Regional Management Corp. Announces Second Quarter 2018 Results
Jul. 31, 2018
GREENVILLE, S.C.--(BUSINESS WIRE)--Jul 31, 2018--Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the second quarter ended June 30, 2018.
Second Quarter 2018 HighlightsNet income for the second quarter of 2018 was $8.5 million, an increase of 38.3% from the prior-year period. Diluted earnings per share for the second quarter of 2018 was $0.70, based on a diluted share count of 12.1 million. Total finance receivables as of June 30, 2018 were $847.2 million, an increase of 16.6%, or $120.5 million, from the prior year. Thirteenth consecutive quarter that total finance receivables have grown at least 10% over the prior-year period.Total core small and large loan finance receivables increased $160.1 million, or 26.0%, compared to the prior-year period.Large loan finance receivables of $392.1 million increased $124.2 million, or 46.3%, from the prior-year period and now represent 46.3% of the total loan portfolio. Small loan finance receivables as of June 30, 2018 were $384.7 million, an increase of 10.3% over the prior-year period. Total revenue for the second quarter of 2018 was $72.4 million, a $7.1 million, or 10.8%, increase from the prior-year period. Eighth consecutive quarter of year-over-year double-digit revenue growth.Interest and fee income increased 11.8%, driven by a 16.6% increase in finance receivables compared to the prior-year period. Provision for credit losses for the second quarter of 2018 was $20.2 million, an increase of 8.7% from the prior-year period, while total finance receivables increased 16.6%. Annualized net credit losses as a percentage of finance receivables were 9.5%, a 40 basis point improvement from 9.9% in the prior-year period. 30+ day contractual delinquencies as of June 30, 2018 were 6.3%, an improvement from 6.5% for both March 31, 2018 and June 30, 2017. 30+ day delinquencies as of March 31, 2018 included 0.2% related to the 2017 hurricanes. Completed first asset-backed securitization, a $150 million note issuance (senior class rated “AA” by DBRS) with a weighted average coupon of 3.93%.
“We produced another strong quarter at Regional, as we continue to consistently generate double-digit finance receivable and top line growth, led by our core portfolio,” said Peter R. Knitzer, President and Chief Executive Officer of Regional Management. “Additionally, by maintaining our solid credit profile and controlling our overall expenses, we are expanding our margins and continuing to record double-digit bottom line growth on a year-over-year basis.”
“In addition to our very solid second quarter performance, we were pleased to complete our first asset-backed term securitization, fully backed by large loan receivables,” continued Mr. Knitzer. “Our successful securitization allowed us to lower our cost of capital and further diversify our funding capabilities. Moving ahead, in the back half of 2018, we are squarely focused on our hybrid growth strategy supported by our de novo branch expansion, which includes expanding our footprint into the Midwest, while continuing to increase our receivables at our existing branches. All in, we are delivering on consistent and profitable growth and remain optimally positioned to continue to generate long-term shareholder value.”
Second Quarter 2018 Results
Finance receivables outstanding at June 30, 2018 were $847.2 million, a 16.6% increase from $726.8 million in the prior year. Finance receivables increased from continued strong growth in both the core small and large loan portfolios.
For the second quarter ended June 30, 2018, the Company reported total revenue of $72.4 million, a 10.8% increase from $65.3 million in the prior-year period. Interest and fee income for the second quarter of 2018 was $66.8 million, an 11.8% increase from $59.8 million in the prior-year period, primarily due to increases in the small and large loan portfolios compared to the prior-year period. Insurance income, net for the second quarter of 2018 was $2.9 million, a $0.2 million, or 6.6%, reduction from the prior-year period. The decrease was primarily due to the transition in insurance carriers in the prior-year period, causing some of the Company’s insurance claims to impact net credit losses in the second quarter of 2017 instead of insurance income. Other income for the second quarter of 2018 was $2.7 million, a 9.7% increase from the prior-year period.
The provision for credit losses in the second quarter of 2018 was $20.2 million, an 8.7% increase compared to $18.6 million in the prior-year period, while total finance receivables increased 16.6%. Net credit losses were $19.5 million in the second quarter of 2018, an increase of $1.9 million over the prior-year period. The increase over the prior-year period was primarily due to portfolio growth, partially offset by a $0.7 million build in the allowance for credit losses compared to a $1.0 million build in the second quarter of 2017. Annualized net credit losses as a percentage of average finance receivables in the second quarter of 2018 were 9.5% (inclusive of 50 basis points related to the 2017 hurricanes), a 40 basis point improvement from 9.9% in the prior-year period.
General and administrative expenses for the second quarter of 2018 were $33.2 million, an increase of $1.6 million, or 5.0%, from the prior-year period. Annualized general and administrative expenses as a percentage of average finance receivables improved 170 basis points from the prior-year period to 16.2% for the second quarter of 2018. General and administrative expenses for the second quarter of 2018 included higher personnel costs related to staffing increases in information technology, centralized collections, and branches to support ongoing loan portfolio growth, as well as higher marketing expense.
Interest expense was $7.9 million in the second quarter of 2018, compared to $5.2 million in the prior-year period. The increase in interest expense was due to larger long-term debt amounts outstanding from growth in finance receivables, federal funds rate increases, larger unused lines of credit, and incremental debt issuance costs associated with upsizing the senior revolving credit facility and entering into the warehouse credit facility. During the quarter, the Company completed its first asset-backed securitization, a $150 million note issuance (senior class rated “AA” by DBRS) with a weighted average coupon of 3.93%. The Company’s diversified sources of funding continue to position it for long-term growth.
Net income for the second quarter of 2018 was $8.5 million, an increase from $6.1 million in the prior-year period. Diluted earnings per share for the second quarter of 2018 was $0.70, an increase from $0.52 in the prior-year period.
2018 De Novo Outlook
As of June 30, 2018, the Company’s branch network consisted of 340 locations. The Company opened one branch and consolidated two locations during the second quarter of 2018. For 2018, the Company maintains its plan to open between 25 and 30 de novo branches.
Liquidity and Capital Resources
As of June 30, 2018, the Company had finance receivables of $847.2 million and outstanding long-term debt of $595.8 million (consisting of $383.2 million of long-term debt on its $638.0 million senior revolving credit facility, $29.7 million of long-term debt on its $150.0 million revolving warehouse credit facility, $32.9 million of long-term debt on its amortizing loan, and $150.0 million through its asset-backed securitization).
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.
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 7, 2018, by telephone at (844) 512-2921 (toll-free) or (412) 317-6671 (international), passcode 10005223. A webcast replay of the call will be available at http://www.RegionalManagement.com for one year following the call.
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: changes in general economic conditions, including levels of unemployment and bankruptcies; risks associated with Regional Management’s transition to a new loan origination and servicing software system; 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; risks relating to our first asset-backed securitization; changes in interest rates; the risk that Regional Management’s existing sources of liquidity become insufficient to satisfy its needs or that its access to these sources becomes unexpectedly restricted; changes in federal, state, or local laws, regulations, or regulatory policies and practices, and risks associated with the manner in which laws and regulations are interpreted, implemented, and enforced; the impact of changes in tax laws, guidance, and interpretations, including related to certain provisions of the Tax Cuts and Jobs Act; 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 credit losses); changes in Regional Management’s markets and general changes in the economy (particularly in the markets served by Regional Management); changes in the competitive environment in which Regional Management operates or in the demand for its products; risks related to acquisitions; 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, online credit application networks, retailers, and its consumer website. For more information, please visit www.RegionalManagement.com.
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