Bread Financial Holdings, Inc. (BFH) Earnings Call Transcript & Summary

Okay. Welcome, everyone, and thank you for joining this afternoon. My name is Terry Ma. I'm the consumer finance analyst at Barclays. I'm very pleased to have Bread Financial with us today. From the company, we have Ralph Andretta, the President and CEO. We have Perry Beberman, the Chief Financial Officer; and we have Valerie Greer, the Chief Commercial Officer. So the format of this will be a short presentation by Bread and then we are going to go to a fireside chat format. So I'll just turn it over to Ralph.

Terry, thank you, and thank you all for coming to the closing act today in initial room. I appreciate it very much. I'm with -- as Terry said, I'm with Perry Beberman, our CFO; and Val Greer, our Chief Commercial Officer. We have some prepared remarks, and then we're happy to take questions during the fireside chat. So I'd like to start on Slide 3. So regarding the U.S. economy, we're closely monitoring the impact of persistent inflation, rising interest rates and the expiration of student loan forbearance and that has -- the impact it has on our consumer spending as microeconomic uncertainties continue. The current economic headwinds tend to disproportionately impact moderate-to-low income consumers and have led to a moderation of overall consumer spending. And with the addition of the -- of spikes in gas prices, it also hurts our spending. But -- however, in certain categories like beauty and travel and entertainment, we continue to see year-over-year spending growth and other categories like specialty apparel, spending is on a decline. Given the current economic uncertainties, we continue to proactively and responsibly tighten our underwriting and credit line management. We manage our exposure by limiting approval rates, pausing line increases and decreasing lines where prudent. We'll continue to adjust to changing economic -- macroeconomic conditions as appropriate. All of these factors will continue to slow credit sales and loan growth in the back half of the year. If you move to Slide 4, when I joined the company in 2020, I committed to simplifying the business model, advancing technological capabilities and fortifying our balance sheet by reducing leverage and improving our capital position. We have made significant progress in all of these areas, providing a solid foundation for sustainable, profitable growth. This slide highlights several large of our transformation actions we have implemented over the past 3 years that will be stronger, more focused financial services company. We started with the addition of consumer finance industry veterans across all areas of our organization, including our Board of Directors. In particular, John Gerspach, the former CFO of Citigroup, was elected to the Board in 2020 and currently leads our Audit Committee. Joyce Sinclair recently joined our Board, bringing 30 years of industry and risk oversight experience. We also strengthened our executive management team with Perry Beberman and Val Greer, our Commercial Officer, both of whom have extensive credit card lending and financial services experiences. Across our executive team, we have the leaders, who have successfully navigated through numerous economic cycles and industry changes. Each of us joined Bread, because we saw the opportunity to build a disciplined, high-quality financial services company with long-term focus. Through responsible risk management and prudent capital management, we aim to drive sustainable profitable growth that builds long-term shareholder value. Back in 2020, we primarily offered a single product private label credit card. Since then, we have enhanced our lending offerings to provide product diversification across our $18 billion of total credit card portfolio. With over 100 brand partner relationships and our direct-to-consumer offerings, our addressable market is expansive and covers a full range of consumer demographics. We continue to grow with long-term strategic partners such as Ulta and Signet and have added iconic brands like AAA and most recently, Dell Technologies. Dell is anticipated to launch in the fourth quarter of this year. With the renewal of Signet in the first quarter of 2023, we now have our 5 largest partners under contract through at least 2028. Nearly 85% of the loans in our current portfolio are with partners, who are under contract through at least the end of 2025 and providing stability to our business. Our direct-to-consumer deposits have experienced significant growth since inception in 2019 and now exceeds $6 billion. The success of our direct-to-consumer deposit platform has been essential in enabling our growth and diversifying our funding. We have made significant investments to upgrade our core technology and digital capabilities supporting our lending and payment products. We have added a digital product platform, upgraded our core processing services, built out our Enhanced Digital Suite for our partners and most recently developed their own self-service app. These enhancements have enabled us to renew existing brand partners, secure new partners and gain operational efficiencies. We continue to proactively manage our credit risk to protect our balance sheet in the face of challenging economic conditions. Through our focus on proactive conservative credit risk management, we have improved our credit risk distribution close to 60% of our cardholders have over 660 or high Vantage score and that was at the end of the second quarter, which was well above prepandemic levels. Finally, we have strengthened our balance sheet by reducing debt and building capital, while maintaining a conservative loan loss reserve. We tripled our TCE to TA ratio over the last 3 years to 9.4%. We reduced our leverage by $1.7 billion during the same period including paying down parent unsecured debt by more than $500 million last quarter. In doing so, we have enhanced shareholder value, increasing our tangible book value by a compound annual growth rate of 33% since 2020. If you move to Slide 5, our current areas of focus for 2023 are growing responsibly, continuing to strengthen our balance sheet, optimizing data and technology, and strategically investing in our business. As we pursue sustainable profitable growth that builds long-term shareholder value, we will moderate growth below our long-term targets when economic conditions present challenges for our customers. We continue to selectively pursue new partnership opportunities that will be accretive to our business, both de novo park programs and partners with existing portfolios. Additional strengthening of our balance sheet remains integral to our long-term strategy, supported by our strong free cash flow, our balance sheet management actions further enhance our financial resilience and provide additional flexibility. We will continue to build our capital position, we find and improve our funding structure and proactively manage our credit liquidity and interest rate risk. Data and analytics, technology upgrades have enhanced our growth and improved our efficiency. We continue to leverage innovative capabilities gained from our platform conversions, system enhancements and extended product portfolio. We are investing in a range of technology innovations from data and customer analytics to self-service and digital capabilities as we continually strive to deliver exceptional value and experience for our cardholders. Our goal is to continuously generate efficiencies to reinvest in our business to support responsible growth and achieve our targeted returns. I'll turn it over now to Val Greer, our Chief Commercial Officer, to discuss the importance of our product and partner diversification. Thank you.

