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

Up next, we're pleased to have Bread Financial joining us once again. Bread has continued to execute on its strategy of being a leading provider in the credit card space through responsible growth and disciplined risk management. In addition, after significantly improving its financial position, it's become a capital return story, which should be a solid EPS lever for the company looking ahead. Joining us from Bread is CEO, Ralph Andretta; and Chief Financial Officer, Perry Beberman.

Today's discussion is going to be a fireside chat. So maybe I'll kick it off with you, Ralph. You've done a ton to transform the company over the past few years. Maybe just talk a little bit about what are your -- what have you done? And what are your current areas of focus as we move into 2026?

Brian, thank you, and thank you for recognizing what we've done. And I think it's going to be more of the same. It's -- I've got a very boring answer for you. It's going to be continue to have responsible growth and be very prudent about that. Navigate the macroeconomic environment, come with May. We're going to navigate that environment with good prudent underwriting, doing the right thing. We'll continue to manage our capital. For the first time in a very long time or ever, we can execute on all our 3 capital priorities. We can invest in the business. We can maintain our strong balance sheet metrics, and we return value to shareholders. We're going to continue to do that. And we're going to lean on operational excellence to really transform -- continue to transform the business because that fuels the business. That's how we invest in the business. So that's our recipe. That's been our recipe for the last few years. That's how we got where we are, and we're not changing our focus.

Great. Maybe let's talk a little bit about the state of the consumer, how the macroeconomic environment is influencing them, their spending patterns and maybe any differential you see across different risk bands.

Yes. So the consumer overall, we've been pleasantly surprised over the past number of quarters that they've remained pretty resilient and stable to slightly improving in terms of their metrics with us. Spending overall has been solid, meaning that you're seeing the higher risk bands spend a little bit more on things like travel, entertainment. And then those that are a little bit on the lower end are spending a little bit more on nondiscretionary items, as you would expect to at this time of the year. But overall, I think the benefit of what we're seeing with our consumers is they've been dealing with this high inflation environment now for the past 4 years. So whilst inflation is still a little higher than it's target rate, it's not compounding at the same rate it had been. And so their wages have outpaced a little bit. It's giving them a little more flexibility. They're budgeting well and what I think we would say is resilient and choiceful, meaning customers are making choice in terms of what they're -- how they're going to spend. And I think you're going to see that manifest itself into -- and what we've seen so far in terms of holiday spend, looking for deals, meaning a little bit more activity on Black Friday, Cyber Monday, a little bit less on the Saturday, Sunday in between when you're looking at comps versus prior year. So I think that's a demonstration that they're kind of reverting to the way they used to be pre-pandemic because they're looking for deals.

Maybe just to expand on that, Perry, in terms of how the holiday season is shaping up. I know that you had said October and early November is strong, but there was some tricky comps maybe from the election. What are you hearing or seeing from your brand partners? Any verticals in particular that you're more bullish on heading into next year? And just any spend updates relative to expectations?

Yes. I think overall, the consumer is, again, resilient. I expect that in fourth quarter, we'll probably end up in the low single-digit, 1% to 2% growth year-over-year. And that's in terms of the spend. As you said, there's some comp issues. When you look back at the third quarter, we lapsed the Saks acquisition. So that was a tailwind. But overall, I think we're just going into next year, we have some good new brands coming out. I mean Ralph will talk about some of that pipeline. And so we're very optimistic that we're going to inflect to growth.

So maybe just to build on that a little bit. So in terms of loan growth, you've guided to flat to slightly down for average loans in '25. And we all know the reasons why given the strategic tightening that you've done. I know you'll provide a specific guidance when we get to earnings, but just talk directionally about loan growth given the macro environment, do you see a path back to low to mid-single digits? And what do you expect to be some of the key drivers behind it?

Yes. We definitely expect to inflect, right? I mean, so while this year is coming out to be kind of exactly where we thought it would be, slightly down, I expect next year to be slightly up. And that inflection is a result of continuing credit performance, less gross losses, continued good build of new partners coming in that will create new growth and then just a continued healing of the existing portfolio.

