Regional Management Corp. Announces Second Quarter 2014 Results

Business Wire

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

Regional Management Corp. (RM), a diversified specialty consumer finance company, today announced results for the second quarter and six-month period ended June 30, 2014.

Second Quarter 2014 Highlights

  • Total second quarter 2014 revenue was $47.4 million, a 21.1% increase from the prior-year period. Same-store1 revenue growth for the second quarter of 2014 was 11.6%.
  • Finance receivables as of June 30, 2014 were $518.0 million, an increase of 12.0% from the prior-year period. Same-store finance receivables growth for the second quarter of 2014 was 2.5%.
  • Net income for the second quarter of 2014 was $4.4 million, a 31.1% decrease from the prior-year period. Diluted earnings per share were $0.34 based on a diluted share count of 12.9 million.
  • Annualized net charge-offs as a percentage of average finance receivables for the second quarter of 2014 were 10.5%, an increase from 6.6% in the prior-year period. Provision for credit losses for the second quarter of 2014 was 28.7% of revenue, an increase from 21.5% in the prior-year period.
  • Regional Management opened 12 new branches in the second quarter of 2014; as of June 30, 2014, Regional Management’s branch network consisted of 293 locations.

“Our second quarter results were affected by the increased level of net charge-offs, which we had previously noted and expected would occur,” said Thomas Fortin, Chief Executive Officer of Regional Management Corp. “As such, we made it a priority in the quarter to further reduce our accounts per employee to diminish the volatility in our delinquencies, and as a result, we successfully reduced contractually delinquent accounts in the quarter sequentially from 7.3% to 6.6%. The delinquency rate is now more aligned with historical levels, and while we will need to remain vigilant, we expect that the lower delinquency rate will result in improved net charge-off performance in the second half of 2014. In addition, we opened 12 branches in the quarter – ahead of our expectations – and continued to see double-digit revenue and same-store revenue growth. 2014 will continue to be a year of growth and investment, and our overall branch growth trajectory and long-term strategy remain unchanged.”

Second Quarter 2014 Results

For the second quarter ended June 30, 2014, Regional Management reported total revenue of $47.4 million, a 21.1% increase from $39.2 million in the prior-year period. Interest and fee income for the second quarter of 2014 was $43.0 million, a 23.0% increase from $34.9 million in the prior-year period, primarily due to a 12.0% year-over-year increase in finance receivables. Insurance income for the second quarter of 2014 was $2.5 million, a 10.5% decrease from the prior-year period. Same-store revenue growth for the second quarter of 2014 was 11.6%.

Finance receivables outstanding at June 30, 2014 were $518.0 million, a 12.0% increase from $462.3 million in the prior-year period. Finance receivables increased due to the addition of 30 de novo branches since June 30, 2013, as well as the increase in same-store finance receivables, which grew 2.5% in the second quarter.

Provision for credit losses in the second quarter of 2014 was $13.6 million versus $8.4 million in the prior-year period, primarily due to increased net charge-offs from previously elevated delinquency levels. Annualized net charge-offs as a percentage of average finance receivables for the second quarter of 2014 were 10.5%, an increase from 6.6% in the prior-year period. The higher net charge-offs were primarily the result of elevated accounts per employee that caused challenges in properly servicing accounts from the latter portion of 2013 through the first quarter of 2014.

General and administrative expenses for the second quarter of 2014 were $23.2 million, an increase of 33.8% from $17.3 million in the prior-year period, primarily due to increased personnel costs from opening an additional 30 branches since June 30, 2013 and costs related to the implementation of the GOLDPoint loan management system platform. Regional Management’s efficiency ratio (the percentage of general and administrative expenses compared to total revenue) in the second quarter of 2014 was 48.9%, an increase of 460 basis points from 44.3% in the prior-year period.

Net income for the second quarter of 2014 was $4.4 million, a 31.1% decrease compared to net income of $6.4 million in the prior-year period. Diluted earnings per share for the second quarter of 2014 were $0.34, a decrease from $0.50 in the prior-year period.

Six Month 2014 Results

For the six-month period ended June 30, 2014, Regional Management reported total revenue of $97.0 million, a 24.7% increase from $77.8 million in the prior-year period. Interest and fee income for the six-month period ended June 30, 2014 was $87.0 million, a 26.2% increase from $69.0 million in the prior-year period. Insurance income for the six-month period ended June 30, 2014 was $5.8 million, a 0.7% increase from the prior-year period.

