentially either new partnerships or portfolio kind of purchase type opportunities?

Great, thanks. I was hoping you could kind of talk a little bit about, um, the competitive dynamic in terms of, uh, you know, kind of new, uh, you know, kind of new customers. Like, what's, uh, you know, what's out there, and are there specific verticals of yours, uh, you know, that you're thinking about, you know, as areas for potential, either new partnership.

Ralph Andretta: Yeah, Moshe. Yeah, it's Ralph. How you doing? Listen, the home vertical has been real strong for us with the addition of Ethan Allen. We've got Raymour & Flanigan, Furniture First. We find that vertical to be extremely strong. Our vertical in beauty with our beauty partners is extremely strong as well. Adding Ford to our automotive vertical continues to strengthen that with our existing partners. We have a number of de novo opportunities in the pipeline. The pipeline continues to be robust. We win more than our fair share because of our product set and the sophistication of how we underwrite, and as well as the reputation our teams have in the marketplace. We feel pretty confident that as we move forward, we'll continue to add partners to each of our verticals.

Moshe Orenbuch: Got it. Thanks. I apologize to the extent that you talked about this was on the call with your NFL partner for some of that time. Essentially, the macroeconomic kind of variables that are out there, outlook has kind of bounced around, and obviously gas prices kind of matter a lot to your customer. Can you just talk a little bit about how to the extent, how are you thinking about that in terms of your outlook for both credit and spend?

Store portfolio, kind of purchase type opportunities. Yeah, motion. Yeah, tra how you doing? I listen we um, you know we you know, the the home vertical is being real real strong for us, you know, with the addition of Ethan Allen we've got way more on planet again. Furniture first, we find that vertical be extremely strong. A vertical in um, Beauty with, with our Beauty part Partners is extremely strong as well. You know, adding 4 to our to our, you know, Automotive vertical continues to strengthen that with our, with our existing Partners. We have a number of denovo opportunities in the pipeline and the pipeline is, is continues to be robust. Uh, we win more than our fair share, uh, because of our product set and, and the sophistication of how we we underwrite. And as well as how we, um, you know, the, the reputation, our our teams have in the marketplace. So we feel pretty confident that as we move forward, we'll continue to add Partners to, um, to to each of our verticals.

Got it. Thanks. And I apologize to the extent that you've talked about this was, uh, on the call, uh, with your NFL partner for some of that time. But, uh, essentially, you know, the, the, you know, the macroeconomic, uh,

Perry Beberman: Yeah. Thanks very much. It's Perry. You're right. There is a lot of moving parts with the economy right now. As we look at it, top line, with full employment and wages outpacing inflation, that continues to provide resilience to the consumer. You've seen that come through in both the spend and credit metrics we put out there. Yet, while that looks good, you look at then the sentiment and confidence are really low, I mean, some historic lows. With the good support of the employment wage growth, consumers are still engaging in purchasing. They're managing their credit obligations, so the payments have been still solid, and more so, they're probably adjusting their lifestyle, which is good. That's how we've used the word choiceful in the past, and they're adjusting.

Kind of variables that are out there Outlook has kind of bounced around and obviously gas prices, you know, kind of matter a lot, uh, you know, to your customer. Um, can you just talk a little bit about how you took, uh, you know, to the extent? Like, how, how are you thinking about that in terms of your outlook for both credit and spend

Perry Beberman: Now, related to the elevated oil prices, that's something that we're watching because consumers are immediately feeling that at the pump. It hasn't yet really pulled through in the form of, I'll say, other price increases yet on goods and services because, as you know, I mean, the higher oil and higher fertilizer costs or helium costs, it's going to pull through. It's just a matter of when. That's something we're cautious about. We think we have it cared for in our outlook, in terms of being cautious with the reserve rates. Tax refunds, we talked a little about that earlier in the call. Overall, it's been a good guide, and it's helped consumers weather the hopefully short-term price impacts in fuel.

Yeah, thanks much is Perry. Um you know you're right there is a lot of moving Parts with the economy right now. So you know as we look at it Top Line you know with full employment and and wages outpacing inflation that continues to provide resilience to the consumer. And you've seen that come through in both the spend and credit metrics. We put out there but yet while that looks good, you look at then the sentiment and confidence are really low. I mean, some historic lows. So, you know, but you know, with the the good support of the employment and wage growth, consumers are still engaging, like I said in purchasing they're managing their credit obligations, so the payments have been still solid and you know, so more so they're probably adjusting their lifestyle which is it's good. And so that's how we've used the word choice for in the past and they're they're adjusting now related to the elevated oil prices. You know, that that's something that we're watching because consumers are immediately feeling that at the pump. Um, and so what what it hasn't yet really pulled through in the

Perry Beberman: We haven't seen an overwhelming amount of that be used to pay down credit card debt and really improve payments more than you otherwise would have thought. A number of customers, when you look at surveys, particularly for those under 100,000, are saying they're going to try to save a little bit, and maybe it's trying to build a buffer for what's to come for them. Those things are what we're watching. We're cautious. I mean, before I'd say we're cautiously optimistic entering the year. Now I'd say we're more cautious for what's happening out there. The consumer as of right now is resilient, and that's encouraging. We're monitoring it very carefully.

