8-K
Regional Management Corp. (RM)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2021
Regional Management Corp.
(Exact name of registrant as specified in its charter)
| Delaware | 001-35477 | 57-0847115 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
979 Batesville Road, Suite B
Greer, South Carolina 29651
(Address of principal executive offices) (zip code)
(864) 448-7000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
|---|---|---|
| Common Stock, $0.10 par value | RM | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2021, Regional Management Corp. (the “Company”) issued a press release announcing financial results for the three and six months ended June 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. On August 3, 2021, the Company will host a conference call to discuss financial results for the three and six months ended June 30, 2021. A copy of the presentation to be used during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
All information in the press release and the presentation is furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition,” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 8.01. Other Events.
On August 3, 2021, the Company also announced that its Board of Directors has: (i) approved a $20 million increase in the amount authorized under its stock repurchase program announced in May 2021, from $30 million to $50 million, and (ii) declared a quarterly cash dividend of $0.25 per share of outstanding common stock, payable on September 15, 2021 to stockholders of record as of the close of business on August 25, 2021.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release issued by Regional Management Corp. on August 3, 2021, announcing financial results for Regional Management Corp. for the three and six months ended June 30, 2021. |
| 99.2 | Presentation of Regional Management Corp., dated August 3, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Regional Management Corp. | ||
|---|---|---|
| Date: August 3, 2021 | By: | /s/ Harpreet Rana |
| Name: | Harpreet Rana | |
| Title: | Executive Vice President and Chief Financial Officer |
3
rm-ex991_6.htm
Exhibit 99.1
Regional Management Corp. Announces Second Quarter 2021 Results
- Net income of $20.2 million and diluted earnings per share of $1.87 -
- 10.9% year-over-year revenue growth and 17.3% core net finance receivables growth -
- Historically low 30+ day contractual delinquencies of 3.6% as of June 30, 2021 -
- Increases authorization under stock repurchase program from $30 million to $50 million -
Greenville, South Carolina – August 3, 2021 – Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the second quarter ended June 30, 2021.
“We are proud of our performance during the second quarter, having generated $20.2 million of net income, strong returns of 7.1% ROA and 28.7% ROE, and double-digit year-over-year receivables and revenue growth,” said Robert W. Beck, President and Chief Executive Officer of Regional Management Corp. “We took advantage of the improving economy and robust loan demand to expand our market share, originating a record $373 million of loans in the quarter and driving our ending net receivables to an all-time high of $1.2 billion. The second quarter loan production and growth contributed to record quarterly revenue and is a validation of our recent strategic investments in our omni-channel model, including our digital initiatives, geographic expansion, and new product and channel development.”
“Along with our exceptional top-line results, we continue to maintain a superior credit profile,” added Mr. Beck. “Our 30+ day delinquency rate improved to a historical low of 3.6%, enabling us to maintain our allowance for credit losses at prior levels despite record sequential quarterly portfolio growth. Robust growth, stable credit, well-managed expenses, and low funding costs combined for another quarter of significant, year-over-year earnings growth. Looking to the second half of 2021, we remain focused on executing on our current strategies to grow our portfolio and to maintain our strong credit profile. With ample unused capacity and available liquidity, we remain well-positioned to continue grabbing market share and delivering attractive returns and long-term value to our shareholders.”
1
Second Quarter 2021 Highlights
| • | Net income for the second quarter of 2021 was $20.2 million and diluted earnings per share was $1.87, compared to net income of $7.5 million and diluted earnings per share of $0.68 in the prior-year period. |
|---|---|
| • | Net finance receivables as of June 30, 2021 were $1.2 billion, an increase of 15.7%, or $160.8 million, from the prior-year period. |
| --- | --- |
| - | Total core small and large loan net finance receivables increased $172.3 million, or 17.3%, compared to the prior-year period. |
| --- | --- |
| - | Large loan net finance receivables of $789.7 million increased $171.6 million, or 27.8%, from the prior-year period and represented 66.7% of the total loan portfolio. Small loan net finance receivables were $380.8 million, an increase of 0.2% from the prior-year period. |
| --- | --- |
| - | Originated $372.8 million of loans in the second quarter of 2021, an increase of $200.6 million, or 116.5%, from the prior-year period. |
| --- | --- |
| • | Total revenue for the second quarter of 2021 was $99.7 million, an increase of $9.8 million, or 10.9%, from the prior-year period. |
| --- | --- |
| - | Interest and fee income increased $8.7 million, or 10.9%, primarily due to higher average net finance receivables and improved interest and fee yield. |
| --- | --- |
| - | Insurance income, net increased $1.0 million, or 13.2%, driven by an increase in premium revenue and partially offset by an increase in life insurance claims expense. |
| --- | --- |
| • | Provision for credit losses for the second quarter of 2021 was $20.5 million, a decrease of $7.0 million, or 25.3%, from the prior-year period. The provision for credit losses for the second quarter of 2021 included a release in the allowance for credit losses of $6.3 million related to the expected economic impact of the COVID-19 pandemic and a net $6.1 million incremental build in reserves related to portfolio growth. |
| --- | --- |
| - | Allowance for credit losses was $139.4 million as of June 30, 2021, including a $17.5 million allowance for credit losses associated with COVID-19. The company’s macroeconomic model assumes an unemployment rate under 8% at the end of 2021. |
| --- | --- |
| • | Annualized net credit losses as a percentage of average net finance receivables for the second quarter of 2021 were 7.4%, a 320 basis point improvement compared to 10.6% in the prior-year period. |
| --- | --- |
| • | As of June 30, 2021, 30+ day contractual delinquencies totaled $42.8 million, or 3.6% of net finance receivables, compared to 4.8% in the prior-year period. As of June 30, 2021, approximately 80% of the company’s total portfolio had been originated since April 2020, the vast majority of which was subject to enhanced credit standards deployed following the outset of the pandemic. |
| --- | --- |
| • | General and administrative expenses for the second quarter of 2021 were $46.4 million, an increase of $4.9 million, or 11.7%, from the prior-year period due to investment in digital and technological capabilities of $1.2 million and increased marketing expenses of $3.3 million, normalized to pre-pandemic levels and to support the company’s growth initiatives. |
| --- | --- |
| • | The operating expense ratio (annualized general and administrative expenses as a percentage of average net finance receivables) for the second quarter of 2021 was 16.5%, an increase of 70 basis points compared to the prior-year period. |
| --- | --- |
| • | As of June 30, 2021, the company had total unused capacity on its revolving credit facilities of $647 million, subject to the borrowing base, and available liquidity of $202 million, including unrestricted cash on hand and immediate availability to draw down cash from its revolving credit facilities. |
| --- | --- |
| • | In the second quarter of 2021, the company repurchased 344,429 shares of its common stock at a weighted-average price of $46.45 per share under the company’s $30 million stock repurchase program announced in May 2021. The company also repurchased an additional 68,437 shares at a weighted-average price of $50.49 per share in July 2021, bringing total repurchases under the stock repurchase program announced in May 2021 to 412,866 shares at a weighted-average price of $47.12 per share through July 2021. |
| --- | --- |
| • | In July 2021, the company closed its sixth asset-backed securitization, a $200 million note issuance with a weighted-average coupon of 2.30%. |
| --- | --- |
Third Quarter 2021 Dividend and Increase in Stock Repurchase Program Authorization
The company’s Board of Directors has declared a dividend of $0.25 per common share for the third quarter of 2021. The dividend will be paid on September 15, 2021 to shareholders of record as of the close of business on August 25, 2021.