Yes, that makes sense. I mean you've been in, I'll say, restrictive underwriting stance for a period of time here, just given all the things you talked about for the cumulative inflation. Can you maybe talk about what underwriting curtailments still remain in place? And what do you want to see to remove inevitably what you still have that has kept loan growth at bay?

So the restrictive underwriting standards, if I look back over the past few years, I'd say the degree of decrease year-over-year in the amount of line increases we gave, so the changeover-year has continued to be less and less. You got less benefit from line increases. At the same time, we were putting in place more line decreases, call it risk detection program. So if somebody looks like they have a little challenge, we do more of that. So over the past couple of years, I'd say the year-over-year is getting tighter and tighter in terms of the net impact. I'd say right now, it's kind of neutral, where the risk detection is being offset by the line increase. So we are doing line increases for those customers coming in the door. And I think next year, it will be a net positive situation. But what I would really want you to walk away with is that regardless of which way it goes, it's not material to growth. So that's not going to be a material driver next year. But it's going to be data-driven. We've got a very sophisticated credit underwriting team. We've been doing this for 30 years. And so it's going to be a customer-by-customer decision. There's not going to be some watershed moment where the gates are going to open and all of a sudden, you're going to see us lean in on credit because that would be a fool's game. We know what we're doing. It's going to be a data-driven decision-based point we make sure we're getting paid for the risk we take.

Got you. Ralph, I wanted to talk about partners for a minute. I know in past years, you've even announced new partners at the conference. Maybe just talk about what your pipeline for new customers looks like. And I know you had a couple of wins in the home vertical space. I think Perry alluded that there's more to come. Maybe just talk about how does it compare to prior years? And are you seeing any differences in the type of partners that are emerging?

Yes. So our partner -- our pipeline continues to be robust. And one of the things I really love about our business development team is we're being asked now to bid instead of trying to push our way in, people are pulling us in. So that's a really good place to be. Just 3 recent announcements, Bed Bath & Beyond, Furniture First and Raymour & Flanigan are 3 new partners that we think will give us some momentum going into 2026. And those partners are what we call de novo partners, right? And there's 2 type of de novo partners. There's a de novo partner where they've never had a card program before. We launched it together and we -- they learn from us and we move forward, and that would be like a crypto.com. And then you have these 3 partners that have a proven track record that build receivables quickly and we work with them, and that's a good place to be. So either one of those are really good. We're not laying out a lot of capital, and we're just off and running, and I feel really good about those types of partners. There are partners in our pipeline with portfolios, and we evaluate those and those have a little bit of a longer tail, but we feel good. We have some announcements to make next year. I'd love to make an announcement now, but my GC won't let me, but I'd love to make a couple. But we continue to have momentum. Partnerships are good. And I think aside from the new partners we're adding, the focus on keeping existing partners is equally as important. If you think about our book, our top 10 partners, our top 10 partners are with us to 2028 and beyond, most of them beyond the end of the decade. That's a good place to be because what we focus on is how do we grow the pie, not how do we renegotiate the pie, but how do we grow the pie. And so that's a really solid focus on driving spend and introducing new products for our top 10 partners. And that's equally as important as adding partners.

And I'll come back to your top partners in a second. But just curious, when you guys have talked historically, you've talked about $100 million to $500 million sort of portfolios as being sort of your sweet spot. And obviously, we know we all have a good sense of who the top 10 partners are. But when you think about some of those recent announcements, Bed Bath & Beyond, Furniture First, Raymour & Flanigan, like any context in terms of are these the type of partners are going to be top 10 partners over time?

Yes. I mean not to pick out one, but I think Raymour & Flanigan, because of its expansive footprint could be really one of our bigger partners. They have over 100 stores. They have discount stores, they have showrooms. And it's -- and right off the bat, it's a really engaged partner. Furniture First is #1 in mattresses, which is a big selling item. So that could -- yes, got to have them. I think there'll be a partner that will be on the come. But Raymour & Flanigan, I think, is the biggest furniture dealer in North East probably one of the top 5 or 6 in the country. And I think there's really opportunity there for that type of partner.

Got you. So you mentioned that the top 10 partners are locked up well into 2028, some through the end of the decade. Obviously, that means a lot of them have been renewed over the last period of time. Maybe just talk about any emerging trends with the renewal, whether it's sharing economics or trends in value propositions that you've seen?