Thank you, Ralph. Slide 6 represents how our unique business model drives customer loyalty and sales growth to our broad set of product offerings. The expansion of Bread Financial product offerings enabled us to meet a wide variety of needs from our customers, resulting in higher conversion and product adoption rates. As a result, our brand partners can better manage their product mix and optimize their profitability. We offer one of the widest payment product suites in the market, serving the entire generational segment. If we offered only one product, which some of our competitors do, we would miss up to 40% of our customers' preferred payment method. Consumers want the option to spread their purchases across different payment methods, often based on the size of the basket or their preference for rewards. By having access to a rich product mix, consumers can grow with a partner brand and progress into more mature product offerings over time and based on behaviors and needs. The graduation strategy deepens customer engagement with the brand and benefits merchants over the long term. For example, our analytics team can pull new cohorts of shoppers, identify purchase patterns and enable targeted acquisition tactics on both our co-brand and private label products. In addition, we offer personalized, intelligent and optimized messaging solutions that help convert and grow shoppers with our brand partners. These capabilities have enabled Bread to put a card product in the wallets of 1 in 8 American adults. Slide 7 highlights the growing diversification of our product mix which is essential to managing a large credit card portfolio. This diversification better optimizes our risk-adjusted returns to help deliver sustainable, profitable growth. You can see the growing balance between our private label and co-brand spend. With co-brand now comprising approximately 50% of credit sales. By expanding our co-brand portfolio, we can capture incremental sales as consumer spending patterns shift in response to evolving economic conditions. Many of our partners like Ulta, Sephora, Victoria's Secret, offer both private label and co-brand financing options for their customers. This optimizes customers' ability to earn rewards and enhances their lifetime value by graduating from a private label card to a co-brand card when appropriate. The further diversified product mix, we introduced our proprietary card in 2020. Benefits of this product include no partner risk and no sharing of economics. Bread Pay rounds out our lending product suite, by offering buy-now-pay-later options, including both split pay and installment lending, products that are desirable by millennials and Gen Zs. With our full product suite, we've increased our total addressable market and captured incremental spend. This full product suite and supporting capabilities allow us to offer the right product to the right customer, when most relevant. Our comprehensive product suite not only provides a graduation and optimization strategies that increase the lifetime value of a customer for us and our brand partner, but also helps to balance portfolio risk. In addition to our product diversification, Slide 8 illustrates our vertical diversification. We continue to expand our newer verticals and strengthen our share in growing verticals like health and beauty, travel and entertainment. For example, we signed and converted the $1.5 billion AAA co-brand portfolio in the fourth quarter of 2022 and have grown our proprietary card offerings to 5% of our total loans. As a result of our diversified growth, our specialty retail vertical is only 1/4 of overall sales, down from over 50% just a few years ago. We bring value to our partners in several ways, including relevant product and experiences, reward and loyalty, technology, data and analytics. We have a long history of working closely with the brands we serve and are focused on building relationships where we increase value for both parties. We are dedicated to providing solutions that drive loyalty, whether through credit reward programs, promotional financing or payment flexibility that is branded and part of the shopping experience. Our product and partner diversification is especially relevant considering the pending CFPB late proposal. Having moved well beyond offering private label credit cards and specialty retail to a much more diversified vertical and product and consumer mix, we are now better positioned to mitigate the financial impacts of the proposal. We are having productive conversations with our brands regarding those mitigation strategies in preparation for a final ruling. While each program has different potential impact, we are focused on optimizing outcomes for our company as well as for our brand partners. I will now turn it over to our CFO, Perry Beberman.