The declaration and payment of any future dividend is subject to the discretion of the Board of Directors and will depend on a variety of factors, including the company’s financial condition and results of operations.
In addition, the company’s Board of Directors has approved a $20 million increase in the amount authorized under the stock repurchase program announced in May 2021, from $30 million to $50 million.
Share repurchases under the stock repurchase program may be made in the open market at prevailing market prices, through privately negotiated transactions, or through other structures in accordance with applicable federal securities laws, at times and in amounts as management deems appropriate. The timing and the amount of any common stock repurchases will be determined by the company’s management based on its evaluation of market conditions, the company’s liquidity needs, legal and contractual requirements and restrictions (including covenants in the company’s credit agreements), share price, and other factors. Repurchases of common stock may be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the company might otherwise be precluded from doing so under insider trading laws. The repurchase program does not obligate the company to repurchase any particular number of shares and may be suspended, modified, or discontinued at any time without prior notice.
Liquidity and Capital Resources
As of June 30, 2021, the company had net finance receivables of $1.2 billion and debt of $853.1 million ($851.3 million of outstanding debt and $1.7 million of interest payable). The debt consisted of:
| • | $144.5 million on its $640.0 million senior revolving credit facility availability, |
|---|---|
| • | $149.2 million on its three revolving warehouse credit facilities availability, totaling $300.0 million, and |
| --- | --- |
| • | $559.3 million through its asset-backed securitizations. |
| --- | --- |
The company’s unused capacity on its revolving credit facilities (subject to the borrowing base) was $647 million, or 68.9%, as of June 30, 2021.
The company had a funded debt-to-equity ratio of 3.1 to 1.0 and a stockholders’ equity ratio of 23.4%, each as of June 30, 2021. On a non-GAAP basis, the company had a funded debt-to-tangible equity ratio of 3.2 to 1.0, as of June 30, 2021. Please refer to the reconciliations of non-GAAP measures to comparable GAAP measures included at the end of this press release.
Full Year 2021 Outlook
In light of the unique circumstances presented by the COVID-19 pandemic and credit loss provisioning under the new CECL accounting standard, the company is initiating a full year 2021 outlook for net income. For the full year 2021, the company expects net income to be between $75 million and $80 million. The outlook assumes that:
| • | Current economic conditions remain steady, |
|---|---|
| • | The full year 2021 net credit loss rate will be approximately 7.0%, |
| --- | --- |
| • | The company will build its allowance for credit losses in the second half of the year due to net finance receivables growth, |
| --- | --- |
| • | The allowance for credit losses rate will normalize to pre-pandemic levels of approximately 10.8% by the end of the year, and |
| --- | --- |
| • | General and administrative expenses will increase in the second half of the year as the company continues to invest in its growth initiatives, including increased marketing expenses associated with digital lending efforts. |
| --- | --- |
Branch Network
As of June 30, 2021, the company’s branch network consisted of 368 locations, and in April 2021, the company opened its first branch in Illinois. The company expects to open 15 to 20 new branches during the full year 2021, subject to the economic environment.
Conference Call Information
Regional Management Corp. will host a conference call and webcast today at 5:00 PM ET to discuss these results.
The dial-in number for the conference call is (855) 327-6837 (toll-free) or (631) 891-4304 (direct). Please dial the number 10 minutes prior to the scheduled start time.
*** A supplemental slide presentation will be made available on Regional’s website prior to the earnings call at www.RegionalManagement.com. ***
In addition, a live webcast of the conference call will be available on Regional’s website at www.RegionalManagement.com.
A webcast replay of the call will be available at www.RegionalManagement.com for one year following the call.
About Regional Management Corp.
Regional Management Corp. (NYSE: RM) is a diversified consumer finance company that provides attractive, easy-to-understand installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. Regional Management operates under the name “Regional Finance” in 368 branch locations across 12 states in the Southeastern, Southwestern, Mid-Atlantic, and Midwestern United States, as of June 30, 2021. Most of its loan products are secured, and each is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments, repayable at any time without penalty. Regional Management sources loans through its multiple channel platform, which includes branches, centrally-managed direct mail campaigns, digital partners,
retailers, and its consumer website. For more information, please visit www.RegionalManagement.com.
Forward-Looking Statements
This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent Regional Management Corp.’s expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning financial outlooks or future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “outlook,” and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements speak only as of the date on which they were made and are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. As a result, actual performance and results may differ materially from those contemplated by these forward-looking statements. Therefore, investors should not place undue reliance on forward-looking statements.
Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: risks related to Regional Management’s business, including the COVID-19 pandemic and its impact on Regional Management’s operations and financial condition; managing growth effectively, implementing Regional Management’s growth strategy, and opening new branches as planned; Regional Management’s convenience check strategy; Regional Management’s policies and procedures for underwriting, processing, and servicing loans; Regional Management’s ability to collect on its loan portfolio; Regional Management’s insurance operations; exposure to credit risk and repayment risk, which risks may increase in light of adverse or recessionary economic conditions; the implementation of new underwriting models and processes, including as to the effectiveness of new custom scorecards; changes in the competitive environment in which Regional Management operates or a decrease in the demand for its products; the geographic concentration of Regional Management’s loan portfolio; the failure of third-party service providers, including those providing information technology products; changes in economic conditions in the markets Regional Management serves, including levels of unemployment and bankruptcies; the ability to achieve successful acquisitions and strategic alliances; the ability to make technological improvements as quickly as competitors; security breaches, cyber-attacks, failures in information systems, or fraudulent activity; the ability to originate loans; reliance on information technology resources and providers, including the risk of prolonged system outages; changes in current revenue and expense trends, including trends affecting delinquencies and credit losses; changes in operating and administrative expenses; the departure, transition, or replacement of key personnel; the ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support Regional Management’s operations and initiatives; changes in interest rates; existing
sources of liquidity may become insufficient or access to these sources may become unexpectedly restricted; exposure to financial risk due to asset-backed securitization transactions; risks related to regulation and legal proceedings, including changes in laws or regulations or in the interpretation or enforcement of laws or regulations; changes in accounting standards, rules, and interpretations and the failure of related assumptions and estimates, including those associated with the implementation of CECL accounting; the impact of changes in tax laws, guidance, and interpretations, including the timing and amount of revenues that may be recognized; risks related to the ownership of Regional Management’s common stock, including volatility in the market price of shares of Regional Management’s common stock; the timing and amount of future cash dividend payments; and anti-takeover provisions in Regional Management’s charter documents and applicable state law. The COVID-19 pandemic may also magnify many of these risks and uncertainties.
The foregoing factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not update or revise forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. Regional Management is not responsible for changes made to this document by wire services or Internet services.
Contact
Investor Relations Garrett Edson, (203) 682-8331
investor.relations@regionalmanagement.com
Regional Management Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per share amounts)
| Better (Worse) | Better (Worse) | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 21 | 2Q 20 | % | YTD 21 | YTD 20 | % | |||||||||||||||||
| Revenue | ||||||||||||||||||||||
| Interest and fee income | $ | 88,793 | $ | 80,067 | 10.9 | % | $ | 176,072 | $ | 167,064 | 5.4 | % | ||||||||||
| Insurance income, net | 8,656 | 7,650 | 13.2 | % | 16,641 | 13,599 | 22.4 | % | ||||||||||||||
| Other income | 2,227 | 2,133 | 4.4 | % | 4,694 | 5,261 | ) | (10.8 | )% | |||||||||||||
| Total revenue | 99,676 | 89,850 | 10.9 | % | 197,407 | 185,924 | 6.2 | % | ||||||||||||||
| Expenses | ||||||||||||||||||||||
| Provision for credit losses | 20,549 | 27,499 | 25.3 | % | 31,911 | 77,021 | 58.6 | % | ||||||||||||||
| Personnel | 28,370 | 26,863 | ) | (5.6 | )% | 57,221 | 56,374 | ) | (1.5 | )% | ||||||||||||
| Occupancy | 5,568 | 5,608 | 0.7 | % | 11,588 | 10,835 | ) | (6.9 | )% | |||||||||||||
| Marketing | 4,776 | 1,438 | ) | (232.1 | )% | 7,486 | 3,124 | ) | (139.6 | )% | ||||||||||||
| Other | 7,675 | 7,616 | ) | (0.8 | )% | 15,937 | 17,435 | 8.6 | % | |||||||||||||
| Total general and administrative | 46,389 | 41,525 | ) | (11.7 | )% | 92,232 | 87,768 | ) | (5.1 | )% | ||||||||||||
| Interest expense | 7,801 | 9,137 | 14.6 | % | 14,936 | 19,296 | 22.6 | % | ||||||||||||||
| Income before income taxes | 24,937 | 11,689 | 113.3 | % | 58,328 | 1,839 | 3,071.7 | % | ||||||||||||||
| Income taxes | 4,771 | 4,219 | ) | (13.1 | )% | 12,640 | 694 | ) | (1,721.3 | )% | ||||||||||||
| Net income | $ | 20,166 | $ | 7,470 | 170.0 | % | $ | 45,688 | $ | 1,145 | 3,890.2 | % | ||||||||||
| Net income per common share: | ||||||||||||||||||||||
| Basic | $ | 1.98 | $ | 0.68 | 191.2 | % | $ | 4.41 | $ | 0.10 | 4,310.0 | % | ||||||||||
| Diluted | $ | 1.87 | $ | 0.68 | 175.0 | % | $ | 4.18 | $ | 0.10 | 4,080.0 | % | ||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||||
| Basic | 10,200 | 10,962 | 7.0 | % | 10,371 | 10,929 | 5.1 | % | ||||||||||||||
| Diluted | 10,797 | 11,013 | 2.0 | % | 10,931 | 11,130 | 1.8 | % | ||||||||||||||
| Return on average assets (annualized) | 7.1 | % | 2.9 | % | 8.2 | % | 0.2 | % | ||||||||||||||
| Return on average equity (annualized) | 28.7 | % | 11.7 | % | 32.7 | % | 0.9 | % |
All values are in US Dollars.
Regional Management Corp. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands, except par value amounts)
| Increase (Decrease) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 20 | % | |||||||||
| Assets | ||||||||||
| Cash | 6,086 | $ | 8,973 | ) | (32.2 | )% | ||||
| Net finance receivables | 1,183,387 | 1,022,635 | 15.7 | % | ||||||
| Unearned insurance premiums | (39,469 | ) | (27,016 | ) | ) | (46.1 | )% | |||
| Allowance for credit losses | (139,400 | ) | (142,000 | ) | 1.8 | % | ||||
| Net finance receivables, less unearned insurance premiums and allowance for credit losses | 1,004,518 | 853,619 | 17.7 | % | ||||||
| Restricted cash | 99,920 | 54,423 | 83.6 | % | ||||||
| Lease assets | 28,223 | 27,177 | 3.8 | % | ||||||
| Deferred tax assets, net | 14,109 | 20,682 | ) | (31.8 | )% | |||||
| Property and equipment | 12,658 | 15,504 | ) | (18.4 | )% | |||||
| Intangible assets | 9,081 | 8,824 | 2.9 | % | ||||||
| Other assets | 16,710 | 11,023 | 51.6 | % | ||||||
| Total assets | 1,191,305 | $ | 1,000,225 | 19.1 | % | |||||
| Liabilities and Stockholders’ Equity | ||||||||||
| Liabilities: | ||||||||||
| Debt | 853,067 | $ | 683,865 | 24.7 | % | |||||
| Unamortized debt issuance costs | (9,356 | ) | (7,584 | ) | ) | (23.4 | )% | |||
| Net debt | 843,711 | 676,281 | 24.8 | % | ||||||
| Accounts payable and accrued expenses | 38,316 | 34,843 | 10.0 | % | ||||||
| Lease liabilities | 30,295 | 29,220 | 3.7 | % | ||||||
| Total liabilities | 912,322 | 740,344 | 23.2 | % | ||||||
| Stockholders’ equity: | ||||||||||
| Preferred stock (0.10 par value, 100,000 shares authorized, none issued or outstanding) | — | — | — | |||||||
| Common stock (0.10 par value, 1,000,000 shares authorized, 14,141 shares issued and 10,360 shares outstanding at June 30, 2021 and 13,727 shares issued and 11,243 shares outstanding at June 30, 2020) | 1,414 | 1,373 | 3.0 | % | ||||||
| Additional paid-in-capital | 105,509 | 104,530 | 0.9 | % | ||||||
| Retained earnings | 268,172 | 204,052 | 31.4 | % | ||||||
| Treasury stock (3,780 shares at June 30, 2021 and 2,484 shares at June 30, 2020) | (96,112 | ) | (50,074 | ) | ) | (91.9 | )% | |||
| Total stockholders’ equity | 278,983 | 259,881 | 7.4 | % | ||||||
| Total liabilities and stockholders’ equity | 1,191,305 | $ | 1,000,225 | 19.1 | % |
All values are in US Dollars.