Brian Vereb: Great. Thanks, Perry and Ralph.

Moshe Orenbuch: Great. Thanks, Perry and Ralph.

And maybe is trying to build a buffer for what's to come for them. Um so you know those things are are what we're watching. Um, we're we're cautious, I mean, you know, before I say we're cautiously optimistic, you know, entering the year. Now I'd say we're we're more cautious for for, what's what's happening out there. Uh, but the consumer as of right now is resilient and, and that's encouraging. Um, so but we're very, we're monitoring it very carefully.

Thanks period. Ralph

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. Our next question will come from the line of Sanjay Sakhrani with KBW. Your line is open. Please go ahead.

thank you. And as a reminder, if you would like to ask a question, please press star 1 1 on your telephone.

And our next question will come from the line of sunja Kearney with KBW. Your line is open, please go ahead.

Sanjay Sakhrani: Thank you. Good morning. I guess I first wanted to talk a little bit about the late fee mitigation impact. Perry, I think you mentioned in the press release that that's coming on. I'm just curious, as we think about the magnitude of the contribution of those mitigation impacts, how does it sequence over the course of the year? Does it get more significant as the loan growth materializes more? I want to make sure I understand it. How does it sort of continue into next year? Thanks.

Thank you, good morning. Um, I guess that first wanted to talk a little bit about um the late fee, mitigation impacts Perry. I think you mentioned on in the press release that that's coming on. I'm just curious as we think about the magnitude of the contribution of those mitigation impacts. But how does it sequence over the course of the year? Like does it get more significant as the loan growth materializes more? I'm just I want to make sure I understand it and then how does it sort of continue into next year? Thanks.

Perry Beberman: Yeah. When you look at the new portfolio coming on, that is at our target state pricing. When the repricing on the existing portfolio has taken hold and basically the portfolio is churning through payments and the new purchases coming on at the higher pricing and things of that nature, we're largely most of the way through that pricing pulling through. You're going to see, over the course of the year, a gradually declining amount of benefit. Think about this Q1, where net interest margin's landing. It's expected to be more stable throughout the year, not really expanding as a result of pricing because other things influencing net interest margin are going to play into effect, which is a more diversified product suite. As more customers come in with better credit risk, they have lower APRs. That's going to pull through.

Yeah, when you when you look at the, the new portfolio coming on, you know, that is at our Target State pricing. So when the re-pricing on the existing portfolio has taken hold and basically the the portfolio is turning over turning through, you know, payments and and the new, the new purchases coming on at the, you know, the higher pricing and things of that nature. We're largely, you know, most of the way through that pricing pulling through. So you're going to see a over the course of the year a gradually declining uh amount of benefits. So, think about this first quarter um the where net interest margins Landing is expected to be more stable throughout the year. Not really expanding as a result of pricing because other things influencing net interest margin are going to play into effect, which is a more Diversified product Suite. So as more customers come in with better,

Perry Beberman: Similarly, you're going to see maybe some rate cuts. I think there's a lot of things happening in there, and even from, I talked about it earlier, on credit, that there'll be lower bill late fees as credit continues to improve. A lot of influences in there which allowed for those pricing changes that have been made to offset some of those what would have been headwinds. As you go throughout the year, the benefit of pricing changes alone will start to be muted, as most of it will have been affected through actuals.

Credit risk, they have lower aprs. That's going to pull through. Um, similarly, you're going to see maybe some rate cuts, um, you know, so, I think there's a lot of things happening in there and even from like talked about earlier on credit that they'll be lower build late fees, as credit continues to improve. So a lot of influences in there which allowed for those pricing changes that have been made to offset some of those, what would have been headwinds. But as you go throughout the year, um, the benefit of pricing

Sanjay Sakhrani: Got it. I just have a higher-level question about the charge-off rate. I know we tend to compare it relative to sort of the historical averages, but the mix has shifted on the portfolio as well, right? You guys have moved more towards co-brand, maybe upmarket a little bit more. I'm just curious, as we think about the path going forward towards normalization, is the target the same or a little bit lower than it was in the past? Maybe just as we're talking about credit quality, Perry, you sort of alluded to tax refunds and people saving more. I'm just curious, how should we think about the magnitude of the impact of tax refunds in Q1 and if there's any residual impact into the April month? Thanks.