Thanks, Val. So moving to Slide 9. Looking at our credit performance, our early-stage delinquency rates are trending as expected, with gradual pressure on the consumer due to persistent inflation and rising interest rates. As we noted, July represented the last month that our credit metrics were impacted by the transition of our credit card processing services. Going forward, our metrics will be more aligned with typical seasonal trends, macroeconomic factors and loan growth. As Ralph mentioned, we are seeing slowing sales growth as a result of both moderating consumer spending and our targeted credit tightening, which is slowing loan growth. While credit tightening should benefit net loss dollars in 2024, it will pressure our net loss rate due to reduced loan growth in the next few quarters. Based on our performance quarter-to-date, we are confident of achieving a loss rate at our guided 7% level for third quarter of this year. Looking ahead to the fourth quarter, we see losses dependent on 3 key elements: First, there is the typical seasonal uplift in the net loss rate of approximately 50 basis points from the third quarter to the fourth quarter. Second, we continue to see the additional impact of over 2 years of persistent inflation pressuring consumers in both spend and their ability to recover from mid- to late-stage delinquency. Lastly, given the macro environment, we will continue to take prudent credit actions with an eye towards our long-term results, which may pressure loan growth, as mentioned, and therefore, add additional pressure in the fourth quarter loss rate equation. Our percentage of cardholders with a 660-plus credit score remains materially above pre-pandemic levels, given our prudent credit tightening actions and a more diversified product mix with co-brand and proprietary cards representing a larger portion of our portfolio. Slide 10 is one of my favorite slides review as it highlights Bread Financial's strong durable profit margins. Even at the elevated loss rates, last seen in the great financial crisis, our risk-adjusted PPNR profit margin would remain positive given the strength of our peer-leading risk-adjusted loan margins. Given the same economic conditions today, we would expect to outperform those historic loss levels due to the transformational improvements we have made, including our improved credit risk score distribution and enhanced underwriting discipline. Now as Ralph mentioned, we proactively manage our portfolio, continuously updating risk management models and underwriting criteria consistent with our recession-ready playbook for both new and existing accounts. We primarily focus on managing open-to-buy authorizations, which help consumers better manage their credit lines and balances. We closely monitor our projected returns with the goal of generating strong risk-adjusted margins above our peers. We believe that our disciplined risk management and improved risk profile, coupled with our more diverse portfolio and brand partner base will enable us to manage even more successfully through the full economic cycle. Moving to Slide 11. While we have made substantial progress to strengthen our balance sheet since 2020, additional opportunities remain. Specifically, we aim to build our total company capital levels closer to those of our peers, while reducing our double leverage ratio from where we are today. We will balance the -- achieving these targets with continued investments in our business and responsible growth aligned with our capital priorities. Our actions over the past 3 years provide the company with greater financial flexibility to support our long-term strategy. Wrapping up, we have meaningfully increased our tangible book value per common share since the fourth quarter of 2020 and given our strong cash flow generation, we expect to further grow our tangible book value over time. We believe that this growth, combined with our improved financial resilience and a strengthened balance sheet should yield a market valuation that is a multiple of tangible book value. We remain confident in our strategic direction, and we will continue to build long-term value for our shareholders. Now I'll pass it over to Terry for Q&A.

Great. Thanks, Perry. So you guys touched on this a little bit. You updated the third quarter a bit. Can you maybe just provide some more color on where sales trends have been going maybe across the different platforms and categories as well, right now?

Sure. So as we think about it, as we've said, there has been a continued inflationary pressure that includes food and grocery and rent. So we have seen some pullback from some of our customer base. where we do see continued strong engagement is in categories like beauty and health, which, although many people might view that as discretionary, consumers very much behave like it's nondiscretionary, so we see good sales there. We also continue to see very good sales in our travel and entertainment portfolio. So consumers continue to lean in on experiences and travel versus hard goods. And so we see some good lift there on the consumer side as well.

