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Regional Management Corp. Announces Second Quarter 2016 Results

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GREENVILLE, S.C.--(BUSINESS WIRE)--

Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the second quarter ended June 30, 2016.

Second Quarter 2016 Highlights

  • Net income for the second quarter of 2016 was $5.9 million, an increase of $0.5 million, or 9.3%, from the prior-year period; non-GAAP net income was $6.3 million, an increase of 16.5% from the prior-year period. Diluted earnings per share were $0.49, and on a non-GAAP basis, diluted earnings per share were $0.53, each calculated on a diluted share count of 12.0 million. Non-GAAP net income excludes $0.6 million of non-operating system implementation costs.
  • Total finance receivables as of June 30, 2016 were $646 million, an increase of 12.8% from the prior year and up 6.3% sequentially:
    • Fifth consecutive quarter that total finance receivables have increased at least 10% over the prior-year period.
    • Large loan finance receivables of $195 million increased $102 million, or 109%, from the prior-year period and now represent over 30% of the total loan portfolio.
  • Total revenue for the second quarter of 2016 was $57.3 million, a $4.3 million, or 8.2%, increase from the prior-year period. Revenue growth over the prior-year period was driven by a 12.8% increase in receivables, partially offset by an overall yield decline of 180 basis points. On a sequential basis, total yield was comparable to the prior two quarters.
  • Net charge-offs for the second quarter of 2016 were $13.4 million, an increase of $0.5 million versus the prior-year period. Annualized net charge-offs of 8.6% of average finance receivables were down 80 basis points compared to the prior-year period.
  • Total delinquencies as a percentage of total finance receivables as of June 30, 2016 were 18.3%, an increase from the seasonally low 16.7% as of March 31, 2016 and an improvement from 20.6% as of June 30, 2015.
    • 30+ day contractual delinquencies were 6.8%, an increase sequentially from 6.2% as of March 31, 2016 and from 6.4% as of June 30, 2015.

"The second quarter was a very solid quarter for the company across a number of important dimensions," said Michael R. Dunn, Chief Executive Officer of Regional Management Corp. "Non-GAAP net income of $6.3 million was up 17% versus the prior-year period, driven by the combined dynamic of volume-driven revenue, strong credit performance and a relatively flat expense base. This is the operating model that we have been building over the last six quarters, and it continues to produce improved operating performance."

"Earlier this month, we converted our second state, New Mexico, to our new operating platform," continued Mr. Dunn. "The system continues to perform up to our expectations, and we remain on track to convert all of our remaining states by year end. Finally, we also announced the appointment of our new CEO, Peter R. Knitzer, effective August 1st. Given Peter's background, I am confident that he will successfully lead the company going forward and believe that he will fully leverage the company's market opportunities."

"I would also like to thank the entire Regional team for their collective efforts in helping to re-establish Regional on the right track over the past couple of years. We are now in a much better position than when I first became CEO, and that is in large measure due to their hard work and commitment to what we needed to do. I know they will continue to support Peter with the same energy and commitment with which they supported me," concluded Mr. Dunn.

Second Quarter 2016 Results

Finance receivables outstanding at June 30, 2016 were $645.7 million, a 12.8% increase from $572.5 million in the prior year. Finance receivables increased primarily due to an increase in both the small and large loan portfolios and the net addition of 22 de novo branches since June 30, 2015.

For the second quarter ended June 30, 2016, the Company reported total revenue of $57.3 million, an 8.2% increase from $53.0 million in the prior-year period. Interest and fee income for the second quarter of 2016 was $52.6 million, a 10.3% increase from $47.7 million in the prior-year period, primarily due to an increase in the portfolios of both small and large loans compared to the prior-year period and partially offset by lower interest and fee yield, primarily in the convenience check portfolio. Insurance income, net for the second quarter of 2016 was $2.6 million, a decline of $0.5 million from the prior-year period. Other income for the second quarter of 2016 was $2.1 million, a 3.5% decline from the prior-year period reflective of lower late fee charges from the improving credit quality of the portfolio.