Regional Management Corp. and Subsidiaries
Selected Financial Data
(Unaudited)
(dollars in thousands, except per share amounts)
| Net Finance Receivables by Product | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 21 | 1Q 21 | QoQ <br>Inc (Dec) | QoQ %<br><br><br>Inc (Dec) | 2Q 20 | YoY <br>Inc (Dec) | YoY %<br><br><br>Inc (Dec) | ||||||||||
| Small loans | $ | 380,780 | $ | 371,188 | 2.6 | % | $ | 380,083 | 0.2 | % | ||||||
| Large loans | 789,743 | 719,441 | 9.8 | % | 618,134 | 27.8 | % | |||||||||
| Total core loans | 1,170,523 | 1,090,629 | 7.3 | % | 998,217 | 17.3 | % | |||||||||
| Automobile loans | 2,303 | 3,033 | ) | (24.1 | )% | 6,059 | ) | (62.0 | )% | |||||||
| Retail loans | 10,561 | 11,941 | ) | (11.6 | )% | 18,359 | ) | (42.5 | )% | |||||||
| Total net finance receivables | $ | 1,183,387 | $ | 1,105,603 | 7.0 | % | $ | 1,022,635 | 15.7 | % | ||||||
| Number of branches at period end | 368 | 365 | 0.8 | % | 368 | — | ||||||||||
| Average net finance receivables per branch | $ | 3,216 | $ | 3,029 | 6.2 | % | $ | 2,779 | 15.7 | % |
All values are in US Dollars.
| Averages and Yields | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 21 | 1Q 21 | 2Q 20 | ||||||||||||||
| Average Net Finance Receivables | Average Yield (Annualized) | Average Net Finance Receivables | Average Yield (Annualized) | Average Net Finance Receivables | Average Yield (Annualized) | |||||||||||
| Small loans | $ | 365,535 | 38.3 | % | $ | 389,138 | 37.5 | % | $ | 404,019 | 36.2 | % | ||||
| Large loans | 744,935 | 28.6 | % | 717,572 | 27.9 | % | 618,860 | 27.3 | % | |||||||
| Automobile loans | 2,647 | 12.7 | % | 3,480 | 13.0 | % | 6,820 | 14.8 | % | |||||||
| Retail loans | 11,181 | 18.2 | % | 13,170 | 17.8 | % | 20,114 | 18.0 | % | |||||||
| Total interest and fee yield | $ | 1,124,298 | 31.6 | % | $ | 1,123,360 | 31.1 | % | $ | 1,049,813 | 30.5 | % | ||||
| Total revenue yield | $ | 1,124,298 | 35.5 | % | $ | 1,123,360 | 34.8 | % | $ | 1,049,813 | 34.2 | % | ||||
| Components of Increase in Interest and Fee Income | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| 2Q 21 Compared to 2Q 20 | ||||||||||||||||
| Increase (Decrease) | ||||||||||||||||
| Volume | Rate | Volume & Rate | Total | |||||||||||||
| Small loans | $ | (3,487 | ) | $ | 2,099 | $ | (200 | ) | $ | (1,588 | ) | |||||
| Large loans | 8,618 | 1,879 | 383 | 10,880 | ||||||||||||
| Automobile loans | (155 | ) | (37 | ) | 23 | (169 | ) | |||||||||
| Retail loans | (403 | ) | 10 | (4 | ) | (397 | ) | |||||||||
| Product mix | 1,108 | (1,108 | ) | — | — | |||||||||||
| Total increase in interest and fee income | $ | 5,681 | $ | 2,843 | $ | 202 | $ | 8,726 | ||||||||
| Net Loans Originated (1) (2) | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2Q 21 | 1Q 21 | QoQ <br>Inc (Dec) | QoQ %<br><br><br>Inc (Dec) | 2Q 20 | YoY <br>Inc (Dec) | YoY %<br><br><br>Inc (Dec) | ||||||||||
| Small loans | $ | 147,456 | $ | 98,817 | 49.2 | % | $ | 79,265 | 86.0 | % | ||||||
| Large loans | 223,648 | 130,821 | 71.0 | % | 90,980 | 145.8 | % | |||||||||
| Retail loans | 1,668 | 1,780 | ) | (6.3 | )% | 1,907 | ) | (12.5 | )% | |||||||
| Total net loans originated | $ | 372,772 | $ | 231,418 | 61.1 | % | $ | 172,152 | 116.5 | % |
All values are in US Dollars.