Yes. What we've noticed about the partners, they're getting smarter, right? I think maybe because each of them maybe uses a consultant, that threaded consultant that gets out there. But they're getting smarter on the business. They know that this -- what we do is not just a bolt-on, it really can drive their economic value. So they're really interested. And when they come to the table again, it's not all about price. It's not all about another bug. It's about, hey, what data analytics do you have? What kind of technology do you have? How -- can we have a new product that expands our reach. So in a lot of our -- those top 10 partners, we have -- private label partners, we now have introduced a co-brand. So we have partner upgrades. And that matters to the partner. Our data and analytics in terms of how do we find -- how do we penetrate your base deeper and how do we think about that? How do we redo the value proposition so it's more appealing. All those matter when you're doing a renewal, quite frankly.

No, that makes a ton of sense. Perry, let's shift gears a little bit and talk about credit. You guys have had very successful credit performance throughout the year. We've seen improving trends. You released your 8-K this morning that showed continued improvement in charge-offs. Delinquencies, I think, were in line to slightly mixed. I think you noted that you expect to come in on the lower end of your 7.8% to 7.9% loss rate guidance. Maybe just talk about what you're seeing in credit in the near term and what gives you confidence that you'll be on the low end?

Yes. I mean we're already 2 months in the quarter. [indiscernible] I'd say 11 months out of the 12. So I'm pretty confident that we can all do the math, and I think that's all an analyst report today that did some math that looked pretty accurate. So the math is basically there where we're going to come in on the low end. And I think that's a good testament that when we lowered the range at the beginning -- from what we thought at the beginning of the year to where we are, things are improving faster than what we thought. And so that gives us high confidence of where we are. Obviously, the credit quality, delinquency came in very much in line with what we were expecting. And so when you look at that, the delinquency formation right now and what that sets us up for the beginning of next year, I think if I would say as a starting position, I'd say we should be able to improve 30 to 40 basis points off of where things may come in this year because this year is coming in a little better than we thought. That's probably a good launch point for next year. But as we go into our planning cycles, we do things on a partner-by-partner basis. We'll have updated macroeconomic outlooks. And so when we formulate and we come back to you in January with our guidance, obviously, we'll tighten that up. But I think we expect continued improvement through next year.

And by that point, we should have all 12 months.

Yes. By then, we'll have all 12 months...

And that will be extremely accurate.

I guess while we're talking about near-term stuff, Perry, I mean, we talked about spend being up 1% to 2%. We talked about the credit. Anything else that you wanted to highlight for the fourth quarter, given that we're more than 2 months in, whether it's top line growth reserves, anything else you wanted to touch upon in your remarks?

Probably the one thing I want to make sure that folks don't lose sight of is that we did a big debt refinancing and paid off $719 million of our senior notes that we were paying 9.75% interest on. And now we have a $500 million senior note at 6.75%, so a good 300 basis point improvement there. But with that, you'll see about $60 million of debt extinguishment costs in the quarter. So while we're doing a great job managing expenses, fourth quarter expenses are typically seasonally a little higher because of benefits costs in the quarter, marketing and just transaction costs because of the higher transactions. But beyond that, that $60 million is something I don't want people to lose sight of.

Yes, but that's obviously because the termination of debt. That makes total sense. So you mentioned in your remarks just before that you expect losses could improve 30 to 40, which is sort of consistent with what you've been saying, particularly now that you're -- we're confirming we're going to be on the low end of the guidance. Maybe just dig a little bit deeper on your early expectations for '26. First, what's driving the improvement? And then secondly, what's giving you the confidence in the improvement?