The provision for credit losses in the second quarter of 2016 was $13.4 million versus $12.1 million in the prior-year period. Net charge-offs were $13.4 million in the second quarter of 2016 versus $12.9 million in the prior-year period. Annualized net charge-offs as a percentage of average finance receivables in the second quarter of 2016 were 8.6%, an improvement from 9.4% in the prior-year period.

On a sequential basis, net charge-offs of $13.4 million were a reduction of $1.6 million from the first quarter of 2016, consistent with the smaller dollar amount of accounts in the last three delinquency buckets at March 31, 2016 compared to December 31, 2015.

General and administrative expenses for the second quarter of 2016 were $29.5 million, an increase of 4.6%, or $1.3 million, from the prior-year period, driven in part by $0.6 million in loan system conversion costs. Branch expenses in the second quarter of 2016 slightly increased $0.2 million from the prior-year period, even with 22 net new branches added since June 30, 2015. Excluding the loan system conversion costs in the second quarter of 2016, general and administrative expenses for the second quarter of 2016 would have been $28.9 million versus $28.2 million in the prior-year period.

GAAP net income for the second quarter of 2016 was $5.9 million, a 9.3% increase compared to GAAP net income of $5.4 million in the prior-year period. Diluted earnings per share for the second quarter of 2016 were $0.49, an increase from $0.41 in the prior-year period. Excluding the aforementioned non-operating expense in the second quarter of 2016, non-GAAP net income in the second quarter of 2016 would have been $6.3 million and diluted earnings per share would have been $0.53. For a reconciliation of non-GAAP financial measures to the nearest comparable GAAP financial measure, please refer to the reconciliation table accompanying this release.

First Half 2016 Results

For the six months ended June 30, 2016, the Company reported total revenue of $114.0 million, an 8.1% increase from $105.5 million in the prior-year period. Interest and fee income for the six months ended June 30, 2016 was $103.9 million, a 9.7% increase from $94.7 million in the prior-year period, primarily due to a significant increase in the portfolios of both small and large installment loans compared to the prior-year period. Insurance income for the six months ended June 30, 2016 was $5.5 million, an 8.4% decrease from the prior-year period. Other income for the six months ended June 30, 2016 was $4.6 million, a 3.2% decline from the prior-year period reflective of lower late fee charges from the improving credit quality of the portfolio.

The provision for credit losses for the six months ended June 30, 2016 was $27.2 million versus $21.8 million in the prior-year period. Net charge-offs for the six months ended June 30, 2016 were $28.4 million compared to $26.2 million in the prior-year period. Annualized net charge-offs as a percentage of average finance receivables for the six months ended June 30, 2016 was 9.1%, a decline from 9.6% in the prior-year period.

General and administrative expenses for the six months ended June 30, 2016 were $59.4 million, a decrease of $1.5 million, or 2.5%, from $60.9 million in the prior-year period. Included in the six months 2016 results were a total of $1.0 million in loan system conversion costs, while the six months 2015 results included $2.7 million in non-operating expenses. Branch expenses include changes in staffing and incentive plans for all branches as well as the expenses associated with 38 net branches added since December 31, 2014.

GAAP net income for the six months ended June 30, 2016 was $11.1 million, a 16.8% increase compared to GAAP net income of $9.5 million in the prior-year period, and diluted earnings per share for the six months ended June 30, 2016 were $0.89 compared to $0.73 in the prior-year period. Excluding the aforementioned non-operating expenses, non-GAAP net income for the six months ended June 30, 2016 totaled $11.7 million and non-GAAP diluted earnings per share were $0.94, compared to non-GAAP net income of $11.2 million and non-GAAP diluted earnings per share of $0.86 in the prior-year period.

2016 De Novo Outlook

As of June 30, 2016, the Company's branch network consisted of 338 locations. The Company closed one branch in the second quarter of 2016. For the full year 2016, due to its focus on implementing its new loan system, the Company is now projecting to open approximately 15 de novo branches.