Okay. That's helpful. And then you guys updated your receivables growth guidance last quarter to low to mid-single digits. So how has that been tracking? Any incremental color there?

Yes, loans are tracking a little lower, right, for the revised guidance, and that's a combination of consumers pulling back on their spend. So think about it as what we'll call it top-of-the-funnel application flow has slowed some for new accounts. And then the credit tightening that I mentioned is then also reducing the number of those applications that convert into new accounts to make sure we're staying within our risk tolerance and framework. And then existing customers are making trade-offs for discretionary versus nondiscretionary spend and self-moderating and pulling back some spend as well. So that's what's contributing to a little bit lower loan growth as we've guided.

Got it. That's helpful. Can you maybe just comment on the overall health of the consumer based on the trends that you're seeing?

Yes. I think what you're observing is across the entire credit spectrum. We've been talking about this for over a year. The consumer has been really resilient through this and navigating the economy as best they can. When you think about the K-economy and for us in particular, a full spectrum lender, we will underwrite moderate and even some lower income folks, so you think about Middle America and lower middle on the bottom part of the K economy, they've been depleting their savings. Inflation has hit them the hardest, rising interest rates and inflation hasn't come down as quickly as I think we'd like to see it to benefit them, and we're starting to finally see a little bit of wage growth outpacing inflation. So that's a good sign. I think things are starting to show some signs of improvement for them, but they're navigating to this. So I think as you look at credit quality, we're starting to see some stabilization as we expected. We're still above our 6% through the cycle loss rate. So when you think about through the cycle, you're going to have periods of time we are above it, and then you've got a periods of time for we should be below what you can average out to what you're expecting. And right now, I think you're seeing -- when you look at what we've guided for this quarter around 7%, that's -- part of that, that's above that 6% through the cycle of target is due to the economic stress that the consumers are feeling.

Got it. That's helpful. So just on the theme credit, you guys guided to a mid-7% net charge-off rate sounds like you're tracking in line with that. Is that correct? And then on the -- through the cycle loss rate of 6%, can you maybe just talk about how you get there and over what time frame?

Yes. So for the 7% is for the third quarter, right? And so you think about the first quarter, it was influenced by about 40 basis points from the conversion to our new processing platform. And then the second quarter was impacted by 100 basis points. So this quarter really had this a little bit in July, but largely, we'll call it a clean quarter. So the 7% for the quarter is really where it's at. And then you think about in my prepared remarks, I talked about this a little bit. Seasonally, fourth quarter is higher. So we're at 7% for the third quarter. Typically, fourth quarter is 50 basis points higher. I expect the fourth quarter to increase more than the 50 basis points due to the fact we're pulling back on the denominator plus you're still seeing a little bit of weakness in -- probably some late-stage delinquencies that may pull through. So again, it's very fluid in terms of watching the consumer, but we're very active with our credit underwriting to help the consumer navigate this.

And then on the 6% cycle loss rate, how do you get back down there and over what time frame?

Yes. So you think about a typical cycle, it can vary between, I'll call it, 9 to 15 years, call it, 10 years on average. So the way to think about through the cycle, it's usually peak or trough to trough and the average of that full cycle. So here, we have this year, we're above the 6% target, I would expect next year to be above. And then you're going to have a period of time when you're going to be below the 6% target, so you then average out to 6%. So right now, we're in a more economic -- I'm going to say severe stress -- the consumer that we serve is a little more stressed right now. So it's just going to be the natural cycles. And that's why they call it economic cycles. This appears above and you're going to have these peers that were below. But the way you avoid the high peak is by prudent underwriting. That's where we talked earlier is the things we've put in place over the past few years under Ralph's leadership, is more prudent risk models, credit underwriting. And we work very carefully or collectively across the firm in the various organization, the credit organization finance to make sure that we really have to get line of sight on what responsible growth looks like and that we can deliver that through the cycle 6%. And a lot of it comes from product mix, credit mix and good underwriting.

That's helpful color. So maybe just turning to the reserve ratio, it was 12.3% last quarter. I think you, you mentioned it may have peaked based on the macro outlook then. Maybe just provide some updated commentary on that.

