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Text: These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them.
Also, our discussion today may include references to certain non-GAAP measures.
I'm joined today by Harp Rana, our chief financial officer.
We continue to deliver consistent, predictable and superior results in the fourth quarter.
We generated $20.8 million of net income or $2.04 of diluted EPS, along with attractive returns of 6% ROA and 29.5% ROE due to quality growth in our loan portfolio, a strong credit profile, disciplined expense management and low funding costs.
For the third straight quarter, we logged double-digit year-over-year growth in our net finance receivables and quarterly revenue, which were up 26% and 23%, respectively.
These annual growth rates far exceeded our 2019 prepandemic portfolio and revenue growth rates of 19% and 16%, respectively.
We originated a record $434 million of loans in the fourth quarter, up 19% over both the prior year and 2019 levels.
Over the past two years, we've taken market share, as evidenced by our growth compared to the broader industry and, at the same time, maintained our robust credit underwriting.
In the fourth quarter, our portfolio also grew sequentially by $112 million, exceeding our guidance and driving our ending net receivables to an all-time high of more than $1.4 billion, which in turn produced record quarterly revenue of $119 million.
While delinquencies continue to normalize in line with our expectations, our credit profile at the end of the year remains stronger than prepandemic levels.
Our 30-plus day delinquency rate ended just below 6%, which was 70 basis points above the prior year end but still 100 basis points below December 31, 2019.
Our net credit loss rate during the quarter was 6.4%, a 50 basis point improvement from the prior year period and 260 basis points better than the fourth quarter of 2019.
Our net credit loss rate for the full year 2021 was 6.6% or 230 basis points lower than 2020 and 290 basis points lower than 2019.
Our operations have proven durable and resilient throughout the pandemic, including during the most recent Omicron variant surge, and we continue to be encouraged by the strength of the economy, positive macroeconomic outlook, and the low unemployment rate.
As I reflect on 2021, I'm proud of our team's relentless execution on our strategic growth initiatives and our company's delivery of strong results that benefit all stakeholders, most importantly our customers, team members, communities and shareholders.
We once again demonstrated our ability to produce exceptional outcomes despite a challenging macroeconomic environment.
For our customers, we continue to execute our vision of delivering a best-in-class experience and a basket of useful, accessible, easily understood financial solutions that serve their evolving needs and support their long-term financial well-being.
We enhanced the digital prequalification experience, launched a guaranteed loan offer program with online fulfillment, expanded our auto secured and retail loan products, and introduced our valuable credit solutions to millions of new customers in two new states.
We also made the investments necessary to deliver end-to-end digital lending and improved customer portal and a mobile app to our customers in 2022.
At the same time, we improved the financial well-being of our customers, including through our graduation programs.
In 2021, we refinanced approximately 41,000 of our customers' small loans into large loans, representing $237 million in finance receivables at origination and reducing these customers' average APR from 42.8% to 30.7%.
For our team members, we established a $15 per hour minimum wage, rolled out additional compensation increases for hourly employees in amounts well ahead of the current inflationary environment, provided an additional week of paid time off and access to bereavement leave, held health and welfare insurance premiums flat, improved our overall benefit offerings and introduced new training and development programs.
For our communities, we continue to make a positive impact through Regional Reach, an employee-led program dedicated to creating social change and goodwill through community service, charitable giving, and diversity, equity and inclusion initiatives.
In the spring, we again partnered with the American Heart Association, leading all upstate South Carolina companies in fundraising for the Heart Walk for the second year in a row and emerged as a top partner for American Heart nationwide.
Throughout the year, we also provided support to other organizations, such as Harvest Hope Food Bank and Asian Americans Advancing Justice.
For our shareholders, we grew our loan portfolio, gained market share, maintained a strong credit profile, appropriately managed our operating expenses, diversified our funding sources, decreased our funding costs, hedged our interest rate risk, and posted a number of annual and quarterly records on both our income statement and balance sheet.
We finished 2021 with a record $88.7 million of net income, $8.33 of diluted EPS, 7.2% ROA, 31.6% ROE.
These results are far and away the best in our company's history, with net income exceeding the high end of our most recent guidance by nearly $2 million.
We also invested heavily throughout the pandemic, enabling us to dramatically improve our capabilities relative to 2019 and positioning us well for 2022 and beyond.
These investments led to a strong portfolio and revenue growth, up 26% and 20%, respectively, in 2021 compared to prepandemic results in 2019.
In addition to growing our portfolio and investing in our future, we returned capital to our shareholders in the form of dividends totaling $10 million and share repurchases totaling $67 million in 2021.