Liquidity and Capital Resources

As of June 30, 2016, the Company had finance receivables of $645.7 million and outstanding long-term debt of $441.1 million (consisting of $386.6 million of long-term debt on its $538.0 million senior revolving credit facility and $54.6 million of long-term debt on its $75.7 million amortizing loan).

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) 590-2959 (toll-free) or (503) 343-6651 (direct), passcode 47978795. Please dial the number 10 minutes prior to the scheduled start time.

*** A supplemental slide presentation will be made available on Regional Management's website prior to the earnings call at www.RegionalManagement.com. ***

In addition, a live webcast of the conference call will also be available on Regional Management's website at www.RegionalManagement.com.

A replay will be available following the end of the call through Tuesday, August 2, 2016, by telephone at (855) 859-2056 (toll-free) or (404) 537-3406 (direct), passcode 47978795. A webcast replay of the call will be available at www.RegionalManagement.com for one year following the call.

Forward-Looking Statements

This press release may contain various "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which represent Regional Management Corp.'s expectations or beliefs concerning future events. 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 are about matters that are inherently subject to risks and uncertainties, many of which are outside of the control of Regional Management. Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, the following: the continuation or worsening of adverse conditions in the global and domestic credit markets and uncertainties regarding, or the impact of, governmental responses to those conditions; changes in interest rates; risks related to acquisitions; risks related to opening new branches, including the ability or inability to open new branches as planned; risks inherent in making loans, including repayment risks and value of collateral, which risks may increase in light of adverse or recessionary economic conditions; recently-enacted or proposed legislation; the timing and amount of revenues that may be recognized by Regional Management; changes in current revenue and expense trends (including trends affecting delinquencies and charge-offs); changes in Regional Management's markets and general changes in the economy (particularly in the markets served by Regional Management); changes in operating and administrative expenses; and the departure, transition or replacement of key personnel. Such factors and others are discussed in greater detail in Regional Management's filings with the Securities and Exchange Commission. Regional Management will not update the information contained in this press release beyond the publication date, except to the extent required by law, and is not responsible for changes made to this document by wire services or Internet services.

About Regional Management Corp.

Regional Management Corp. (NYSE: RM) is a diversified consumer finance company providing a broad array of loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies and other traditional lenders. Regional Management began operations in 1987 with four branches in South Carolina and has since expanded its branch network across South Carolina, Texas, North Carolina, Tennessee, Alabama, Oklahoma, New Mexico, Georgia and Virginia. Each of its loan products is structured on a fixed rate, fixed term basis with fully amortizing equal monthly installment payments and is repayable at any time without penalty. Regional Management's loans are sourced through its multiple channel platform, including in its branches, through direct mail campaigns, independent and franchise automobile dealerships, online credit application networks, retailers and its consumer website. For more information, please visit www.RegionalManagement.com.

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

(in thousands, except per share amounts)

           
Better (Worse) Better (Worse)
2Q'16 2Q'15 $   % YTD'16 YTD'15 $   %
Revenue
Interest and fee income $ 52,589 $ 47,668 $ 4,921 10.3 % $ 103,889 $ 94,733 $ 9,156 9.7 %
Insurance income, net 2,601 3,120 (519 ) (16.6

)%

5,540 6,049 (509 ) (8.4

)%

Other income   2,135     2,213     (78 ) (3.5

)%

  4,593     4,743     (150 ) (3.2

)%

Total revenue   57,325     53,001     4,324   8.2 %   114,022     105,525     8,497   8.1 %
 