Provision for credit losses in the six-month period ended June 30, 2014 was $30.6 million versus $16.5 million in the prior-year period, primarily due to increased net charge-offs combined with elevated delinquency levels. Annualized net charge-offs as a percentage of average finance receivables for the six-month period ended June 30, 2014 was 10.1%, an increase from 6.5% in the prior-year period.

General and administrative expenses for the six-month period ended June 30, 2014 were $43.1 million, an increase of 26.7% from $34.0 million in the prior-year period, primarily due to increased personnel costs from opening an additional 30 branches since June 30, 2013. During the six months ended June 30, 2014, Regional Management opened 29 new branches. Regional Management’s efficiency ratio in the six-month period ended June 30, 2014 was 44.4%, an increase of 70 basis points from 43.7% in the prior-year period; excluding a $1.4 million pre-tax benefit related to a one-time reversal of vacation pay liability, Regional Management’s efficiency ratio for the six-month period ended June 30, 2014 would have been 45.9%.

GAAP net income for the six-month period ended June 30, 2014 was $10.0 million, a 23.9% decrease compared to GAAP net income of $13.2 million in the prior-year period. Diluted earnings per share for the six-month period ended June 30, 2014 were $0.77, a decrease from $1.03 in the prior-year period. Excluding $1.4 million of pre-tax benefit related to a one-time reversal of vacation pay liability, non-GAAP net income for the six-month period ended June 30, 2014 was $9.2 million and diluted earnings per share were $0.71. For a reconciliation of non-GAAP to GAAP measures, please review the disclosures and table included with this release.

Liquidity and Capital Resources

As of June 30, 2014, Regional Management had finance receivables of $518.0 million and outstanding debt of $324.6 million on its $500.0 million senior revolving credit facility and on its $1.5 million cash management line of credit.

Conference Call Information

The Company will host a conference call and webcast today at 5:00 PM Eastern. Both the call and webcast are open to the general public.

The dial-in number for the conference call is (877) 474-9501, passcode 89177308 – please dial the number 10 minutes prior to the scheduled start time. A live webcast of the conference call will also be available on Regional Management's website at www.RegionalManagement.com.

A replay of the call will be available two hours following the end of the call through midnight Eastern on Wednesday, August 6 at www.RegionalManagement.com and by telephone at (888) 286-8010, passcode 86978455.

Forward-Looking Statements

This press release may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, which represent Regional Management Corp.’s expectations or beliefs concerning future events. 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 and new branches; 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). Such factors and others are discussed in greater detail in Regional Management’s filings with the Securities and Exchange Commission. Regional Management will not and is not responsible for updating the information contained in this press release beyond the publication date, or for changes made to this document by wire services or Internet services.

About Regional Management Corp.

Regional Management Corp. (RM) is a diversified specialty 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 and Georgia. 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, furniture and appliance retailers and its consumer website. For more information, please visit http://www.RegionalManagement.com.

1 Defined as stores open for at least 13 months.

Regional Management Corp. and Subsidiaries

Consolidated Statements of Income

(in thousands, except per share amounts)

(Unaudited)

 
Three Months Ended

June 30,

  Six Months Ended

June 30,

  2014     2013   2014     2013
Revenue
Interest and fee income $ 42,959 $ 34,920 $ 87,037 $ 68,966
Insurance income, net 2,481 2,772 5,776 5,736
Other income   1,997   1,490   4,205   3,080
 
Total revenue   47,437   39,182   97,018   77,782
 
Expenses
Provision for credit losses 13,620 8,405 30,564 16,476
General and administrative expenses
Personnel 13,068 9,882 24,242 20,105
Occupancy 3,713 2,697 7,133 5,213
Marketing 1,750 1,347 2,732 1,852
Other 4,667 3,413 8,990 6,855
Interest expense   3,556   3,241   7,319   6,322
 
Total expenses   40,374   28,985   80,980   56,823
 
Income before income taxes 7,063 10,197 16,038 20,959
Income taxes   2,649   3,793   6,014   7,791
 
Net income $ 4,414 $ 6,404 $ 10,024 $ 13,168
 
Net income per common share:
Basic $ 0.35 $ 0.51 $ 0.79 $ 1.05
 
Diluted $ 0.34 $ 0.50 $ 0.77 $ 1.03
 
Weighted average common shares outstanding:
Basic   12,691,227   12,584,942   12,673,177   12,543,888
 
