Regional Management Corp. Announces Fourth Quarter 2018 Results
GREENVILLE, S.C.--(BUSINESS WIRE)--Feb 12, 2019--Regional Management Corp. (NYSE: RM), a diversified consumer finance company, today announced results for the fourth quarter and full year ended December 31, 2018.
Fourth Quarter 2018 HighlightsNet income for the fourth quarter of 2018 was $10.8 million, a 1.1% reduction from the prior-year period of 2017. The prior-year period included $3.5 million of tax benefits and credits, primarily related to the Tax Cuts and Jobs Act. Diluted earnings per share for the fourth quarter of 2018 was $0.90, compared to $0.92 in the prior-year period (of which $0.30 was related to the aforementioned tax benefits and credits). Total finance receivables as of December 31, 2018 were $932.2 million, an increase of 14.0%, or $114.8 million, from the prior-year period. 15 th consecutive quarter of year-over-year double-digit finance receivables growth.Total core small and large loan finance receivables increased $152.7 million, or 21.1%, compared to the prior-year period.Large loan finance receivables of $438.0 million increased $90.8 million, or 26.1%, from the prior-year period and represented 47.0% of the total loan portfolio. Small loan finance receivables as of December 31, 2018 were $437.7 million, an increase of 16.5% over the prior-year period. Total revenue for the fourth quarter of 2018 was $83.7 million, an $11.6 million, or 16.1%, increase from the prior-year period. 10 th consecutive quarter of year-over-year double-digit revenue growth.Interest and fee income increased 13.0%, driven by a 14.0% increase in finance receivables compared to the prior-year period.Insurance income, net increased $2.5 million; approximately $1.5 million of the increase was due to a change in business practice of the company to lower its utilization of non-file insurance. Provision for credit losses for the fourth quarter of 2018 was $23.7 million, an increase of 21.8% from the prior-year period. The provision for credit losses for the fourth quarter of 2018 included approximately $1.5 million related to a change in business practice of the company to lower its utilization of non-file insurance, which grossed up the provision for credit losses and insurance income. This change had no impact on net income. Annualized net credit losses as a percentage of finance receivables were 9.1%, a 10 basis point increase from 9.0% in the prior-year period, primarily due to 30 basis points of additional non-file claims shifting to credit losses compared to the prior-year period. 30+ day contractual delinquencies as of December 31, 2018 were 7.7%, compared to 7.5% as of December 31, 2017. 30+ day contractual delinquencies include 0.4% and 0.3% related to hurricane-affected branches as of December 31, 2018 and December 31, 2017, respectively. Expanded operations into Wisconsin, the Company’s 11 th U.S. state, during the quarter.
“The fourth quarter was successful on all fronts, allowing us to cap off a terrific 2018 for Regional,” said Peter R. Knitzer, President and Chief Executive Officer of Regional Management. “We continued to generate double-digit year-over-year top line growth, supported by double-digit finance receivable gains in our core loan portfolio. In addition, we maintained our stable credit performance, which is a testament to our underwriting and the added benefit of our centralized credit collections team. We also continue to drive down our overall expenses as a percentage of receivables, which positions us well to expand margins and profitability over the longer term.”
“Looking ahead, in 2019, we remain focused on executing our hybrid growth strategy of increasing receivables within our established branches, and further expanding our branch network through our de novo program,” added Mr. Knitzer. “We also plan to complete the implementation of custom scorecards in our branches, which should further improve our credit profile by the end of this year. Overall, we are confident in the fundamental strength of our current model, as well as our growth trajectory and market share opportunity. We remain positioned as strongly as ever to generate increasing value for our shareholders.”
Fourth Quarter 2018 Results
Finance receivables outstanding at December 31, 2018 were $932.2 million, a 14.0% increase from $817.5 million in the prior year. Finance receivables increased based on double-digit growth in both the core small and large loan portfolios.
For the fourth quarter ended December 31, 2018, the Company reported total revenue of $83.7 million, a 16.1% increase from $72.1 million in the prior-year period. Interest and fee income for the fourth quarter of 2018 was $75.0 million, a 13.0% increase from $66.4 million in the prior-year period, related to consistent gains in the small and large loan portfolios.
The provision for credit losses in the fourth quarter of 2018 was $23.7 million, a 21.8% increase compared to $19.5 million in the prior-year period, primarily due to portfolio growth. Net credit losses were $20.7 million in the fourth quarter of 2018, an increase of $2.7 million over the prior-year period, with $1.5 million of losses attributable to the change in business practice to lower utilization of non-file insurance. Annualized net credit losses as a percentage of average finance receivables in the fourth quarter of 2018 were 9.1% (including 70 basis points related to non-file impact), a 10 basis point increase from 9.0% in the prior-year period (which included 40 basis points related to non-file impact).
General and administrative expenses for the fourth quarter of 2018 were $36.6 million, an increase of $2.6 million, or 7.6%, from the prior-year period. Annualized general and administrative expenses as a percentage of average finance receivables improved 100 basis points from the prior-year period from 17.1% to 16.1% for the fourth quarter of 2018. General and administrative expenses for the fourth quarter of 2018 included higher personnel costs related to staffing increases in information technology, centralized collections, de novo branch openings, and existing branches to support ongoing loan portfolio growth.
Interest expense was $9.6 million in the fourth quarter of 2018, compared to $6.8 million in the prior-year period. The increase in interest expense was due to higher cost of funding and larger long-term debt amounts outstanding from growth in finance receivables. Cost of funding has increased due to federal funds rate increases, larger unused lines of credit, and incremental debt issuance costs associated with upsizing the senior revolving credit facility, entering into the warehouse credit facility, and the Company’s recent completion of its second asset-backed securitization. Diversified sources of funding continue to position the Company for long-term growth.
Net income for the fourth quarter of 2018 was $10.8 million, a decrease from $10.9 million in the prior-year period. Diluted earnings per share for the fourth quarter of 2018 was $0.90, a decrease from $0.92 in the prior-year period. Net income and diluted earnings per share for the fourth quarter of 2017 included $3.5 million, or $0.30 per diluted share, of tax benefits and credits, primarily related to the Tax Cuts and Jobs Act.
2019 De Novo Outlook
As of December 31, 2018, the Company’s branch network consisted of 359 locations, including 13 net branches opened during the fourth quarter of 2018. For the full year 2019, the Company expects to open between 15 and 30 de novo branches.
Liquidity and Capital Resources
As of December 31, 2018, the Company had finance receivables of $932.2 million and outstanding long-term debt of $660.5 million, consisting of:$328.1 million of long-term debt on its $638.0 million senior revolving credit facility, $21.6 million of long-term debt on its amortizing loan, $30.1 million of long-term debt on its $125.0 million revolving warehouse credit facility, and $280.7 million of long-term debt through its asset-backed securitizations.
The Company had a GAAP debt-to-equity ratio of 2.4 to 1.0 and a shareholder equity ratio of 29.2% as of December 31, 2018.
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 (800) 319-4610 (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, February 19, 2019, by telephone at (844) 512-2921 (toll-free) or (412) 317-6671 (international), passcode 10006059. 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 Regional Management’s asset-backed securitization transactions; 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; the impact of a prolonged shutdown of the federal government; 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, Virginia, Missouri and Wisconsin. 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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CONTACT: Investor Relations
Garrett Edson, (203) 682-8331
KEYWORD: UNITED STATES NORTH AMERICA SOUTH CAROLINA
INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE
SOURCE: Regional Management Corp.
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PUB: 02/12/2019 04:15 PM/DISC: 02/12/2019 04:15 PM