Expenses
Provision for credit losses 13,386 12,102 (1,284 ) (10.6

)%

27,177 21,814 (5,363 ) (24.6

)%

 
Personnel 16,674 16,211 (463 ) (2.9

)%

33,801 35,971 2,170 6.0 %
Occupancy 4,770 4,227 (543 ) (12.8

)%

9,633 8,333 (1,300 ) (15.6

)%

Marketing 2,062 2,009 (53 ) (2.6

)%

3,577 4,480 903 20.2 %
Other   6,042     5,796     (246 ) (4.2

)%

  12,342     12,082     (260 ) (2.2

)%

Total general and administrative 29,548 28,243 (1,305 ) (4.6

)%

59,353 60,866 1,513 2.5 %
 
Interest expense   4,811     3,932     (879 ) (22.4

)%

  9,521     7,536     (1,985 ) (26.3

)%

 
Income before income taxes 9,580 8,724 856 9.8 % 17,971 15,309 2,662 17.4 %
Income taxes   3,668     3,316     (352 ) (10.6

)%

  6,883     5,818     (1,065 ) (18.3

)%

Net income $ 5,912   $ 5,408   $ 504   9.3 % $ 11,088   $ 9,491   $ 1,597   16.8 %
 
Net income per common share:
Basic $ 0.50   $ 0.42   $ 0.08   19.0 % $ 0.90   $ 0.74   $ 0.16   21.6 %
Diluted $ 0.49   $ 0.41   $ 0.08   19.5 % $ 0.89   $ 0.73   $ 0.16   21.9 %
Weighted-average shares outstanding:
Basic   11,756     12,845     1,089   8.5 %   12,256     12,812     556   4.3 %
Diluted   11,974     13,078     1,104   8.4 %   12,462     13,040     578   4.4 %
 
Return on average assets (annualized)   3.8 %   4.0 %   3.6 %   3.6 %
Return on average equity (annualized)   12.0 %   11.5 %   11.1 %   10.3 %

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in thousands, except par value amounts)

     
Increase (Decrease)
2Q'16 2Q'15 $   %
Assets
Cash $ 2,827 $ 4,793 $ (1,966 ) (41.0

)%

Gross finance receivables 820,688 704,862 115,826 16.4 %
Unearned finance charges, insurance premiums, and commissions   (174,944 )   (132,337 )   (42,607 ) (32.2

)%

Finance receivables 645,744 572,525 73,219 12.8 %
Allowance for credit losses   (36,200 )   (36,171 )   (29 ) (0.1

)%

Net finance receivables 609,544 536,354 73,190 13.6 %
Property and equipment, net of accumulated depreciation 9,073 7,820 1,253 16.0 %
Restricted cash 8,237 1,901 6,336 333.3 %
Intangible assets, net 4,021 1,507 2,514 166.8 %
Goodwill 716 716 0.0 %
Repossessed assets at net realizable value 488 407 81 19.9 %
Deferred tax asset, net 2,305 (2,305 ) (100.0

)%

Other assets   7,897     4,548     3,349   73.6 %
Total assets $ 642,803   $ 560,351   $ 82,452   14.7 %
 
Liabilities and Stockholders' Equity
Liabilities:
Long-term debt $ 441,147 $ 359,491 $ 81,656 22.7 %
Unamortized debt issuance costs   (2,285 )   (630 )   (1,655 ) (262.7

)%

Net long-term debt 438,862 358,861 80,001 22.3 %
Accounts payable and accrued expenses 10,571 10,733 (162 ) (1.5

)%

Deferred tax liability, net   446         446   100.0 %
Total liabilities 449,879 369,594 80,285 21.7 %
Commitments and Contingencies
Stockholders' equity:

Preferred stock, $0.10 par value, 100,000 shares authorized, no shares
issued or outstanding

Common stock, $0.10 par value, 1,000,000 shares authorized, 12,961
shares issued and 11,415 shares outstanding at June 30, 2016 and
12,889 shares issued and outstanding at June 30, 2015

1,296 1,289 7 0.5 %
Additional paid-in-capital 90,828 88,584 2,244 2.5 %
Retained earnings 125,846 100,884 24,962 24.7 %
Treasury stock, at cost, 1,546 shares at June 30, 2016   (25,046 )       (25,046 ) (100.0