Yes. I mean confidence is what we just talked about. I mean you look at the quality of the portfolio that we're going to enter next year with versus where we were this time last year, that gives us a high degree of confidence that the credit quality is already better. As well, we've continued to see resiliency in the consumer in terms of consumer behavior and the expectation that I think we'll continue to see the consumer, hopefully, if inflation continues to moderate, is in a better position going into next year. And then the growth that Ralph commented on some of the new partner signings that we've had, that's going to be good new clean quality growth that we're going to put in place. And then we also talked about a little bit of the improving credit actions that we can take. So I think all these things together give us a high degree of confidence that next year should continue to improve. Now that's based on a stable macro outlook to slightly improving. If things go a little sideways or get worse from unemployment, if labor, a lot of this stuff has to unfold in terms of what the policies are, but I think we all believe that the policies that are in place are intended to help the American consumer. It just has to take a little time to play out.

Absolutely. And look, your consumer more than most has been impacted by the cumulative inflation you and I have talked about a lot, and that set loss rates above 8%. Now we're working our way back down. And you've had this sort of long-term historical average of around 6%. Can you talk about what gets you back there over what period of time? And can -- given the upward pressure that it puts on losses, can you resume growing at sort of mid-single-digit levels and continue to make progress on credit over time?

Absolutely. So a couple of things. One, as we put on newer business with good growth, that's going to help just because of the credit risk mix that's in flight. So that will help drive down the loss rate. Then you're also putting on new loans that are -- I'll say, I call them clean loans that are good credit quality, that's going to help average in. So the newer vintages may get a little larger and help average down that rate. And then the existing portfolio is going to slowly cure over time as the consumer continues to manage their own personal balance sheet. So that gives us high confidence that we'll get there. It's just not going to happen next year, right? It's going to happen gradually over time. Kind of the way you're seeing it unfold is how I expect to over the next few years. But we are remaining focused on underwriting for profitability. We could drive that rate down faster if we wanted to put on an even smaller new vintage, if we said, hey, let's put on a vintage that achieves 4% loss rate instead of the 6% loss rate, we could drive it down faster. But that would do damage to our partnership business that we're in. And our goal is not to, I'll say, unduly harm our partners just to make our loss rate look good, and that will also be detrimental to profitability.

Sure. Maybe to round out the discussion on credit. So the reserve rate has been declining a little bit over the past few quarters. We're in the high 11s now. I guess, first, do you think the trajectory, assuming the macro holds, can continue? And how much more room is that and over what time to get back to sort of that 10% level that I think that you have talked about as a more steady-state reserve?

Yes. There's definitely room for that to improve. As you just said, I mean, my expectation is it gets back down to around 10% over the next couple of years. The pace at which it gets there will be highly dependent on predominantly the credit quality of the portfolio. So if you think about where we're going, I would expect the fourth quarter reserve to seasonally drop down. It's possible it does a little better than that if the delinquency ends the year in an improved position. But then as you go into next year, again, I expect it to continue to improve. But again, largely based on the credit quality of the portfolio and the macro inputs as well as we have more confidence in the macro environment. Today, we're very heavily weighted into the adverse and severely adverse scenarios for our credit risk weighting because that was prudent. Again, right now, we're in this bit of uncertainty. So I would have liked to have unwound that a little bit. Again, that's not going to be the big driver of what drives 170 basis points improvement but it will make a difference. And that we should be able to start to move back towards a little bit more neutral position over the next year.

Ralph, since you've taken over as CEO, probably a little over 5 years now, 5.5 years, give or take, you've made tons of investments in the business, repositioned the technology, done tons of things to upgrade the standing of the company. Maybe just talk about the investments that -- what is on your agenda for right now? And how do you balance that with an improving yet not like great revenue environment? Obviously, we've seen you guys have taken a lot of actions across the board on the revenue side. But just talk to us how you think about the overall investment picture.

Yes. Our investment thesis hasn't changed at all. Maybe it's changed a little bit from -- because we've improved it. But we'll continue to invest in our partnerships and our products, particularly around digital and technology. We'll continue to make those investments. I was up here a few years ago, I said we're going to pay off our debt. They're done, right? We paid off our debt. So we're going to continue to make that -- make sure our balance sheet metrics are strong, and we're doing the right thing and making sure that we're there with competitors. And returning value to shareholders is a really good thing to do. We've been able to do that. We've increased our dividend a couple of cents, and we have some buybacks. So those are our priorities. They continue to be our priorities. But the real -- what really makes it gratifying for me is we don't have to choose, right? We can do all 3 because we have adequate capital and a strong balance sheet. So that's a really good place to be.

