The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto presented in this quarterly report and the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission, or SEC, on February 26, 2021.

2021 First Quarter Financial Highlights

Results of operations for the first quarter of 2021 continued to be impacted by the COVID-19 pandemic; however, we continue to see improvement in key credit metrics and continued sequential improvement in business conditions. Financial highlights for the first quarter of 2021 as compared to the corresponding prior year period are as follows:

? For the three months ended March 31, 2021, as compared to the three months

ended March 31, 2020:

? Revenue decreased $296.9 million, or 21%, to $1,084.9 million.

? Provision for loan loss decreased $622.5 million, or 95%, to $33.4 million

? Income before income taxes increased $369.0 million, or 1,452%, to $394.4

million.

? Net income increased $256.2 million, or 854%, to $286.2 million.

? We paid dividends and dividend equivalent rights of $10.7 million for the three

months ended March 31, 2021.

On April 14, 2021, the Company announced that Perry Beberman will be named

Executive Vice President and Chief Financial Officer, effective July 6, 2021.

? Mr. Beberman served most recently as Senior Vice President and Finance

Executive for Bank of America's Consumer and Wealth Management Lending

Products. He succeeds Mr. King who resigned as Executive Vice President and

Chief Financial Officer on April 13, 2021.

COVID-19 Update

On March 11, 2020, the World Health Organization declared the current coronavirus, or COVID-19, outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19, international, provincial, federal, state and local government or other authorities have imposed varying degrees of restrictions on social and commercial activity in an effort to improve health and safety. As the global COVID-19 pandemic has continued to evolve, our priority has been and continues to be, the health and safety of our employees, with the vast majority of our employees continuing to work from home.

The effects of the COVID-19 pandemic impacted our results and year-over-year comparisons; however, credit metrics have remained resilient, with a net loss rate of 5.0% for the three months ended March 31, 2021, and a delinquency rate of 3.8% for the period ended March 31, 2021. Improvement in the net loss rate is a result of prudent risk management strategy changes, deliberate underwriting actions, and direct consumer stimulus payments. Credit sales year-over-year performance strengthened versus the previous quarter. The majority of the credit sales improvement can be attributed to in­store sales, which have benefitted from increased consumer confidence and mobility. However, redemptions in our AIR MILES Reward Program declined 26% largely due to the downturn in the travel market as a result of the pandemic and related restrictions such as border closures repressing travel-related redemptions. The AIR MILES Reward Program continues to pivot the rewards portfolio to emphasize more non­travel options, driving higher merchandise redemptions. In addition, the AIR MILES Reward Program is working with airline partners to plan for the eventual return of airline travel with optimism for the second half of the year. At BrandLoyalty, uncertainty remains with many European countries still in lockdown; however, new program activity is increasing with consumers actively engaged in loyalty campaigns, with particular success in products focused on the home.

Despite the emergence of vaccines, surges in COVID-19 cases, including variants of the strain, may cause people to self-quarantine or governments to shut down nonessential businesses again. The broad availability of COVID-19 vaccines and the willingness of individuals to be vaccinated are difficult to predict. The pace and shape of the COVID-19 recovery as well as the impact and extent of potential resurgences is not presently known. We continue to evaluate the nature and extent of changes to the market and economic conditions related to the COVID-19 pandemic and current and potential impact on our business and financial position. However, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our future results of operations or cash flows at this time.



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