)%

Total stockholders' equity   192,924     190,757     2,167   1.1 %
Total liabilities and stockholders' equity $ 642,803   $ 560,351   $ 82,452   14.7 %

Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

(in thousands, except per share amounts)

 
Averages and Yields
2Q'16   1Q'16   2Q'15
Average Finance
Receivables
 

Average Yield
(Annualized)

Average Finance
Receivables
 

Average Yield
(Annualized)

Average Finance
Receivables
 

Average Yield
(Annualized)

Branch small loans $ 154,843 44.5 % $ 153,516 43.1 % $ 130,806 45.3 %
Convenience checks 158,545 41.5 % 172,133 40.8 % 171,323 45.0 %
Large loans 178,683 28.8 % 152,938 28.2 % 79,756 27.7 %
Automobile loans 103,626 17.9 % 111,008 18.2 % 143,659 19.3 %
Retail loans   29,007 19.1 %   27,923 19.2 %   24,556 18.8 %
Total interest and fee yield $ 624,704 33.7 % $ 617,518 33.2 % $ 550,100 34.7 %
Total revenue yield $ 624,704 36.7 % $ 617,518 36.7 % $ 550,100 38.5 %
 

Components of Increase in Interest and Fee Income
2Q'16 Compared to 2Q'15
Increase (Decrease)

Volume   Rate   Net
Branch small loans $ 2,677 $ (258 ) $ 2,419
Convenience checks (1,382 ) (1,409 ) (2,791 )
Large loans 7,119 238 7,357
Automobile loans (1,823 ) (472 ) (2,295 )
Retail loans   213     18     231  
Total increase (decrease) in interest and fee income $ 6,804   $ (1,883 ) $ 4,921  
  Net Loans Originated (1)
2Q'16   1Q'16  

QoQ $
Inc (Dec)

 

QoQ %
Inc (Dec)

  2Q'15  

YoY $
Inc (Dec)

 

YoY %
Inc (Dec)

Branch small loans $ 83,276 $ 58,399 $ 24,877 42.6 % $ 80,818 $ 2,458 3.0 %
Convenience checks 69,773 55,978 13,795 24.6 % 90,745 (20,972 ) (23.1

)%

Large loans 72,174 48,569 23,605 48.6 % 46,134 26,040 56.4 %
Automobile loans 9,355 8,485 870 10.3 % 11,802 (2,447 ) (20.7

)%

Retail loans   8,627   8,701   (74 ) (0.9

)%

  8,136   491   6.0 %
Total net loans originated $ 243,205 $ 180,132 $ 63,073   35.0 % $ 237,635 $ 5,570   2.3 %
(1)   Represents the balance of loan origination and refinancing net of unearned finance charges
  Other Key Metrics
2Q'16     1Q'16     2Q'15
Net charge-offs $ 13,416 $ 15,013 $ 12,881
Percentage of average finance receivables (annualized) 8.6% 9.7% 9.4%
 
Provision for credit losses $ 13,386 $ 13,791 $ 12,102
Percentage of average finance receivables (annualized) 8.6% 8.9% 8.8%
Percentage of total revenue 23.4% 24.3% 22.8%
 
General and administrative expenses $ 29,548 $ 29,805 $ 28,243
Percentage of average finance receivables (annualized) 18.9% 19.3% 20.5%
Percentage of total revenue 51.5% 52.6% 53.3%
 
Same store results:
Finance receivables at period-end $ 611,589 $ 552,313 $ 545,928
Finance receivable growth rate 9.5% 7.3% 8.0%
Number of branches in calculation 306 300 281
  Finance Receivables by Product
2Q'16   1Q'16  

QoQ $
Inc (Dec)

 

QoQ %
Inc (Dec)

  2Q'15  

YoY $
Inc (Dec)

 

YoY %
Inc (Dec)

Branch small loans $ 162,562 $ 148,700 $ 13,862 9.3 % $ 140,161 $ 22,401 16.0 %
Convenience checks 157,515 161,802 (4,287 ) (2.6