| (1) | Represents the balance of loan originations and refinancings net of unearned finance charges. | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (2) | The company ceased originating automobile purchase loans in November 2017. | |||||||||||||
| --- | --- | |||||||||||||
| Other Key Metrics | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||
| 2Q 21 | 1Q 21 | 2Q 20 | ||||||||||||
| Net credit losses | $ | 20,749 | $ | 21,762 | $ | 27,899 | ||||||||
| Percentage of average net finance receivables (annualized) | 7.4 | % | 7.7 | % | 10.6 | % | ||||||||
| Provision for loan losses (1) | $ | 20,549 | $ | 11,362 | $ | 27,499 | ||||||||
| Percentage of average net finance receivables (annualized) | 7.3 | % | 4.0 | % | 10.5 | % | ||||||||
| Percentage of total revenue | 20.6 | % | 11.6 | % | 30.6 | % | ||||||||
| General and administrative expenses | $ | 46,389 | $ | 45,843 | $ | 41,525 | ||||||||
| Percentage of average net finance receivables (annualized) | 16.5 | % | 16.3 | % | 15.8 | % | ||||||||
| Percentage of total revenue | 46.5 | % | 46.9 | % | 46.2 | % | ||||||||
| Same store results (2): | ||||||||||||||
| Net finance receivables at period-end | $ | 1,175,516 | $ | 1,100,840 | $ | 1,016,776 | ||||||||
| Net finance receivable growth rate | 15.4 | % | 0.2 | % | 2.2 | % | ||||||||
| Number of branches in calculation | 356 | 356 | 349 | |||||||||||
| (1) | Includes COVID-19 pandemic impacts to provision for credit losses of $(6,300), $(6,600), and $9,500 for 2Q 21, 1Q 21, <br>and 2Q 20, respectively. | |||||||||||||
| --- | --- | |||||||||||||
| (2) | Same store sales reflect the change in year-over-year sales for the comparable branch base. The comparable branch base includes those branches open for at least one year. | |||||||||||||
| --- | --- | |||||||||||||
| Contractual Delinquency by Aging | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 2Q 21 | 1Q 21 | 2Q 20 | ||||||||||||
| Allowance for credit losses (1) | $ | 139,400 | 11.8 | % | $ | 139,600 | 12.6 | % | $ | 142,000 | 13.9 | % | ||
| Current | 1,066,124 | 90.1 | % | 1,010,859 | 91.4 | % | 896,928 | 87.8 | % | |||||
| 1 to 29 days past due | 74,470 | 6.3 | % | 47,024 | 4.3 | % | 76,172 | 7.4 | % | |||||
| Delinquent accounts: | ||||||||||||||
| 30 to 59 days | 14,488 | 1.2 | % | 11,252 | 1.0 | % | 15,277 | 1.4 | % | |||||
| 60 to 89 days | 9,614 | 0.8 | % | 9,808 | 0.9 | % | 9,764 | 1.0 | % | |||||
| 90 to 119 days | 6,116 | 0.5 | % | 8,682 | 0.8 | % | 7,014 | 0.7 | % | |||||
| 120 to 149 days | 5,961 | 0.5 | % | 8,717 | 0.8 | % | 8,081 | 0.8 | % | |||||
| 150 to 179 days | 6,614 | 0.6 | % | 9,261 | 0.8 | % | 9,399 | 0.9 | % | |||||
| Total contractual delinquency | $ | 42,793 | 3.6 | % | $ | 47,720 | 4.3 | % | $ | 49,535 | 4.8 | % | ||
| Total net finance receivables | $ | 1,183,387 | 100.0 | % | $ | 1,105,603 | 100.0 | % | $ | 1,022,635 | 100.0 | % | ||
| 1 day and over past due | $ | 117,263 | 9.9 | % | $ | 94,744 | 8.6 | % | $ | 125,707 | 12.2 | % | ||
| Contractual Delinquency by Product | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 2Q 21 | 1Q 21 | 2Q 20 | ||||||||||||
| Small loans | $ | 18,876 | 5.0 | % | $ | 22,582 | 6.1 | % | $ | 24,465 | 6.4 | % | ||
| Large loans | 23,068 | 2.9 | % | 24,177 | 3.4 | % | 23,660 | 3.8 | % | |||||
| Automobile loans | 183 | 7.9 | % | 227 | 7.5 | % | 291 | 4.8 | % | |||||
| Retail loans | 666 | 6.3 | % | 734 | 6.1 | % | 1,119 | 6.1 | % | |||||
| Total contractual delinquency | $ | 42,793 | 3.6 | % | $ | 47,720 | 4.3 | % | $ | 49,535 | 4.8 | % | ||
| (1) | Includes incremental COVID-19 allowance for credit losses of $17,500, $23,800, and $33,400 in 2Q 21, 1Q 21, and 2Q 20, respectively. | |||||||||||||
| --- | --- | |||||||||||||
| Income Statement Quarterly Trend | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2Q 20 | 3Q 20 | 4Q 20 | 1Q 21 | 2Q 21 | QoQ <br>B(W) | YoY <br>B(W) | ||||||||
| Revenue | ||||||||||||||
| Interest and fee income | $ | 80,067 | $ | 81,306 | $ | 86,845 | $ | 87,279 | $ | 88,793 | ||||
| Insurance income, net | 7,650 | 6,861 | 7,889 | 7,985 | 8,656 | |||||||||
| Other income | 2,133 | 2,371 | 2,710 | 2,467 | 2,227 | ) | ||||||||
| Total revenue | 89,850 | 90,538 | 97,444 | 97,731 | 99,676 | |||||||||
| Expenses | ||||||||||||||
| Provision for credit losses | 27,499 | 22,089 | 24,700 | 11,362 | 20,549 | ) | ||||||||
| Personnel | 26,863 | 26,207 | 26,979 | 28,851 | 28,370 | ) | ||||||||
| Occupancy | 5,608 | 5,894 | 5,900 | 6,020 | 5,568 | |||||||||
| Marketing | 1,438 | 3,249 | 3,984 | 2,710 | 4,776 | ) | ) | |||||||
| Other | 7,616 | 8,404 | 7,931 | 8,262 | 7,675 | ) | ||||||||
| Total general and administrative | 41,525 | 43,754 | 44,794 | 45,843 | 46,389 | ) | ) | |||||||
| Interest expense | 9,137 | 9,300 | 9,256 | 7,135 | 7,801 | ) | ||||||||
| Income before income taxes | 11,689 | 15,395 | 18,694 | 33,391 | 24,937 | ) | ||||||||
| Income taxes | 4,219 | 4,157 | 4,347 | 7,869 | 4,771 | ) | ||||||||
| Net income | $ | 7,470 | $ | 11,238 | $ | 14,347 | $ | 25,522 | $ | 20,166 | ) | |||
| Net income per common share: | ||||||||||||||
| Basic | $ | 0.68 | $ | 1.02 | $ | 1.32 | $ | 2.42 | $ | 1.98 | ) | |||
| Diluted | $ | 0.68 | $ | 1.01 | $ | 1.28 | $ | 2.31 | $ | 1.87 | ) | |||
| Weighted-average shares outstanding: | ||||||||||||||
| Basic | 10,962 | 10,977 | 10,882 | 10,543 | 10,200 | |||||||||
| Diluted | 11,013 | 11,092 | 11,228 | 11,066 | 10,797 | |||||||||
| Net interest margin | $ | 80,713 | $ | 81,238 | $ | 88,188 | $ | 90,596 | $ | 91,875 | ||||
| Net credit margin | $ | 53,214 | $ | 59,149 | $ | 63,488 | $ | 79,234 | $ | 71,326 | ) |
All values are in US Dollars.