Yes. I'm feeling, I'd say, more confident in the reserve rate and is hopefully around this 12.3% and a combination of I don't expect material movements in the economic outlooks, meaning that I expect to see some period of time where, okay, losses across the industry could rise into the next year. I mean you hear some of you was talking about maybe peak in 2025. I think they'll peak somewhere next year for the consumers we serve and then it should start to -- you start to see the improvement. But as the dynamics of the reserve rate, what is your expected credit losses over the life of these loans been carrying for possible downside economic scenarios. I think as the baseline models increase the loss rate expectation as more delinquency comes to the losses rise, you can pull back on those risk overlays, because things are playing out and as you expect. And if the outlook really improves, you could actually see a scenario where the reserve rate can come down a little bit even as you're peaking out your loss rate, because the outlook is now an improved outlook, because when the actual loss happen, that's a rear view event. It's now about the future. So I think we're in a good spot for this. I think you see a little bit seasonal movement in the reserve rate. So fourth quarter can often get tick down, but then pops back up in the first quarter.

Yes. The only thing I'll say about reserve rate is I -- Perry with really being focused on getting us some of these uncertainties with the -- you may recall first couple of quarters in the last year, our reserve rate was questioned by the industry in terms of was it too high. But now we're very comfortable that we could absorb losses through the uncertainty, I guess, very quickly.

Got it. So what about longer term, it's about -- the reserve rate that is about 300 basis points higher than CECL day 1? Many other issuers have talked about converging on to that number or in their specific number over time. Is that fair to assume for you?

There's a lot of moving parts that go into the CECL reserve rate. One, first and foremost, it's going to be the credit quality of the book that we have 2 years out, right, or 3 years or whenever it is, you think, we might converge. So what's the risk mix of the book? What's the product mix? If there's a continued shift in product mix to more co-brand or some delivers a through-the-cycle loss rate below 6%, you should expect to be at or below that day 1, all else being equal. Then I think the day 1 that's produced by different companies, you all have different risk overlays in there. And I would tell you that unless there's a really blue sky scenario where there's almost no risk on the horizon. I think it's tough to get back to today's book to that day 1 number, because most of the risk overlays is the care for some downside scenario. So I think we're going to come down markedly from where we are today. I don't know if we get all the way to day 1, but I think it's really dependent on the credit risk mix.

Got it. All right. That's helpful. So is there any color you can provide on the impact of student loan forbearance ending? Any color you can give on a portion of your portfolio that's impacted by that? And just any potential credit outcomes from that?

Yes. So we have a little less than 1/4 of our book has a student loan. We know that at the time of consumer when we underwrote them, who has that. So that feeds into all of the active and proactive risk management actions that we take around looking at the lines, line increases, line decreases, who you underwrite. And so we're going to monitor very carefully how these consumers perform as the expected repayments resume. So we've got them from ring fence to watch, but we do not believe it's going to have a material impact for us. And then the other thing that we're watching is the administration's action, they've already signaled they're going to be pretty proactive. They didn't like the fact they didn't get to waive a bunch of these payments or rather forgive. So they're going to do things where the discretionary income calculation that then there's a percentage that the consumer would be obligated to put towards student debt. It sounds like they're going to change the discretionary income calculation. And then reduce the minimum required amount of repay debt from 10% to 5%, that will further benefit these consumers. And then if you're somebody, who makes minimum wage, it might be $0 they have to repay. So there's a number of other things that will aid consumers, particularly in that modern income range that could mitigate some of the -- what could be expected impacts.

Okay. Got it. So I wanted to switch gears and talk about regulatory action or change and tapping of late fees. Can you maybe just give us updated thoughts on that? And is there any way to quantify or help investors for any amount of revenue that's exposed?

Yes. So I'll start. It wouldn't be a fireside chat without talking about late fees. And I'm sure our comments will be consistent with everybody that presents that question. So we're waiting for the final announcement in October. My guess is it probably won't change much from what the CFPB originally signaled that will happen. I expect that there will be litigation. We've lined up with the industry as everybody -- as all of other financial services have and we've got our plans in place. We weren't waiting for the CFPB announcement. We've been working this prior to the announcement. And the plans fall in 4 specific areas. And no secret, there'll be APR increases as we think about it through the cycle. There will be a cost for credit like or in other countries in terms of applying for credit will there be a cost of credit. We'll work with our partners to get to a point where it's -- we can still underwrite and it could be profitable for them, but profitable for us. That will be the third kind of leg of the stool and the fourth leg of the stool will be we just won't underwrite certain segments that we underwrite today. The short-term benefit there from a capital perspective and a CECL perspective. But that's an unintended consequence of tapping a late fees there in that economic -- those economics no longer -- we're not privy to that economics and we'll have to just draw line in terms of who we can underwrite and how we can right. But we're focused on it. Like everything else we've done over the 3.5 years, and you see that here our capital metrics are better. Our debt levels -- our shareholder value is higher. We will focus on this in terms of execution and close the gap over the appropriate period of time.