)%

174,786 (17,271 ) (9.9

)%

Large loans   194,857   162,301   32,556   20.1 %   93,203   101,654   109.1 %
Total core loans 514,934 472,803 42,131 8.9 % 408,150 106,784 26.2 %
Automobile loans 100,721 106,297 (5,576 ) (5.2

)%

139,593 (38,872 ) (27.8

)%

Retail loans   30,089   28,263   1,826   6.5 %   24,782   5,307   21.4 %
Total finance receivables $ 645,744 $ 607,363 $ 38,381   6.3 % $ 572,525 $ 73,219   12.8 %
 
Number of branches at period end 338 339 (1 ) (0.3

)%

316 22 7.0 %
Average finance receivables per branch $ 1,910 $ 1,792 $ 118   6.6 % $ 1,812 $ 98   5.4 %
  Contractual Delinquency by Aging
2Q'16   1Q'16   2Q'15
Allowance for credit losses $ 36,200   5.6 % $ 36,230   6.0 % $ 36,171   6.3 %
 
Current 527,080 81.7 % 505,801 83.3 % 454,424 79.4 %
1 to 29 days past due   74,439 11.5 %   63,686 10.5 %   81,275 14.2 %
Delinquent accounts:
30 to 59 days 16,710 2.5 % 11,986 1.9 % 14,665 2.5 %
60 to 89 days 10,045 1.6 % 7,640 1.3 % 8,113 1.4 %
90 to 119 days 7,237 1.1 % 7,099 1.1 % 5,633 1.0 %
120 to 149 days 5,358 0.8 % 5,914 1.0 % 4,597 0.8 %
150 to 179 days   4,875 0.8 %   5,237 0.9 %   3,818 0.7 %
Total contractual delinquency $ 44,225 6.8 % $ 37,876 6.2 % $ 36,826 6.4 %
Total finance receivables $ 645,744 100.0 % $ 607,363 100.0 % $ 572,525 100.0 %
 
1 day and over past due $ 118,664 18.3 % $ 101,562 16.7 % $ 118,101 20.6 %
 
Contractual Delinquency by Product
2Q'16 1Q'16 2Q'15
Branch small loans $ 14,096 8.7 % $ 12,627 8.5 % $ 10,804 7.7 %
Convenience checks 12,340 7.8 % 12,351 7.6 % 13,561 7.8 %
Large loans 8,459 4.3 % 5,561 3.4 % 2,748 2.9 %
Automobile loans 7,768 7.7 % 6,120 5.8 % 8,619 6.2 %
Retail loans   1,562 5.2 %   1,217 4.3 %   1,094 4.4 %
Total contractual delinquency $ 44,225 6.8 % $ 37,876 6.2 % $ 36,826 6.4 %
  Quarterly Trend
2Q'15   3Q'15   4Q'15   1Q'16   2Q'16  

QoQ $
B(W)

 

YoY $
B(W)

Revenue
Interest and fee income $ 47,668 $ 49,741 $ 51,320 $ 51,300 $ 52,589 $ 1,289 $ 4,921
Insurance income, net 3,120 2,767 2,838 2,939 2,601 (338 ) (519 )
Other income   2,213   2,588   2,527   2,458   2,135   (323 )   (78 )
Total revenue   53,001   55,096   56,685   56,697   57,325   628     4,324  
 
Expenses
Provision for credit losses 12,102 14,085 11,449 13,791 13,386 405 (1,284 )
 
Personnel 16,211 15,993 17,283 17,127 16,674 453 (463 )
Occupancy 4,227 4,458 4,522 4,863 4,770 93 (543 )
Marketing 2,009 1,134 1,403 1,515 2,062 (547 ) (53 )
Other   5,796   4,597   5,342   6,300   6,042   258     (246 )
Total general and administrative 28,243 26,182 28,550 29,805 29,548 257 (1,305 )
 