And when I think about -- and again, I know we'll get guidance in January, and this is a question for either of you. As you think about balancing investments in an improving revenue environment with positive operating leverage, how do you think about the balance? I mean you've continued to post year in and year out positive operating leverage even in more challenging revenue environments. How are you thinking about it into '26?

No, I think one of the things we do have, operational excellence has played a pretty big role in our efficiency and our operating leverage. We focus on doing things better, smarter, reinventing the way we do things. And that has helped us manage our cost base, drive a little bit of revenue. But we have a really good handle on expenses. So as we add revenue, you don't get that add of expenses, commensurate expenses to that. That's really due to all the things we do with operating leverage. Some of it is common sense, some of it comes from the people, some of it's focused on new and different technologies, some of it's common sense to get these things done. So we're -- that's been our focus to help us drive that positive operating leverage as we move forward.

And one of the things that a lot of companies have been talking about at the conference has been AI and just the heightened focus on how it's being utilized in businesses. Maybe just talk to us about how you guys evaluate opportunities to use it, how you're currently leveraging it and what your plans are to deploy new technology and capabilities in '26.

Listen, I think I could go back and say we've been using some form of AI for a number of years, whether it's machine learning, robotics, we've been using it, and we've been in the market. But when it comes to this emerging AI, whether it's Agentic or AI in general, we're a fast follower. We're going to focus on what's out there and how does it solve our problems. We're not going to chase the shiny object and say, here are our use cases. And what's out there that can help us -- help with these use cases? And do we get the payback for the expense that we're going to get out there. And I think that's our focus. We're working with partners on point-of-sale Agentic AI, how do you think about getting in the purchase path when somebody is making a recommendation. So we're there, but our focus is to be very thoughtful like with everything else. We've got partner data. We've got customer data. We're not going to risk that. But we're going to focus on where AI can help us from a customer service perspective, driving down first call resolution, getting that done, making sure that our reps have knowledge at their fingertips using collections, how do we think about it from a collection perspective. Fraud is a big area in terms of AI, how we manage our fraud and manage down our fraud. [indiscernible] fraud is at their own game, quite frankly. But it's across and pervasive across the network, 100% monitoring on risk, on regulation. Those are areas that really makes sense for us as a regulated industry, and that's where we're going to invest.

And I guess just sort of building on that, obviously, there's a ton of technological change that's happened. We talked about AI. There's things like digital wallets, a host of other things. Like what is Bread doing to assure that you guys remain top of mind for your partners and don't get lost in the mix given new players in the space and like I said, all these things that are...

Well, part of it comes down to relationships, right? We have relationships with these partners. Some of these partners have been with us for 20 years. They started and we were their first partner and continue to be their first partner. The constant curiosity about how we can make the partnership better really resonates with the partners. That's important. Being -- feeling you're part of their business. So our -- we continuously meet with them. And a lot of our renewals are far in advance of the -- never go to RFP because we're with them and we renew based on mutual goals and how we move forward. So we're always with them on a pretty regular basis. There's a quarterly meetings and all those types of things, but we're very much focused on their success, and they feel that. It's not a transaction. It's a relationship where sometimes the new entrants, particularly around buy now, pay later, that's a transaction. We build relationships, and that's what's important to the partners. It's not that one transaction. It's those 5 other transactions that come behind it and how do we make that work? And how do we drive deeper into their base? How do we help them be successful and grow the pie. And it resonates with partners. Nothing is better than an engaged partner.

Yes, absolutely. And maybe we'll come back to buy now, pay later. So I wanted to talk a little bit about capital. I like your acronym Ralph, is it grow, maintain, distribute. But I think with the 3 things that you highlighted, you could phrase that if you want. You've spoken about the progress that you've made building capital, paying down debt. I think you recently issued preferred. Maybe just talk about, Perry, what are the next steps on capital from here in terms of just overall capital structure?