| Balance Sheet Quarterly Trend | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 20 | 3Q 20 | 4Q 20 | 1Q 21 | 2Q 21 | QoQ <br>Inc (Dec) | YoY <br>Inc (Dec) | ||||||||
| Total assets | $ | 1,000,225 | $ | 1,037,559 | $ | 1,103,856 | $ | 1,098,295 | $ | 1,191,305 | ||||
| Net finance receivables | $ | 1,022,635 | $ | 1,059,554 | $ | 1,136,259 | $ | 1,105,603 | $ | 1,183,387 | ||||
| Allowance for credit losses | $ | 142,000 | $ | 144,000 | $ | 150,000 | $ | 139,600 | $ | 139,400 | ) | ) | ||
| Debt | $ | 683,865 | $ | 700,139 | $ | 768,909 | $ | 752,200 | $ | 853,067 |
All values are in US Dollars.
| Other Key Metrics Quarterly Trend | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2Q 20 | 3Q 20 | 4Q 20 | 1Q 21 | 2Q 21 | QoQ<br><br><br>Inc (Dec) | YoY<br><br><br>Inc (Dec) | |||||||||||||||
| Interest and fee yield (annualized) | 30.5 | % | 31.5 | % | 31.9 | % | 31.1 | % | 31.6 | % | 0.5 | % | 1.1 | % | |||||||
| Efficiency ratio (1) | 46.2 | % | 48.3 | % | 46.0 | % | 46.9 | % | 46.5 | % | (0.4 | )% | 0.3 | % | |||||||
| Operating expense ratio (2) | 15.8 | % | 17.0 | % | 16.4 | % | 16.3 | % | 16.5 | % | 0.2 | % | 0.7 | % | |||||||
| 30+ contractual delinquency | 4.8 | % | 4.7 | % | 5.3 | % | 4.3 | % | 3.6 | % | (0.7 | )% | (1.2 | )% | |||||||
| Net credit loss ratio (3) | 10.6 | % | 7.8 | % | 6.9 | % | 7.7 | % | 7.4 | % | (0.3 | )% | (3.2 | )% | |||||||
| Book value per share | $ | 23.11 | $ | 24.03 | $ | 24.89 | $ | 26.28 | $ | 26.93 | $ | 0.65 | $ | 3.82 | |||||||
| (1) | General and administrative expenses as a percentage of total revenue. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | Annualized general and administrative expenses as a percentage of average net finance receivables. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (3) | Annualized net credit losses as a percentage of average net finance receivables. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| Averages and Yields | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||
| YTD 21 | YTD 20 | ||||||||||||||||||||
| Average Net Finance Receivables | Average Yield (Annualized) | Average Net Finance Receivables | Average Yield (Annualized) | ||||||||||||||||||
| Small loans | $ | 377,272 | 37.9 | % | $ | 431,076 | 36.5 | % | |||||||||||||
| Large loans | 731,329 | 28.3 | % | 626,185 | 27.4 | % | |||||||||||||||
| Automobile loans | 3,061 | 12.9 | % | 7,719 | 14.1 | % | |||||||||||||||
| Retail loans | 12,170 | 18.0 | % | 21,585 | 17.9 | % | |||||||||||||||
| Total interest and fee yield | $ | 1,123,832 | 31.3 | % | $ | 1,086,565 | 30.8 | % | |||||||||||||
| Total revenue yield | $ | 1,123,832 | 35.1 | % | $ | 1,086,565 | 34.2 | % | |||||||||||||
| Components of Increase in Interest and Fee Income | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||
| YTD 21 Compared to YTD 20 | |||||||||||||||||||||
| Increase (Decrease) | |||||||||||||||||||||
| Volume | Rate | Volume & Rate | Total | ||||||||||||||||||
| Small loans | $ | (9,818 | ) | $ | 2,994 | $ | (374 | ) | $ | (7,198 | ) | ||||||||||
| Large loans | 14,428 | 2,539 | 426 | 17,393 | |||||||||||||||||
| Automobile loans | (328 | ) | (47 | ) | 28 | (347 | ) | ||||||||||||||
| Retail loans | (844 | ) | 8 | (4 | ) | (840 | ) | ||||||||||||||
| Product mix | 2,292 | (2,325 | ) | 33 | — | ||||||||||||||||
| Total increase in interest and fee income | $ | 5,730 | $ | 3,169 | $ | 109 | $ | 9,008 | |||||||||||||
| Net Loans Originated (1) (2) | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| YTD 21 | YTD 20 | YTD <br>Inc (Dec) | YTD %<br><br><br>Inc (Dec) | ||||||||||||||||||
| Small loans | $ | 246,273 | $ | 199,289 | 23.6 | % | |||||||||||||||
| Large loans | 354,469 | 196,628 | 80.3 | % | |||||||||||||||||
| Retail loans | 3,448 | 5,480 | ) | (37.1 | )% | ||||||||||||||||
| Total net loans originated | $ | 604,190 | $ | 401,397 | 50.5 | % |
All values are in US Dollars.
| (1) | Represents the balance of loan originations and refinancings net of unearned finance charges. | |||||
|---|---|---|---|---|---|---|
| (2) | The company ceased originating automobile loans in November 2017. | |||||
| --- | --- | |||||
| Other Key Metrics | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| YTD 21 | YTD 20 | |||||
| Net credit losses | $ | 42,511 | $ | 57,321 | ||
| Percentage of average net finance receivables (annualized) | 7.6 | % | 10.6 | % | ||
| Provision for loan losses (1) | $ | 31,911 | $ | 77,021 | ||
| Percentage of average net finance receivables (annualized) | 5.7 | % | 14.2 | % | ||
| Percentage of total revenue | 16.2 | % | 41.4 | % | ||
| General and administrative expenses (2) (3) | $ | 92,232 | $ | 87,768 | ||
| Percentage of average net finance receivables (annualized) | 16.4 | % | 16.2 | % | ||
| Percentage of total revenue | 46.7 | % | 47.2 | % |
(1) Includes COVID-19 pandemic impacts to provision for credit losses of $(12,900) and $33,400 for YTD 21 and YTD 20, respectively.