Diluted   12,915,673   12,881,117   12,957,976   12,831,040

Regional Management Corp. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except per share amounts)

(Unaudited)

 
June 30, 2014   December 31, 2013
Assets
Cash $ 3,562 $ 4,121
Gross finance receivables 622,854 658,176
Less unearned finance charges, insurance premiums, and commissions   (104,879 )   (113,492 )
 
Finance receivables 517,975 544,684
Allowance for credit losses   (34,584 )   (30,089 )
 
Net finance receivables 483,391 514,595
Property and equipment, net of accumulated depreciation 7,929 7,100
Repossessed assets at net realizable value 615 548
Goodwill 716 716
Intangible assets, net 1,068 1,386
Other assets   6,714     5,422  
 
Total assets $ 503,995   $ 533,888  
 
Liabilities and Stockholders’ Equity
Liabilities:
Deferred tax liability, net $ 847 $ 2,653
Accounts payable and accrued expenses 6,718 7,312
Senior revolving credit facility   324,570     362,750  
 
Total liabilities 332,135 372,715
Commitments and Contingencies
Stockholders’ equity:
Preferred stock, $0.10 par value, 100,000,000 shares authorized, no shares issued and outstanding at June 30, 2014 and December 31, 2013
Common stock, $0.10 par value, 1,000,000,000 shares authorized, 12,701,821 and 12,652,197 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively 1,270 1,265
Additional paid-in-capital 83,975 83,317
Retained earnings   86,615     76,591  
 
Total stockholders’ equity   171,860     161,173  
 
Total liabilities and stockholders’ equity $ 503,995   $ 533,888  

Regional Management Corp. and Subsidiaries

Selected Financial Data

(Unaudited)

(in thousands)

 
Three Months Ended June 30,
2014       2013  
Average Finance
Receivables
  Average Yield

(Annualized)

Average Finance
Receivables
  Average Yield

(Annualized)

Small installment loans $ 262,159 46.0 % $ 192,154 43.8 %
Large installment loans 42,380 27.3 % 44,830 29.8 %
Automobile purchase loans 173,676 19.8 % 178,418 20.6 %
Retail purchase loans   28,810 18.4 %   30,832 17.9 %
 
Total interest and fee yield $ 507,025 33.9 % $ 446,234 31.3 %
 
Total revenue yield $ 507,025 37.4 % $ 446,234 35.1 %
Components of Increase in Interest and Fee Income
Three Months Ended June 30, 2014
Compared to Three Months Ended June 30, 2013
Increase (Decrease)
Volume   Rate   Net
Small installment loans $ 8,005 $ 1,120 $ 9,125
Large installment loans (188 ) (262 ) (450 )
Automobile purchase loans (248 ) (334 ) (582 )
Retail purchase loans   (88 )   34     (54 )
 
Total increase in interest and fee income $ 7,481   $ 558   $ 8,039  
 
Loans Originated (1)

Three Months Ended June 30,

2014 2013
Small installment loans $ 198,047 $ 160,291
Large installment loans 17,065 16,845
Automobile purchase loans 23,049 32,648
Retail purchase loans   7,360   8,202
 
Total finance receivables $ 245,521 $ 217,986

(1) Represents gross balance of loan originations, including unearned finance charges

         
Three Months Ended June 30,
2014   2013  
Amount Percentage of
Average Finance
Receivables

(Annualized)

  Amount Percentage of
Average Finance
Receivables

(Annualized)

Net charge-offs as a percentage of average finance receivables $ 13,361 10.5 % $ 7,416 6.6 %
 
Amount Percentage of
Total Revenue
  Amount Percentage of
Total Revenue
Provision for credit losses $ 13,620 28.7 % $ 8,405 21.5 %
General and administrative expenses $ 23,198 48.9 % $ 17,339 44.3 %
 
Amount Growth Rate   Amount Growth Rate
Same store finance receivables at period-end/growth rate $ 457,944 2.5 % $ 416,889 22.6 %
Same store revenue during period/growth rate $ 42,908 11.6 % $ 36,311 17.4 %
Number of branches in calculation 232 194
           
Six Months Ended June 30,
2014   2013  
Average Finance
Receivables
  Average Yield

(Annualized)

  Average Finance
Receivables
  Average Yield

(Annualized)