Yes. And you asked about the financial impact. Right now the late fees are in our net interest margin in our interest fee line item. You would expect at the time of implementation, meaning, when you are legally required to have the effect going into place, we don't think it will be before mid next year just due to the time it takes for the, I'll say, the processors that practice across all the banks they serve, that's at earliest, and that's after a stay and everything else. There's going to be a period of time where there's a little bit of [indiscernible] burning for the APR changes that you should expect, as Ralph mentioned, APRs to go up across the board. And then whereas things like for fees that create almost immediate new accounts pricing immediate. So there's going to be a burn in over the next 2 to 3 years just to be fully mitigated through the actions that Ralph spoke about. When you think about the impact to us it really -- it depends on -- and Val talked through the product set that we have, each product set has a different degree of impact. So the [indiscernible] are good, less impact -- brands less impacted, whereas the private label soft goods are more impacted. And that -- maybe all you can give some color in terms of how that looks across the different dimensions of each of those types of products and partners.

Yes. And thanks, Perry. So when you think about just the average balance across, you've got a small ticket, small balance around the soft goods private label, which is why the late fee is more impactful there versus your bigger ticket on the promotional side and your co-brands. So our mitigants that Ralph talked about are very specific to those 3 different types of products and our partners. And they're each weighing them a little bit differently. In some cases, some folks are very sensitive around their value propositions. And so that's going to be a core part of what we're going to be focused on as we are mitigating through on either the APR, the underwriting or the new product that we talked about in terms of do you add promotional fee to access promotional financing. It's a product that we had here in the U.S. before, it's in Canada today and Australia. And so we will be mitigating in different ways across those product sets.

Yes. And the last thing I'll say is if you think about our portfolio from the end of '19 to where we are today, it's a [ bump ]. So we were primarily private label as we enter 2020, [indiscernible] now, co-brand, direct-to-consumer, the buy now, pay later and installment loan, all of those skewed towards less reliance on late fees, and we'll continue to pivot the business as we move forward. But make no mistake, it's going to create a gap and our job is to close that gap thoughtfully and as quickly as we can.

Great. So I just wanted to round out the regulatory discussion with capital allocation and impact from [indiscernible] -- maybe just talk about that.

Sure. I mean we're less than $1 billion asset company. So the B3 endgame applies to firms with over $100 billion in assets. So it should not be applicable to us. In fact, when Val, Ralph and I talk about it, we think it acts to be a strategic opportunity for us, because a lot of our big competitors are going to have to hold a higher degree of capital for different opportunities that are presented. So as we're competing for deals or evaluating new product opportunities, our capital ratios won't be as impacted for those types of changes. We'll monitor it. We're not going to lean in harder than what we do. We're going to stay very disciplined to our responsible growth and make sure we're getting the right return on our capital. But again, it's for the capital that we're expected to hold, not for what they're expecting.

Got it. All right. So I'm going to pause, right, to go to the audience response questions. Can you guys see those up? Question 1 is, where would you like Bread's focus to be regarding capital in the medium term? One, growth; two, paying down debt; three, buybacks; or four other?

Do we get to vote? Or just the audience?

The audience. [Voting]

So paying down debt. Do you guys have any comments on that?

Thank you. And I'm glad you recognize that over the last 3 years, and we've talked about, we've paid down $1.7 billion of our debt at the parent. We've been able to dividend up to the parent from the banks $0.5 billion in the second quarter. Our focus is to continue to pay down that debt and reduce our double leverage. And that's a use of our capital. Other use of our capital to prudently grow this business and continue to invest, obviously. And then we certainly would love to turn to return value to shareholders over the right period of time. I'd like to know what's in the other category, but...

So last question, please. Over the next year, would you expect your position in Bread, one, increase; two, decrease; or three, stay the same? [Voting]

Okay. So 53% stay the same and then about equally split between increase/decrease.

I'm very pleased with these results. I think October is going to have a lot to do with the future. In terms of where the CFPB comes out and what the implications of that are. But I'm very confident that our plans and the execution of our plans have been over the last few years, we'll mitigate that in due time.

Okay. Great. We have a couple of minutes. I'll just open it up to Q&A if there is any questions. All right. Then I guess we'll just wrap up. Thank you.

Thank you all for your time. Appreciate it.

Thanks everyone.