Interest expense   3,932   4,335   4,350   4,710   4,811   (101 )   (879 )
Income before income taxes 8,724 10,494 12,336 8,391 9,580 1,189 856
Income taxes   3,316   3,987   4,969   3,215   3,668   (453 )   (352 )
Net income $ 5,408 $ 6,507 $ 7,367 $ 5,176 $ 5,912 $ 736   $ 504  
Net income per common share:
Basic $ 0.42 $ 0.51 $ 0.57 $ 0.41 $ 0.50 $ 0.09   $ 0.08  
Diluted $ 0.41 $ 0.50 $ 0.56 $ 0.40 $ 0.49 $ 0.09   $ 0.08  
Weighted-average shares outstanding:
Basic   12,845   12,881   12,891   12,756   11,756   1,000     1,089  
Diluted   13,078   13,111   13,105   12,949   11,974   975     1,104  
 
Net interest margin $ 49,069 $ 50,761 $ 52,335 $ 51,987 $ 52,514 $ 527   $ 3,445  
 
Net credit margin $ 36,188 $ 38,291 $ 40,552 $ 36,974 $ 39,098 $ 2,124   $ 2,910  
 
2Q'15 3Q'15 4Q'15 1Q'16 2Q'16

QoQ $
Inc (Dec)

YoY $
Inc (Dec)

Total assets $ 560,351 $ 587,508 $ 626,373 $ 609,707 $ 642,803 $ 33,096   $ 82,452  
Finance receivables $ 572,525 $ 601,608 $ 628,444 $ 607,363 $ 645,744 $ 38,381   $ 73,219  
Allowance for credit losses $ 36,171 $ 37,786 $ 37,452 $ 36,230 $ 36,200 $ (30 ) $ 29  
Long-term debt $ 359,491 $ 379,617 $ 411,177 $ 396,543 $ 441,147 $ 44,604   $ 81,656  
  Headcount Trend
2Q'15   3Q'15   4Q'15   1Q'16   2Q'16  

QoQ
Inc (Dec)

 

YoY
Inc (Dec)

Legacy branch headcount 1,245 1,256 1,280 1,237 1,184 (53 ) (61 )
2016 new branches         17   17       17  
Total branch headcount 1,245 1,256 1,280 1,254 1,201 (53 ) (44 )
Home office headcount   120   129   133   137   140   3     20  
Total headcount   1,365   1,385   1,413   1,391   1,341   (50 )   (24 )
 
Number of branches   316   322   331   339   338   (1 )   22  
 
 
General & Administrative Expenses Trend
2Q'15 3Q'15 4Q'15 1Q'16 2Q'16

QoQ $
B(W)

YoY $
B(W)

Legacy branch G&A expenses $ 17,094 $ 18,794 $ 18,724 $ 18,822 $ 16,729 $ 2,093 $ 365
2016 new branches         548   606   (58 )   (606 )
Total branch G&A expenses 17,094 18,794 18,724 19,370 17,335 2,035 (241 )
Marketing 2,009 1,134 1,403 1,515 2,062 (547 ) (53 )
Home office G&A expenses   9,140   6,254   8,423   8,920   10,151   (1,231 )   (1,011 )
Total G&A expenses $ 28,243 $ 26,182 $ 28,550 $ 29,805 $ 29,548 $ 257   $ (1,305 )
  Averages and Yields
YTD'16   YTD'15

Average Finance
Receivables

 

Average Yield
(Annualized)

Average Finance
Receivables

 

Average Yield
(Annualized)

Branch small loans $ 154,962 43.6 % $ 128,425 45.4 %
Convenience checks 165,844 41.0 % 177,283 45.2 %
Large loans 166,312 28.4 % 66,663 27.1 %
Automobile loans 107,463 18.1 % 146,905 19.3 %
Retail loans   28,494 19.1 %   24,932 18.5 %
Total interest and fee yield $ 623,075 33.3 % $ 544,208 34.8 %
Total revenue yield $ 623,075 36.6 % $ 544,208 38.8 %
 