Small installment loans $ 270,389 45.3 % $ 191,266 43.5 %
Large installment loans 42,583 26.9 % 47,052 28.4 %
Automobile purchase loans 175,915 19.7 % 174,860 20.5 %
Retail purchase loans   29,635 18.1 %   30,756 17.9 %
 
Total interest and fee yield $ 518,522 33.6 % $ 443,934 31.1 %
 
Total revenue yield $ 518,522 37.4 % $ 443,934 35.0 %
Components of Increase in Interest and Fee Income
Six Months Ended June 30, 2014
Compared to Six Months Ended June 30, 2013
Increase (Decrease)
Volume     Rate     Net
Small installment loans $ 17,867   $ 1,790   $ 19,657
Large installment loans (657 ) (300 ) (957 )
Automobile purchase loans 107 (660 ) (553 )
Retail purchase loans   (100 )   24     (76 )
 
Total increase in interest and fee income $ 17,217   $ 854   $ 18,071  
 
Loans Originated (1)

Six Months Ended June 30,

2014 2013
Small installment loans $ 326,291 $ 262,001
Large installment loans 30,648 29,353
Automobile purchase loans 46,745 67,582
Retail purchase loans   15,907   17,125
 
Total finance receivables $ 419,591 $ 376,061

(1) Represents gross balance of loan originations, including unearned finance charges

           
Six Months Ended June 30,
2014   2013  
Amount   Percentage of
Average Finance
Receivables

(Annualized)

  Amount   Percentage of
Average Finance
Receivables

(Annualized)

Net charge-offs as a percentage of average finance receivables $ 26,069 10.1 % $ 14,473 6.5 %
 
Amount   Percentage of
Total Revenue
  Amount   Percentage of
Total Revenue
Provision for credit losses $ 30,564 31.5 % $ 16,476 21.2 %
General and administrative expenses $ 43,097 44.4 % $ 34,024 43.7 %
 
As of June 30,
2014     2013  
Finance
Receivables
  Percentage of

Total

Finance
Receivables
  Percentage of

Total

Small installment loans $ 275,456 53.1 % $ 206,915 44.8 %
Large installment loans 42,996 8.3 % 44,143 9.5 %
Automobile purchase loans 171,777 33.2 % 180,349 39.0 %
Retail purchase loans   27,746 5.4 %   30,941 6.7 %
 
Total finance receivables $ 517,975 100.0 % $ 462,348 100.0 %
 
 
Number of branches at period end 293 263
Average finance receivables per branch $ 1,768 $ 1,758
               
June 30, 2014 December 31, 2013 June 30, 2013
Amount Percentage of
Total Finance
Receivables
  Amount Percentage of
Total Finance
Receivables
  Amount Percentage of
Total Finance
Receivables
Allowance for credit losses $ 34,584 6.7 % $ 30,089 5.5 % $ 25,619 5.5 %
Delinquent accounts:
30 to 59 days $ 14,984 2.9 % $ 17,088 3.1 % $ 12,512 2.6 %
60 to 89 days 6,772 1.3 % 9,267 1.7 % 5,783 1.3 %
90 to 119 days 4,435 0.9 % 6,842 1.3 % 3,377 0.7 %
120 to 149 days 3,206 0.6 % 5,108 0.9 % 2,598 0.6 %
150 to 179 days 2,155 0.4 % 3,409 0.6 % 1,797 0.4 %
180 days and over   2,833 0.5 %   2,096 0.4 %   2,763 0.6 %
 
Total contractual delinquency $ 34,385 6.6 % $ 43,810 8.0 % $ 28,830 6.2 %

Regional Management Corp. and Subsidiaries

Unaudited Non-GAAP Reconciliation of Selected Financial Data

For the Six Months Ended June 30, 2014

(in thousands, except per share amounts)

 
Six Months Ended June 30, 2014
Actual     Adjustments     Non-GAAP
General and administrative expenses $ 43,097   $

1,388(1)

 

  $ 44,485
 
Income taxes $ 6,014 $ (521

)(2)

$ 5,493
 
Net income $ 10,024 $ (867 ) $ 9,157
 
Diluted net income per common share $ 0.77 $ 0.71
Diluted weighted average common shares outstanding 12,957,976 12,957,976
 
Efficiency ratio 44.4 % 45.9 %

(1) Benefit related to the reversal of vacation pay liability

(2) Tax effect of the reversal of vacation pay liability

Contact:
Investor Relations
Garrett Edson, 203-682-8331

Rates

View Comments (0)