Yes. So again, really proud of the work that the team has done and where we've come over the past few years. I think when you and I first met, the capital structure looked a lot different. And this quarter was really an inflection point in that we hit our capital targets that we set out there being mid 13% to 14% with our CET1 ratio. The next step, I mean, we've already cleaned up our debt structure. So we've paid down, as we talked about earlier, a big chunk of our parent debt. So now we have $500 million of senior notes out there at a rate that we think is pretty attractive compared to what it was. So really not a lot more to do on that front. I don't see any new issuance. The preferreds, we just came into the market with the first tranche of preferreds at $75 million. We do have an opportunity to put preferreds on the balance sheet of up to about 1.5% of RWA. So that would be about $300 million in total. So you can think that we're going to look to issue another $225 million over the coming year or so. But again, opportunistically. You can tell from the size of the deal that we just did, we could have chased a larger deal if we wanted to pay more of a rate. So we'll look at the market and figure out the right time to introduce that, but that would be the next step because by doing so, we'll reduce our binding constraint on capital targets down to 12% to 13%.

I remember when you guys -- I've been around long enough to remember when you guys barely had any capital. So you guys have done a great job rebuilding it.

Or a balance sheet.

So I guess, Perry, maybe to build on that, you have -- I think you put out 2 different buyback authorizations. You got like over -- almost $350 million outstanding. How should we think about the pace of utilization? And then that transition that you just talked about from the 13% to 14% to 12% to 13%, we have to get all the way there on the preferred issuance to be able to formally do that? Or can we start legging into that over the next couple of quarters?

Yes. I would look to -- look, we'll continue to deploy that authorization over time. So first and foremost, we've got to continue to make sure we maintain that, I'll call it, 13.5% and make sure we're caring for growth that's right in front of us. But with the capital accretion that this company is able to generate, I would expect that we'll continue to revise the authorization in time as we're able to consume it. And then as we're able to issue more preferreds, that obviously unlocks that as well as you go.

So you mentioned returns, and I know you've talked about wanting to get to mid-20s returns, and you've had some successful quarters where credit has been strong. You've been in that range. Maybe just talk about the 2 to 3 main drivers to achieving that goal and over what time frame? Obviously, getting the credit losses down is a big piece of it. But maybe just spend a minute just talking about the key components of that.

Yes. I would say there's really 3 components for us to get there. I mean you're going to see a meaningful step-up in our returns next year. But the 3 key requirements, as you mentioned, credit getting back towards that 6%, the capital optimization, so us getting that full $300 million of preferreds on the balance sheet and then driving down our efficiency ratio, which is basically as Ralph talked about earlier, operational excellence is going to drive us towards that.

Is there any sort of formalized efficiency level you guys are hoping to get to? Or is it more just broad strokes continuing to make?

Every year continues...

Better than it was this year.

Because if every year, we deliver positive operating leverage, the inverse of that is your efficiency ratio continues to come down.

No, that's fair enough. Just a couple of other areas I wanted to hit on. Ralph, when you talk about repeat partners, obviously, you brought up BNPL. Maybe just talk about how this fits into your ecosystem and what the competitive landscape looks like. And obviously, these companies are growing at a fast pace, but -- and people are constantly asking me, are they taking share from the incumbents? Or are these more parts of the market that you guys really don't play in? Just help us contextualize.

Yes. First of all, we do have the BNPL products, right? So we have pay in 4, we have installment loan. We prefer installment loan because that's where the profitability is, right? Pay in 4, there's really not a lot of profitability there. And if you think about the pay in 4 customer, they're usually skewed towards debit, right? They're the debit customer. And some of them may not even qualify for a credit card or a private label card. So from that perspective, they're not really taking our share. And maybe we couldn't underwrite those. And if they're debit users, so from that perspective, we don't see it. That said, we have this basket of products from private label to buy now, pay later to installment loan to a proprietary card to deposits. We've really expanded our -- the co-brands. We've really expanded our base. So we are able to accommodate both the partner and the customer on any type of lending they would like in any particular time in their lending journey. So we feel good about our partner product set. But -- and buy now, pay later is a member of that product set, but not our only one. and I feel good about that.

Got you. Perry, maybe I want to spend a minute or 2 just talking about margins. And I know that there's lots of moving pieces, late fees, revenue suppression, movements in rates, payment rates, APR repricing, a handful of other things. But when you put all of those together and you think about the rate backdrop, how do you think about the trend in your base case expectation? Can we see expansion? Or do the negatives outweigh the positives?