Components of Increase in Interest and Fee Income
YTD'16 Compared to YTD'15
Increase (Decrease)

Volume   Rate   Net
Branch small loans $ 5,825 $ (1,222 ) $ 4,603
Convenience checks (2,487 ) (3,544 ) (6,031 )
Large loans 14,148 456 14,604
Automobile loans (3,605 ) (841 ) (4,446 )
Retail loans   339     87     426  
Total increase (decrease) in interest and fee income $ 14,220   $ (5,064 ) $ 9,156  
  Net Loans Originated (1)
YTD'16   YTD'15  

YTD $
Inc (Dec)

 

YTD %
Inc (Dec)

Branch small loans $ 141,675 $ 132,189 $ 9,486 7.2 %
Convenience checks 125,751 151,398 (25,647 ) (16.9 ) %
Large loans 120,743 75,963 44,780 58.9 %
Automobile loans 17,840 26,392 (8,552 ) (32.4 ) %
Retail loans   17,328   14,863   2,465   16.6 %
Total net loans originated $ 423,337 $ 400,805 $ 22,532   5.6 %
(1)   Represents the balance of loan origination and refinancing net of unearned finance charges
  Other Key Metrics
YTD'16   YTD'15
Net charge-offs $ 28,429 $ 26,154
Percentage of average finance receivables (annualized) 9.1% 9.6%
 
Provision for credit losses $ 27,177 $ 21,814
Percentage of average finance receivables (annualized) 8.7% 8.0%
Percentage of total revenue 23.8% 20.7%
 
General and administrative expenses $ 59,353 $ 60,866
Percentage of average finance receivables (annualized) 19.1% 22.4%
Percentage of total revenue 52.1% 57.7%

Because it adjusts for certain non-operating and non-cash items, the Company believes that non-GAAP measures are useful to investors as supplemental financial measures that, when viewed with its GAAP financial information, provide information regarding trends in the Company's results of operations and credit metrics, which is intended to help investors meaningfully evaluate and compare the Company's results of operations and credit metrics between periods.

  Non-GAAP Reconciliation
2Q‘16     Adjustments     Non-GAAP
General and administrative expenses $ 29,548 $ (636 )(1) $ 28,912
Income taxes $ 3,668 $

244

(5)

$ 3,912
Net income $ 5,912 $ 392 $ 6,304
Diluted net income per common share $ 0.49 $ 0.04 $ 0.53
 
Non-GAAP Reconciliation
2Q‘15 Adjustments Non-GAAP
General and administrative expenses $ 28,243 $ (4 )(1) $ 28,239
Income taxes $ 3,316 $

2

(5)

$ 3,318
Net income $ 5,408 $ 2 $ 5,410
Diluted net income per common share $ 0.41 $ 0.00 $ 0.41
 
Non-GAAP Reconciliation
YTD'16 Adjustments Non-GAAP
General and administrative expenses $ 59,353 $ (1,028 )(2) $ 58,325
Income taxes $ 6,883 $

394

(5)

$ 7,277
Net income $ 11,088 $ 634 $ 11,722
Diluted net income per common share $ 0.89 $ 0.05 $ 0.94
 
Non-GAAP Reconciliation
YTD'15 Adjustments Non-GAAP
General and administrative expenses $ 60,866 $ (2,676 )(2)(3)(4) $ 58,190
Income taxes $ 5,818 $

1,017

(5)

$ 6,835
Net income $ 9,491 $ 1,659 $ 11,150
Diluted net income per common share $ 0.73 $ 0.13 $ 0.86
(1)   Exclude loan system conversion costs of $636 and $4 for 2Q'16 and 2Q'15
(2) Exclude loan system conversion costs of $1,028 and $613 for YTD'16 and YTD'15
(3) Exclude executive retirement agreement costs of $533
(4) Exclude CEO equity award costs of $1,530
(5) Tax effect of the adjustments

Regional Management Corp.
Investor Relations
Garrett Edson, 203-682-8331

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