(2) Includes non-operating executive transition costs of $3,066 for YTD 20.
(3) Includes non-operating loan management system outage costs of $720 for YTD 20.
Non-GAAP Financial Measures
In addition to financial measures presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. The company’s management utilizes non-GAAP measures as additional metrics to aid in, and enhance, its understanding of the company’s financial results. Tangible equity and funded debt-to-tangible equity ratio are non-GAAP measures that adjust GAAP measures to exclude intangible assets. Management uses these equity measures to evaluate and manage the company’s capital and leverage position. The company also believes that these equity measures are commonly used in the financial services industry and provide useful information to users of the company’s financial statements in the evaluation of its capital and leverage position.
This non-GAAP financial information should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following tables provide a reconciliation of GAAP measures to non-GAAP measures.
| 2Q 21 | |||
|---|---|---|---|
| Debt | $ | 853,067 | |
| Total stockholders' equity | 278,983 | ||
| Less: Intangible assets | 9,081 | ||
| Tangible equity (non-GAAP) | $ | 269,902 | |
| Funded debt-to-equity ratio | 3.1 | x | |
| Funded debt-to-tangible equity ratio (non-GAAP) | 3.2 | x |
14
2Q 2021 Earnings Call Supplemental Presentation August 3, 2021 Exhibit 99.2
Legal Disclosures This document contains summarized information concerning Regional Management Corp. (the “Company”) and the Company’s business, operations, financial performance, and trends. No representation is made that the information in this document is complete. For additional financial, statistical, and business information, please see the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission (the “SEC”), as well as the Company’s other reports filed with the SEC from time to time. Such reports are or will be available on the Company’s website (www.regionalmanagement.com) and on the SEC’s website (www.sec.gov). The information and opinions contained in this document are provided as of the date of this presentation and are subject to change without notice. This document has not been approved by any regulatory or supervisory authority. This presentation, the related remarks, and the responses to various questions may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent the Company’s expectations or beliefs concerning future events. Forward-looking statements include, without limitation, statements concerning financial outlook or future plans, objectives, goals, projections, strategies, events, or performance, and underlying assumptions and other statements related thereto. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “outlook,” and similar expressions may be used to identify these forward-looking statements. Such forward-looking statements speak only as of the date on which they were made and are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of the Company. As a result, actual performance and results may differ materially from those contemplated by these forward-looking statements. Therefore, investors should not place undue reliance on such statements. Factors that could cause actual results or performance to differ from the expectations expressed or implied in forward-looking statements include, but are not limited to, the following: risks related to Regional Management's business, including the COVID-19 pandemic and its impact on Regional Management's operations and financial condition; managing growth effectively, implementing Regional Management's growth strategy, and opening new branches as planned; Regional Management's convenience check strategy; Regional Management's policies and procedures for underwriting, processing, and servicing loans; Regional Management's ability to collect on its loan portfolio; Regional Management's insurance operations; exposure to credit risk and repayment risk, which risks may increase in light of adverse or recessionary economic conditions; the implementation of new underwriting models and processes, including as to the effectiveness of new custom scorecards; changes in the competitive environment in which Regional Management operates or a decrease in the demand for its products; the geographic concentration of Regional Management's loan portfolio; the failure of third-party service providers, including those providing information technology products; changes in economic conditions in the markets Regional Management serves, including levels of unemployment and bankruptcies; the ability to achieve successful acquisitions and strategic alliances; the ability to make technological improvements as quickly as competitors; security breaches, cyber-attacks, failures in information systems, or fraudulent activity; the ability to originate loans; reliance on information technology resources and providers, including the risk of prolonged system outages; changes in current revenue and expense trends, including trends affecting delinquencies and credit losses; changes in operating and administrative expenses; the departure, transition, or replacement of key personnel; the ability to timely and effectively implement, transition to, and maintain the necessary information technology systems, infrastructure, processes, and controls to support Regional Management's operations and initiatives; changes in interest rates; existing sources of liquidity may become insufficient or access to these sources may become unexpectedly restricted; exposure to financial risk due to asset-backed securitization transactions; risks related to regulation and legal proceedings, including changes in laws or regulations or in the interpretation or enforcement of laws or regulations; changes in accounting standards, rules, and interpretations and the failure of related assumptions and estimates, including those associated with the implementation of CECL accounting; the impact of changes in tax laws, guidance, and interpretations, including the timing and amount of revenues that may be recognized; risks related to the ownership of Regional Management's common stock, including volatility in the market price of shares of Regional Management's common stock; the timing and amount of future cash dividend payments; and anti-takeover provisions in Regional Management's charter documents and applicable state law. The COVID-19 pandemic may also magnify many of these risks and uncertainties. The foregoing factors and others are discussed in greater detail in the Company's filings with the SEC. The Company will not update or revise forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events or the non-occurrence of anticipated events, whether as a result of new information, future developments, or otherwise, except as required by law. This presentation also contains certain non-GAAP measures. Please refer to the Appendix accompanying this presentation for a reconciliation of non-GAAP measures to the most comparable GAAP measures.