Changes alone will start to be muted as most of it will then uh you know affected through actuals.

Got it, got it. And then um, I guess I have like a higher level question about the charge off rate. I know we tend to compare it relative to sort of the historical averages, but the mix is shifted on the portfolio as well, right? Like you guys have moved more towards co-brand, maybe a market a little bit more and so I'm just curious as we think about the path. Going forward towards the normalization is the target the same or or a little bit lower than it was in the past. And then maybe just as we're talking about credit quality pair you sort of alluded to tax refunds and people saving more. But I'm just curious, like, has how should we think about the magnitude of the impact of tax refunds in the first quarter? And if there's any residual impact,

Perry Beberman: Thanks, Sanjay. I'll start with the first piece of the equation around the target state of our losses. Because I think there's a view that all co-brands are created equal. We do have some top-of-wallet type of co-brands. You hear Ralph talk about the NFL card earlier, or AAA, or Caesars partnership. Then we also have a lot of retail partner co-brands. And in those partner programs, we're still underwriting deep, and we're getting paid for that risk. The loss profile is kind of replacing what was just only private label. When we talk about our loss rate target, we're still looking to get to a loss rate target that is around 6% or below.

In in into the the April month, thanks.

Thanks, Audrey. Um, I'll start with the first piece of the, the equation, around the target state of our losses. Um, you know, because I think there's a a view that all Co brands are created equal and there we do have some top of wallet type of co-brands that you know your your rough talk about the NFL card earlier or Triple A or or Caesar's partnership but then we also have a lot of retail partner co-brands and in those partner programs we're still underwriting deep and we're getting paid for that risk. So the Lost profile is kind of

Perry Beberman: Now, if the product mix really shifts, I'll say strongly towards top-of-wallet, yes, you may end up with something lower than that, but largely for what we expect and how we underwrite, how we get paid for the risk and the ROTCE targets that we put out there, that around 6% is where we want to live, because that's where you get the best return. That's what we're putting out there and what we're striving to get. Because if we went too far upstream, then we wouldn't be able to deliver the returns that we were looking for.

Perry Beberman: Specific to tax season, I've mentioned this a little bit earlier, or tried to, is that our consumers have seen $300 to $350 of higher tax refunds on average, which is nice, but many who are below $100,000 have stated that they're looking to save some more of that. We have not seen a material increase in payments to date above what you otherwise might have expected. I think it's helping, but it's also, they're probably using some of that to offset some of the near-term gas price impacts that they felt at the pump. We're encouraged overall. In some years, you'd think that might have been more of a stimulus to pay down debt, but consumers are always looking to use it different ways, either to spend on some near-term needs, to save, or pay down debt.

Perry Beberman: In this case, it really hasn't bent the curve in payments as it related to payments. That said, our credit metrics for the quarter and even starting through April, we're seeing that the payments are remaining strong. It just isn't excessively better than what we would like to have seen.

Wouldn't be able to deliver the returns that that we were looking for, then, you know, specific to tax season. Um, you know, I I mentioned, it's a little bit earlier or tried to is that, you know, we've seen, you know, consumers have seen, you know, 300 to 350 dollars of higher tax refunds on average which is nice but many, who are below 100,000 have stated that, they're looking to save some more of that and we have not seen a material increase in payments to date of what you otherwise might have expected. I think it's helping, but it's also, they're probably using some of that to offset some of the near-term, um, gas price impacts that, they felt at the pump. Um, you know, we're encouraged overall it. You know, in some years you think that might have been more of a stimulus to pay down debt. But consumers are always looking to use a different ways either to spend on some near-term needs to save or pay down debt. And in this case, um, it really hasn't really bent the curve in payments as it related to, um, to payments but that

Said, our credit metrics for the quarter—and even starting through April, we're seeing that the payments are remaining strong; it just isn't, like, excessively better than what we, you know, would like to see.

Sanjay Sakhrani: Okay. Well, great. Thank you, guys.

Okay. Well great. Thank you guys.

Operator: Thank you. I'll pass it back to Ralph Andretta for closing remarks.

Ralph Andretta: Well, I want to thank you all for joining the call and your continued interest in Bread Financial. Looking forward to our next quarterly call, and everybody have a wonderful day.

Thank you. I'll pass it back to Ralph Andrea for closing remarks.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

Love. I want to thank you all for joining the call and your continued interest in Bread Financial. Looking forward to our next quarterly call, and everybody have a wonderful day.

Q1 2026 Bread Financial Holdings Inc Earnings Call

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