Since the outset of the pandemic in 2020, we have returned a total of $92 million of capital, comprised of $80 million of share repurchases or 17.2% of shares outstanding at the beginning of 2020 and $12 million of dividends.
In recognition of our exceptional results, our strong capital position and the long-term earnings power and resiliency of our business, I am pleased to announce that our board of directors has approved a 20% increase in our quarterly dividend to $0.30 per share and has authorized a new $20 million stock repurchase program.
Pivoting to the new year.
We entered 2022 in a position of considerable strength.
Our loan portfolio at the outset of the year was at an all-time high, providing a solid jump-off point for 2022, and we expect that loan demand will continue to be robust.
We remain well-situated to execute on our long-term strategies, including our ambitious growth plans throughout the year and beyond.
We will continue to invest heavily in technology as we innovate and evolve our business.
Our improved digital prequalification experience produced another period of record digitally sourced originations.
We originated $49 million of digitally sourced loans in the fourth quarter, up 135% from the prior year period and 226% from the fourth quarter of 2019.
New digital volumes represented 28.2% of our total new borrower volume in the quarter, with 59.8% originated as large loans.
Total digitally sourced originations in 2021 were $149 million, up 239% from 2020 and 199% from 2019.
With the combination of our digital prequalification engine and our new end-to-end digital lending capabilities, which we'll begin testing this quarter, we expect to be in a position to deliver another year of record digitally sourced originations in 2022.
Earlier this week, we continued to grow our geographic footprint with the expansion of operations to Mississippi, our 14th state.
We also plan to enter at least five additional new states and open approximately 25 de novo branches later this year as we continue our national expansion.
Our digital investments and support from our centralized sales and service team will allow our branches in new states to maintain a broader geographic reach.
This will result in higher average receivables per branch and the need for fewer branches, creating greater operating leverage.
We remain confident in our ability to quickly gain a strong foothold in new geographies as we expand.
Along with our rapid growth, we continue to keep a firm handle on our balance sheet and credit profile.
As of the end of 2021, we had more than $550 million of unused borrowing capacity and available liquidity of $210 million to fund our growth.
We are positioned well for rising interest rates with 78% of our $1.1 billion in outstanding debt carrying a fixed rate interest rate with a weighted average coupon of 2.7% and an average revolving duration of 3.1 years.
In the fourth quarter, we added two forward interest rate caps totaling $100 million at strike rates of 50 basis points, a timely purchase in light of increasing rates at the outset of 2022.
The new caps are effective in 2023 and 2024, provide protection into early 2026 and extend our weighted average interest rate cap duration to nearly two years.
As of December 31, inclusive of the new caps, we had a total of $450 million of interest rate caps with strike rates at 25 to 50 basis points, covering $244 million in existing variable debt and creating protection for future growth.
By midyear 2022, we also plan to begin implementing our next-generation scorecard with a full rollout by year-end.
The new proprietary model will provide significant advancements in underwriting capabilities by utilizing sophisticated modeling algorithms that leverage new alternative data sources to drive more predictable outcomes.
Also, in support of our end-to-end digital growth strategy, we will integrate industry-leading APIs for fraud, income, cash flow and employment verification into the underwriting and origination process.
These efforts will contribute to stable credit performance in the coming years.
We also began 2022 with healthy reserves against future credit losses.
Consistent with our strong portfolio growth in the fourth quarter, we built our allowance for credit losses by $9.2 million, resulting in an allowance for credit losses reserve rate at the end of the year of 11.2%.
Our allowance includes a $14.4 million reserve related to the expected economic impact of the COVID-19 pandemic.
We released only $1.1 million of these COVID-related reserves in the fourth quarter as we continue to maintain a conservative stance while monitoring the impact of the Omicron variant, the pace of the economic recovery and the financial health of the consumer.
In summary, our strategic investments in digital initiatives, geographic expansion, and product and channel development, along with our proven multichannel marketing engine, continue to drive substantial profitable growth.
We've also derisked our business by investing heavily in our custom underwriting models and shifting 83% of our portfolio to higher quality loans at or below 36% APR, enabling us to maintain stable credit profile as we grow.
We also continue to prioritize our operating efficiency and balance sheet strength.
Together, these efforts have yielded consistent, predictable and superior results and will drive profitable growth with sustainable long-term value creation and capital return in the future.
I'll take you through our fourth-quarter results in more detail.
We generated net income of $20.8 million and diluted earnings per share of $2.04, up 45% and 59%, respectively, over the prior-year period.