2
2Q 2021 Financial Highlights 3 Net income of $20.2 million, or $1.87 diluted EPS Total revenue increase of $9.8 million, or 10.9% Interest and fee income up 10.9% year-over-year primarily due to a 7.1% increase in average net finance receivables Insurance income, net increased by $1.0 million year-over-year primarily due to higher premium revenue in TX Provision for credit losses decreased $7.0 million, or 25.3% Lower net credit losses of $7.2 million on historically low delinquency levels Decrease in provision of $0.2 million from a $6.3 million COVID-19 related reserve release in 2Q 21 compared to a $9.5 million build in 2Q 20, offset by a $6.1 million reserve build from portfolio growth compared to a $9.9 million reserve release from portfolio liquidation in 2Q 20 G&A expense increased $4.9 million, or 11.7%, over the prior-year period partially due to our investment in digital and technological capabilities of $1.2 million, and increased marketing expense of $3.3 million, normalized to pre-pandemic levels, and to support growth initiatives Interest expense decreased $1.3 million, or 14.6%, primarily due to new debt facilities with lower interest rates Board of Directors increases authorization under current stock repurchase program from $30 million to $50 million
4 Originations Increase & Delinquencies Reach Historic Lows 2Q 21 originations are up 116.5% year-over-year Record volume driven by growth initiative originations of $87.0 million in 2Q 21 Digital channel all-time high originations of $34.7 million, up from $15.7 million in 1Q 21 Delinquency levels are at historic lows; expected to gradually rise in the second half of 2021
Generated sequential total loan product growth of $78 million, or 7.0%, in 2Q 21 Achieved year-over-year core loan growth of $172 million, or 17.3%, in 2Q 21 Continued the mix shift toward large loans 5 Return to Year-Over-Year Double-Digit Portfolio Growth
Digitally-Sourced Originations Reach Record Best Digital originations are sourced from either our affiliate partnerships or directly from our website
All digitally-sourced loans are underwritten in our branches by our custom credit scorecards and serviced by our branches
Our new digital volume represented 28.5% of our total new borrower volume in 2Q 21
Large loans represented 65.3% of digitally-sourced loans booked 6
Revenue and Average Net Finance Receivables Trends 7 Total revenue yield increased 130 basis points year-over-year and 70 basis points sequentially Interest and fee yield increased 110 basis points year-over-year and 50 basis points sequentially As of June 30, 2021, 82% of net finance receivables were at or below 36% APR Note: Table above reflects changes in total revenue yield
Lower Net Credit Losses on Low Delinquency Levels 8 Net credit loss rate improved 320 basis points versus the prior-year period on low delinquency levels
Delinquency at Historically Low Levels 2Q 21 delinquency is down from prior year as a result of government stimulus and enhanced credit standards 30+ days past due of 3.6% is 120 basis points lower than prior year 30+ days past due of $42.8 million (loan loss reserves of $139.4 million) 9
Reserved For Stressed Credit Losses In 2Q 21, we reserved $6.1 million primarily for $77.8 million in sequential portfolio growth and released COVID-19 related reserves of $6.3 million based on the macroeconomic model 10 (1) (1) 2Q 21 Ending Reserve includes $17.5 million of remaining COVID-19 reserves Millions Jan 1st CECL Impact 4Q 19 Ending Reserve
Annualized general and administrative expenses as a percentage of average net finance receivables Normalized to exclude $3.8 million of non-operating costs; $3.1 million related to the CEO transition and $0.7 million from the system outage. This is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measure. Normalized to exclude $0.8 million of severance related to workforce actions. This is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measure. The following items impacted the Operating Expense Ratio by 160 basis points in 2Q 21: our investment in digital and technological capabilities of $1.2 million, and increased marketing expenses of $3.3 million, normalized to pre-pandemic levels, and to support our growth initiatives (2) 11 (3) Operating Expense Ratio Trend
Cost of Funds Trending Downward (1) Annualized interest expense as a percentage of average net finance receivables 12 2Q 21 annualized interest expense as a percentage of ANR improved 60 basis points from the prior-year period Favorable market value increases on interest rate caps impacted 1Q 21 by 30 basis points Purchased $50 million of interest rate caps in 2Q 21 to take advantage of the favorable interest rate environment Closed new securitization transactions in 3Q 20 and 1Q 21 with weighted-average coupons (WACs) of 2.85% and 2.08%; replacing prior transactions with WACs of 3.93% and 4.87%, respectively Closed new transaction in early 3Q 21 with a WAC of 2.30%; reducing debt with a higher cost of funds
13 Strong Funding Profile This is a non-GAAP measure. Refer to the Appendix for a reconciliation to the most comparable GAAP measure. Interest expense as a percentage of average net finance receivables As of June 30, 2021, total unused capacity was $647 million (subject to borrowing base)
Available liquidity of $202 million as of June 30, 2021
Fixed-rate debt represents 66% of total debt as of June 30, 2021
Senior revolver has a 1% LIBOR floor; as such, we are nearing the lower end of our cost of funds (1) (2)
Appendix 14
(1) TTM Margin defined as total revenue of $385.4 million, less general and administrative expenses of $180.8 million and interest expense of $33.5 million from 3Q 20 through 2Q 21
(2) Net credit losses as a percentage of average net finance receivables 15 Significant Capacity to Absorb Losses Our balance sheet is in a strong position to absorb losses
Same Store Portfolio Growth (1) Same store sales based on branches more than 1 year old 16 Same store(1) year-over-year growth rate of 15.4% in 2Q 21 vs. 2.2% in the prior-year period Considerable growth opportunities in our existing branch footprint, particularly from branches opened within the last 3 years
17 Diversified Liquidity Profile Weighted Average Coupon Long history of liquidity support from a strong group of banking partners Diversified funding platform with a senior revolving facility, warehouse facilities, and securitizations
Consolidated Income Statements 18
Consolidated Balance Sheets 19
Non-GAAP Financial Measures In addition to financial measures presented in accordance with generally accepted accounting principles (“GAAP”), this presentation contains certain non-GAAP financial measures. The company’s management utilizes non-GAAP measures as additional metrics to aid in, and enhance, its understanding of the company’s financial results. Tangible equity and funded debt-to-tangible equity ratio are non-GAAP measures that adjust GAAP measures to exclude intangible assets. Management uses these equity measures to evaluate and manage the company’s capital and leverage position. The company also believes that these equity measures are commonly used in the financial services industry and provide useful information to users of the company’s financial statements in the evaluation of its capital and leverage position. In addition, the company has presented non-GAAP measures that adjust for the executive transition, the loan management system outage, and the workforce actions taken. The company believes that these non-GAAP measures provide useful information by excluding certain material items that may not be indicative of our core operating results. As a result, the company believes that the non-GAAP measures that it has presented will allow for a better evaluation of the operating performance of the business. This non-GAAP financial information should be considered in addition to, not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may not be comparable to similarly titled non-GAAP measures of other companies. The following tables provide a reconciliation of GAAP measures to non-GAAP measures. Annualized general and administrative expenses as a percentage of average net finance receivables Non-operating G&A expense items include costs of $3,066 related to the executive transition and $720 related to the loan management system outage Non-operating G&A expense items include severance costs of $778 related to workforce actions 20
Non-GAAP Financial Measures (Cont’d) 21