BREAD FINANCIAL HOLDINGS, INC.BFH
BREAD FINANCIAL HOLDINGS, INC. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
We have adopted equity compensation plans to advance the interests of BFH by rewarding certain employees for their contributions to the financial success of BFH and thereby motivating them to continue to make such contributions in the future. Under the Omnibus Incentive Plans described further below, certain shares of common stock are reserved for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock unit awards (RSUs), performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for us or our affiliates, with only employees being eligible to receive incentive stock options. As well, the maximum amount that may be awarded under any of our equity compensation plans to any independent member of our Board of Directors in any one calendar year may not exceed $1 million.
2020 Omnibus Incentive Plan
The 2020 Omnibus Incentive Plan (the 2020 Plan) became effective July 1, 2020 and reserved 2,400,000 shares of common stock for future grants. The 2020 Plan expires on June 30, 2030; provided that, pursuant to the terms of the 2022 Omnibus Incentive Plan (as defined below), no new grants are permitted to be made under the 2020 Plan.
2022 Omnibus Incentive Plan
The 2022 Omnibus Incentive Plan (the 2022 Plan) became effective July 1, 2022 and reserved 3,075,000 shares of common stock for future grants. The 2022 Plan expires on June 30, 2032, provided that pursuant to the terms of the 2024 Omnibus Incentive Plan (the 2024 Plan), no new grants are permitted to be made under the 2022 Plan, and all of the shares that remained available for grant under the 2022 Plan (203,687 shares) were rolled over into the 2024 Plan under the terms thereof, together with any shares that may be forfeited under the outstanding equity awards under the 2022 Plan, as discussed in more detail below.
2024 Omnibus Incentive Plan
In April 2024, our Board of Directors adopted the 2024 Plan, which was subsequently approved by our stockholders on May 14, 2024. The 2024 Plan became effective May 14, 2024 and expires on May 13, 2034. The 2024 Plan reserves 5,000,000 new shares of common stock for future grants. In addition, the 2024 Plan (i) permitted us to roll over the shares that remained available for grant under the 2022 Plan at the time the 2024 Plan was approved (203,687 shares as of May 14, 2024) and (ii) permits us to roll over and re-issue shares that are forfeited under outstanding equity awards under the 2022 Plan. As of December 31, 2025 61,300 shares had been forfeited and rolled over from the 2022 Plan to the 2024 Plan, and 1,574,387 shares remained subject to outstanding equity awards under the 2022 Plan.
On May 14, 2024 we registered up to an aggregate of 7,667,594 shares of our common stock authorized for issuance in accordance with the 2024 Plan pursuant to a Registration Statement on Form S-8, File No. 333-279495. Terms of all awards under the 2024 Plan are determined by the Board of Directors or the Compensation & Human Capital Committee of the Board of Directors or its designee at the time of award.
Stock-based Compensation Expense
Stock-based compensation expense is measured at the grant date of the award, based on the fair value of the award, and is recognized ratably over the requisite service period. Stock-based compensation expense recognized in Employee compensation and benefits expense in the Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023 was $56 million, $54 million and $44 million, respectively, with corresponding income tax benefits of $10 million, $9 million and $8 million, respectively.
As the amount of stock-based compensation expense recognized is based on awards ultimately expected to vest, the amount recognized in the Consolidated Statements of Income has been reduced for estimated forfeitures. We estimate forfeitures at each grant date based on historical experience, with forfeiture estimates to be revised, if necessary, in subsequent periods should actual forfeitures differ from those estimates. Forfeitures were estimated at 4% for the year ended December 31, 2025, and were estimated at 5% for the years ended December 31, 2024 and 2023.
As of December 31, 2025, there was approximately $63 million of unrecognized expense, adjusted for estimated forfeitures, related to non-vested, stock-based equity awards granted to employees, which is expected to be recognized over a weighted average remaining period of approximately 1.6 years.
Restricted Stock Unit Awards
The following table summarizes RSUs activity for our stock-based compensation plans:
Performance- Based(1) | Service- Based | Total | Weighted Average Fair Value | ||||||||||||||||||||
| Balance as of December 31, 2022 | 164,946 | 1,107,663 | 1,272,609 | $ | 68.86 | ||||||||||||||||||
| Shares granted | 175,587 | 1,172,465 | 1,348,052 | 38.02 | |||||||||||||||||||
| Shares vested | (9,254) | (434,049) | (443,303) | 67.49 | |||||||||||||||||||
| Shares forfeited | — | (87,527) | (87,527) | 53.82 | |||||||||||||||||||
| Balance as of December 31, 2023 | 331,279 | 1,758,552 | 2,089,831 | $ | 49.89 | ||||||||||||||||||
| Shares granted | 243,312 | 1,307,833 | 1,551,145 | 37.78 | |||||||||||||||||||
| Shares vested | (95,133) | (730,635) | (825,768) | 56.58 | |||||||||||||||||||
| Shares forfeited | — | (68,012) | (68,012) | 43.39 | |||||||||||||||||||
| Balance as of December 31, 2024 | 479,458 | 2,267,738 | 2,747,196 | $ | 41.54 | ||||||||||||||||||
| Shares granted | 157,788 | 867,302 | 1,025,090 | 61.93 | |||||||||||||||||||
| Shares vested | (99,184) | (962,815) | (1,061,999) | 47.05 | |||||||||||||||||||
| Shares forfeited | — | (59,233) | (59,233) | 45.17 | |||||||||||||||||||
| Balance as of December 31, 2025 | 538,062 | 2,112,992 | 2,651,054 | $ | 47.20 | ||||||||||||||||||
| Outstanding and Expected to Vest | 2,621,537 | $ | 46.85 | ||||||||||||||||||||
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(1) Shares granted reflect a 100% target attainment of the respective performance-based metric. Shares forfeited include those RSUs forfeited as a result of BFH not meeting the respective performance-based metric conditions.
For Service-based and Performance-based awards, the fair value of the RSUs was estimated using our closing share price on the date of grant. Service-based RSUs typically vest ratably over a three-year period. Performance-based RSUs typically cliff vest at the end of three years, if specified performance measures tied to our financial performance are met, which are measured annually over the three-year period. Performance-based RSUs granted in 2025 include a market-based relative total stockholder return modifier which is measured over the three-year vesting period. For Performance-based awards granted in 2023 and 2024, the predefined vesting criteria permit a range from 0% to 150% to be earned. For Performance-based awards granted in 2025, the predefined vesting criteria permit a range from 0% to 160% to be earned, including the +/- 10% relative total stockholder return modifier, which is measured against a defined peer group. Accruals of compensation cost for an award with a performance condition are based on the probable outcome of that performance condition.
For RSUs vested during the years ended December 31, 2025, 2024 and 2023, the total fair value, based upon our stock price at the date the RSUs vested, was $50 million, $47 million and $30 million, respectively. As of December 31, 2025, the aggregate intrinsic value of RSUs outstanding and expected to vest was $194 million.About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.