These results were driven once again by significant portfolio and revenue growth, low funding costs and a healthy credit profile.
The business produced strong returns with 6% ROA and 29.5% ROE this quarter, and 7.2% ROA and 31.6% ROE for the full year 2021.
We continue to demonstrate our ability to drive revenue to our bottom line and generate robust returns.
As illustrated on Page 4, branch originations increased year over year as we originated $287 million of branch loans in the fourth quarter, 7% higher than the prior year period.
Meanwhile, direct mail and digital originations were 55% above the prior year period, rising to $148 million of originations.
Our total originations were a record $434 million, up 19% from the prior year period.
Notably, our new growth initiatives drove $128 million of fourth-quarter originations and continue to be a significant factor in our accelerating expansion.
Page 5 displays our portfolio growth and mix trends through the end of 2021.
Our core loan portfolio grew $112 million or 8.6% sequentially in the quarter and $296 million or 26.5% from the prior year period as we continued to capture market share.
Large loans and small loans grew 10% and 6% on a sequential basis.
As a reminder, for the first quarter of 2022, we expect to see some degree of normal seasonal runoff in the portfolio as customers have historically paid down their loans in the first quarter with tax refunds and bonuses.
However, in light of strong demand in the market this year, we anticipate that our finance receivables portfolio will liquidate only slightly in the quarter.
Our first quarter ending net receivables should be approximately $1.4 billion, and consistent with prior years, the portfolio will return to growth in the second quarter.
On Page 6, we show our digitally sourced originations, which were 28% of our new borrower volume in the fourth quarter as we continue to meet the needs of our customers through our omnichannel strategy.
During the fourth quarter, large loans were nearly 60% of our new digitally sourced origination.
Turning to Page 7.
Total revenue grew by 23% to a record $119.5 million.
Interest and fee yield declined 50 basis points year over year as expected primarily due to the continued mix shift toward larger loans and the impact of nonaccrual loans as credit continues to normalize.
Sequentially, interest and fee yield was lower by 60 basis points and total revenue yield was lower by 80 basis points, reflecting normal seasonal increases in 90-plus day delinquencies.
In the first quarter, we expect total revenue yield to be approximately 110 basis points lower than the fourth quarter and our interest in fee yield to be approximately 120 basis points lower due to the continued mix shift to large loans, seasonally higher net credit losses and credit normalization.
Moving to Page 8.
Our net credit loss rate was 6.4% for the fourth quarter, a 50 basis point improvement year over year and 260 basis points better than the fourth quarter of 2019.
We typically experience a seasonal increase in our net credit loss rate in the first quarter of each year, and we also expect that the credit profile of our portfolio will continue to normalize in the first quarter of this year.
Despite the combination of typical first quarter seasonality and this year's credit normalization, we anticipate that our net credit loss rate will remain 130 basis points better than first quarter 2020 prepandemic level.
For the full year 2022, we expect that our loss rate will be approximately 8.5% or 100 basis points below full year 2019 levels.
30-plus day delinquencies continue to normalize as expected.
Our 30-plus day delinquency level as of December 31 was 6%, an increase of 130 basis points versus September 30, and up 70 basis points versus the prior year-end.
However, we remain 100 basis points below year-end 2019 level.
On a product basis, our mix shift to higher quality large loans has served us well.
As of December 31, 68% of our portfolio was comprised of large loans, and 83% of our portfolio had an APR at or below 36%.
As expected, our 30-plus day delinquency on our small loan portfolio is normalizing more quickly than on our large loan portfolio, with our small loan delinquency rate up 200 basis points year over year compared to only 20 basis points on the large loan portfolio.
However, our small loan portfolio has higher yields and wider net credit margins to accommodate the faster normalization of credit as we manage our overall portfolio to achieve attractive risk-adjusted returns.
Both our large and small loans, 30-plus day delinquency rates remain below 2019 levels.
Moving forward, we expect delinquencies to continue to rise toward more normalized levels.
Turning to Page 9.
We ended the third quarter with an allowance for credit losses of $150.1 million or 11.4% of net finance receivables.
During the fourth quarter, the allowance increased by $9.2 million sequentially to $159.3 million to support our strong portfolio growth, but the allowance as a percentage of net finance receivables decreased to 11.2%.
The allowance increase in the quarter consisted of a base reserve build of $10.3 million to support our portfolio growth and a COVID-related reserve release of $1.1 million due to improving economic conditions.
We continue to maintain a reserve of $14.4 million related to the expected economic impact of the ongoing COVID-19 pandemic.