You definitely hit on all the moving parts. And -- but that's right. Yes. So think about the rate backdrop as an example, right? So the pace at which rates come down, we're slightly asset sensitive, so that could put a little near-term squeeze on us. We do have pricing actions in flight that are continuing to accrete and drive, I'll say, increased loan yield. We have an improving delinquency environment. So that would mean you're going to have lower late fees, which go into yields, that would be a headwind against that. You've got product mix changing and credit risk mix improving. You have higher payment rates, so that could be -- put a little pressure on. So it all kind of comes together. But I'd say right now, I go stable-ish, but it depends macro is going to move it one way or another. And obviously, as I mentioned earlier, look, we're doing the whole bottoms-up partner by partner. We'll give better guidance in January, maybe that we're going to give more revenue guidance and net interest margin because there's so many moving parts in there.

No, that's super helpful. And one thing that's helped the margin over time is you've been on a journey to improve the overall funding base. We just talked about and debt and we talked about preferred. But maybe let's spend a minute just talking about the deposit side. Where are you on the journey? Where would you like to take this to over the medium term and over what time frame?

Yes. So one, we're really pleased with the deposit program, around $8.2 billion at the end of last quarter. It's continued to grow throughout this quarter, and I expect to continue to see that to grow. I mean Ralph put out a target of getting to 50%. I think that was almost 5 years ago of our total funding being direct-to-consumer, 47% at the end of last quarter and growing. We're going to look at things around our bank structure. And is there things that we can do that would allow us then to fund more of our assets using deposits. So we have a simplified structure, think about merging the bank some point down the road, then we could bring that -- yes, because in one of our banks today, we can't offer direct-to-consumer deposits. So that will be helpful. But overall, we're very pleased with the direct-to-consumer deposit program and expect to see that continue to grow probably up to 70% over a long period of time. But again, that's going to be because we can be towards the top of the league table given our expansive margins that we have.

Two last questions I want to hit on now that we're under the 2-minute warning. I don't want to talk about football Perry.

No time. No football.

No football.

It's a soft subject for both Perry and I, much more so than me. But we've spoken about the impact of APR repricing. Some others have made some tweaks or roll back. Maybe just talk a little bit about the partner response you've seen. I know that there's still more to go as it layers in. And are there any other changes you're expecting over the next 12 to 18 months?

Yes. I think we've had very constructive relationships with our brand partners and some moved quickly with a very strong revenue share in there. So again, that remains in place, not having to see a lot of rollbacks. Some were a little bit more, I'll say, middle innings coming to agree on some of the repricing. One of the things with all the partners, it's a partner-by-partner decision, and they're looking at competitive peer set. And I'd say there has not been a lot of pushback to roll things back. We're in a good place. We're underwriting as deeply as we normally will for them. So it's been constructive. And a lot of this also gets reinvested back into their program. So there's trade-offs when you do certain things. And right now, I'd say we're kind of more of a BAU mode of those types of partnerships.

So maybe one last question. I think I've asked you for a handful of years, Ralph. So might not -- why stock now, although maybe a little nuance. So the stock is now trading above tangible book value. I think last year, it was below. So good for you guys. Obviously, there's still uncertainty around the macro landscape. But what are you telling investors to get them excited about owning shares of Bread right now?

I might have to go into overtime. So a couple of things. I tell them, judge us by what we've done and not by what we said we were going to do, judge us by our acts, our outcomes. I think our outcomes have been consistent with what we said we would deliver. And I think that's important. We've got -- I think we've gained back integrity with our shareholders. Our balance sheet is strong. I mean our balance sheet is as strong as it's ever been. We no longer have to choose. It is -- we can accrete cash capital and we can use it the right way for our shareholders and our customers and our partners and our employees. I think that's critically important. Credit is getting better. It's not where it needs to be. It's moving in the right direction. We're signing partners. We've got some good momentum going into 2026. And we have our handle on expenses. So that, to me, are all really good signs of a very stable company. So buy now and buy often.

I get a topic next door that means we're out of time. So please join me in thanking the team.