As a reminder, as our portfolio grows, we will build additional reserves to support new growth, but we continue to expect that the reserve rate will normalize over the course of 2022.
We estimate that our reserve rate will remain at approximately 11.2% at the end of the first quarter and gradually decline to prepandemic levels of approximately 10.8% by the middle to the end of the year, depending upon the continued impact of COVID-19 and how quickly cases subside.
Our $159.3 million allowance for credit losses as of December 31 continues to compare very favorably to our 30-plus-day contractual delinquencies of $84.9 million.
We are confident that we remain appropriately reserved.
Flipping to Page 10.
G&A expenses for the fourth quarter were $55.5 million, up $11 million or 24% from the prior year period, a bit higher than we previously guided.
The increase was driven by increased investment in our new growth initiatives, personnel and omnichannel strategy.
G&A expenses for the fourth quarter also included $0.9 million of expenses related to the consolidation of 31 branches as a part of the company's branch optimization plan.
Looking ahead, 2022 will be a year of heavy investment.
Overall, we expect G&A expenses for the first quarter to be approximately $55 million or $0.5 million lower than the fourth quarter as we continue to invest in our digital capabilities, geographic expansion and personnel to drive additional sustainable growth and improved operating leverage over the longer term.
These investments include centralized sales and service staff to support our digital initiatives as well as additional centralized collectors to mitigate the impact of credit normalization.
Turning to Page 11.
Interest expense was $7.6 million in the fourth quarter or 2.3% of our average net finance receivables on an annualized basis.
This was a $1.7 million or 100 basis point improvement year over year.
The improved cost of funds was driven by the lower interest rate environment, improved costs from our recent securitization transactions and a mark-to-market adjustment of $2.2 million on our interest rate cap.
We currently have $550 million of interest rate caps to protect us against rising rates on our variable rate debt, which as of the end of fourth quarter totaled $244 million.
$450 million of the interest rate caps have a one-month LIBOR strike price between 25 and 50 basis points and a weighted average duration of two years.
As rates fluctuate, the value of these interest rate caps will be mark-to-market value accordingly.
Looking ahead, we expect interest expense in the first quarter to be approximately $10.5 million, excluding any mark-to-market impact on interest rate caps with the sequential increase in expense attributable to the growth in our average net receivables.
Page 12 is the reminder of our strong funding profile.
Our fourth-quarter funded debt-to-equity ratio remained at a conservative 3.9:1.
We continue to maintain a very strong balance sheet with low leverage and $159 million in loan loss reserves.
As of December 31, we had $557 million of unused capacity on our credit facilities and $210 million of available liquidity, consisting of unrestricted cash and immediate availability to draw down our credit facilities.
Our fixed rate debt as a percentage of total debt was 78% with a weighted average coupon of 2.7% and an average revolving duration of 3.1 years.
Our effective tax rate during the fourth quarter was 18% compared to 23% in the prior year period, primarily due to tax benefits from share-based awards.
For the first quarter, we expect an effective tax rate of approximately 25%, excluding discrete items such as tax impacts associated with equity compensation.
During the fourth quarter, we repurchased nearly 200,000 shares of our common stock at a weighted average price of $57.38 per share under our $50 million stock repurchase program.
We completed the stock repurchase program in January of 2022, having repurchased in total 945,089 shares at a weighted average price of $52.91 per share.
As Rob noted earlier, our board of directors has declared a dividend of $0.30 per common share for the first quarter of 2022, a 20% increase over the prior quarter's dividend.
The dividend will be paid on March 16, 2022, to shareholders of record as of the close of business on February 23, 2022.
In addition, as Rob mentioned earlier, we are also pleased to announce that our board of directors has authorized a new $20 million stock repurchase program.
We are proud of our outstanding performance throughout the year, and we remain extremely pleased with our strong balance sheet and our near- and long-term prospects for growth.
That concludes my remarks.
The successes of our long-term strategic initiatives are evident.
We built a growth company with a focused omnichannel strategy and proven consistent execution.
Our investments throughout the pandemic in technology, the digital experience and credit underwriting have transformed the company and driven substantial quality growth in customer accounts, our loan portfolio and the top and bottom lines.
Looking ahead, we'll continue to invest in our future, including in geographic expansion and the development of digital capabilities on par with any fintech lender.
These investments and our key strategic initiatives will position us to sustainably grow our business, expand our market share and create additional value for our shareholders.
Operator, could you please open the line?

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q4 earnings per share $2.04.
q4 revenue rose 22.6 percent to $119.5 million.

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